Case List Remedies under the NIRC

CIR v. Sony Philippines, Inc., G.R. No. 178697, November 17, 2010 Pilipinas Shell Petroleum Corporation v. CIR , G.R. No. 172598, December 21, 2007 CIR v. Menguito, G.R. No. 167560, September 17, 2008 CIR v. Metro Star Superama, Inc., G.R. No. 185371, December 8, 2010 CIR v. Pascor Realty and Development Corporation, et al., , June 29, 1999 CIR v. Hantex Trading Co., Inc., G.R. No. 136975, March 31, 2005 Magnetic Resonance Imaging Services v. CIR, CTA Case No. 6608, October 20, 2009 CIR v. Phoenix Assurance Co., Ltd., G.R. No. L-19727, May 20, 1965 CIR v. GJM Philippines Manufacturing Inc., CTA En Banc Case No. 637, March 6, 2012 CIR v. BF Goodrich Philippines, Inc., et al., G.R. No. 1041771, February 24, 1999 Philippine Journalists, Inc. v. CIR , G.R. No. 162852, December 15, 2004 CIR v. FMF Development Corporation, G.R. No. 167765, June 30, 2008 CIR v. Kudos Metal Corporation, G.R. No. 178087, May 5, 2010 National Marketing Corporation (NAMARCO) v. Tecson, G.R. No. L-29131, August 27, 1969 CIR v. Primetown Property Group, Inc., G.R. No. 162155, August 28, 2007 Adamson, et al. v. Court of Appeals, et al., G.R. Nos. 120935 and 124557, May 21, 2009 BPI v. CIR , G.R. No. 139736, October 17, 2005 CIR v. Isabela Cultural Corporation, G.R. No. 135210, July 11, 2011 Advertising Associates, Inc. v. Court of Appeals, G.R. No. 59758, December 26, 1984 Yabes, et al. v. Flojo, et al., G.R. No. L-46954, July 20, 1982 Fishwealth Canning Corporation v. CIR , G.R. No. 179343, January 21, 2010 Lascona Land Co., Inc. v. CIR, et al., G.R. No. 171251, March 5, 2012 Allied Banking Corporation v. Parayno, CTA Case No. 6565, November 3, 2004 Rizal Commercial Banking Corporation v. CIR, G.R. No. 168498, April 24, 2007 La Flor Dela Isabela, Inc. v. CIR, CTA En Banc No. 672, February 2, 2012 Oceanic Wireless Network, Inc. v. CIR, G.R. No. 148380, December 9, 2005 CIR v. Philamlife, G.R. No. 105208, May 29, 1995 CIR v. Tokyo Shipping, G.R. No. 68252, May 25, 1995 CIR v. Manila Electric Company, Inc., CTA En Banc No. 773, May 8, 2012 CIR v. PNB, G.R. No. 161997, October 25, 2005 CIR v. TMX Sales, Inc., G.R. No. 83736, January 15, 1992 ACCRA Investments Corporation v. Court of Appeals, G.R. No. 96322, December 20, 1991 Citibank N.A. v. Court of Appeals, G.R. No. 107434, October 10, 1997 CIR v. Palanca, G.R. No. L-16626, October 29, 1966 CIR v. Philippine American Life Insurance Co., et al., G.R. No. 105208, May 29, 1995 Gibbs v. Collector of Internal Revenue, G.R. No. L-13453, February 29, 1960 CIR v. Splash Corporation, CTA En Banc No. 330, May 5, 2008 Atlas Consolidated Mining and Development Corporation v. CIR , G.R. Nos. 141104 & 148763, June 8, 2007 CIR v. Mirant Pagbilao Corporation, G.R. No. 172129, September 12, 2008 CIR v. Aichi Forging Company of Asia, Inc., G.R. No. 184823, October 6, 2010 Calamba Steel Center, Inc. v. CIR, G.R. No. 151857, April 28, 2005 Philam Asset Management, Inc. v. CIR, G.R. Nos. 156637 and 162004, December 14, 2005 Silkair (Singapore) Pte. Ltd. V. CIR, G.R. No. 166482, January 25, 2012 CIR v. Mirant Philippines Operations Corporation, , June 15, 2011

CIR vs. Sony Philippines, Inc.

Facts: LOA was issued. The LOA issued by the BIR covered the period 1997 and unverified prior years. However, the LOA was invalidated by a prior Court of Tax Appeals (CTA) en banc decision (CTA EB 90, July 5, 2007) because the taxpayer commenced business operations only on Oct. 1, 1997, indicating that the taxpayer was not yet operating during the period covered by the examination.On Dec. 6, 1999 CIR issued a preliminary assessment for 1997 deficiency taxes and penalties to Sony, which it protested.A petition for review was filed by Sony before the CTA, within 30 days after the lapse of the 180 days from the submission of the supporting documents to the CIR.CTA-1st Division disallowed the deficiency VAT assessment the subsidized advertising expense paid by Sony was duly covered by a VAT invoice resulted in an input VAT credit. However, for the EWT, the deficiency assessment was upheld.CIR sought reconsideration on the ground that Sony should be liable for the deficiency VAT. It contends that Sonys advertising expense cannot be considered as an input VAT credit because the same was eventually reimbursed by Sony International Singapore (SIS). As a result, Sony is not entitled to a tax credit and that the said advertising expense should be for the account of SIS.

ISSUE: 1. W/N the source of the payment of tax is relevant to determine 2. WON the assessment is valid

Ruling: 1. NO. Sonys deficiency VAT assessment derived from the CIRs allowance of the input VAT credits that should have been realized from advertising expense of the latter.Under Sec. 110 of the 1997 Tax Code, an advertising expense duly covered by a VAT invoice is a legitimate business expense. It cannot be denied that Sony incurred advertising expense. CIRs own witness Aluquin even testified that advertising companies issued invoices in the name of Sony and the latter paid for the same. Hence, Sony incurred and paid for advertising expense services. Where the money came from is another matter all together.Before any VAT is levied, there must be sale, barter or exchange of goods or property. In this case, there was no sale, barter, exchange in the subsidy given by SIS to Sony. It was but a dole out and not in payment for the goods or properties sold, bartered or exchanged by Sony.

2. The revenue examiner went beyond the authority conferred by LOA. A LOA authorizes or empowers a designated revenue officer toexamine, verify and scrutinize ataxpayers books and records in relation to his internal revenue tax liability for a particular period. The LOA, the examiners were authorize to examine Sonys book of accounts and other accounting records for the period 1997 and unverified prior years. However, CIRs basis for deficiency vat for 1997was 1998. They acted without authority in arriving at the deficiency vat assessment. It should be considered without orce and effect a nullity.Furthermore, the period 1997 and unverified prior years violates Revenue Memorandum Order (RMO) No. 43-90, which states that a LOA should cover a taxable period not exceeding one taxable year. It also prohibits the issuance of LOAs covering the audit of unverified prior years. Hence, the SC held that the deficiency assessment against the taxpayer was canceled.

-------------PILIPINAS SHELL vs. CIR

Facts:FIRST ASSESSMENTPetitioner Pilipinas Shell, a Philippine subsidiary of the international petroleum giant Shell, and is engaged in theimportation, refining and sale of petroleum productsin the country.It was granted Tax Credit Certificates (TCC) by the Dept. of Finance by the Duty Drawback Center (Center in brevity). Pilipinas Shell used the TCCs in payment of some of its excise tax liabilities.On April 22, 1998, the BIR sent a collection letter[4]to Pilipinas Shell foralleged deficiency excise taxliabilities of PhP 1,705,028,008.06 for the taxable years 1992 and 1994 to 1997, inclusive of delinquency surcharges and interest.As basis for the collection letter, theBIR allegedthat Pilipinas Shell isnot a qualified transfereeof the TCCs it acquired from other BOI-registered companies. Pilipinas Shell protested thecollection letter, but theprotest was deniedby the BIR. Pilipinas Shell filed its motion for reconsideration. However, due to respondents inaction on the motion, Pilipinas Shell filed a petition for review before the CTA.CTA ruled that the use by Pilipinas Shell of the TCCs was legal and valid, and that respondents attempt to collect alleged delinquent taxes and penalties from Pilipinas Shell without an assessment constitutes denial of due process. Respondent elevated the case to the CA still pending to date.SECOND ASSESSMENT: THIS IS WHAT IS IMPORTANT!Despite the pendency the above case, the Center sent several letters (3 letters) to Pilipinas Shell, which required them to submit copies of pertinent sales invoices and delivery receipts covering sale transactions of their products to the TCC assignors/transferors purportedly in connection with an ongoing post audit,ANDrequired submission of the same documents covering Pilipinas Shell Industrial Fuel Oil (IFO) deliveries to Spintex International, IncAND FINALLYrequesting a list of the serial numbers of the TCCs assigned or transferred to it by various BOI-registered companies, either assignors or transferors.In reply Pilipinas Shell emphasized that the required submission of these documents had no legal basis. For non-compliance, the Center informed Pilipinas Shell of the cancellation of the first batch of TCCs transferred to them.Pilipinas Shell motion for reconsideration was not acted upon.OnNovember 22, 1999, Pilipinas Shell received theNovember 15, 1999assessment letter[12]from respondent for excise tax deficiencies, surcharges, and interest based on thefirst batch of cancelled TCCs. All these cancelled TCCs were also part of the subject matter in pending case.Pilipinas Shell protested[13]the assessment letter, but the protest was denied by the BIR, constraining it to file another petition for review[14]before the CTA, docketed as CTA Case No. 6003.By virtue of RA 9282 (act which expanded the jurisdiction of CTA), CTA Division granted the petition for review holding that respondent failed to prove with convincing evidence that the TCCs transferred to Pilipinas Shell were fraudulently issued as respondents finding of alleged fraud was merely speculative.Respondent filed his MR of the above decision which was rejected. Appealed the above decision before the CTAEn Banc.En Bancresolved respondents appeal by holding that Pilipinas Shell was liable to pay the alleged excise tax deficiencies arising from the cancellation of the TCCs.Thus, PSPC filed this petition.

ISSUE:WHETHER OR NOT THE ASSESSMENT DATED15 NOVEMBER 1999IS VOID CONSIDERING THAT IT FAILED TO COMPLY WITH THE STATUTORY AS WELL AS REGULATORY REQUIREMENTS IN THE ISSUANCE OF ASSESSMENTS?YES.Pilipinas Shell avers that its statutory and procedural right to due process was violated by respondent in the issuance of the assessment. It claims that respondent violated RR 12-99 since no pre-assessment notice was issued to PSPC before the November 15, 1999 assessment.Moreover, PSPC argues that the November 15, 1999 assessment effectively deprived it of its statutory right to protest the pre-assessment within 30 days from receipt of the disputed assessment letter.

HELD:While this has likewise been mooted by our discussion above, it would not be amiss to state thatPilipinas Shells rights to substantive and procedural due process have indeed been violated.The facts show that PSPC was not accorded due process before the assessment was levied on it.The Center requiredPilipinas Shellto submit certain sales documents relative to supposed delivery of IFOs by PSPC to the TCC transferors.PSPC contends that it could not submit these documents as the transfer of the subject TCCs did not require that it be a supplier of materials and/or component supplies to the transferors in a letter dated October 29, 1999 which was received by the Center on November 3, 1999.On the same day, the Center informedPilipinas Shellof the cancellation of the subject TCCs.The objections ofPilipinas Shellwere brushed aside by the Center and the assessment was issued by respondent on November 15, 1999, without following the statutory and procedural requirements clearly provided under the NIRC and applicable regulations.What is applicable is RR 12-99, which superseded RR 12-85, pursuant to Sec.244 in relation to Sec. 245 of the NIRC implementing Secs.6, 7, 204, 228, 247, 248, and 249 on the assessment of national internal revenue taxes, fees, and charges.The procedures delineated in the said statutory provisos and RR 12-99 were not followed by respondent, deprivingPilipinas Shellof due process in contesting the formal assessment levied against it.Respondent ignored RR 12-99 and did not issue Pilipinas Shell a notice for informal conference[44]and a preliminary assessment notice, as required.[45]Pilipinas ShellsNovember 4, 1999 motion for reconsideration of the purported Center findings and cancellation of the subject TCCs and the TDM was not even acted upon.Pilipinas Shellwas merely informed that it is liable for the amount of excise taxes it declared in its excise tax returns for 1992 and 1994 to 1997 covered by the subject TCCs via the formal letter of demand and assessment notice.For being formally defective, the November 15, 1999 formal letter of demand and assessment notice is void.Paragraph 3.1.4 of Sec. 3, RR 12-99 pertinently provides:3.1.4Formal Letter of Demand and Assessment Notice.The formal letter of demand and assessment notice shall be issued by the Commissioner or his duly authorized representative.The letter of demand calling for payment of the taxpayers deficiency tax or taxesshall state the facts, the law, rules and regulations, or jurisprudence on which the assessment is based,otherwise, the formal letter of demand and assessment notice shall be void.The same shall be sent to the taxpayer only by registered mail or by personal delivery. x x x (Emphasis supplied.)

In short, respondent merely relied on the findings of the Center which did not givePilipinas Shellample opportunity to air its side.WhilePilipinas Shellindeed protested the formal assessment, such does not denigrate the fact that it was deprived of statutory and procedural due process to contest the assessment before it was issued.Respondent must be more circumspect in the exercise of his functions, as this Court aptly held inRoxas v. Court of Tax Appeals:The power of taxation is sometimes called also the power to destroy.Therefore it should be exercised with caution to minimize injury to the proprietary rights of a taxpayer.It must be exercised fairly, equally and uniformly, lest the tax collector kill the hen that lays the golden egg. And, in the order to maintain the general publics trust and confidence in the Government this power must be used justly and not treacherously.--------------------

CIR V. DOMINADOR MENGUITO SEPTEMBER 17, 2008

Facts:Respondent is married to Jeanne Menguito and is engaged in the restaurant and/or cafeteria business. The spouses owned Copper Kettle Cafeteria Specialist ( hereinafter CKCS ) located at Kalayaan Bar, Departure Area, Ninoy Aquino International Airport, Pasay City. They are also the owners of a business named Copper Kettle Catering Services, Inc ( hereinafter CKCS, Inc.) located at Club John Hay, Baguio City with which Texas Instruments Phil., Inc. and Club John Hay had a contract. Subsequently, BIR Baguio received information that respondent has undeclared income from Texas Instruments Phil., Inc. and Club John Hay. On September 2, 1997, after due investigation, the BIR issued assessment notices stating therein that there is due from respondent deficiency income and percentage tax covering the years 1991,1992 and 1993. Ms. Jeane Menguito protested the assessments. Respondent thereafter filed the present case praying for the cancellation and withdrawal of the deficiency income tax and percentage tax assessments. The Court of Tax Appeals ordered respondent to pay the CIR the deficiency income, percentage taxes and delinquency interest. However the Court of Appeals reversed the decision.

Issues:1. Whether or not CKCS, Inc. and CKCS are one and the same taxable entity with the same tax base and liability.2. WON there was a valid formal assessment notice.

Ruling:1. CKCS, Inc. and CKCS are one and the same taxable entity with the same tax base and liability. The Court considers the presence of the following circumstances to wit; when the owner of one directs and controls the operations of the other, and the payments effected or received by one are for the accounts due from or payable to the other, or when the properties or products of one are all sold to the other, which in turn immediately sells them to the public as substantial evidence in support of the finding that the two are actually one juridical taxable personality. All the circumstances are present in this case.The Supreme Court held that based on evidence presented, respondents CKCS is also known and referred to as CKCS, Inc. Moreover, respondent and his wife own, manage and act as proprietors of CKCS, and that through said business, respondent also had taxable transactions with Texas Instruments Phil., Inc. and Club John Hay. CKCS and CKCS, Inc. are merely employing the fiction of their separate corporate existence to evade payment of proper taxes.2. If taxpayer denies ever having received an assessment from BIR, its incumbent upon the latter toprove by competent evidence that notice was received by addressee. Since respondent hasnt adduced sufficient evidence thatpetitionerhad in fact received pre-assessment notice & post-reporting notice required by law, it cant be assumed that petitioner had been servedsaid notices.It should be emphasized that the stringent requirement that an assessment notice be satisfactorily proven to have been issued and released or, if receipt thereof is denied, that said assessment notice have been served on the taxpayer, applies only to formal assessments prescribed under Section 228 of the National Internal Revenue Code, but not to post-reporting notices or pre-assessment notices. The issuance of a valid formal assessment is a substantive prerequisite to tax collection, for it contains not only a computation of tax liabilities but also a demand for payment within a prescribed period, thereby signaling the time when penalties and interests begin to accrue against the taxpayer and enabling the latter to determine his remedies therefor. Due process requires that it must be served on and received by the taxpayer. A post-reporting notice and pre-assessment notice do not bear the gravity of a formal assessment notice. The post-reporting notice and pre-assessment notice merely hint at the initial findings of the BIR against a taxpayer and invites the latter to an "informal" conference or clarificatory meeting. Neither notice contains a declaration of the tax liability of the taxpayer or a demand for payment thereof. Hence, the lack of such notices inflicts no prejudice on the taxpayer for as long as the latter is properly served a formal assessment notice.------------------

CIR v. Metro Star Superama, Inc., G.R. No. 185371, December 8, 2010

OnJanuary 26, 2001, the Regional Director of Revenue of LegazpiCity, issued letter of Authority to examine Metro Stars books of accounts and other accounting records for income tax and other internal revenue taxes for the taxable year 1999.For Metro Stars failure to comply with several requests for the presentation of records and Subpoena Duces Tecum, BIR of LegazpiCityproceeded with the investigation based on the best evidence obtainable preparatory to the issuance of assessment notice.On April 11, 2002, Metro Star received aFormal Letter of Demanddated April 3, 2002 from Revenue District No. 67, Legazpi City, assessing petitioner the amount ofP292,874.16.) for deficiency value-added and withholding taxes for the taxable year 1999.Subsequently, Revenue District Office No. 67 sent a copy of theFinal Notice of Seizuredated May 12, 2003, which petitioner received on May 15, 2003, giving the latter last opportunity to settle its deficiency tax liabilities within ten (10) [days] from receipt thereof, otherwise respondent BIR shall be constrained to serve and execute the Warrants of Distraint and/or Levy and Garnishment to enforce collection.On February 6, 2004, petitioner received from Revenue District Office No. 67 a Warrant of Distraint and/or Levy No. 67-0029-23 dated May 12, 2003 demanding payment of deficiency value-added tax and withholding tax payment in the amount ofP292,874.16.OnJuly 30, 2004, petitioner filed with the Office of respondent Commissioner a Motion for Reconsideration pursuant to Section 3.1.5 of Revenue Regulations No. 12-99.OnFebruary 8, 2005, respondent Commissioner, through its authorized representative, Revenue Regional Director of Revenue Region 10,LegaspiCity, issued a Decision denying petitioners Motion for Reconsideration. Petitioner, through counsel received said Decision onFebruary 18, 2005.Denying that it received a Preliminary Assessment Notice(PAN)andclaiming that it was not accorded due process, Metro Starfiled a petition for review[4]with the CTA.The CTA-Second Division found merit in the petition of Metro Star and, onMarch 21, 2007, rendered a decision, granting the petition and ordering CIR from collecting the subject taxes. It opined that[w]hile there [is] a disputable presumption that a mailed letter [is] deemed received by the addressee in the ordinary course of mail, a direct denial of the receipt of mail shifts the burden upon the party favored by the presumption to prove that the mailed letter was indeed received by the addressee.[5]It also found that there wasno clear showing that Metro Star actually received the alleged PAN, datedJanuary 16, 2002. It, accordingly, ruled that the Formal Letter of Demand datedApril 3, 2002, as well as the Warrant of Distraint and/or Levy datedMay 12, 2003were void, as Metro Star was denied due process.[6]The CIR sought reconsideration[7]but the motion was denied. CIR filed a petition for review[9]with theCTA-En Banc, but the petition was dismissed after a determination that no new matters were raised. The motion for reconsideration[10]filed by the CIR was likewise denied bytheCTA-En Banc in itsNovember 18, 2008Resolution.[11]Hence this petition.

ISSUES & HELD:1. Whether or not Metro Star was denied due process? YES.The Court agrees with the CTA that theCIR failed to discharge its duty and present any evidence to show that Metro Star indeed received the PANdatedJanuary 16, 2002. Itcould have simply presented the registry receiptor the certification from the postmaster that it mailed the PAN, but failed. Neither did it offer any explanation on why it failed to comply with the requirement of service of the PAN. It merely accepted the letter of Metro Stars chairman datedApril 29, 2002, that stated that he had received theFANdatedApril 3, 2002, but not thePAN; that he was willing to pay the tax as computed by the CIR; and that he just wanted to clarify some matters with the hope of lessening its tax liability.

2. Is the failure to strictly comply with notice requirements tantamount to a denial of due process?Section 228 of the Tax Codeclearly requiresthat the taxpayer must first be informed that he is liable for deficiency taxes through the sending of a PAN. Hemust be informed of the facts and the law upon which the assessment is made.The law imposes a substantive, not merely a formal, requirement. To proceed heedlessly with tax collection without first establishing a valid assessment is evidently violative of the cardinal principle in administrative investigations - that taxpayers should be able to present their case and adduce supporting evidence.[14]It is clear that the sending of a PAN to taxpayer to inform him of the assessment made is but part of the due process requirement in the issuance of a deficiency tax assessment, the absence of which renders nugatory any assessment made by the tax authorities.The use of the word shallin subsection3.1.2describes the mandatory nature of the service of a PAN.The persuasiveness of the right to due process reaches both substantial and procedural rights and the failure of the CIR to strictly comply with the requirements laid down by law and its own rules is a denial of Metro Stars right to due process.[15]Thus, for its failure to send the PAN stating the facts and the law on which the assessment was made as required by Section 228 of R.A. No. 8424, the assessment made by the CIR is void.The case ofCIR v. Menguito[16]cited by the CIR in support of its argument that only the non-service of the FAN is fatal to the validity of an assessment, cannot apply to this case because the issue therein was the non-compliance with the provisions of R. R. No. 12-85 which sought to interpret Section 229 of the old tax law. RA No. 8424 has already amended the provision of Section 229 on protesting an assessment. The old requirement of merelynotifyingthe taxpayer of the CIRs findings was changed in 1998 toinformingthe taxpayer of not only the law, but also of the facts on which an assessment would be made. Otherwise, the assessment itself would be invalid.[17]The regulation then, on the other hand, simply provided that a notice be sent to the respondent in the form prescribed, and that no consequence would ensue for failure to comply with that form.The Court need not belabor to discuss the matter of Metro Stars failure to file its protest, for it is well-settled that a void assessment bears no fruit.---------------------

CIR V PASCOR REALTYG.R 128315June 29, 1999

Facts:The CIR authorized certain BIR officers to examine thebooks ofaccounts and otheraccountingrecords of Pascor Realty and Development Corp. (PRDC) for 1986, 1987 and 1988. The examination resulted in recommendation for the issuance of an assessment of P7,498,434.65 and P3,015,236.35 for 1986 and 1987, respectively.On March 1, 1995, Commissioner filed a criminal complaint fortax evasionagainst PRDC, its president and treasurer before the DOJ. Private respondents filed immediately an urgent request for reconsideration on reinvestigation disputing the tax assessment and tax liability.On March 23, 1995, private respondents received a subpoena from the DOJ in connection with the criminal complaint. In a letter dated, May 17, 1995, the Commissioner denied private respondents request for reconsideration (reinvestigation on the ground that no formal assessment has been issued which the latterelevatedto the CTA on a petition for review. The Commissioners motion to dismiss on the ground of the CTAs lack of jurisdiction inasmuch as no formal assessment was issued against private respondent was denied by CTA and ordered the Commissioner to file an answer but did not instead filed a petition with the CA alleging grave abuse of discretion and lack of jurisdiction on the part of CTA for considering the affidavit/report of the revenue officers and the endorsement of said report as assessment which may be appealed to he CTA. The CA sustained the CTA decision and dismissed the petition.

Issues: 1. Whether or not the criminal complaint fortax evasioncan be construed as an assessment.2. Whether or not an assessment is necessary beforecriminal chargesfortax evasionmay be instituted.

Held:The filing of the criminal complaint with the DOJ cannot be construed as a formal assessment. Neither theTax Codenor the revenue regulations governing the protest assessments provide a specific definition or form of an assessment.An assessment must be sent to and received by the taxpayer, and mustdemandpayment of the taxes described therein within a specific period. The revenue officers affidavit merely contained a computation of respondentstax liability. It did not state ademandor period for payment. It was addressed to the Secretary of Justice not to the taxpayer. They joint affidavit was meant to support the criminal complaint fortax evasion; it was not meant to be a notice of tax due and ademandto private respondents for the payment thereof. The fact that the complaint was sent to the DOJ, and not to private respondent, shows that commissioner intended to file a criminal complaint fortax evasion, not to issue an assessment.An assessment is not necessary beforecriminal chargescan be filed. Acriminal chargeneed not only be supported by a prima facie showing of failure to file a required return. The CIR had, in suchtax evasioncases, discretion on whether to issue an assessment, or to file a criminal caseagainst the taxpayer, or to do both.----------------------------

CIR vs. HANTEX TRADING CO., INC.G.R. No. 136975; March 31, 2005

Facts: Hantex Trading Co is a company organized under the Philippines. It is engaged in the sale of plastic products, it imports synthetic resin and other chemicals for the manufacture of its products. For this purpose, it is required to file an Import Entry and Internal Revenue Declaration (Consumption Entry) with the Bureau of Customs under Section 1301 of the Tariff and Customs Code. Sometime in October 1989, Lt. Vicente Amoto, Acting Chief of Counter-Intelligence Division of the Economic Intelligence and Investigation Bureau (EIIB), received confidential information that the respondent had imported synthetic resin amounting to P115,599,018.00 but only declared P45,538,694.57. Thus, Hentex receive a subpoena to present its books of account which it failed to do. The bureau cannot find any original copies of the products Hentex imported since the originals were eaten by termites. Thus, the Bureau relied on the certified copies of the respondents Profit and Loss Statement for 1987 and 1988 on file with the SEC, the machine copies of the Consumption Entries, Series of 1987, submitted by the informer, as well as excerpts from the entries certified by Tomas and Danganan. The case was submitted to the CTA which ruled that Hentex have tax deficiency and is ordered to pay, per investigation of the Bureau. The CA ruled that the income and sales tax deficiency assessments issued by the petitioner were unlawful and baseless since the copies of the import entries relied upon in computing the deficiency tax of the respondent were not duly authenticated by the public officer charged with their custody, nor verified under oath by the EIIB and the BIR investigators.

Issue: Whether or not the final assessment of the petitioner against the respondent for deficiency income tax and sales tax for the latters 1987 importation of resins and calcium bicarbonate is based on competent evidence and the law.

Held: Central to the second issue is Section 16 of the NIRC of 1977, as amended which provides that the CIR has the power to make assessments and prescribe additional requirements for tax administration and enforcement. Among such powers are those provided in paragraph (b), which provides that Failure to submit required returns, statements, reports and other documents. When a report required by law as a basis for the assessment of any national internal revenue tax shall not be forthcoming within the time fixed by law or regulation or when there is reason to believe that any such report is false, incomplete or erroneous, the Commissioner shall assess the proper tax on the best evidence obtainable. This provision applies when the CIR undertakes to perform her administrative duty of assessing the proper tax against a taxpayer, to make a return in case of a taxpayers failure to file one, or to amend a return already filed in the BIR. The best evidence envisaged in Section 16 of the 1977 NIRC, as amended, includes the corporate and accounting records of the taxpayer who is the subject of the assessment process, the accounting records of other taxpayers engaged in the same line of business, including their gross profit and net profit sales. Such evidence also includes data, record, paper, document or any evidence gathered by internal revenue officers from other taxpayers who had personal transactions or from whom the subject taxpayer received any income; and record, data, document and information secured from government offices or agencies, such as the SEC, the Central Bank of the Philippines, the Bureau of Customs, and the Tariff and Customs Commission. However, the best evidence obtainable under Section 16 of the 1977 NIRC, as amended, does not include mere photocopies of records/documents. The petitioner, in making a preliminary and final tax deficiency assessment against a taxpayer, cannot anchor the said assessment on mere machine copies of records/documents. Mere photocopies of the Consumption Entries have no probative weight if offered as proof of the contents thereof. The reason for this is that such copies are mere scraps of paper and are of no probative value as basis for any deficiency income or business taxes against a taxpayer.Companies exempt from zero-rate tax------------------

Magnetic Resonance Imaging Services v. CIR ,CTA Case No. 6608, October 20, 2009.

The petitioner in the case argued that the assessment issued against it lacks factual and legal bases for the reason that it is based merely on a tentative income-tax return, as the revenue examiner supposedly totally disregarded the amended return that the company filed in making the assessment. According to the taxpayer, this should not have been the case since the amendment of the return has no adverse impact on the companys tax liability.In effect, the taxpayer is asserting that since it was able to amend the tentative income tax return that it previously filed, prior to the expiration of the three-year period prescribed under the law and the issuance of the applicable Letter of Authority, the BIR should have disregarded the same and instead, should have limited its investigation on the amended return subsequently filed by the company.Nonetheless, the CTA Second Division ruled that the BIR is not prevented from looking into the petitioners tentative return since under the Tax Code, in ascertaining the correctness of any return, or in making a return when none has been made, or in determining the liability of any person for any internal-revenue tax, or in collecting any such liability, or in evaluating tax compliance, the commissioner is authorized to examine any book, paper, record or other data which may be relevant or material to such inquiry. The court further said that once a return has been filed, or even when a return has not been filed, the commissioner is empowered to authorize the examination of any taxpayer to determine whether or not the latter is liable for any unpaid or deficiency internal revenue taxes.In conducting the examination, respondent or his duly authorized representative is given much latitude as to what documents may be examined considering that the law allows him or his authorized representative to look into any book, paper, record or other data which may be relevant to ascertain the correctness of the return filed. Moreover, in view of the provisions of the Tax Code which provides that (a)ny return, statement or declaration filed in any office authorized to receive the same shall not be withdrawn, the court held that once a return has been filed, the commissioner or his duly authorized representative is not precluded from examining the correctness of any return filed at their office for the reason that the term any return is indicative that atentative return is likewise included. Surely, the abovementioned pronouncements of the CTA Second Division must serve as a caution to taxpayers who haphazardly file a tentative return just to beat the deadline and rely on the idea of filing an amended return.Therefore, the best safeguard of taxpayers against tax assessments is still themaintenance of efficient and organized books of accounts and records, and of course,not to rely on presumptions.-----------------

CIR v. GJM Philippines Manufacturing Inc.

Facts:Petitioner is a corporation, duly organized and existing under the laws of the Republic of the Philippines, and also duly registered as a Philippine Export Zone Authority (PEZA) investor/locator.On April 12, 2000, petitioner filed its Annual Income Tax Return for taxable year 1999. Sometime in 2001, Warnaco (HK) Ltd., then petitioner's parent company, underwent bankruptcy proceedings, andthis resulted in the conveyance of ownership of petitioner and its global affiliates to Luen Thai Overseas Limited in December 2001. Thereafter, the present owner set in place streamlining efforts, among which was the transfer of petitioner's Makati Office to the facilities in Rosario, Cavite.On October 18, 2002, the BIR, through Revenue District Officer Ner Alfredo B. Plana, sent a letter of informal conference dated October 14, 2002, by facsimile transfer, informing petitioner that the report of investigation on its income and business tax liabilities for the calendar year ended December 31, 1999 had been submitted. The report reveals that petitioner is still liable for an income tax deficiency and corresponding 20% interest as well as compromise penalty in the total amount of P1,192,541.51, from shipment/loading freights, fringe benefit taxes, etc. On February 12, 2003, respondent issued a Pre-Assessment Notice.On April 14, 2003, respondent issued the undated Assessment Notice No. IT-17316-99-03-282 against petitioner, indicating a deficiency income tax assessment in the amount of P1,480,099.29. On August 18, 2003, respondent issued a Final Notice Before Seizure addressed to petitioner informing the latter that it was being given a last opportunity to make the necessary settlement of the same deficiency income tax for taxable year 1999. Petitioner claims that although said notice indicated its new address at Phase 2 Lot 9 Blk. 4, PEZA, Rosario, Cavite, the same never reached it. On December 8, 2003, petitioner received a Warrant of Distraint and/or Levy from the BIR RDO [No.] 48-West Makati, which stemmed from Assessment/Demand No. IT-17316-99-03-282 on April 14, 2003, involving the amount of P1,480,099.29, as deficiency income tax for taxable year 1999. Accompanying the said Warrant were the Preliminary Collection Letter dated July 25, 2003, and the Final Notice Before Seizure dated August 18, 2003.On January 7, 2004, petitioner filed its Letter Protest dated January 6, 2004 against the said Warrant of Distraint and/ or Levy dated November 27, 2003. And on January 26, 2004, petitioner receivedrespondent's letter dated January 15, 2003, supposedly constituting the respondent's final decision on the disputed assessment, denying petitioner's protest for lack of factual and legal bases.The Ruling of the Court in Division: FAN and Warrant is CANCELLED andWITHDRAWN.

Issue: WON THE FORMAL ASSESSMENT NOTICE (FAN) FOR DEFICIENCY INCOME TAX FOR TAXABLE YEAR 1999 HAD BEEN RELEASED, MAILED OR SENT TO HEREIN RESPONDENT WITHIN THE 3-YEAR PRESCRIPTIVE PERIOD UNDER SECTION 203 OF THE NIRC OF 1997.

HELD:The three (3)-year period within which the CIR can validly issue an assessment is reckoned from: (a) the last day required by law for filing the final adjustment return, i.e., on or before the fifteenth (15th) day of April, or on or before the fifteenth (15th) day of the fourth (4th) month following the close of the fiscal year, as the case may be; or (b) the date of actual filing of the return, whichever is later.Based on the records of the case, GJM filed its Annual Income Tax Return for the taxable year 1999 on April 12, 2000, consequently, the three (3)-year period within which the CIR can validly issue assessment is until April 15, 2003. And records show that the FAN, with attached Details of Discrepancies, was released, mailed and sent through registered mail on April 14, 2003. Apparently, the FAN was made within the period provided under Section 203 of the 1997 NIRC, as amended. The settled rule in our jurisprudence is that when mail matter is sent by registered mail, there may exist a presumption, set forth under Section 2(v), Rule 131 of the Rules of Court, that it was received in the regular course of mail. The facts to be proved in order to raise this presumption are: (a) that the letter was properly addressed with postage prepaid; and (b) that it was mailed. Once these facts are proved, the presumption is that the letter was received by the addressee as soon as it could have been transmitted to him in the ordinary course of the mails. While respondent avers that it sent through registered mail the subject assessment notice on April 14, 2003, within the three (3)-yearprescriptive period, petitioner denies having received the said assessment notice from respondent. Petitioner alleges (i) that it came to know of the deficiency income tax assessment only on December 8, 2003 when it was served with the Warrant of Distraint and/ or Levy; and (ii) that it was able to receive the Formal Assessment Notice and the Details of Discrepancies on January 26, 2004, when the same documents were attached to respondent's letter dated January 15, 2004. Therefore, considering that petitioner denies receipt of the said mail, it behooves upon respondent to prove that it was indeed received by petitioner.The failure of the respondent to prove receipt of the assessment by the Petitioner leads to the conclusion that no assessment was issued. Consequently, the government's right to issue an assessment for the said period has already prescribed.To prove that the subject mail was served upon petitioner, respondent offered in evidence the Transmittal Letter No. 282 dated April 14, 2003 duly prepared and signed by Ms. Ma. Nieva A. Guerrero, as Chief of the Assessment Division of BIR Revenue Region No. 8-Makati. Notably however, respondent did not present Ma. Nieva A. Guerrero to testify on the said Transmittal Letter dated April 14, 2003 which she supposedly prepared and signed, considering that petitioner has denied having received the subject Formal Assessment Notice and the Details of Discrepancies. Furthermore, independent evidence, such as the registry receipt of the assessment notice, or a certification from the Bureau of Posts, could have easily been obtained, and offered before this Court, yet respondent failed to do so. Thus, for failure of respondent to establish that Formal Assessment Notice No. IT-17316-99-03-282 had been released, mailed or sent within the three (3)-year prescriptive period under Section 203 of the NIRC of 1997, the right of the Government to assess the subject tax has prescribed

CIR v. Phoenix Assurance Co., Ltd

Facts: Phoenix Assurance Co. Ltd., a foreign insurance corporation organized under the laws of Great Britain, is licensed to do business in the Philippines with head office in London. Through its head office it entered, in London, into worldwide reinsurance treaties with various foreign insurance companies. It agreed to cede a portion of premiums received on original insurances underwritten by its head office, subsidiaries, and branch offices throughout the world, in consideration for assumption by the foreign insurance companies of an equivalent portion of the liability from such original insurances. Pursuant to such reinsurance treaties,Phoenix Assurance Co., Ltd. ceded portions of the premiums it earned from its underwriting business in the Philippines (1952, P316,526.75; 1953, P246,082.04; 1954, P203,384.69) upon which the CIR , by letter of 6 May 1958, assessed withholding tax totaling P183,838.42 (1952, P75,966.42; 1953, 59,059.68; 1954, 48,812.32). On 1 April 1951, Phoenix Assurance filed its Philippine income tax return for 1950, claiming therein, among others, a deduction of P37,147.04 as net addition to marine insurance reserve equivalent to 40% of the gross marine insurance premiums received during the year. The Commissioner disallowed P11,772.57 of such claim for deduction and subsequently assessed against Phoenix Assurance the sum of P1,884.00 as deficiency income tax. The disallowance resulted from the fixing by the Commissioner of the net addition to the marine insurance reserve at 100% of the marine insurance premiums received during the last three months of the year. The Commissioner assumed that ninety and thirty days are approximately the length of time required before shipments reach their destination or before claims are received by the insurance companies. On 1 April 1953 Phoenix Assurance filed its Philippine income tax return for 1952, declaring therein a deduction from gross income of P35,912.25 as part of the head office expenses incurred for its Philippine business, computed at 5% on its gross Philippine income. On 30 August 1955 it amended its income tax return for 1952 by excluding from its gross income the amount of P316,526.75 representing reinsurance premiums ceded to foreign reinsurers and further eliminating deductions corresponding to the ceded premiums. The amended return showed an income tax due in theamount of P2,502.00. The Commissioner disallowed P15,826.35 of the claimed deduction for head office expenses and assessed a deficiency tax of P5,667.00 on 24 July 1958. On 30 April 1954 Phoenix Assurance filed its Philippine income tax return for 1953 and claimed therein a deduction from gross income of P33,070.88 as head office expenses allocable to its Philippine business, equivalent to 5% of its gross Philippine income. On 30 August 1955 it amended its 1953 income tax return to exclude from its gross income the amount of P246,082.04 representing reinsurance premiums ceded to foreign reinsurers. At the same time it requested the refund of P23,409.00 as overpaid income tax for 1953. To avoid the prescriptive period provided for in Section 306 of the Tax Code, it filed a petition for review on 11 August 1956 in the Court of Tax Appeals praying for such refund. After verification of the amended income tax return the Commissioner disallowed P12,304.10 of the deduction representing head office expenses allocable to Philippine business thereby reducing the refundable amount to P20,180.00. On 29 April 1955 Phoenix Assurance filed its Philippine income tax return for 1954 claiming therein, among others, a deduction from gross income of P29,624.75 as head office expenses allocable to its Philippine business, computed at 5% of its gross Philippine income. It also excluded from its gross income the amount of P203,384.69 representing reinsurance premiums ceded to foreign reinsurers not doing business in the Philippines. On 1 August 1958 the Bureau of Internal Revenue released an assessment for deficiency income tax for the years 1952 and 1954 against Phoenix Assurance amounting to P2,847. The assessment resulted from the disallowance of a portion of the deduction claimed by Phoenix Assurance as head office expenses allocable to its business in the Philippines fixed by the Commissioner at 5% of the net Philippine income instead of 5% of the gross Philippine income as claimed in the returns. Phoenix Assurance protested against the assessments for withholding tax and deficiency income tax. However, the Commissioner denied such protest.Subsequently, Phoenix Assurance appealed to the Court of Tax Appeals (CTA Cases 305 and 543). In a decision dated 14 February 1962, the Court of Tax Appeals allowed in full the deduction claimed by Phoenix Assurance for 1950 as net addition to marine insurance reserve; determined the allowable head office expenses allocable to Philippine business to be 5% of the net income in the Philippines; declared the right of the Commissioner to assess deficiency income tax for 1952 to have prescribed; absolved Phoenix Assurance from payment of the statutory penalties for non-filing of withholding tax return. Thus, the court ordered Phoenix Assurance to pay the Commissioner the respective amounts of P75,966.42, P59,059.68 and P48,812.32, as withholding tax for the years 1952, 1953 and 1954, and P2,847.00 as income tax for 1954, or the total sum of P186,685.42 within 30 days from the date the decision becomes final. Upon the other hand, the Commissioner was ordered to refund to Phoenix Assurance the sum of P20,180.00 as overpaid income tax for 1953, which sum is to be deducted from the total sum of P186,685.42 due as taxes; and ordered further that if any amount of the tax is not paid within the time prescribed, there shall be collected a surcharge of 5%of the tax unpaid, plus interest at the rate of 1% a month from the date of delinquency to the date of payment, provided that the maximum amount that may be collected as interest shall not exceed the amount corresponding to a period of 3 years; without pronouncement as to costs. Both parties appealed to the Supreme Court.The Supreme Court modified the decision appealed from, and ordered Phoenix Assurance to pay the Commissioner the amount of P75,966.42, P59,059.68 and P48,812.32 as withholding tax for the years 1952, 1953 and 1954, respectively, and the sums of P5,667.00 and P2,847.00 as income tax for 1952 and 1954 or a total of P192,352.42; and ordered the Commissioner to refund to Phoenix Assurance the amount of P20,180.00 as overpaid income tax for 1953, which should be deducted from the amount of P192,352.42; and ordered further that if the amount of P192,352.42 or a portion thereof is not paid within 30 days from the datethe judgment becomes final, there shall be collected a surcharge and interest as provided for in Section 51 (e) (2) of the Tax Code. No costs. HELD:1. British Traders Insurance vs. CIR; Reinsurance premiums ceded to foreign reinsurers not doing business in the Philippines pursuant to contracts executed abroad are income from sources within the Philippines subject to withholding tax The question of whether reinsurance premiums ceded to foreign reinsurers not doing business in the Philippines pursuant to contracts executed abroad are income from sources within the Philippines subject to withholding tax under Section 53 and 54 of the Tax Code has already been resolved in the affirmative in British Traders Insurance Co. Ltd. vs. CIR , L-20501, 30 April 1965.

2. Section 331 of the Tax Code; Period of limitation upon assessment and collection Section 331 of the Tax Code, which limits the right of the CIR to assess income tax within five years from the filing of the income tax return, states: Except as provided in the succeeding section, internal-revenue taxes shall be assessed within five years after the return was filed, and no proceeding in court without assessment for the collection of such taxes shall be begun after the expiration of such period. For the purposes of this section a return filed before the last day prescribed by law for the filing thereof shall be considered as filed on such last day: Provided, That this limitation shall not apply to cases already investigated prior to the approval of this Code.

3. Running of the prescriptive period commence from filing of original return The Court of Tax Appeals ruled that the original return was a complete return containing information on various items of income and deduction from which respondent may intelligently compute and determine the tax liability of petitioner, hence, the prescriptive period should be counted from the filing of said originalreturn; the view which the Supreme Court sustains. The object of the Tax Code is to impose taxes for the needs of the Government, not to enhance tax avoidance to its prejudice. To hold otherwise would pave the way for taxpayers to evade the payment of taxes by simply reporting in their original return heavy losses and amending the same more than five years later when the CIR has lost his authority to assess the proper tax thereunder.

4. Right of Commissioner to assess the deficiency tax has not prescribed Considering that the deficiency assessment was based on the amended return which, as aforestated, is substantially different from the original return, the period of limitation of the right to issue the same should be counted from the filing of the amended income tax return. From August 30, 1955, when the amended return was filed, to July 24, 1958, when the deficiency assessment was issued, less than five years elapsed. The right of the Commissioner to assess the deficiency tax on such amended return has not prescribed.

5. Section 32, paragraph (a) of the Tax Code Special provisions regarding income and deductions of insurance companies, whether domestic or foreign, Special deductions allowed to insurance companies Paragraph (a) of Section 32 of the Tax Code states In the case of insurance companies, except domestic life insurance companies and foreign life insurance companies doing business in the Philippines, the net additions, if any, required by law to be made within the year to reserve funds and the sums other thandividends paid within the year on policy and annuity contracts may be deducted from their gross income: Provided, however, That the released reserve be treated as income for the year of release.

6. Section 186 of the Insurance LawSection 186 of the Insurance Law requires the setting up of reserves for liability on marine insurance, thus . . . Provided, That for marine risks the insuring company shall be required to charge as the liability for reinsurance fifty per centum of the premiums written in the policies upon yearly risks, and the full premiums written in the policies upon all other marine risks not terminated.

7. Determination of the required reserve for marine insurance The reserve required for marine insurance is determined on two bases: 50% of premiums under policies on yearly risks and 100% of premiums under policies of marine risks not terminated during the year. Section 32 (a) of the Tax Code allows the full amount of such reserve to be deducted from gross income. In the present case, the formulas for determining the marine reserve employed by Phoenix Assurance and the Commissioner (40% of premiums received during the year and 100% of premiums received during the last three months of the year, respectively) do not comply with Section 186. Said determinations run short of the requirement. For purposes of the Insurance Law, the Court therefore cannot countenance the same. Phoenix Assurances claim for deduction of P37,147.04 being less than the amount required in Section 186 of the Insurance Law, the same cannot be and is not excessive, and should therefore be fully allowed.

8. Purpose of the reserve; What is prohibited by income tax law The reserve called for in Section 186 is a safeguard to the general public and should be strictly followed not only because it is an express provision but also as a matter of public policy. However, forincome tax purposes a taxpayer is free to deduct from its gross income a lesser amount, or not to claim any deduction at all. What is prohibited by the income tax law is to claim a deduction beyond the amount authorized therein. *

9. Items of income not belonging to the companys Philippine business excluded from head office expenses allocable to Philippine Branch; Paragraph 2, subsection (a), Section 30 of the Tax Code The gross income of Phoenix Assurance consists of income from its Philippine business as well as reinsurance premiums received for its head office in London and reinsurance premiums ceded to foreign reinsurers. Since the items of income not belonging to its Philippine business are not taxable to its Philippine branch, they should be excluded in determining the head office expenses allocable to said Philippine branch. This conclusion finds support in paragraph 2, subsection (a), Section 30 of the Tax Code, which provides that Expenses allowable to non-resident alien individuals and foreign corporations. In the case of a non-resident alien individual or a foreign corporation, the expenses deductible are the necessary expenses paid or incurred in carrying on any business or trade conducted within the Philippines exclusively. Consequently, the deficiency assessments for 1952, 1953 and 1954, resulting from partial disallowance of deduction representing head office expenses, are sustained.

10. Interest on tax payment; Absolution based on equitable groundThe imposition of interest on unpaid taxes is one of the statutory penalties for tax delinquency, from the payments of which the Court of Tax Appeals absolved the Phoenix Assurance on the equitable ground that the latters failure to pay the withholding tax was due to the Commissioners opinion that no withholding tax was due. Consequently, the taxpayer could be liable for the payment of statutory penalties only upon its failure to comply with the Tax Courts judgment rendered on 14 February 1962, after Republic Act 2343 took effect. This part of the ruling of the court ought not to be disturbed.--------------------

CIR v. BF Goodrich PhilippinesFacts:Private respondentBF GoodrichPhilippines Inc. was an American corporation prior to July 3, 1974. As a condition for approving the manufacture of tires and other rubber products, private respondent was required by the CentralBankto develop a rubber plantation. In compliance therewith, private respondent bought from the government certain parcels of land in Tumajubong Basilan, in 1961 under the Public Land Act and the Parity Amendment to the 1935 constitution, and there developed a rubber plantation.On August 2, 1973, the Justice Secretary rendered an opinion that ownership rights of Americans over Public agricultural lands, including the right to dispose or sell their real estate, would be lost upon expiration on July 3, 1974 of the Parity Amendment. Thus, private respondent sold its Basilan land holding to Siltown Realty Phil. Inc., (Siltown) for P500,000 on January 21, 1974. Under the terms of the sale, Siltown would lease the property to private respondent for 25 years with an extension of 25 years at the option of private respondent.Private respondent books of accounts were examined by BIR for purposes of determining itstax liabilityfor 1974. Thisexaminationresulted in the April 23, 1975assessmentof private respondent for deficiencyincome taxwhich it duly paid. Siltowns books of accounts were also examined, and on the basis thereof, on October 10, 1980, theCollectorof Internal Revenue assessed deficiency donors tax of P1,020,850 in relation to said sale of the Basilan landholdings.Private respondent contested thisassessmenton November 24, 1980. AnotherassessmentdatedMarch 16, 1981, increasing the amount demanded for the alleged deficiency donors tax, surcharge, interest and compromise penalty and was received by private respondent on April 9, 1981. On appeal, CTA upheld theassessment. On review, CA reversed the decision of the court finding that theassessmentwas made beyond the 5-year prescriptive period in Section 331 of the Tax Code.

Issue:Whether or not petitioners right to assess has prescribed.

Held:Applying then Sec. 331, NIRC (now Sec. 203, 1997 NIRC which provides a 3-year prescriptive period for making assessments), it is clean that the October 16, 1980 and March 16, 1981 assessments were issued by the BIR beyond the 5-yearstatute of limitations. The court thoroughly studied the records of this case and found no basis to disregard the 5-year period of prescription, expressly set under Sec. 331 of the Tax Code, the law then in force.For the purpose ofsafeguardingtaxpayers from any unreasonableexamination, investigation orassessment, ourtax lawprovides astatute of limitationsin the collection of taxes. Thus, the law or prescription, being a remedial measure, should be liberally construed in order to afford such protection. As a corollary, the exceptions to the law on prescription should perforce be strictly construed.-------------------

CIR , vs. FMF DEVELOPMENT CORPORATION. [G.R. No. 167765. June 30, 2008.]

Facts: FMF filed its Corporate Annual Income Tax Return for taxable year 1995 and declared a loss of P3,348,932. On May 8, 1996, however, it filed an amended return and declared a loss of P2,826,541. The BIR then sent FMF pre-assessment notices, all dated October 6, 1998, informing it of its alleged tax liabilities. 4 FMF filed a protest against these notices with the BIR and requested for a reconsideration/reinvestigationFMF President Enrique Fernandez executed a waiver of the three-year prescriptive period for the BIR to assess internal revenue taxes, hence extending the assessment period. The waiver was accepted and signed by RDO Zambarrano. FMF received amended pre-assessment notices 5 dated October 6, 1999 from the BIR. FMF immediately filed a protest on November 3, 1999 but on the same day, it received BIR's Demand Letter and Assessment Notice No. 33-1-00487-95 dated October 25, 1999 reflecting FMF's alleged deficiency taxes and accrued interests. FMF filed a letter of protest on the assessment invoking, inter alia, 7 the defense of prescription by reason of the invalidity of the waiver. In its reply, the BIR insisted that the waiver is valid because it was signed by the RDO, a duly authorized representative of petitioner. It also ordered FMF to immediately settle its tax liabilities; otherwise, judicial action will be taken. Treating this as BIR's final decision, FMF filed a petition for review with the CTA challenging the validity of the assessment. CTA and CA ruled in favor of respondent.

Issue/ Held: W/N the waiver is valid- NO

Ratio: Applying RMO No. 20-90, the waiver in question here was defective and did not validly extend the original three-year prescriptive period. Firstly, it was not proven that respondent was furnished a copy of the BIR-accepted waiver. Secondly, the waiver was signed only by a revenue district officer, when it should have been signed by the Commissioner as mandated by the NIRC and RMO No. 20-90, considering that the case involves an amount of more than P1 million, and the period to assess is not yet about to prescribe. Lastly, it did not contain the date of acceptance by the CIR , a requisite necessary to determine whether the waiver was validly accepted before the expiration of the original three-year period. Bear in mind that the waiver in question is a bilateral agreement, thus necessitating the very signatures of both the Commissioner and the taxpayer to give birth to a valid agreement.------------------

CIR vs. KUDOS METAL CORPORATION

FACTS:Kudos Metal Corporation filed its Income Tax Return (ITR) on April 1999 for taxable year 1998. However, pursuant to Letter of Authority, the BIR issued three notices of Presentation of Records to Kudos but Kudos did not comply with the said notice. The BIR then issued subpoena duces tecum, thus the review and audit of the record ensued.However, on December 2001, Pasco, the accountant of Kudos executed an affidavit of Waiver of Prescription duly notarized and was received by BIR and accepted the same by Assistant Commissioner Salazar. Pasco executed second waiver on February 2003 following the process undergone by the first waiver she executed.The BIR later issued a Preliminary Notice of Assessment followed by Formal Demand letter to Kudos asking them to settle their tax liabilities for the year 2008 covering the following:Income Tax9,693,897.85VAT13,962,460.90EWT1,712,336.76Withholding Compensation Tax247,353.24Penalties8,000.00TOTAL25,624,048.76

On appeal, the Court of Tax Appeal en banc affirmed the decision of the CTA Second Division ruling that the governments right to assess taxes has already prescribed. BIR appealed then appealed to the Supreme Court.

ISSUE:Whether or not the right of the government to assess taxes has already prescribed despite the waivers executed by the accountant of Kudos.

HELD:Supreme Court affirmed the decision of the CTA en banc stating that Section 222 of tax code provide that the period to assess and collect taxes may only be extended upon written agreement between the CIR and the taxpayer following the procedures laid down on RMO 20.90 and RDAO 05-01 such as:1. Waiver must in official form and the expiration period must be stated.2. Waiver must be notarized and must be signed by the duly authorized representative in case of representation.3. The revenue officer must sign the waiver indicating that the BIR has accepted and agreed to the waiver.4. Both the date of execution by the taxpayer and the acceptance by the revenue officer should be before the expiration of the period agreed upon in case of subsequent waiver.5. The fact of receipt by the taxpayer of his file copy must be indicated din the original. In the above case, there is not written authorization given by the management of Kudos to Pasco to execute such waiver. The date of execution of the waiver was not indicated to show if it was executed before the lapsed of the agreed period in the first waiver. The fact of the acceptance of the file copy of the taxpayer was not indicated on the original. The second waiver was filed after the lapsed of the agreed period in the first waiver which was on December 2002. These shows that the waivers were incomplete and defective thus not in accordance with the procedures provided for. Thus, due to the defective waivers, the prescriptive period of 3-years was not extended and it remained 3 years in this case thus the governments right as already prescribed making the assessment in effective.--------------------

National Marketing Corporation (NAMARCO) v. Tecson

On 10/14/55, the CFI-Mla. rendered judgment in a civil case, Price Stabilization Corp. vs. Tecson, et al. Copy of this decision was, on 10/21/55 served upon defendants in said case. On 12/21/65, NAMARCO, as successor to all the properties, assets, rights, and choses in action of Price, as pltff in that case and judgment creditor therein, filed w/ the same court, a complaint against defendants for the revival of the judgment rendered therein. Def. Tecson moved to dismiss said complaint, upon the ground of prescription of action, among others. The motion was granted by the court. Hence, the appeal to the CA w/c was certified to the SC, upon the ground that the only question raised therein is one of law.

ISSUE: W/n the present action for the revival of a judgment is barred by the statute of limitations.

Pursuant to Art. 1144 (3), NCC, an action for judgment must be brought w/in 10 yrs from the time the judgment sought to be revived has become final. This in turn, took place on 12/21/55 or 30 days from notice of the judgment-- w/c was received by defendants on 10/21/55-- no appeal having been taken therefrom. The issue is thus confined to the date on w/c the 10 yrs from 12/21/55 expired. Pltff alleges that it was 12/21/65, but appellee maintains otherwise, because :when the law speaks of years xxx it shall be understood that years are of 365 days each"-- and, in 1960 and 1964 being leap years, so that 10 yrs of 365 days each, or an aggregate of 3650 days, from 12/21/55, expired on 12/19/65.

Plaintiff.-appellant further insists that there is no question that when it is not a leap year, 12/21 to 12/21 of the following year is one year. If the extra day in a leap year is not a day of the year, bec. it is the 366th day, then to what year does it belong? Certainly, it must belong to the year where it falls, and therefore, that the 366 days constitute one yr.

HELD: The very conclusion thus reached by appellant shows that its theory contravenes the explicit provision of Art. 13 limiting the connotation of each "year"-- as the term is used in our laws-- to 365 days.[The action to enforce a judgment which became final on December 21, 1955 prescribes in 10 years. Since the Civil Code computes "years" in terms of 365 days each, the action has prescribed on December 19, 1955, since the two intervening leap years added two more days to the computation. It is not the calendar year that is considered.]---------------------

CIR v. Primetown Property GroupGR 161155;August 28, 2007

Facts: Gilbert Yap, vice chair of respondent Primetown Property Group, Inc., applied for the refund or credit of income tax respondents paid in 1997.The CTA found that respondent filed its final adjusted return on April 14, 1998. Thus, its right to claim a refund or credit commenced on that date. According to the CTA, the two-year prescriptive period under Section 229 of the NIRC for the filing of judicial claims was equivalent to 730 days. Because the year 2000 was a leap year, respondent's petition, which was filed 731 days after respondent filed its final adjusted return, was filed beyond the reglementary period.On appeal, the CA reversed and set aside the decision of the CTA.It ruled that Article 13 of the Civil Code did not distinguish between a regular year and a leap year. According to the CA, even if the year 2000 was a leap year, the periods covered by April 15, 1998 to April 14, 1999 and April 15, 1999 to April 14, 2000 should still be counted as 365 days each or a total of 730 days. A statute which is clear and explicit shall be neither interpreted nor construed.

Issue:Whether or not the counting of the 2-year prescriptive period for filing claim of refund is governed by the Civil Code.

Held:Counting of 2-year period for filing claim for refund is no longer in accordance with Art 13 of the Civil Code but under Sec 31 of EO 227 - The Administrative Code of 1987.

As between the Civil Code, which provides that a year is equivalent to 365 days, and the Administrative Code of 1987, which states that a year is composed of 12 calendar months, it is the latter that must prevail being the more recent law, following the legal maxim,Lex posteriori derogat priori.

In the case at bar, there are 24 calendar months in 2 years. For a Final Corporate ITR filed on Apr 14, 1998, the counting should start from Apr 15, 1998 and end on Apr 14, 2000. The procedure is 1stmonth -Apr 15, 1998 to May 14, 1998 . 24thmonth - Mar 15, 2000 to Apr 14, 2000. National Marketing v. Tecson, 139 Phil 584 (1969) is no longer controlling. The 2-year period should start to run from filing of the final adjusted return.We therefore hold that respondent's petition (filed on April 14, 2000) was filed on the last day of the 24thcalendar month from the day respondent filed its final adjusted return. Hence, it was filed within the reglementary period---------------------

Adamson, et al. v. Court of Appeals

FACTS:Case involves a petition for review on certiorari filed by petitioners LUCAS G. ADAMSON, THERESE JUNE D. ADAMSON, and SARA S. DE LOS REYES (private respondents), in their respective capacities as president, treasurer and secretary of Adamson Management Corporation (AMC) against then CIR Liwayway Vinzons-Chato (COMMISSIONER).

OnJune 20, 1990, Lucas Adamson andAMCsold 131,897 common shares of stock in Adamson and Adamson, Inc. (AAI) toAPACHolding Limited (APAC). The shares were valued atP7,789,995.00.OnJune 22, 1990,P159,363.21 was paid as capital gains tax for the transaction.OnOctober 12, 1990,AMCsold toAPACPhilippines, Inc. another 229,870 common shares of stock inAAIforP17,718,360.00.AMC paid the capital gains tax ofP352,242.96.OnOctober 15, 1993, the Commissioner issued a Notice of Taxpayer to AMC, Lucas G. Adamson, Therese June D. Adamson and Sara S. de los Reyes, informing them of deficiencies on their payment of capital gains tax and Value Added Tax (VAT).

A deficiency tax assessment was issued against Petitioners relating to their payment of capital gains tax and VAT on their sale of shares of stock and parcels of land. Subsequent to the preliminary conference, the CIR filed with the Department of Justice her Affidavit of Complaint against Petitioners. The Court of Appeals ultimately ruled that, in a criminal prosecution for tax evasion, assessment of tax deficiency is not required because the offense of tax evasion is complete or consummated when the offender has knowingly and willfully filed a fraudulent return with intent to evade the tax.

ISSUES:(1) Dis the CIR issue an assessment?(2) Must a criminal prosecution for tax evasion be preceded by a deficiency tax assessment?(3) Does the CTA have jurisdiction on the case?

HELD:(1) NO. The recommendation letter of the Commissioner cannot be considered a formal assessment as (a) it was not addressed to the taxpayers; (b) there was no demand made on the taxpayers to pay the tax liability, nor a period for payment set therein; (c) the letter was never mailed or sent to the taxpayers by the Commissioner. It was only an affidavit of the computation of the alleged liabilities and thus merely served as prima facie basis for filing criminal informations.

(2) YES. When fraudulent tax returns are involved as in the cases at bar, a proceeding in court after the collection of such tax may be begun without assessment considering that upon investigation of the examiners of the BIR, there was a preliminary finding of gross discrepancy in the computation of the capital gains taxes due from the transactions. The Tax Code is clear that the remedies may proceed simultaneously.

(3) NO. While the laws governing the CTA have expanded the jurisdiction of the Court, they did not change the jurisdiction of the CTA to entertain an appeal only from a final decision of the Commissioner, or in cases of inaction within the prescribed period. Since in the cases at bar, the Commissioner has not issued an assessment of the tax liability of the Petitioners, the CTA has no jurisdiction.-------------------

BPI v CIR G.R No. 139786 October 17, 2005

Facts: The BIR issued an Assessment for a deficiency of Documentary Stamp Tax (DST). The petitioner filed a protest letter, requesting for reconsideration with BIR however the latter did not reply. Instead, BIR issued a warrant for distraint/levy against petitioner BPI. The petitioner did not hear from BIR until September 11, 1997 when then Commissioner Liwayway Vinzons-Chado, denied its request for reconsideration.Subsequently, the petitioner filed a petition for review with the CTA, raising the defense of prescription. The CTA denied the petition and held that the period of prescription had not yet prescribed nonetheless, it held that the petitioner was not liable for the deficiency of DST.On appeal, the CA reversed the ruling of CTA on the issue of DST tax and held that the petitioner was indeed liable for DST.

ISSUE: Whether or not the right of the respondent to collect from petitioner BPI is barred by prescription?

Held: Yes, the Court ruled that the period to collect has already prescribed. The BIR has three years, counted from the date of actual filing of the return or from the last date prescribed by law for the filing of such return, whichever comes later, to assess a national internal revenue tax or to begin a court proceeding for the collection thereof without an assessment. In case of a false or fraudulent return with intent to evade tax or the failure to file any return at all, the prescriptive period for assessment of the tax due shall be 10 years from discovery by the BIR of the falsity, fraud, or omission. When the BIR validly issues an assessment, within either the three-year or ten-year period, whichever is appropriate, then the BIR has another three years after the assessment within which to collect the national internal revenue tax due thereon by distraint, levy, and/or court proceeding. The assessment of the tax is deemed made and the three-year period for collection of the assessed tax begins to run on the date the assessment notice had been released, mailed or sent by the BIR to the taxpayer.In their Decisions, both the CTA and the Court of Appeals found that the filing by petitioner BPI of a protest letter suspended the running of the prescriptive period for collecting the assessed DST. This Court, however, takes the opposing view, and, based on the succeeding discussion, concludes that there is no valid ground for suspending the running of the prescriptive period for collection of the deficiency DST assessed against petitioner BPI.The statute of limitations on assessment and collection of taxes is for the protection of the taxpayer and, thus, shall be construed liberally in his favor.----------------------

CIR v. Isabela Cultural Corp. (515 SCRA 556)Facts:When the Bureau of Internal Revenue disallowed Isabela Cultural Corporations claimed deductions for the years 1984-1986 in their 1986 taxes for expense deductions, to wit: (1) Expenses for auditing services for the year ending 31 December 1985;(2) Expenses for legal services for the years 1984 and 1985; and(3) Expense for security services for the months of April and May 1986.As such, the former charged the latter for deficiency income taxes. Isabela Cultural Corporation contests the assessment.Issues and Ruling:1. For a taxpayer using the accrual method, when do the facts present themselves in such a manner that the taxpayer must recognize income or expense?The accrual of income and expense is permitted when the all-events test has been met. This test requires: (1) fixing of a right to income or liability to pay; and (2) the availability of the reasonable accurate determination of such income or liability. The test does not demand that the amount of income or liability be known absolutely, only that a taxpayer has at his disposal the information necessary to compute the amount with reasonable accuracy. The all-events test is satisfied where computation remains uncertain, if its basis is unchangeable; the test is satisfied where a computation may be unknown, but is not as much as unknowable, within the taxable year.2. W/N the deductions were properly claimed by Isabela Cultural Corporation.The deductions for expenses for professional fees consisting of expenses for legal and auditing services are NOT allowable. However, the deductions for expenses for security services were properly claimed by Isabela Cultural Corporation. For the legal and auditing services, Isabela Cultural Corporation could have reasonably known the fees of those firms that it hired, thus satisfying the all-events test. As such, per Revenue Audit Memorandum Order No. 1-2000, they cannot validly be deducted from its gross income for the said year and were therefore properly disallowed by the BIR. As for the security services, because they were incurred in 1986, they could be properly claimed as deductions for the said year.

Notes:The requisites for the deductibility of ordinary and necessary trade, business, or professional expenses, like expenses paid for legal and auditing services, are:a. The expense must be ordinary and necessary;b. It must have been paid or incurred during the taxable year;c. It must have been paid or incurred in carrying on the trade or business of the taxpayer; andd. It must be supported by receipts, records, or other pertinent papers.Revenue Audit Memorandum Order No. 1-2000, provides that under the accrual method of accounting, expenses not being claimed as deductions by a taxpayer in the current year when they are incurred cannot be claimed as deduction from income for the succeeding year. Thus, a taxpayer who is authorized to deduct certain expenses and other allowable deductions for the current year but failed to do so cannot deduct the same for the next year.----------------------Advertising Associates, Inc. v. Court of Appeals (fulltext)This case is about the liability of Advertising Associates, lnc. for P382,700.16 as 3% contractor's percentage tax on its rental income from the lease of neon signs and billboards imposed by section 191 of the Tax Code.The Commissioner required Advertising Associates to pay P297,927.06 and P84,773.10 as contractor's tax for 1967-1971 and 1972, respectively, including 25% surcharge (the latter amount includes interest) on its income from billboards and neon signs.The basis of the assessment is the fact that the taxpayer's articles of incorporation provide that its primary purpose is to engage in general advertising business. Its income tax returns indicate that its business was advertisingAdvertising Associates contested the assessments in its 'letters of June 25, 1973 (for the 1967-71 deficiency taxes) and March 7, 1974 (for the 1972 deficiency). The Commissioner reiterated the assessments in his letters of July 12 and September 16,1974.The taxpayer requested the cancellation of the assessments in its letters of September 13 and November 21, 1974 (p. 3, Rollo).Inexplicably, for about four years there was no movement in the case.Then, on March 31, 1978, the Commissioner resorted to the summary remedy of issuing two warrants of distraint, directing the collection enforcement division to levy on the taxpayer's personal properties as would be sufficient to satisfy the deficiency taxes (pp. 4, 29 and 30, Rollo). The warrants were served upon the taxpayer on April 18 and May 25, 1978.More than a year later, Acting Commissioner Efren I. Plana wrote a letter dated May 23, 1979 in answer to the requests of the taxpayer for the cancellation of the assessments and thewithdrawal of the warrants of distraint.He justified the assessments by stating that the rental income of Advertising Associates from billboards and neon signs constituted fees or compensation for its advertising services. He requested the taxpayer to pay the deficiency taxes within ten days from receipt of the demand; otherwise, the Bureau would enforce the warrants of distraint. He closed his demand letter with this paragraph:This constitutes our final decision on the matter. If you are not agreeable, you may appeal to the Court of Tax Appeals within 30 days from receipt of this letter.Advertising Associates received that letter on June 18, 1979. Nineteen days later or on July 7, it filed its petition for review. In its resolution of August 28, 1979, the Tax Courtenjoined the enforcement of the warrants of distraint.The Tax Court did not resolve the case on the merits. It ruled that the warrants of distraint were the Commissioner'sappealable decisions.Since Advertising Associates appealed from the decision of May 23, 1979, the petition for review was filed out of time. It was dismissed. The taxpayer appealed to this Court.We hold that the petition for review was filed on time. The reviewable decision is that contained in Commissioner Plana's letter of May 23, 1979 and not the warrants of distraint.No amount of quibbling or sophistry can blink the fact that said letter, as its tenor shows, embodies the Commissioner's final decision within the meaning of section 7 of Republic Act No. 1125. The Commissioner said so. He even directed the taxpayer to appeal it to the Tax Court. That was the same situation inSt. Stephen's Association and St. Stephen's Chinese Girl's School vs. Collector of Internal Revenue,104 Phil. 314, 317-318.The directive is in consonance with this Court's dictum that the Commissioner should always indicate to the taxpayer in clear and unequivocal language what constitutes his final determination of the disputed assessment. That procedure is demanded by the pressing need for fair play, regularity and orderliness in administrative action (Surigao Electric Co., Inc. vs. Court of Tax Appeals, L-25289, June 28, 1974, 57 SCRA 523).On the merits of the case, the petitioner relies on the Collector's rulings dated September 12, 1960 and June 20, 1967 that it is neither an independent contractor nor a business agent (Exh. G and H).As already stated, it considers itself a media company, like a newspaper or a radio broadcasting company, but not an advertising agency in spite of the purpose stated in its articles of incorporation. It argues that its act of leasing its neon signs and billboards does not make it a business agent or an independent contractor. It stresses that it is a mere lessor of neon signs and billboards and does not perform advertising services.But the undeniable fact is that neon signs and billboards are primarily designed for advertising. We hold that the petitioner is a business agent and an independent contractor as contemplated in sections 191 and 194(v).However, in view of the prior rulings that the taxpayer is not a business agent nor an independent contractor and in view of the controversial nature of the deficiency assessments, the 25% surcharge should be eliminated (C. M. Hoskins & Co., Inc. vs. CIR , L-28383, June 22, 1976, 71 SCRA 511, 519; Imus Electric Co., Inc. vs. CIR , 125 Phil. 1084).Petitioner's last contention is that the collection of the tax had already prescribed. Section 332 of the 1939 Tax Code, now section 319 of the 1977 Tax Code, Presidential Decree No. 1158, effective on June 3, 1977, provides that the tax may be collected by distraint or levy or by a judicial proceeding begun 'within five years after the assessment of the tax".The taxpayer received on June 18, 1973 and March 5, 1974 the deficiency assessments herein. The warrants of distraint were served upon it on April 18 and may 25,1978 or within five years after the assessment of the tax. Obviously, the warrants were issued to interrupt the five-year prescriptive period. Its enforcement was not implemented because of the pending protests of the taxpayer and its requests for withdrawal of the warrants which were eventually resolved in Commissioner Plana's letter of May 23, 1979.It should be noted that the Commissioner did not institute any judicial proceeding to collect the tax. He relied on the warrants of distraint to interrupt the running of the statute of limitations. He gave the taxpayer ample opportunity to contest the assessments but at the same time safeguarded the Government's interest by means of the warrants of distraint.WHEREFORE, the judgment of the Tax Court is reversed and set aside. The Commissioner's deficiency assessments are modified by requiring the petitioner to pay the tax proper and eliminating the 25% surcharge, interest and penalty. In case of non-payment, the warrants of distrant should be implemented. The preliminary injunction issued by the Tax Court on August 28, 1979 restraining the enforcement of said warrants is lifted. No costs.

YABES vs. FLOJOFacts: Doroteo Yabes of Calamaniugan Cagayan, is an exclusive dealer of products of the International Harvester Macleod, Inc., received on or about May 1, 1962, a letter from the CIR dated March 27, 1962, demanding payment of the amount of P15,976.81, as commercial broker's fixed and percentage taxes plus surcharges and the sum of P2,530 as compromise penalty allegedly due from Yabes for the years 1956-1960;On May 11, 1962, Doroteo Yabes, through his counsel, filed with the Commissioner's Office his letter protesting the assessment of commercial broker's fixed and percentage taxes plus penalties against him on the ground that his agreements with the International Harvester Macleod, Inc. were of purchase and sale, and not of agency, hence he claimed he was not able to pay such kind of taxes;Thereafter, there ensued an exchange of correspondence between the lawyers of Doroteo Yabes and the Commissioner; the Commissioner in a letter dated August 3, 1962, informed Doroteo Yabes that he acted as a commercial broker "in accordance with the ruling of this Office in the case of Cirilo D. Constantino;"in turn, Doroteo Yabes, in a letter dated August 22, 1962, requested for the reinvestigation, or review of the case by the appellate division of the Bureau of Internal Revenue in accordance with standing rules, regulations or practice on the matter;Yabes also wrote the Commissioner on August 24, 1962, requesting that the appeal be held in abeyance pending final decision of the Case of Cirilo D. Constantino;in reply, the Commissioner informed Doroteo Yabes in a letter dated September 18, 1962, that the latter's request for reinvestigation was denied on the ground that he has "not submitted any evidence to offset the findings of this Office as to warrant a reinvestigation thereof,but eight days later or on September 26, 1962, the Commissioner wrote a letter advising Doroteo Yabes that "the administrative appeal ... will be held in abeyance pending the resolution of the issues in a similar case (obviously referring to the aforesaid Constantino case)"; To give time for the Commissioner to study the case and several other cases similar thereto, the lawyers of Doroteo Yabes agreed to file, and their client, Doroteo Yabes did file a tax waiver on October 20, 1962, extending the period of prescription to December 31, 1967;Then Doroteo Yabes died and no estate proceedings were instituted for the settlement of his estate; his widow also died during the pendency of the case; the petitioners are the children of the deceased taxpayer. On March 14, 1966, the Court of Tax Appeals decided the Constantino "test" case. The Court of Tax Appeals ruled that agreements entered into by Constantino with the International Harvester Macleod, Inc. were of purchase and sale, and not of agency, hence no commercial broker's fixed and percentage fees could be collected from the said taxpayer. However this Court on February 27, 1970, in G.R. No. L-25926 reversed the Court of Tax Appeals and ruled in favor of the CIR . After a lapse of about five years, the heirs of the deceased Doroteo Yabes, through their lawyers, received a letter from the Commissioner dated July 27, 1967, requesting that they "waive anew the Statute of Limitations" and further confirming the previous understanding that the final resolution of the protest of the deceased Doroteo Yabes was "being held in abeyance until the Supreme Court renders its decision on a similar case involving the same factual and legal issues brought to it on appeal" (referring to the Constantino "test" case);conformably with the request of the Commissioner, the heirs of Doroteo Yabes filed a revised waiver further extending the period of prescription to December 31, 1970. Thereafter, no word was received by the petitioners or their lawyers during the interim of more than three (3) years, but on January 20, 1971, petitioners as heirs of the deceased Doroteo Yabes received the summons and a copy of the complaint filed by the Commissioner. Taking the complaint as the final decision of the Commissioner on the disputed assessment against the deceased