Cases - Remedies 1

7/24/2019 Cases - Remedies 1

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G.R. No. 210987 November 24, 2014

THE PHILIPPINE AMERICAN LIFE AND GENERAL INSRANCE

C!MPAN", Petitioner,vs.THE SECRETAR" !F FINANCE #$% THE C!MMISSI!NER !F INTERNAL

RE&ENE, Respondents.

D E C I S I O N

&ELASC!, 'R., J.:

Nature of the Case

Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court assailin and see!in the reversal of the Resolutions of the Court of "ppeals#C"$ in C"%&.R. SP No. '()*+4, dated a- (, (/'' and 0anuar- (', (/'4, whi1hdis2issed outriht the petitioner3s appeal fro2 the Se1retar- of inan1e3s review of BIR Rulin No. /'5%'(( for la1! of urisdi1tion.

6he a1ts

Petitioner 6he Philippine "2eri1an 7ife and &eneral Insuran1e Co2pan- #Phila2life$used to own 4*+,5*/ Class " shares in Phila2 Care 8ealth S-ste2s, In1.#Phila2Care$, representin 4*.+*9 of the latter3s outstandin 1apital sto1!. In (//*,

petitioner, in a :id to divest itself of its interests in the health 2aintenan1eorani;ation industr-, o<ered to sell its shareholdins in Phila2Care throuh1o2petitive :iddin. 6hus, on Septe2:er (4, (//*, petitioner3s Class " shares weresold for =SD (,'*/,///, or PhP '/4,(5*,/ :ased on the prevailin e>1hane rateat the ti2e of the sale, to S6I Invest2ents, In1., who e2ered as the hihest :idder.

"fter the sale was 1o2pleted and the ne1essar- do1u2entar- sta2p and 1apitalains ta>es were paid, Phila2life ?led an appli1ation for a 1erti?1ate authori;inreistration@ta> 1learan1e with the Bureau of Internal Revenue #BIR$ 7are 6a>pa-ersServi1e Division to fa1ilitate the transfer of the shares. onths later, petitioner wasinfor2ed that it needed to se1ure a BIR rulin in 1onne1tion with its appli1ation dueto potential donorAs ta> lia:ilit-. In 1o2plian1e, petitioner, on 0anuar- 4, (/'(,reuested a rulin4 to 1on?r2 that the sale was not su:e1t to donorAs ta>, pointinout, in its reuest, the followin that the transa1tion 1annot attra1t donorAs ta>

lia:ilit- sin1e there was no donative intent and,ero, no ta>a:le donation, 1itin BIRRulin D"%#D6%/5$ )'5%/*F dated Nove2:er (), (//*G5 that the shares were sold attheir a1tual fair 2ar!et value and at ar2As lenthG that as lon as the transa1tion1ondu1ted is at ar2As lenthHHsu1h that a :ona ?de :usiness arrane2ent of thedealins is done inthe ordinar- 1ourse of :usinessHHa sale for less than an adeuate1onsideration is not su:e1t to donorAs ta>G and that donorAs ta> does not appl- tosaleof shares sold in an open :iddin pro1ess.

On 0anuar- 4, (/'(, however, respondent Co22issioner on Internal Revenue#Co22issioner$ denied Phila2lifeAs reuest throuh BIR Rulin No. /'5%'(. "sdeter2ined :- the Co22issioner, the sellin pri1e of the shares thus sold was lowerthan their :oo! value :ased on the ?nan1ial state2ents of Phila2Care as of the endof (//+. "s su1h, the Co22isioner held, donorAs ta> :e1a2e i2posa:le on thepri1e di<eren1e pursuant to Se1. '// of the National Internal Revenue Code #NIRC$,

vi;

SEC. '//. 6ransfer for 7ess 6han "deuate and full Consideration.% here propert-,other than real propert- referred to in Se1tion (4#D$, is transferred for less than anadeuate and full 1onsideration in 2one- or 2one-As worth, then the a2ount :-whi1h the fair 2ar!et value of the propert- e>1eeded the value of the 1onsiderationshall, for the purpose of the ta> i2posed :- this Chapter, :e dee2ed a ift, and shall:e in1luded in 1o2putin the a2ount of ifts 2ade durin the 1alendar -ear.

6he afore%uoted provision, the Co22issioner added, is i2ple2ented :- RevenueReulation %(//+ #RR %(//+$, whi1h provides

SEC. ). S"7E, B"R6ER OR EJC8"N&E O S8"RES O S6OCK NO6 6R"DED 68RO=&8" 7OC"7 S6OCK EJC8"N&E P=RS="N6 6O SECS. (4#C$, (5#"$#$, (5#B$, ()#D$#($,(+#"$#)$#1$, (+#B$#5$#1$ O 68E 6"J CODE, "S "ENDED. L

> > > >

#1$ Deter2ination of "2ount and Re1onition of &ain or 7oss H

#1.'$ In the 1ase of 1ash sale, the sellin pri1e shall :e the 1onsideration per deed of sale.

> > > >

#1.'.4$ In 1ase the fair 2ar!et value of the shares of sto1! sold, :artered, ore>1haned is reater than the a2ount of 2one- and@or fair 2ar!et value of the

propert- re1eived, the e>1ess of the fair 2ar!et value of the shares of sto1! sold,:artered or e>1haned overthe a2ount of 2one- and the fair 2ar!et value of thepropert-, if an-, re1eived as 1onsideration shall :e dee2ed a ift su:e1t to thedonorAsta> under Se1tion '// of the 6a> Code, as a2ended.

> > > >

#1.($ De?nition of Mfair 2ar!et valueAof Shares of Sto1!. H or purposes of thisSe1tion, Mfair 2ar!et valueA of the share of sto1! sold shall :e

> > > >

#1.(.($ In the 1ase of shares of sto1! not listed and traded in the lo1al sto1!e>1hanes, the :oo! value of the shares of sto1! as shown in the ?nan1ialstate2ents dul- 1erti?ed :- an independent 1erti?ed pu:li1 a11ountant nearest to

the date of sale shall :e the fair 2ar!et value.

In view of the foreoin, the Co22issioner ruled that the di<eren1e :etween the:oo! value and the sellin pri1e in the sales transa1tion is ta>a:le donation su:e1tto a /9 donorAs ta> under Se1tion **#B$ of the NIRC. )Respondent Co22issionerli!ewise held that BIR Rulin D"%#D6%/5$ )'5%/*F, on whi1h petitioner an1hored its1lai2, has alread- :een revo!ed :- Revenue e2orandu2 Cir1ular #RC$ No. (5%(/''.+

"rieved, petitioner reuested respondent Se1retar- of inan1e #Se1retar-$ toreview BIR Rulin No. /'5%'(, :ut to no avail. or on Nove2:er (, (/'(,respondent Se1retar- ar2ed the Co22issionerAs assailed rulin in its entiret-.*

Rulin of the Court of "ppeals

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Not 1ontented with the adverse results, petitioner elevated the 1ase to the C" via apetition for review under Rule 4, assinin the followin errors'/

".

6he 8onora:le Se1retar- of inan1e ravel- erred in not ?ndin that the appli1ationof Se1tion )#1.(.($ of RR /%/+ in the "ssailed Rulin and RC (5%'' is void insofaras it altersthe 2eanin and s1ope of Se1tion '// of the 6a> Code.

B.

6he 8onora:le Se1retar- of inan1e ravel- erred in ?ndin that Se1tion '// of the 6a> Code is appli1a:le tothe sale of the Sale of Shares.

'.

6he Sale of Shares were sold at their fair 2ar!et value and for fair and full1onsideration in 2one- or 2one-As worth.

(.

6he sale of the Sale Shares is a :ona ?de :usiness transa1tion without an- donativeintent and is therefore :e-ond the a2:it of Se1tion '// of the 6a> Code.

.

It is superuous for the BIR to reuire an e>press provision for the e>e2ption of thesale of the Sale Shares fro2 donorAs ta> sin1e Se1tion '// of the 6a> Code does note>pli1itl- su:e1t the transa1tion to donorAs ta>.

C.

6he 8onora:le Se1retar- of inan1e ravel- erred in failin to ?nd that in thea:sen1e of an- of the rounds 2entioned in Se1tion (4 of the 6a> Code, rules andreulations, rulins or 1ir1ulars H su1h as RC (5%'' H 1annot :e iven retroa1tiveappli1ation to the preudi1e of Phila2life.

On a- (, (/', the C" issued the assailed Resolution dis2issin the C" Petition,thusl-

8EREORE, the Petition for Review dated 0anuar- *, (/' is DISISSED for la1! of urisdi1tion.

SO ORDERED.

In disposin of the C" petition, the appellate 1ourt ratio1inated that it is the Court of 6a> "ppeals #C6"$, pursuant to Se1. )#a$#'$ of Repu:li1 "1t No. ''(5 #R" ''(5$,'' asa2ended, whi1h has urisdi1tion over the issues raised. 6he outriht dis2issal, sothe C" held, is predi1ated on the postulate that BIR Rulin No. /'5%'( was issued inthe e>er1ise of the Co22issionerAs power to interpret the NIRC and other ta> laws.Conseuentl-, reuestin for its review 1an :e 1ateori;ed as other 2atters arisinunder the NIRC or other laws ad2inistered :- the BIR, whi1h is under the

urisdi1tion of the C6", not the C".

Phila2life eventuall- souht re1onsideration :ut the C", in its euall- assailed

0anuar- (', (/'4 Resolution, 2aintained its earlier position. 8en1e, the instantre1ourse.

Issues

Stripped to the essentials, the petition raises the followin issues in :oth pro1edureand su:stan1e

'. hether or not the C" erred in dis2issin the C" Petition for la1! of urisdi1tionGand

(. hether or not the pri1e di<eren1e in petitionerAs adverted sale of shares inPhila2Care attra1ts donorAs ta>.

Pro1edural "ru2ents

a. PetitionerAs 1ontentions

Insistin on the propriet- of the interposed C" petition, Phila2life, while 1on1edinthat respondent Co22issioner issued BIR Rulin No. /'5%'( in a11ordan1e with herauthorit- to interpret ta> laws, arued nonetheless that su1h rulin is su:e1t toreview :- the Se1retar- of inan1e under Se1. 4 of the NIRC, to wit

SEC6ION 4. Power of the Co22issioner to Interpret 6a> 7aws and to De1ide 6a>Cases. H 6he power to interpret the provisions of this Code and other ta> laws shall:e under the e>1lusive and oriinal urisdi1tion of the Co22issioner, su:e1t toreview :- the Se1retar- of inan1e.

6he power to de1ide disputed assess2ents, refunds of internal revenue ta>es, feesor other 1hares, penalties i2posed in relation thereto, or other 2atters arisinunder this Code orother laws or portions thereof ad2inistered :- the Bureau of Internal Revenue is vested in the Co22issioner, su:e1t to the e>1lusive appellate

urisdi1tion of the Court of 6a> "ppeals. Petitioner postulates that there is a need todi<erentiate the rulins pro2ulated :- the respondent Co22issioner relatin tothose rendered under the ?rst pararaph of Se1. 4 of the NIRC, whi1h are appeala:leto the Se1retar- of inan1e, fro2 those rendered under the se1ond pararaph of Se1.4 of the NIRC, whi1h are su:e1t to review on appeal with the C6".

6his distin1tion, petitioner arues, is readil- 2ade apparent :- Depart2ent OrderNo. )%/(,'( as 1ir1ulari;ed :- RC No. 4/%"%/(.

Phila2life further averred that Se1.) of R" ''(5, as a2ended, does not ?ndappli1ation in the 1ase at :ar sin1e it onl- overns appeals fro2 the Co22issionerAsrulins under the se1ond pararaph and does not en1o2pass rulins fro2 theSe1retar- of inan1e in the e>er1ise of his power of review under the ?rst, as whatwas elevated to the C". It added that under R" ''(5, as a2ended, the onl-de1isions of the Se1retar- appeala:le to the C6" are those rendered in 1usto2s1ases elevated to hi2 auto2ati1all- under Se1tion ('5 of the 6ari< and Custo2sCode.'

6here is, thus, a ap in the law when the NIRC, as 1ou1hed, and R" ''(5, asa2ended, failed to suppl- where the rulins of the Se1retar- in its e>er1ise of itspower of review under Se1. 4 of the NIRC are appeala:le to. 6his ap, petitionersu:2its, was re2edied :- British "2eri1an 6o:a11o v. Ca2a1ho'4 wherein the Courtruled that where what is assailed is the validit- or 1onstitutionalit- of a law, or a ruleor reulation issued :- the ad2inistrative aen1-, the reular 1ourts have

urisdi1tion to pass upon the sa2e.

















In su2, appeals uestionin the de1isions of the Se1retar- of inan1e in the e>er1iseof its power of review under Se1. 4 of the NIRC are not within the C6"As li2itedspe1ial urisdi1tion and, a11ordin to petitioner, are appeala:le to the C" via a Rule4 petition for review.

:. RespondentsA 1ontentions

Before the C", respondents 1ountered petitionerAs pro1edural aru2ents :- 1lai2inthat even assu2in aruendo that the C6" does not have urisdi1tion over the 1ase,Phila2life, nevertheless,1o22itted a fatal error when it failed to appeal the

Se1retar- of inan1eAs rulin to the O1e of the President #OP$. "s 2ade apparent:- the rules, the Depart2ent of inan1e is not a2on the aen1ies and uasi%udi1ial:odies enu2erated under Se1. ', Rule 4 of the Rules of Court whose de1isions andrulins are appeala:le throuh a petition for review.'5 6his is in star! 1ontrast to theOPAs spe1i?1 2ention under the sa2e provision, so respondents pointed out.

6o further reinfor1e their aru2ent, respondents 1ite the PresidentAs power of reviewe2anatin fro2 his power of 1ontrol as enshrined under Se1. ') of "rti1le QII of theConstitution, whi1h reads

Se1tion ').6he President shall have 1ontrol of all the e>e1utive depart2ents,:ureaus, and o1es. 8e shall ensure that the laws :e faithfull- e>e1uted.

6he nature and e>tent of the PresidentAs 1onstitutionall- ranted power of 1ontrolhave :eende?ned in a plethora of 1ases, 2ost re1entl- in El2a v. 0a1o:i,' wherein itwas held that

> > > 6his power of 1ontrol, whi1h even Conress 1annot li2it, let alone withdraw,2eans the power of the Chief E>e1utive to review, alter, 2odif-, nullif-, or set asidewhat a su:ordinate, e.., 2e2:ers of the Ca:inet and heads of line aen1ies, haddone in the perfor2an1e of their duties and to su:stitute the ud2ent of the for2erfor that of the latter.

In their Co22ent on the instant petition, however, respondents asseverate that theC" did not err in its holdin respe1tin the C6"As urisdi1tion over the 1ontrovers-.

6he CourtAs Rulin

6he petition is un2eritorious.

Reviews :- the Se1retar- of inan1e pursuant to Se1. 4 of the NIRC are appeala:le tothe C6"

6o re1apitulate, three di<erent, if not 1oni1tin, positions as indi1ated :elow have:een advan1ed :- the parties and :- the C" as the proper re2ed- open for assailinrespondentsA rulins

'. Petitioners 6he rulin of the Co22issioner is su:e1t to review :- the Se1retar-under Se1. 4 of the NIRC, and that of the Se1retar- to the C" via Rule 4G

(. Respondents 6he rulin of the Co22issioner is su:e1t to review :- theSe1retar- under Se1. 4 of the NIRC, and that of the Se1retar- to the O1e of thePresident :efore appealin to the C" via a Rule 4 petitionG and

. C" 6he rulin of the Co22issioner is su:e1t to review :- the C6".

e now resolve.

Preli2inaril-, it :ears stressin that there is no dispute that what is involved hereinis the respondent Co22issionerAs e>er1ise of power under the ?rst pararaph of Se1. 4 of the NIRCHHthe power to interpret ta> laws. 6his, in fa1t, was re1oni;ed :-the appellate 1ourt itself, :ut erroneousl- held that her a1tion in the e>er1ise of su1hpower is appeala:le dire1tl- to the C6". "s 1orre1tl- pointed out :- petitioner, Se1. 4of the NIRC readil- provides that the Co22issionerAs power to interpret theprovisions of this Code and other ta> laws is su:e1t to review :- the Se1retar- of inan1e. 6he issue that now arises is thisHHwhere does one see! i22ediate re1ourse

fro2 the adverse rulin of the Se1retar- of inan1e in its e>er1ise of its power of review under Se1. 4

"d2ittedl-, there is no provision in law that e>pressl- provides where e>a1tl- therulin of the Se1retar- of inan1e under the adverted NIRC provision is appeala:leto. 8owever, e ?nd that Se1. )#a$#'$ of R" ''(5, as a2ended, addresses thesee2in ap in the law asit vests the C6", al:eit i2pliedl-, with urisdi1tion over theC" petition as other 2atters arisin under the NIRC or other laws ad2inistered :-the BIR. "s stated

Se1. ). 0urisdi1tion.% 6he C6" shall e>er1ise

a. E>1lusive appellate urisdi1tion to review :- appeal, as herein provided

'. De1isions of the Co22issioner of Internal Revenue in 1ases involvin disputedassess2ents, refunds of internal revenue ta>es, fees or other 1hares, penalties inrelation thereto, or other 2atters arisin under the National Internal Revenue orother laws ad2inistered :- the Bureau of Internal Revenue. #e2phasis supplied$

Even thouh the provision suests that it onl- 1overs rulins of the Co22issioner,e hold that it is, nonetheless, su1ient enouh to in1lude appeals fro2 theSe1retar-As review under Se1. 4 of the NIRC.

It is a>io2ati1 that laws should :e iven a reasona:le interpretation whi1h does notdefeat the ver- purpose for whi1h the- were passed. ') Courts should not follow theletter of a statute when to do so would depart fro2 the true intent of the leislatureor would otherwise -ield 1on1lusions in1onsistent with the purpose of the a1t. '+ 6hisCourt has, in 2an- 1ases involvin the 1onstru1tion of statutes, 1autioned aainstnarrowl- interpretin a statute as to defeat the purpose of the leislator, and

ree1ted the literal interpretation of statutes if todo so would lead to unust or a:surdresults.'*

Indeed, to leave undeter2ined the 2ode of appeal fro2 the Se1retar- of inan1ewould :e an inusti1e to ta>pa-ers preudi1ed :- his adverse rulins. 6o re2ed- thissituation, ei2pl- fro2 the purpose of R" ''(5 and its a2endator- laws that theC6" is the proper foru2 with whi1h to institute the appeal. 6his is not, and shouldnot, in an- wa-, :e ta!en as a deroation of the power of the O1e of President :ut2erel- as re1onition that 2atters 1allin for te1hni1al !nowlede should :ehandled :- the aen1- or uasi%udi1ial :od- with spe1iali;ation over the1ontrovers-. "s the spe1iali;ed uasi%udi1ial aen1- 2andated to adudi1ate ta>,1usto2s, and assess2ent 1ases, there 1an :e no other 1ourt of appellate urisdi1tionthat 1an de1ide the issues raised inthe C" petition, whi1h involves the ta> treat2entof the shares of sto1!s sold. Petitioner, thouh, ne>tinvites attention to the rulin in

=rsal v. Court of 6a> "ppeals(/ to arue aainst rantin the C6" urisdi1tion :-i2pli1ation, vi;



















Repu:li1 "1t No. ''(5 1reatin the Court of 6a> "ppeals did not rant it :lan!etauthorit- to de1ide an- and all ta> disputes. De?nin su1h spe1ial 1ourtAs

urisdi1tion, the "1t ne1essaril- li2ited its authorit- to those 2atters enu2eratedtherein. Inline with this idea we re1entl- approved said 1ourtAs order ree1tin anappeal to it :- 7ope; Sons fro2 the de1ision of the Colle1tor ofCusto2s, :e1ausein our opinion its urisdi1tion e>tended onl- to a review of the de1isions of theCo22issioner of Custo2s, as provided :-the statute L and not to de1isions of theColle1tor of Custo2s. #7ope; Sons vs. 6he Court of 6a> "ppeals, '// Phil., +5/, 5O<. &a;., '/F /5$.

> > > >

> > > Repu:li1 "1t No. ''(5 is a 1o2plete law :- itself and e>pressl- enu2erates the2atters whi1h the Court of 6a> "ppeals 2a- 1onsiderG su1h enu2eration e>1ludes allothers :- i2pli1ation. E>pressio unius est e>1lusio alterius.

PetitionerAs 1ontention is untena:le. 7est the rulin in =rsal:e ta!en out of 1onte>t,:ut worse as a pre1edent, it 2ust :e noted that the pri2ar- reason for the dis2issalof the said 1ase was that the petitioner therein la1!ed the personalit- to ?le the suitwith the C6" :e1ause he was not adversel- a<e1ted :- a de1ision or rulin of theColle1tor of Internal Revenue, as was reuired under Se1. '' of R" ''(5.(' "s held

e share the view that the assessor had no personalit- to resort to the Court of 6a>"ppeals. 6he rulins of the Board of "ssess2ent "ppeals did not adversel- a<e1t

hi2. "t 2ost it was the Cit- of Ce:u that had :een adversel- a<e1ted in the sensethat it 1ould not thereafter 1olle1t hiher realt- ta>es fro2 the a:ove2entionedpropert- owners. 8is opinion, it is true had :een overruledG :ut the overrulinini1ted no 2aterial da2ae upon hi2 or his o1e. "nd the Court of 6a> "ppealswas not 1reated to de1ide 2ere 1oni1ts of opinion :etween ad2inistrative o1ersor aen1ies. I2aine an in1o2e ta> e>a2iner resortin to the Court of 6a> "ppealswhenever the Colle1tor of Internal Revenue 2odi?es, or lower his assess2ent on thereturn of a ta> pa-erT((

6he appellate power of the C6" in1ludes 1ertiorari

Petitioner is ui1! to point out, however, that the rounds raised in its C" petitionin1luded the nullit- of Se1tion )#1.(.($ of RR /%/+ and RC (5%''. In an atte2pt todivest the C6" urisdi1tion over the 1ontrovers-, petitioner then 1ites British"2eri1an 6o:a11o, wherein this Court has e>pounded on the li2ited urisdi1tion of

the C6" in the followin wise

hile the a:ove statute 1onfers on the C6" urisdi1tion to resolve ta> disputes ineneral, this does not in1lude 1ases where the 1onstitutionalit- of a law or rule is1hallened. here what is assailed is the validit- or 1onstitutionalit- of a law, or arule or reulation issued :- the ad2inistrative aen1- in the perfor2an1e of itsuasi leislative fun1tion, the reular 1ourts have urisdi1tion to pass upon thesa2e. 6he deter2ination of whether a spe1i?1 rule or set of rules issued :- anad2inistrative aen1- 1ontravenes the law or the 1onstitution is within the

urisdi1tion of the reular 1ourts. Indeed, the Constitution vests the power of udi1ialreview or the power to de1lare a law, treat-, international or e>e1utive aree2ent,presidential de1ree, order, instru1tion, ordinan1e, or reulation inthe 1ourts,in1ludin the reional trial 1ourts. 6his is within the s1ope of udi1ial power, whi1hin1ludes the authorit- of the 1ourts to deter2ine inan appropriate a1tion the validit-

of the a1ts of the politi1al depart2ents. 0udi1ial power in1ludes the dut- of the1ourts of usti1e to settle a1tual 1ontroversies involvin rihts whi1h are leall-

de2anda:le and enfor1ea:le, and to deter2ine whether or not there has :een arave a:use of dis1retion a2ountin to la1! or e>1ess of urisdi1tion on the part of an- :ran1h or instru2entalit- of the &overn2ent.(

Qis%a%vis British "2eri1an 6o:a11o, it :ears to stress what appears to :e a1ontrastin rulin in "sia International "u1tioneers, In1. v. Para-no, 0r., to wit

Si2ilarl-, in CIR v. 7eal, pursuant to Se1tion '' of Presidential De1ree No. ''5+#6he National Internal Revenue Code, as a2ended$ whi1h states that dFealers inse1urities shall pa- a ta> euivalent to si> #9$ per 1entu2 of their ross in1o2e.

7endin investors shall pa- a ta> euivalent to ?ve #59$ per 1ent, of their rossin1o2e, the CIR issued Revenue e2orandu2 Order #RO$ No. '5%*' i2posin 59lendin investorAs ta> on pawnshops :ased on their ross in1o2e and reuirin allinvestiatin units of the BIR to investiate and assess the lendin investorAs ta>due fro2 the2. 6he issuan1e of RO No. '5%*' was an o<shoot of the CIRAs ?ndinthat the pawnshop :usiness is a!in to that of lendin investors as de?ned inSe1tion '5)#u$ of the 6a> Code. Su:seuentl-, the CIR issued RC No. 4%*'su:e1tin pawn ti1!ets to do1u2entar- sta2p ta>. Respondent therein, 0ose?na7eal, owner and operator of 0ose?naAs Pawnshop, as!ed for a re1onsideration of :othRO No. '5%*' and RC No. 4%*', :ut the sa2e was denied :- petitioner CIR. 7ealthen ?led a petition for prohi:ition with the R6C of San ateo, Ri;al, see!in toprohi:it petitioner CIR fro2 i2ple2entin the revenue orders. 6he CIR, throuh theOS&, ?led a 2otion to dis2iss on the round of la1! of urisdi1tion. 6he R6C deniedthe 2otion. Petitioner ?led a petition for 1ertiorari and prohi:ition with the C" whi1h

dis2issed the petition for la1! of :asis. In reversin the C", dissolvin the rit of Preli2inar- Inun1tion issued :- the trial 1ourt and orderin the dis2issal of the 1ase:efore the trial 1ourt, the Supre2e Court held that tFhe uestioned RO No. '5%*'and RC No. 4%*' are a1tuall- rulins or opinions of the Co22issioneri2ple2entin the 6a> Code on the ta>a:ilit- of pawnshops. 6he- were issuedpursuant to the CIRAs power under Se1tion (45 of the 6a> Code to 2a!e rulins oropinions in 1onne1tion with the i2ple2entation of the provisions of internal revenuelaws, in1ludin rulin on the 1lassi?1ation of arti1les of sales and si2ilarpurposes.6he Court held that under R.". No. ''(5 #"n "1t Creatin the Court of 6a>"ppeals$, as a2ended, su1h rulins of the CIR are appeala:le to the C6".

In the 1ase at :ar, the assailed revenue reulations and revenue 2e2orandu21ir1ulars are a1tuall- rulins or opinions of the CIR on the ta> treat2ent of 2otorvehi1les sold at pu:li1 au1tion within the SSEU to i2ple2ent Se1tion '( of R.". No.

)(() whi1h provides that e>portation or re2oval of oods fro2 the territor- of theSSEUF to the other parts of the Philippine territor- shall :e su:e1t to 1usto2s dutiesand ta>es under the Custo2s and 6ari< Codeand other relevant ta> laws of thePhilippines. 6he- were issued pursuant to the power of the CIR under Se1tion 4 of the National Internal Revenue Code > > >.(4 #e2phasis added$

6he respe1tive tea1hins in British "2eri1an 6o:a11o and "sia International"u1tioneers, at ?rst :lush, appear to :ear no 1oni1tHHthat when the validit- or1onstitutionalit- of an ad2inistrative rule or reulation is assailed, the reular 1ourtshave urisdi1tionG and if what is assailed are rulins or opinions of the Co22issioneron ta> treat2ents, urisdi1tion over the 1ontrovers- is loded with the C6". 6hepro:le2 with the a:ove postulates, however, is that the- failed to ta!e into1onsideration one 1ru1ial pointHHa ta>pa-er 1an raise :oth issues si2ultaneousl-.

Petitioner avers that there is now a trend wherein :oth the C6" and the C" dis1lai2 urisdi1tion over ta> 1ases on the one hand, 2ere pra-er for the de1laration of a ta>











2easureAs un1onstitutionalit- or invalidit- :efore the C6" 1an result in a petitionAsoutriht dis2issal, and on the other hand, the C" will li!ewise dis2iss the sa2epetition should it ?nd that the pri2ar- issue is not the ta> 2easureAs validit- :ut theassess2ent or ta>a:ilit- of the transa1tion or su:e1t involved. 6o illustrate thispoint, petitioner 1ites the assailed Resolution, thusl- "d2ittedl-, in British "2eri1an

6o:a11o vs. Ca2a1ho, the Supre2e Court has ruled that the deter2ination of whether a spe1i?1 rule or set of rules issued :- an ad2inistrative aen1-1ontravenes the law or the 1onstitution is within the urisdi1tion of the reular1ourts, not the C6".

> > > >

Petitioner essentiall- uestions the CIRAs rulin that PetitionerAs sale of shares is ata>a:le donation under Se1. '// of the NIRC. 6he validit- of Se1. '// of the NIRC,Se1. ) #C.(.($ and RC (5%'' is 2erel- uestioned in1identall- sin1e it was used :-the CIR as :ases for its unfavoura:le opinion. Clearl-, the Petition involves an issueon the ta>a:ilit- of the transa1tion rather than a dire1t atta1! on the1onstitutionalit- of Se1. '//, Se1.) #1.(.(.$ of RR /%/+ and RC (5%''. 6hus, theinstant Petition properl- pertains to the C6" under Se1. ) of R" *(+(.

"s a result of the see2inl- 1oni1tin pronoun1e2ents, petitioner su:2its thatta>pa-ers are now at a uandar- on what 2ode of appeal should :e ta!en, to whi1h1ourt or aen1- it should :e ?led, and whi1h 1ase law should :e followed.

PetitionerAs a:ove su:2ission is spe1ious.

In the re1ent 1ase of Cit- of anila v. &re1ia%Cuerdo,(5 the Court en :an1 has ruledthat the C6" now has the power of 1ertiorari in 1ases within its appellate urisdi1tion.

6o elu1idate

6he prevailin do1trine is that the authorit- to issue writs of 1ertiorari involves thee>er1ise of oriinal urisdi1tion whi1h 2ust :e e>pressl- 1onferred :- theConstitution or :- law and 1annot :e i2plied fro2 the 2ere e>isten1e of appellate

urisdi1tion. 6hus, > > > this Court has ruled aainst the urisdi1tion of 1ourts ortri:unals over petitions for 1ertiorari on the round that there is no law whi1he>pressl- ives these tri:unals su1h power. It2ust :e o:served, however, that > > >these rulins pertain not to reular 1ourts :ut to tri:unals e>er1isin uasiudi1ialpowers. ith respe1t tothe Sandian:a-an, Repu:li1 "1t No. +(4* now provides thatthe spe1ial 1ri2inal 1ourt has e>1lusive oriinal urisdi1tion over petitions for the

issuan1e of the writs of 2anda2us, prohi:ition, 1ertiorari, ha:eas 1orpus,inun1tions, and other an1illar- writs and pro1esses in aid of its appellate urisdi1tion.

In the sa2e 2anner, Se1tion 5 #'$, "rti1le QIII of the '*+) Constitution rants powerto the Supre2e Court, in the e>er1ise of its oriinal urisdi1tion, to issue writs of 1ertiorari, prohi:ition and 2anda2us. ith respe1t to the Court of "ppeals, Se1tion* #'$ of Batas Pa2:ansa Bl. '(* #BP '(*$ ives the appellate 1ourt, also in thee>er1ise of its oriinal urisdi1tion, the power to issue, a2on others, a writ of 1ertiorari, whether or not in aid of its appellate urisdi1tion. "s to Reional 6rialCourts, the power to issue a writ of 1ertiorari, in the e>er1ise of their oriinal

urisdi1tion, is provided under Se1tion (' of BP '(*.

6he foreoin notwithstandin, while there is no e>press rant of su1h power, withrespe1t to the C6", Se1tion ', "rti1le QIII of the '*+) Constitution provides,

nonetheless, that udi1ial power shall :e vested in one Supre2e Court and in su1hlower 1ourts as 2a- :e esta:lished :- law and that udi1ial power in1ludes the dut-

of the 1ourts of usti1e to settle a1tual 1ontroversies involvin rihts whi1h areleall- de2anda:le and enfor1ea:le, and to deter2ine whether or not there has:een a rave a:use of dis1retion a2ountin to la1! or e>1ess of urisdi1tion on thepart of an- :ran1h or instru2entalit- of the &overn2ent.

On the strenth of the a:ove 1onstitutional provisions, it 1an :e fairl- interpretedthat the power of the C6" in1ludes that of deter2inin whether or not there has:een rave a:use of dis1retion a2ountin to la1! or e>1ess of urisdi1tion on thepart of the R6C in issuin an interlo1utor- order in 1ases fallin within the e>1lusiveappellate urisdi1tion of the ta> 1ourt. It, thus, follows that the C6", :- 1onstitutional

2andate, is vested with urisdi1tion to issue writs of 1ertiorari in these 1ases.

Indeed, in order for an- appellate 1ourt to e<e1tivel- e>er1ise its appellate urisdi1tion, it 2ust have the authorit- to issue, a2on others, a writ of 1ertiorari. Intransferrin e>1lusive urisdi1tion over appealed ta> 1ases to the C6", it 1anreasona:l- :e assu2ed that the law intended to transfer also su1h power as isdee2ed ne1essar-, if not indispensa:le, in aid of su1h appellate urisdi1tion. 6here isno per1eiva:le reason wh- the transfer should onl- :e 1onsidered as partial, nottotal. #e2phasis added$

Evidentl-, Cit- of anila1an :e 1onsidered as a departure fro2 =rsal in that in spiteof there :ein no e>press rant in law, the C6" is dee2ed ranted with powers of 1ertiorari :- i2pli1ation. oreover, Cit- of anila dia2etri1all- opposes British"2eri1an 6o:a11o to the e<e1t that it is now within the power of the C6", throuh its

power of 1ertiorari, to rule on the validit- of a parti1ular ad2inistrative ruleorreulation so lon as it is within its appellate urisdi1tion. 8en1e, it 1an now rule notonl- on the propriet- of an assess2ent or ta> treat2ent of a 1ertain transa1tion, :utalso on the validit- of the revenue reulation or revenue 2e2orandu2 1ir1ular onwhi1h the said assess2ent is :ased.

&uided :- the do1trinal tea1hin in resolvin the 1ase at :ar, the fa1t that the C"petition not onl- 1ontested the appli1a:ilit- of Se1. '// of the NIRC over the salestransa1tion :ut li!ewise uestioned the validit- of Se1. ) #1.(.($ of RR /%/+ andRC (5%'' does not divest the C6" of its urisdi1tion over the 1ontrovers-, 1ontrar-to petitioner3s aru2ents.

6he pri1e di<eren1e is su:e1t to donor3s ta>

Petitioner3s su:stantive aru2ents are unavailin. 6he a:sen1e of donative intent, if

that :e the 1ase, does not e>e2pt the sales of sto1! transa1tion fro2 donor3s ta>sin1e Se1. '// of the NIRC 1ateori1all- states that the a2ount :- whi1h the fair2ar!et value of the propert- e>1eeded the value of the 1onsideration shall :edee2ed a ift.1âwphi1 6hus, even if there is no a1tual donation, the di<eren1e inpri1e is 1onsidered a donation :- ?1tion of law.

oreover, Se1. )#1.(.($ of RR /%/+ does not alter Se1. '// of the NIRC :ut 2erel-sets the para2eters for deter2inin the fair 2ar!et value of a sale of sto1!s. Su1hissuan1e was 2ade pursuant to the Co22issioner3s power to interpret ta> laws andto pro2ulate rules and reulations for their i2ple2entation.

7astl-, petitioner is 2ista!en in statin that RC (5%'', havin :een issued after thesale, was :ein applied retroa1tivel- in 1ontravention to Se1. (4 of theNIRC.( Instead, it 2erel- 1alled for the stri1t appli1ation of Se1. '//, whi1h was

alread- in for1e the 2o2ent the NIRC was ena1ted.








8EREORE, the petition is here:- DISISSED. 6he Resolutions of the Court of "ppeals in C"%&.R. SP No. '()*+4 dated a- (, (/' and 0anuar- (', (/'4 arehere:- "IRED.

SO ORDERED



G.R. No. L(1)*+* '#$#r- )1, 19*2

C!LLECT!R !F INTERNAL RE&ENE, $o/ Commo$er, petitioner,vs.AL3ERT! D. 3ENIPA"!, respondent.

DI!N, J.:

6his is an appeal ta!en :- the Colle1tor of Internal Revenue fro2 the de1ision of theCourt of 6a> "ppeals dated 0anuar- (, '*4+, reversin the one rendered :- thefor2er, there:- relievin respondent "l:erto D. Benipa-o fro2 the pa-2ent of thede?1ien1- a2use2ent ta> assessed aainst hi2 in the total a2ount of P'(,/*.45.

Respondent is the owner and operator of the 7u1ena 6heater lo1ated in the2uni1ipalit- of 7u1ena, Vue;on. On O1to:er , '*5 Internal Revenue "ent Ro2eode &uia investiated respondent3s a2use2ent ta> lia:ilit- in 1onne1tion with theoperation of said theater durin the period fro2 "uust, '*5( to Septe2:er, '*5.On O1to:er '5, '*5 De &uia su:2itted his report to the Provin1ial Revenue "entto the e<e1t that respondent had disproportionatel- issued ta>%free (/%1entavo1hildren3s ti1!ets. 8is ?ndin was that durin the -ears '*4* to '*5' the averaeratio of adults and 1hildren patroni;in the 7u1ena 6heater was to ', i.e., for ever-three adults enterin the theater, one 1hild was also ad2itted, while durin theperiod in uestion, the proportion is reversed % three 1hildren to one adult. ro2 thishe 1on1luded that respondent 2ust have fraudulentl- sold two ta>%free (/%1entavoti1!ets, in order to avoid pa-2ent of the a2use2ent ta> pres1ri:ed in Se1tion (/of the National Internal Revenue Code. Based on the averae ratio :etween adultand 1hildren attendan1e in the past -ears, E>a2iner de &uia re1o22ended ade?1ien1- a2use2ent ta> assess2ent aainst respondent in the su2 of P'','*.45, in1lusive of (59 sur1hare, plus a suested 1o2pro2ise penalt- of P*//.// for violation of se1tion (/ of the National Internal Revenue Code, or a totalsu2 of P'(,/*.45 1overin the period fro2 "uust, '*5( to Septe2:er, '*5in1lusive. On 0ul- '4, '*54, petitioner issued a de?1ien1- a2use2ent ta>assess2ent aainst respondent, de2andin fro2 the latter the pa-2ent of the totalsu2 of P'(,'5(.* within thirt- da-s fro2 re1eipt thereof. On "uust ', '*54,respondent ?led the 1orrespondin protest with the Conferen1e Sta< of the Bureauof Internal Revenue. "fter due hearin, the Conferen1e Sta< su:2itted to petitionerColle1tor of Internal Revenue its ?ndin to the e<e1t that the 2eaer reports of these ?eld2en #E>a2iner de &uia and the Provin1ial Revenue "ent of Vue;on$ are

2ere presu2ptions and 1on1lusions, devoid of ?ndins of the fa1t of the alleedfraudulent pra1ti1es of the herein ta>pa-er. In view thereof, and as re1o22ended:- the Conferen1e Sta<, petitioner referred the 1ase :a1! to the Provin1ial Revenue"ent of Vue;on for further investiation. 6he report su:2itted :- Provin1ialRevenue O1er 8.I. Bernardo after this last investiation partl- reads as follows.

6he returns fro2 0ul- ' to 0ul- '', showed that '.49 of the entire audien1e of '(,)54 1onsisted of adults, the re2ainin +.5)9 of 1hildren. Durin this said perioddue, perhaps, to the a:sen1e of aents in the pre2ises, su:e1t ta>pa-er was a:leto 2anipulate the issuan1e of ti1!ets in the wa- and 2anner alleed in "sst. De&uia3s indorse2ent report 2entioned a:ove. But durin the period fro2 0ul- '4 to

0ul- (4, '*55, when aents of this O1e supervised in the sales of ad2ission ti1!etsthe sales for adults soared upwards to )9 while that for 1hildren dropped1orrespondinl- to (49.

It is opined without fear of 1ontradi1tion that the ratio of three #$ adults to ever-one #'$ 1hild in the audien1e or a proportion of )5(5 as re1!oned in "sst. De &uia3s

indorse2ent report to this O1e3s new ?ndins of a proportion of )(4, representsand 1onve-s the true pi1ture of the situation under the law of averaes, providedthat the ?l2 :ein shown is not a 1hildren3s show. 6here is no hard and fast rule inthis reard, :ut this ?ndins would see2 to ad2it no 1ontradi1tion.

Please note that the new ?ndins of this O1e is not a dire1t proof of what hastranspired durin the period investiated :- "sst. De &uia and now pendin :eforethe Conferen1e Sta<, . . #E>h. , BIR Re1ord, p. ')%'+$.

"fter 1onsiderin said report, the Conferen1e Sta< of the Bureau of Internal Revenue

re1o22ended to the Colle1tor of Internal Revenue the issuan1e of the de?1ien1-a2use2ent ta> assess2ent in uestion.

6he onl- issue in this appeal is whether or not there is su1ient eviden1e in there1ord showin that respondent, durin the period under review, sold and issued tohis adult 1usto2ers two ta>%free (/%1entavo 1hildren3s ti1!ets, instead of one 4/%1entavo ti1!et for ea1h adult 1usto2erG to 1heat or defraud the &overn2ent. On thisuestion the Court of 6a> "ppeals said the followin in the appealed de1ision.

6o our 2ind, the appealed de1ision has no fa1tual :asis and 2ust :e reversed. "nassess2ent ?>es and deter2ines the ta> lia:ilit- of a ta>pa-er. "s soon as it isserved, an o:liation arises on the part of the ta>pa-er 1on1erned to pa- thea2ount assessed and de2anded. 8en1e, assess2ents should not :e :ased on 2erepresu2ptions no 2atter how reasona:le or loi1al said presu2ptions 2a- :e."ssu2inarguendo that the averae ratio of adults and 1hildren patroni;in the7u1ena 6heater fro2 '*4* to '*5' was to ', the sa2e does not ive rise to theinferen1e that the sa2e 1onditions e>isted durin the -ears in uestion #'*5( and'*5$. 6he fa1t that al2ost the sa2e ratio e>isted durin the 2onth of 0ul-, '*55does not provide a su1ient inferen1e on the 1onditions in '*5( and '*5. . .

In order to stand the test of udi1ial s1rutin-, the assess2ent 2ust :e :ased ona1tual fa1ts. 6he presu2ption of 1orre1tness of assess2ent :ein a 2erepresu2ption 1annot :e 2ade to rest on another presu2ption that the 1ir1u2stan1esin '*5( and '*5 are presu2ed to :e the sa2e as those e>istin in '*4* to '*5'and 0ul- '*55. In the 1ase under 1onsideration there are no su:stantial fa1ts tosupport the assess2ent in uestion. ...

" review of the re1ords has not dis1losed an-thin su1ient to ustif- a reversal of the a:ove ?ndin 2ade :- the Court of 6a> "ppeals. It should :e :orne in 2ind that

to sustain the de?1ien1- ta> assessed aainst respondent would a2ount, in e<e1t,to a ?ndin that he had, for a 1onsidera:le period of ti2e, 1heated and defraudedthe overn2ent :- sellin to ea1h adult patron two 1hildren3s ta>%free ti1!etsinstead of one ti1!et su:e1t to the a2use2ent ta> provided for in Se1tion (/ of the National Internal Revenue Code. raud is a serious 1hare and, to :e sustained,it 2ust :e supported :- 1lear and 1onvin1in proof whi1h, in the present 1ase, isla1!in.

6he 1lai2 that respondent ad2itted havin resorted to the ano2alous pra1ti1ealread- 2entioned is not entirel- 1orre1t. hat respondent appears to havead2itted was that durin a 1ertain li2ited period he had adopted a sort of re:ates-ste2 appli1a:le to 1ases where adults and 1hildren 1a2e in roups and were alano2alous pra1ti1e alread- 2entioned is not entirel- 1orre1t. hat respondentappears to have ad2itted was that durin a 1ertain li2ited period he had adopted a

sort of re:ate -ste2 appli1a:le to 1ases where adults and 1hildren 1a2e in roupand were all 1hared (/ 1entavo ad2ission ti1!ets. 6his pra1ti1e was, however,



dis1ontinued when he was infor2ed :- the Bureau of Internal Revenue that it wasnot in a11ordan1e with law.

8EREORE, the appealed ud2ent is here:- ar2ed with 1osts.

G.R. No. 18+)71 De5ember 8, 2010

C!MMISSI!NER !F INTERNAL RE&ENE, Petitioner,vs.METR! STAR SPERAMA, INC., Respondent.

D E C I S I O N

MEND!A, J.:

6his petition for review on 1ertiorari under Rule 45 of the Rules of Court ?led :- thepetitioner Co22issioner of Internal Revenue #CIR$ see!s to reverse and set asidethe 'F Septe2:er ', (//+ De1ision' of the Court of 6a> "ppeals En Ban1 #C6"%EnBan1$, in C.6.". EB No. / and (F its Nove2:er '+, (//+ Resolution( den-inpetitionerAs 2otion for re1onsideration.

6he C6"%En Ban1 ar2ed in toto the de1ision of its Se1ond Division (CTA-SecondDivision) in C6" Case No. )'* reversin the e:ruar- +, (//5 De1ision of the CIRwhi1h assessed respondent etro Star Supera2a, In1.(Metro Star) of de?1ien1-value%added ta> and withholdin ta> for the ta>a:le -ear '***.

Based on a 0oint Stipulation of a1ts and Issues of the parties, the C6" Se1ondDivision su22ari;ed the fa1tual and pro1edural ante1edents of the 1ase, thepertinent portions of whi1h read

Petitioner is a do2esti1 1orporation dul- orani;ed and e>istin :- virtue of the lawsof the Repu:li1 of the Philippines, > > >.

On 0anuar- (, (//', the Reional Dire1tor of Revenue Reion No. '/, 7ea;pi Cit-,issued 7etter of "uthorit- No. ////5' for Revenue O1er Dais- &. 0ustiniana toe>a2ine petitionerAs :oo!s of a11ounts and other a11ountin re1ords for in1o2e ta>and other internal revenue ta>es for the ta>a:le -ear '***. Said 7etter of "uthorit-was revalidated on "uust '/, (//' :- Reional Dire1tor 7eonardo Sa1a2os.

or petitionerAs failure to 1o2pl- with several reuests for the presentation of

re1ords and Su:poena Du1es 6e1u2, theF OIC of BIR 7eal Division issued anIndorse2ent dated Septe2:er (, (//' infor2in Revenue Distri1t O1er of Revenue Reion No. ), 7ea;pi Cit- to pro1eed with the investiation :ased on the:est eviden1e o:taina:le preparator- to the issuan1e of assess2ent noti1e.

On Nove2:er +, (//', Revenue Distri1t O1er So1orro O. Ra2os%7afuente issued aPreli2inar- '5%da- 7etter, whi1h petitioner re1eived on Nove2:er *, (//'. 6he saidletter stated that a post audit review was held and it was as1ertained that there wasde?1ien1- value%added and withholdin ta>es due fro2 petitioner in the a2ountof P (*(,+)4.'.

On "pril '', (//(, petitioner re1eived a or2al 7etter of De2and dated "pril , (//(fro2 Revenue Distri1t No. ), 7ea;pi Cit-, assessin petitioner the a2ount of 6wo8undred Ninet- 6wo 6housand Eiht 8undred Sevent- our Pesos and Si>teen

Centavos #P(*(,+)4.'.$ for de?1ien1- value%added and withholdin ta>es for theta>a:le -ear '***, 1o2puted as follows

"SSESSEN6 NO6ICE NO. /)%**%//%5)*%/)(

Q"7=E "DDED 6"J

&ross Sales P',*),)'+.*/

Output 6a> P '54,+./+

7ess Input 6a> WWWWWWWWWWWWW

Q"6 Pa-a:le P '54,+./+

"dd (59 Sur1hare P +,5+4.54

(/9 Interest )*,)4.4*

Co2pro2ise Penalt-

7ate Pa-2ent P',///.//

ailure to ile Q"6 returns (,4//.// '+,4//.// ',)'./'

6O6"7 P (*',/*./*

I688O7DIN& 6"J

Co2pensation (,))(.*'

E>panded ''/,'/.*(

6otal 6a> Due P ''(,+).+

7ess 6a> ithheld ''',+4+.()

De?1ien1- ithholdin 6a> P ',/(+.5

"dd (/9 Interest p.a. 5).5'

Co2pro2ise Penalt- (//.//

6O6"7 P ',+/5./)

XE>panded ithholdin 6a> P',*4*,4.(5 > 59 *),4.)'

http://www.lawphil.net/judjuris/juri2010/dec2010/gr_185371_2010.html#fnt1









il2 Rental '/,///.(5 > '/9 ',///.//

"udit ee '*,('.(/ > 59 *,.//

Rental E>pense 4',()(.) > '9 4'(.)

Se1urit- Servi1e '5,'4(./' > '9 ',5'.4(

Servi1e Contra1tor P ''/,'/.*(

6otal

S="RIES O DEICIENCIES

Q"7=E "DDED 6"J P (*',/*./*

I688O7DIN& 6"J ',+/5./)

6O6"7 P (*(,+)4.'

Su:seuentl-, Revenue Distri1t O1e No. ) sent a 1op- of the inal Noti1e of Sei;ure dated a- '(, (//, whi1h petitioner re1eived on a- '5, (//, ivin thelatter last opportunit- to settle its de?1ien1- ta> lia:ilities within ten #'/$ da-sFfro2 re1eipt thereof, otherwise respondent BIR shall :e 1onstrained to serve ande>e1ute the arrants of Distraint and@or 7ev- and &arnish2ent to enfor1e 1olle1tion.

On e:ruar- , (//4, petitioner re1eived fro2 Revenue Distri1t O1e No. ) aarrant of Distraint and@or 7ev- No. )%//(*%( dated a- '(, (// de2andinpa-2ent of de?1ien1- value%added ta> and withholdin ta> pa-2ent in the a2ountof P(*(,+)4.'.

On 0ul- /, (//4, petitioner ?led with the O1e of respondent Co22issioner aotion for Re1onsideration pursuant to Se1tion .'.5 of Revenue Reulations No. '(%

**.

On e:ruar- +, (//5, respondent Co22issioner, throuh its authori;edrepresentative, Revenue Reional Dire1tor of Revenue Reion '/, 7easpi Cit-,issued a De1ision den-in petitionerAs otion for Re1onsideration. Petitioner,throuh 1ounsel re1eived said De1ision on e:ruar- '+, (//5.

> > >.

Den-in that it re1eived a Preli2inar- "ssess2ent Noti1e (PAN) and 1lai2in that itwas not a11orded due pro1ess, etro Star ?led a petition for review 4 with the C6".

6he parties then stipulated on the followin issues to :e de1ided :- the ta> 1ourt

'. hether the respondent 1o2plied with the due pro1ess reuire2ent as providedunder the National Internal Revenue Code and Revenue Reulations No. '(%** with

reard to the issuan1e of a de?1ien1- ta> assess2entG

'.' hether petitioner is lia:le for the respe1tive a2ounts of P(*',/*./*and P',+/5./) as de?1ien1- Q"6 and withholdin ta> for the -ear '***G

'.(. hether the assess2ent has :e1o2e ?nal and e>e1utor- and de2anda:le forfailure of petitioner to protest the sa2e within / da-s fro2 its re1eipt thereof on"pril '', (//(, pursuant to Se1tion ((+ of the National Internal Revenue CodeG

(. hether the de?1ien1- assess2ents issued :- the respondent are void for failureto state the law and@or fa1ts upon whi1h the- are :ased.

(.( hether petitioner was infor2ed of the law and fa1ts on whi1h the assess2entis 2ade in 1o2plian1e with Se1tion ((+ of the National Internal Revenue CodeG

. hether or not petitioner, as owner@operator of a 2ovie@1ine2a house, is su:e1tto Q"6 on sales of servi1es under Se1tion '/+#"$ of the National Internal RevenueCodeG

4. hether or not the assess2ent is :ased on the :est eviden1e o:taina:lepursuant to Se1tion #:$ of the National Internal Revenue Code.

6he C6"%Se1ond Division found 2erit in the petition of etro Star and, on ar1h (',(//), rendered a de1ision, the de1retal portion of whi1h reads

8EREORE, pre2ises 1onsidered, the Petition for Review is here:- &R"N6ED."11ordinl-, the assailed De1ision dated e:ruar- +, (//5 is here:- REQERSED and

SE6 "SIDE and respondent is ORDERED 6O DESIS6 fro2 1olle1tin the su:e1t ta>esaainst petitioner.

6he C6"%Se1ond Division opined that wFhile there isF a disputa:le presu2ptionthat a 2ailed letter isF dee2ed re1eived :- the addressee in the ordinar- 1ourse of 2ail, a dire1t denial of the re1eipt of 2ail shifts the :urden upon the part- favored:- the presu2ption to prove that the 2ailed letter was indeed re1eived :- theaddressee.5 It also found that there was no 1lear showin that etro Star a1tuall-re1eived the alleed P"N, dated 0anuar- ', (//(. It, a11ordinl-, ruled that theor2al 7etter of De2and dated "pril , (//(, as well as the arrant of Distraintand@or 7ev- dated a- '(, (// were void, as etro Star was denied due pro1ess .

6he CIR souht re1onsideration) of the de1ision of the C6"%Se1ond Division, :ut the2otion was denied in the latterAs 0ul- (4, (//) Resolution.+

"rieved, the CIR ?led a petition for review* with the C6"%En Ban1, :ut the petitionwas dis2issed after a deter2ination that no new 2atters were raised. 6he C6"%EnBan1 disposed

8EREORE, the instant Petition for Review is here:- DENIED D=E CO=RSE andDISISSED for la1! of 2erit. "11ordinl-, the ar1h (', (//) De1ision and 0ul- (),(//) Resolution of the C6" Se1ond Division in C6" Case No. )'* entitled, etroStar Supera2a, In1., petitioner vs. Co22issioner of Internal Revenue, respondentare here:- "IRED in toto.

SO ORDERED.

6he 2otion for re1onsideration'/ ?led :- the CIR was li!ewise denied :- the C6"%EnBan1 in its Nove2:er '+, (//+ Resolution.''






















6he CIR, insistin that etro Star re1eived the P"N, dated 0anuar- ', (//(, and thatdue pro1ess was served nonetheless :e1ause the latter re1eived the inal"ssess2ent Noti1e #"N$, 1o2es now :efore this Court with the sole issue of whether or not etro Star was denied due pro1ess.

6he eneral rule is that the Court will not lihtl- set aside the 1on1lusions rea1hed:- the C6" whi1h, :- the ver- nature of its fun1tions, has a11ordinl- developed ane>1lusive e>pertise on the resolution unless there has :een an a:use or i2providente>er1ise of authorit-.'( In Bar1elon, Ro>as Se1urities, In1. #now !nown as =BPSe1urities, In1.$ v. Co22issioner of Internal Revenue,' the Court wrote

0urispruden1e has 1onsistentl- shown that this Court a11ords the ?ndins of fa1t :-the C6" with the hihest respe1t. In Sea-Land Service nc! v! Court o" Appea#s &.R.No. '((/5, / "pril (//', 5) SCR" 44', 445%44F, this Court re1oni;es that theCourt of 6a> "ppeals, whi1h :- the ver- nature of its fun1tion is dedi1atede>1lusivel- to the 1onsideration of ta> pro:le2s, has ne1essaril- developed ane>pertise on the su:e1t, and its 1on1lusions will not :e overturned unless there has:een an a:use or i2provident e>er1ise of authorit-. Su1h ?ndins 1an onl- :edistur:ed on appeal if the- are not supported :- su:stantial eviden1e or there is ashowin of ross error or a:use on the part of the 6a> Court. In the a:sen1e of an-1lear and 1onvin1in proof to the 1ontrar-, this Court 2ust presu2e that the C6"rendered a de1ision whi1h is valid in ever- respe1t.

On the 2atter of servi1e of a ta> assess2ent, a further perusal of our rulin in

Bar1elon is instru1tive, vi;

0urispruden1e is replete with 1ases holdin that if the ta>pa-er denies ever havinre1eived an assess2ent fro2 the BIR, it is in1u2:ent upon the latter to prove :-1o2petent eviden1e that su1h noti1e was indeed re1eived :- the addressee. 6heonus pro:andi was shifted to respondent to prove :- 1ontrar- eviden1e that thePetitioner re1eived the assess2ent in the due 1ourse of 2ail. 6he Supre2e Courthas 1onsistentl- held that while a 2ailed letter is dee2ed re1eived :- the addresseein the 1ourse of 2ail, this is 2erel- a disputa:le presu2ption su:e1t to1ontroversion and a dire1t denial thereof shifts the :urden to the part- favored :-the presu2ption to prove that the 2ailed letter was indeed re1eived :- theaddressee #Repu:li1 vs. Court of "ppeals, '4* SCR" 5'$. 6hus as held :- theSupre2e Court in $on%a#o P! Nava vs! Co&&issioner o" nterna# 'evenue , ' SCR"'/4, 0anuar- /, '*5

6he fa1ts to :e proved to raise this presu2ption are #a$ that the letter was properl-addressed with postae prepaid, and #:$ that it was 2ailed. On1e these fa1ts areproved, the presu2ption is that the letter was re1eived :- the addressee as soon asit 1ould have :een trans2itted to hi2 in the ordinar- 1ourse of the 2ail. But if oneof the said fa1ts fails to appear, the presu2ption does not lie. #QI, oran, Co22entson the Rules of Court, '* ed, 5%5) 1itin Enriue; vs. Sunlife "ssuran1e of Canada, 4' Phil (*$.

> > >. hat is essential to prove the fa1t of 2ailin is the reistr- re1eipt issued :-the Bureau of Posts or the Reistr- return 1ard whi1h would have :een sined :- thePetitioner or its authori;ed representative. "nd if said do1u2ents 1annot :e lo1ated,Respondent at the ver- least, should have su:2itted to the Court a 1erti?1ationissued :- the Bureau of Posts and another pertinent do1u2ent whi1h is e>e1utedwith the intervention of the Bureau of Posts. 6his Court does not put 2u1h 1reden1eto the self servin do1u2entations 2ade :- the BIR personnel espe1iall- if the- areunsupported :- su:stantial eviden1e esta:lishin the fa1t of 2ailin. 6hus

hile we have held that an assess2ent is 2ade when sent within the pres1ri:edperiod, even if re1eived :- the ta>pa-er after its e>piration #Coll. of Int. Rev. vs.Bautista, 7%'((5/ and 7%'((5*, a- (), '*5*$, this rulin 2a!es it the 2orei2perative that the release, 2ailin or sendin of the noti1e :e 1learl- andsatisfa1toril- proved. ere notations 2ade without the ta>pa-erAs intervention,noti1e or 1ontrol, without adeuate supportin eviden1e 1annot su1eG otherwise,the ta>pa-er would :e at the 2er1- of the revenue o1es, without adeuateprote1tion or defense. #Nava vs. CIR, ' SCR" '/4, 0anuar- /, '*5$.

> > >.

6he failure of the respondent to prove re1eipt of the assess2ent :- the Petitionerleads to the 1on1lusion that no assess2ent was issued. Conseuentl-, theovern2entAs riht to issue an assess2ent for the said period has alread-pres1ri:ed. #Industrial 6e>tile anufa1turin Co. of the Phils., In1. vs. CIR C6" Case4++5, "uust ((, '**$. #E2phases supplied.$

6he Court arees with the C6" that the CIR failed to dis1hare its dut- and presentan- eviden1e to show that etro Star indeed re1eived the P"N dated 0anuar- ',(//(. It 1ould have si2pl- presented the reistr- re1eipt or the 1erti?1ation fro2 thepost2aster that it 2ailed the P"N, :ut failed. Neither did it o<er an- e>planation onwh- it failed to 1o2pl- with the reuire2ent of servi1e of the P"N. It 2erel-a11epted the letter of etro StarAs 1hair2an dated "pril (*, (//(, that stated thathe had re1eived the "N dated "pril , (//(, :ut not the P"NG that he was willin to

pa- the ta> as 1o2puted :- the CIRG and that he ust wanted to 1larif- so2e 2atterswith the hope of lessenin its ta> lia:ilit-.

6his now leads to the uestion Is the failure to stri1tl- 1o2pl- with noti1ereuire2ents pres1ri:ed under Se1tion ((+ of the National Internal Revenue Code of '**) and Revenue Reulations #R.R.$ No. '(%** tanta2ount to a denial of duepro1ess Spe1i?1all-, are the reuire2ents of due pro1ess satis?ed if onl- the "Nstatin the 1o2putation of ta> lia:ilities and a de2and to pa- within the pres1ri:edperiod was sent to the ta>pa-er

6he answer to these uestions reuire an e>a2ination of Se1tion ((+ of the 6a>Code whi1h reads

SEC. ((+. Protestin of "ssess2ent. % hen the Co22issioner or his dul- authori;edrepresentative ?nds that proper ta>es should :e assessed, he shall ?rst notif- the

ta>pa-er of his ?ndins provided, however, that a preassess2ent noti1e shall not:e reuired in the followin 1ases

#a$ hen the ?ndin for ande?1ien1- ta> is the result of 2athe2ati1al error in the1o2putation of the ta> as appearin on the fa1e of the returnG or

#:$ hen a dis1repan1- has :een deter2ined :etween the ta> withheld and thea2ount a1tuall- re2itted :- the withholdin aentG or

#1$ hen a ta>pa-er who opted to 1lai2 a refund or ta> 1redit of e>1ess 1redita:lewithholdin ta> for a ta>a:le period was deter2ined to have 1arried over andauto2ati1all- applied the sa2e a2ount 1lai2ed aainst the esti2ated ta> lia:ilitiesfor the ta>a:le uarter or uarters of the su11eedin ta>a:le -earG or

#d$ hen the e>1ise ta> due on e>1isea:le arti1les has not :een paidG or









#e$ hen the arti1le lo1all- pur1hased or i2ported :- an e>e2pt person, su1h as,:ut not li2ited to, vehi1les, 1apital euip2ent, 2a1hineries and spare parts, has:een sold, traded or transferred to non%e>e2pt persons.

6he ta>pa-ers shall :e infor2ed in writin of the law and the fa1ts on whi1h theassess2ent is 2adeG otherwise, the assess2ent shall :e void.

ithin a period to :e pres1ri:ed :- i2ple2entin rules and reulations, theta>pa-er shall :e reuired to respond to said noti1e. If the ta>pa-er fails to respond,the Co22issioner or his dul- authori;ed representative shall issue an assess2ent

:ased on his ?ndins.

Su1h assess2ent 2a- :e protested ad2inistrativel- :- ?lin a reuest forre1onsideration or reinvestiation within thirt- #/$ da-s fro2 re1eipt of theassess2ent in su1h for2 and 2anner as 2a- :e pres1ri:ed :- i2ple2entin rulesand reulations. ithin si>t- #/$ da-s fro2 ?lin of the protest, all relevantsupportin do1u2ents shall have :een su:2ittedG otherwise, the assess2ent shall:e1o2e ?nal.

If the protest is denied in whole or in part, or is not a1ted upon within one hundredeiht- #'+/$ da-s fro2 su:2ission of do1u2ents, the ta>pa-er adversel- a<e1ted:- the de1ision or ina1tion 2a- appeal to the Court of 6a> "ppeals within thirt- #/$da-s fro2 re1eipt of the said de1ision, or fro2 the lapse of one hundred eiht-#'+/$%da- periodG otherwise, the de1ision shall :e1o2e ?nal, e>e1utor- andde2anda:le. #E2phasis supplied$.

Indeed, Se1tion ((+ of the 6a> Code 1learl- reuires that the ta>pa-er 2ust ?rst :einfor2ed that he is lia:le for de?1ien1- ta>es throuh the sendin of a P"N. 8e 2ust:e infor2ed of the fa1ts and the law upon whi1h the assess2ent is 2ade. 6he lawi2poses a su:stantive, not 2erel- a for2al, reuire2ent. 6o pro1eed heedlessl- withta> 1olle1tion without ?rst esta:lishin a valid assess2ent is evidentl- violative of the 1ardinal prin1iple in ad2inistrative investiations % that ta>pa-ers should :e a:leto present their 1ase and addu1e supportin eviden1e.'4

6his is 1on?r2ed under the provisions R.R. No. '(%** of the BIR whi1h pertinentl-provide

SEC6ION . Due Pro1ess Reuire2ent in the Issuan1e of a De?1ien1- 6a>"ssess2ent. L

.' ode of pro1edures in the issuan1e of a de?1ien1- ta> assess2ent

.'.' Noti1e for infor2al 1onferen1e. L 6he Revenue O1er who audited theta>pa-er3s re1ords shall, a2on others, state in his report whether or not theta>pa-er arees with his ?ndins that the ta>pa-er is lia:le for de?1ien1- ta> orta>es. If the ta>pa-er is not a2ena:le, :ased on the said O1er3s su:2itted reportof investiation, the ta>pa-er shall :e infor2ed, in writin, :- the Revenue Distri1tO1e or :- the Spe1ial Investiation Division, as the 1ase 2a- :e #in the 1aseRevenue Reional O1es$ or :- the Chief of Division 1on1erned #in the 1ase of theBIR National O1e$ of the dis1repan1- or dis1repan1ies in the ta>pa-er3s pa-2ent of his internal revenue ta>es, for the purpose of Infor2al Conferen1e, in order toa<ord the ta>pa-er with an opportunit- to present his side of the 1ase. If theta>pa-er fails to respond within ?fteen #'5$ da-s fro2 date of re1eipt of the noti1e

for infor2al 1onferen1e, he shall :e 1onsidered in default, in whi1h 1ase, theRevenue Distri1t O1er or the Chief of the Spe1ial Investiation Division of the

Revenue Reional O1e, or the Chief of Division in the National O1e, as the 1ase2a- :e, shall endorse the 1ase with the least possi:le dela- to the "ssess2entDivision of the Revenue Reional O1e or to the Co22issioner or his dul-authori;ed representative, as the 1ase 2a- :e, for appropriate review and issuan1eof a de?1ien1- ta> assess2ent, if warranted.

.'.( Preli2inar- "ssess2ent Noti1e #P"N$. L If after review and evaluation :- the"ssess2ent Division or :- the Co22issioner or his dul- authori;ed representative,as the 1ase 2a- :e, it is deter2ined that there e>ists su1ient :asis to assess theta>pa-er for ande?1ien1- ta> or ta>es, the said O1e shall issue to the ta>pa-er,

at least :- reistered 2ail, a Preli2inar- "ssess2ent Noti1e #P"N$ for the proposedassess2ent, showin in detail, the fa1ts and the law, rules and reulations, or

urispruden1e on whi1h the proposed assess2ent is :ased #see illustration in "NNEJ" hereof$. If the ta>pa-er fails to respond within ?fteen #'5$ da-s fro2 date of re1eipt of the P"N, he shall :e 1onsidered in default, in whi1h 1ase, a for2al letter of de2and and assess2ent noti1e shall :e 1aused to :e issued :- the said O1e,1allin for pa-2ent of the ta>pa-er3s de?1ien1- ta> lia:ilit-, in1lusive of theappli1a:le penalties.

.'. E>1eptions to Prior Noti1e of the "ssess2ent. L 6he noti1e for infor2al1onferen1e and the preli2inar- assess2ent noti1e shall not :e reuired in an- of thefollowin 1ases, in whi1h 1ase, issuan1e of the for2al assess2ent noti1e for thepa-2ent of the ta>pa-er3s de?1ien1- ta> lia:ilit- shall :e su1ient

#i$ hen the ?ndin for ande?1ien1- ta> is the result of 2athe2ati1al error in the1o2putation of the ta> appearin on the fa1e of the ta> return ?led :- the ta>pa-erGor

#ii$ hen a dis1repan1- has :een deter2ined :etween the ta> withheld and thea2ount a1tuall- re2itted :- the withholdin aentG or

#iii$ hen a ta>pa-er who opted to 1lai2 a refund or ta> 1redit of e>1ess 1redita:lewithholdin ta> for a ta>a:le period was deter2ined to have 1arried over andauto2ati1all- applied the sa2e a2ount 1lai2ed aainst the esti2ated ta> lia:ilitiesfor the ta>a:le uarter or uarters of the su11eedin ta>a:le -earG or

#iv$ hen the e>1ise ta> due on e>1isa:le arti1les has not :een paidG or

#v$ hen an arti1le lo1all- pur1hased or i2ported :- an e>e2pt person, su1h as, :ut

not li2ited to, vehi1les, 1apital euip2ent, 2a1hineries and spare parts, has :eensold, traded or transferred to non%e>e2pt persons.

.'.4 or2al 7etter of De2and and "ssess2ent Noti1e. L 6he for2al letter of de2and and assess2ent noti1e shall :e issued :- the Co22issioner or his dul-authori;ed representative. 6he letter of de2and 1allin for pa-2ent of theta>pa-er3s de?1ien1- ta> or ta>es shall state the fa1ts, the law, rules andreulations, or urispruden1e on whi1h the assess2ent is :ased, otherwise, thefor2al letter of de2and and assess2ent noti1e shall :e void #see illustration in"NNEJ B hereof$.

6he sa2e shall :e sent to the ta>pa-er onl- :- reistered 2ail or :- personaldeliver-.

If sent :- personal deliver-, the ta>pa-er or his dul- authori;ed representative shalla1!nowlede re1eipt thereof in the dupli1ate 1op- of the letter of de2and, showin






the followin #a$ 8is na2eG #:$ sinatureG #1$ desination and authorit- to a1t forand in :ehalf of the ta>pa-er, if a1!nowleded re1eived :- a person other than theta>pa-er hi2selfG and #d$ date of re1eipt thereof.

> > >.

ro2 the provision uoted a:ove, it is 1lear that the sendin of a P"N to ta>pa-er toinfor2 hi2 of the assess2ent 2ade is :ut part of the due pro1ess reuire2ent inthe issuan1e of a de?1ien1- ta> assess2ent, the a:sen1e of whi1h rendersnuator- an- assess2ent 2ade :- the ta> authorities. 6he use of the word shall in

su:se1tion .'.( des1ri:es the 2andator- nature of the servi1e of a P"N. 6hepersuasiveness of the riht to due pro1ess rea1hes :oth su:stantial and pro1eduralrihts and the failure of the CIR to stri1tl- 1o2pl- with the reuire2ents laid down:- law and its own rules is a denial of etro StarAs riht to due pro1ess.'5 6hus, forits failure to send the P"N statin the fa1ts and the law on whi1h the assess2entwas 2ade as reuired :- Se1tion ((+ of R.". No. +4(4, the assess2ent 2ade :- theCIR is void.

6he 1ase of CIR v. enuito' 1ited :- the CIR in support of its aru2ent that onl-the non%servi1e of the "N is fatal to the validit- of an assess2ent, 1annot appl- tothis 1ase :e1ause the issue therein was the non%1o2plian1e with the provisions of R.R. No. '(%+5 whi1h souht to interpret Se1tion ((* of the old ta> law. R" No. +4(4has alread- a2ended the provision of Se1tion ((* on protestin an assess2ent. 6heold reuire2ent of 2erel-noti"ing the ta>pa-er of the CIRAs ?ndins was 1haned in

'**+ to in"or&ing the ta>pa-er of not onl- the law, :ut also of the fa1ts on whi1h anassess2ent would :e 2ade. Otherwise, the assess2ent itself would :e invalid.') 6hereulation then, on the other hand, si2pl- provided that a noti1e :e sent to therespondent in the for2 pres1ri:ed, and that no 1onseuen1e would ensue for failureto 1o2pl- with that for2.1avvphi1

6he Court need not :ela:or to dis1uss the 2atter of etro StarAs failure to ?le itsprotest, for it is well%settled that a void assess2ent :ears no fruit.'+

It is an ele2entar- rule enshrined in the '*+) Constitution that no person shall :edeprived of propert- without due pro1ess of law.'* In :alan1in the s1ales :etweenthe power of the State to ta> and its inherent riht to prose1ute per1eivedtransressors of the law on one side, and the 1onstitutional rihts of a 1iti;en to duepro1ess of law and the eual prote1tion of the laws on the other, the s1ales 2ust tiltin favor of the individual, for a 1iti;enAs riht is a2pl- prote1ted :- the Bill of Rihtsunder the Constitution. 6hus, while ta>es are the life:lood of the overn2ent, thepower to ta> has its li2its, in spite of all its plenitude. 8en1e in Co22issioner of Internal Revenue v. "lue, In1.,(/ it was said H

6a>es are the life:lood of the overn2ent and so should :e 1olle1ted withoutunne1essar- hindran1e. On the other hand, su1h 1olle1tion should :e 2ade ina11ordan1e with law as an- ar:itrariness will neate the ver- reason for overn2entitself. It is therefore ne1essar- to re1on1ile the apparentl- 1oni1tin interests of theauthorities and the ta>pa-ers so that the real purpose of ta>ation, whi1h is thepro2otion of the 1o22on ood, 2a- :e a1hieved.

> > > > > > > > >

It is said that ta>es are what we pa- for 1ivili;ed so1iet-. ithout ta>es, the

overn2ent would :e paral-;ed for the la1! of the 2otive power to a1tivate andoperate it. 8en1e, despite the natural relu1tan1e to surrender part of oneAs hard%

earned in1o2e to ta>in authorities, ever- person who is a:le to 2ust 1ontri:ute hisshare in the runnin of the overn2ent. 6he overn2ent for its part is e>pe1ted torespond in the for2 of tani:le and intani:le :ene?ts intended to i2prove the livesof the people and enhan1e their 2oral and 2aterial values. 6his s-2:ioti1relationship is the rationale of ta>ation and should dispel the erroneous notion that itis an ar:itrar- 2ethod of e>a1tion :- those in the seat of power.

But even as we 1on1ede the inevita:ilit- and indispensa:ilit- of ta>ation, it is areuire2ent in all de2o1rati1 rei2es that it :e e>er1ised reasona:l- and ina11ordan1e with the pres1ri:ed pro1edure. If it is not, then the ta>pa-er has a riht

to 1o2plain and the 1ourts will then 1o2e to his su11or. or all the aweso2e powerof the ta> 1olle1tor, he 2a- still :e stopped in his tra1!s if the ta>pa-er 1ande2onstrate > > > that the law has not :een o:served.(' #E2phasis supplied$.

6HEREF!RE, the petition is DENIED.

S! !RDERED.





















G.R. No. 1712+1 M#r5 +, 2012

LASC!NA LAND C!., INC., Petitioner,vs.C!MMISSI!NER !F INTERNAL RE&ENE, Respondent.

D E C I S I O N

PERALTA, J.:

Before this Court is a Petition for Review on Certiorari under Rule 45 of the Rules of

Court see!in the reversal of the De1ision' dated O1to:er (5, (//5 andResolution( dated 0anuar- (/, (// of the Court of "ppeals #C"$ in C"%&.R. SP No.5+/' whi1h set aside the De1ision dated 0anuar- 4, (/// and Resolution 4 datedar1h , (/// of the Court of 6a> "ppeals #C6"$ in C.6.". Case No. 5))) andde1lared "ssess2ent Noti1e No. /////4)%*%4/) dated ar1h (), '**+ to :e ?nal,e>e1utor- and de2anda:le.

6he fa1ts, as 1ulled fro2 the re1ords, are as follows

On ar1h (), '**+, the Co22issioner of Internal Revenue #CIR$ issued "ssess2entNoti1e No. /////4)%*%4/)5 aainst 7as1ona 7and Co., In1. #7as1ona$ infor2in thelatter of its alleed de?1ien1- in1o2e ta> for the -ear '** in the a2ountof P)5,(.5.

Conseuentl-, on "pril (/, '**+, 7as1ona ?led a letter protest, :ut was denied :-Nor:erto R. Odulio, O1er%in%Chare #OIC$, Reional Dire1tor, Bureau of InternalRevenue, Revenue Reion No. +, a!ati Cit-, in his 7etter dated ar1h , '***,whi1h reads, thus

> > > >

Su:e1t 7"SCON" 7"ND CO., INC.

'** De?1ien1- In1o2e 6a>

ada2,

"nent the '** ta> 1ase of su:e1t ta>pa-er, please :e infor2ed that while wearee with the aru2ents advan1ed in -our letter protest, we reret, however, that

we 1annot ive due 1ourse to -our reuest to 1an1el or set aside the assess2entnoti1e issued to -our 1lient for the reason that the 1ase was not elevated to theCourt of 6a> "ppeals as 2andated :- the provisions of the last pararaph of Se1tion((+ of the 6a> Code. B- virtue thereof, the said assess2ent noti1e has :e1o2e ?nal,e>e1utor- and de2anda:le.

In view of the foreoin, please advise -our 1lient to pa- its '** de?1ien1- in1o2eta> lia:ilit- in the a2ount of P)5,(.5.

> > > > #E2phasis ours$

On "pril '(, '***, 7as1ona appealed the de1ision :efore the C6" and was do1!etedas C.6.". Case No. 5))). 7as1ona alleed that the Reional Dire1tor erred in rulinthat the failure to appeal to the C6" within thirt- #/$ da-s fro2 the lapse of the'+/%da- period rendered the assess2ent ?nal and e>e1utor-.

6he CIR, however, 2aintained that 7as1ona3s failure to ti2el- ?le an appeal with theC6" after the lapse of the '+/%da- rele2entar- period provided under Se1tion ((+of the National Internal Revenue Code #NIRC$ resulted to the ?nalit- of theassess2ent.

On 0anuar- 4, (///, the C6", in its De1ision, ) nulli?ed the su:e1t assess2ent. It heldthat in 1ases of ina1tion :- the CIR on the protested assess2ent, Se1tion ((+ of theNIRC provided two options for the ta>pa-er #'$ appeal to the C6" within thirt- #/$da-s fro2 the lapse of the one hundred eiht- #'+/$%da- period, or #($ wait until theCo22issioner de1ides on his protest :efore he elevates the 1ase.

6he CIR 2oved for re1onsideration. It arued that in de1larin the su:e1tassess2ent as ?nal, e>e1utor- and de2anda:le, it did so pursuant to Se1tion #.'.5$ of Revenue Reulations No. '(%** dated Septe2:er , '*** whi1h reads,thus

If the Co22issioner or his dul- authori;ed representative fails to a1t on theta>pa-er3s protest within one hundred eiht- #'+/$ da-s fro2 date of su:2ission, :-the ta>pa-er, of the reuired do1u2ents in support of his protest, the ta>pa-er 2a-appeal to the Court of 6a> "ppeals within thirt- #/$ da-s fro2 the lapse of the said'+/%da- periodG otherwise, the assess2ent shall :e1o2e ?nal, e>e1utor- andde2anda:le.

On ar1h , (///, the C6" denied the CIR3s 2otion for re1onsideration for la1! of 2erit.+ 6he C6" held that Revenue Reulations No. '(%** 2ust 1onfor2 to Se1tion((+ of the NIRC. It pointed out that the for2er spo!e of an assess2ent :e1o2in?nal, e>e1utor- and de2anda:le :- reason of the ina1tion :- the Co22issioner,while the latter referred to de1isions :e1o2in ?nal, e>e1utor- and de2anda:leshould the ta>pa-er adversel- a<e1ted :- the de1ision fail to appeal :efore the C6"within the pres1ri:ed period. inall-, it e2phasi;ed that in 1ases of dis1repan1-,Se1tion ((+ of the NIRC 2ust prevail over the revenue reulations.

Dissatis?ed, the CIR ?led an appeal :efore the C".*

In the disputed De1ision dated O1to:er (5, (//5, the Court of "ppeals ranted theCIR3s petition and set aside the De1ision dated 0anuar- 4, (/// of the C6" and itsResolution dated ar1h , (///. It further de1lared that the su:e1t "ssess2entNoti1e No. /////4)%*%4/) dated ar1h (), '**+ as ?nal, e>e1utor- andde2anda:le.

7as1ona 2oved for re1onsideration, :ut was denied for la1! of 2erit.

6hus, the instant petition, raisin the followin issues

I

68E 8ONOR"B7E CO=R6 8"S, IN 68E REQISED R=7ES O CO=R6 O 6"J "PPE"7S8IC8 I6 RECEN67Y PRO=7&"6ED, R=7ED 68"6 "N "PPE"7 RO 68E IN"C6IONO RESPONDEN6 COISSIONER IS NO6 "ND"6ORY.

II

68E CO=R6 O "PPE"7S SERIO=S7Y ERRED 8EN I6 8E7D 68"6 68E "SSESSEN68"S BECOE IN"7 "ND DE"ND"B7E BEC"=SE, "77E&ED7Y, 68E ORD

DECISION IN 68E 7"S6 P"R"&R"P8 O SEC6ION ((+ C"NNO6 BE S6RIC67YCONS6R=ED "S REERRIN& ON7Y 6O 68E DECISION P' S O 68E COISSIONER,

http://www.lawphil.net/judjuris/juri2012/mar2012/gr_171251_2012.html#fnt1























B=6 S8O=7D "7SO BE CONSIDERED SYNONYO=S I68 "N "SSESSEN6 8IC88"S BEEN PRO6ES6ED, B=6 68E PRO6ES6 ON 8IC8 8"S NO6 BEEN "C6ED =PONBY 68E COISSIONER.'/

In a nutshell, the 1ore issue to :e resolved is hether the su:e1t assess2ent has:e1o2e ?nal, e>e1utor- and de2anda:le due to the failure of petitioner to ?le anappeal :efore the C6" within thirt- #/$ da-s fro2 the lapse of the One 8undredEiht- #'+/$%da- period pursuant to Se1tion ((+ of the NIRC.

Petitioner 7as1ona, invo!in Se1tion ,'' Rule 4 of the Revised Rules of the Court of

6a> "ppeals, 2aintains that in 1ase of ina1tion :- the CIR on the protestedassess2ent, it has the option to either #'$ appeal to the C6" within / da-s fro2the lapse of the '+/%da- periodG or #($ await the ?nal de1ision of the Co22issioneron the disputed assess2ent even :e-ond the '+/%da- period Z in whi1h 1ase, theta>pa-er 2a- appeal su1h ?nal de1ision within / da-s fro2 the re1eipt of the saidde1ision. Corollaril-, petitioner posits that when the Co22issioner failed to a1t on itsprotest within the '+/%da- period, it had the option to await for the ?nal de1ision of the Co22issioner on the protest, whi1h it did.

6he petition is 2eritorious.

Se1tion ((+ of the NIRC is instru1tional as to the re2edies of a ta>pa-er in 1ase of the ina1tion of the Co22issioner on the protested assess2ent, to wit

SEC. ((+. Protestin of "ssess2ent. Z > > >

> > > >

ithin a period to :e pres1ri:ed :- i2ple2entin rules and reulations, theta>pa-er shall :e reuired to respond to said noti1e. If the ta>pa-er fails to respond,the Co22issioner or his dul- authori;ed representative shall issue an assess2ent:ased on his ?ndins.

Su1h assess2ent 2a- :e protested ad2inistrativel- :- ?lin a reuest forre1onsideration or reinvestiation within thirt- #/$ da-s fro2 re1eipt of theassess2ent in su1h for2 and 2anner as 2a- :e pres1ri:ed :- i2ple2entin rulesand reulations.

ithin si>t- #/$ da-s fro2 ?lin of the protest, all relevant supportin do1u2entsshall have :een su:2ittedG otherwise, the assess2ent shall :e1o2e ?nal.

If the protest is denied in whole or in part, or is not a1ted upon within one hundredeiht- #'+/$ da-s fro2 su:2ission of do1u2ents, the ta>pa-er adversel- a<e1ted:- the de1ision or ina1tion 2a- appeal to the Court of 6a> "ppeals within #/$ da-sfro2 re1eipt of the said de1ision, or fro2 the lapse of the one hundred eiht- #'+/$%da- periodG otherwise the de1ision shall :e1o2e ?nal, e>e1utor- and de2anda:le.#E2phasis supplied$.

Respondent, however, insists that in 1ase of the ina1tion :- the Co22issioner onthe protested assess2ent within the '+/%da- rele2entar- period, petitioner shouldhave appealed the ina1tion to the C6". Respondent 2aintains that due to 7as1ona3sfailure to ?le an appeal with the C6" after the lapse of the '+/%da- period, theassess2ent :e1a2e ?nal and e>e1utor-.

e do not aree.

In 'C*C v! C','( the Court has held that in 1ase the Co22issioner failed to a1t onthe disputed assess2ent within the '+/%da- period fro2 date of su:2ission of do1u2ents, a ta>pa-er 1an either #'$ ?le a petition for review with the Court of 6a>"ppeals within / da-s after the e>piration of the '+/%da- periodG or #($ await the?nal de1ision of the Co22issioner on the disputed assess2ents and appeal su1h?nal de1ision to the Court of 6a> "ppeals within / da-s after re1eipt of a 1op- of su1h de1ision.'

6his is 1onsistent with Se1tion " #($, Rule 4 of the Revised Rules of the Court of 6a>"ppeals,'4 to wit

SEC. . Cases within the urisdi1tion of the Court in Divisions. H 6he Court in Divisionsshall e>er1ise

#a$ E>1lusive oriinal or appellate urisdi1tion to review :- appeal the followin

#'$ De1isions of the Co22issioner of Internal Revenue in 1ases involvin disputedassess2ents, refunds of internal revenue ta>es, fees or other 1hares, penalties inrelation thereto, or other 2atters arisin under the National Internal Revenue Codeor other laws ad2inistered :- the Bureau of Internal RevenueG

#($ Ina1tion :- the Co22issioner of Internal Revenue in 1ases involvin disputedassess2ents, refunds of internal revenue ta>es, fees or other 1hares, penalties inrelation thereto, or other 2atters arisin under the National Internal Revenue Codeor other laws ad2inistered :- the Bureau of Internal Revenue, where the National

Internal Revenue Code or other appli1a:le law provides a spe1i?1 period for a1tionProvided, that in 1ase of disputed assess2ents, the ina1tion of the Co22issioner of Internal Revenue within the one hundred eiht- da-%period under Se1tion ((+ of theNational Internal revenue Code shall :e dee2ed a denial for purposes of allowinthe ta>pa-er to appeal his 1ase to the Court and does not ne1essaril- 1onstitute afor2al de1ision of the Co22issioner of Internal Revenue on the ta> 1aseG Provided,further, that should the ta>pa-er opt to await the ?nal de1ision of the Co22issionerof Internal Revenue on the disputed assess2ents :e-ond the one hundred eiht-da-%period a:ove2entioned, the ta>pa-er 2a- appeal su1h ?nal de1ision to theCourt under Se1tion #a$, Rule + of these RulesG and Provided, still further, that in the1ase of 1lai2s for refund of ta>es erroneousl- or illeall- 1olle1ted, the ta>pa-er2ust ?le a petition for review with the Court prior to the e>piration of the two%-earperiod under Se1tion ((* of the National Internal Revenue CodeG

#E2phasis ours$

In aruin that the assess2ent :e1a2e ?nal and e>e1utor- :- the sole reason thatpetitioner failed to appeal the ina1tion of the Co22issioner within / da-s after the'+/%da- rele2entar- period, respondent, in e<e1t, li2ited the re2ed- of 7as1ona,as a ta>pa-er, under Se1tion ((+ of the NIRC to ust one, that is % to appeal theina1tion of the Co22issioner on its protested assess2ent after the lapse of the '+/%da- period. 6his is in1orre1t.

"s earl- as the 1ase of C' v! +i##a,'5 it was alread- esta:lished that the wordde1isions in pararaph ', Se1tion ) of Repu:li1 "1t No. ''(5, uoted a:ove, has:een interpreted to 2ean the de1isions of the Co22issioner of Internal Revenue onthe protest of the ta>pa-er aainst the assess2ents. De?nitel-, said word does notsinif- the assess2ent itself. e uote what this Court said aptl- in a previous 1ase



















In the ?rst pla1e, we :elieve the respondent 1ourt erred in holdin that theassess2ent in uestion is the respondent Colle1tor3s de1ision or rulin appeala:le toit, and that 1onseuentl-, the period of thirt- da-s pres1ri:ed :- se1tion '' of Repu:li1 "1t No. ''(5 within whi1h petitioner should have appealed to therespondent 1ourt 2ust :e 1ounted fro2 its re1eipt of said assess2ent. here ata>pa-er uestions an assess2ent and as!s the Colle1tor to re1onsider or 1an1el thesa2e :e1ause he #the ta>pa-er$ :elieves he is not lia:le therefor, the assess2ent:e1o2es a disputed assess2ent that the Colle1tor 2ust de1ide, and the ta>pa-er1an appeal to the Court of 6a> "ppeals onl- upon re1eipt of the de1ision of theColle1tor on the disputed assess2ent, . . . '

6herefore, as in Se1tion ((+, when the law provided for the re2ed- to appeal theina1tion of the CIR, it did not intend to li2it it to a sinle re2ed- of ?lin of anappeal after the lapse of the '+/%da- pres1ri:ed period. Pre1isel-, when a ta>pa-erprotested an assess2ent, he naturall- e>pe1ts the CIR to de1ide either positivel- orneativel-. " ta>pa-er 1annot :e preudi1ed if he 1hooses to wait for the ?nalde1ision of the CIR on the protested assess2ent. ore so, :e1ause the law and

urispruden1e have alwa-s 1onte2plated a s1enario where the CIR will de1ide on theprotested assess2ent.

It 2ust :e e2phasi;ed, however, that in 1ase of the ina1tion of the CIR on theprotested assess2ent, while we reiterate Z the ta>pa-er has two options, either #'$?le a petition for review with the C6" within / da-s after the e>piration of the '+/%da- periodG or #($ await the ?nal de1ision of the Co22issioner on the disputed

assess2ent and appeal su1h ?nal de1ision to the C6" within / da-s after there1eipt of a 1op- of su1h de1ision, ee oo$ #re m#::- e;5:ve #$%

reor o o$e b#r e #:5#o$ o< e oer.

"11ordinl-, 1onsiderin that 7as1ona opted to await the ?nal de1ision of theCo22issioner on the protested assess2ent, it then has the riht to appeal su1h?nal de1ision to the Court :- ?lin a petition for review within thirt- da-s afterre1eipt of a 1op- of su1h de1ision or rulin, even after the e>piration of the '+/%da-period ?>ed :- law for the Co22issioner of Internal Revenue to a1t on the disputedassess2ents.') 6hus, 7as1ona, when it ?led an appeal on "pril '(, '*** :efore theC6", after its re1eipt of the 7etter '+ dated ar1h , '*** on ar1h '(, '***, theappeal was ti2el- 2ade as it was ?led within / da-s after re1eipt of the 1op- of thede1ision.1âwphi1

inall-, the CIR should :e re2inded that ta>pa-ers 1annot :e left in uandar- :- itsina1tion on the protested assess2ent. It is i2perative that the ta>pa-ers areinfor2ed of its a1tion in order that the ta>pa-er should then at least :e a:le to ta!ere1ourse to the ta> 1ourt at the opportune ti2e. "s 1orre1tl- pointed out :- the ta>1ourt

> > > to adopt the interpretation of the respondent will not onl- san1tion ine1ien1-,:ut will li!ewise 1ondone the Bureau3s ina1tion. 6his is espe1iall- true in the instant1ase when despite the fa1t that respondent found petitioner3s aru2ents to :e inorder, the assess2ent will :e1o2e ?nal, e>e1utor- and de2anda:le for petitioner3sfailure to appeal :efore us within the thirt- #/$ da- period.'*

6a>es are the life:lood of the overn2ent and so should :e 1olle1ted withoutunne1essar- hindran1e. On the other hand, su1h 1olle1tion should :e 2ade ina11ordan1e with law as an- ar:itrariness will neate the ver- reason for overn2ent

itself. It is therefore ne1essar- to re1on1ile the apparentl- 1oni1tin interests of theauthorities and the ta>pa-ers so that the real purpose of ta>ation, whi1h is the

pro2otion of the 1o22on ood, 2a- :e a1hieved. (/ 6hus, even as we 1on1ede theinevita:ilit- and indispensa:ilit- of ta>ation, it is a reuire2ent in all de2o1rati1rei2es that it :e e>er1ised reasona:l- and in a11ordan1e with the pres1ri:edpro1edure.('

8EREORE, the petition is &R"N6ED. 6he De1ision dated O1to:er (5, (//5 and theResolution dated 0anuar- (/, (// of the Court of "ppeals in C"%&.R. SP No. 5+/'are RE&ERSED and SET ASIDE. "11ordinl-, the De1ision dated 0anuar- 4, (/// of the Court of 6a> "ppeals in C.6.". Case No. 5))) and its Resolution dated ar1h ,(/// are REINSTATED.

SO ORDERED.

















G.R. No. L(2889* Febr#r- 17, 1988

C!MMISSI!NER !F INTERNAL RE&ENE, petitioner,vs.ALGE, INC., #$% THE C!RT !F TA= APPEALS, respondents.

CR, J.:

6a>es are the life:lood of the overn2ent and so should :e 1olle1ted withoutunne1essar- hindran1e On the other hand, su1h 1olle1tion should :e 2ade ina11ordan1e with law as an- ar:itrariness will neate the ver- reason for overn2entitself. It is therefore ne1essar- to re1on1ile the apparentl- 1oni1tin interests of theauthorities and the ta>pa-ers so that the real purpose of ta>ation, whi1h is thepro2otion of the 1o22on ood, 2a- :e a1hieved.

6he 2ain issue in this 1ase is whether or not the Colle1tor of Internal Revenue1orre1tl- disallowed the P)5,///.// dedu1tion 1lai2ed :- private respondent "lueas leiti2ate :usiness e>penses in its in1o2e ta> returns. 6he 1orollar- issue iswhether or not the appeal of the private respondent fro2 the de1ision of theColle1tor of Internal Revenue was 2ade on ti2e and in a11ordan1e with law.

e deal ?rst with the pro1edural uestion.

6he re1ord shows that on 0anuar- '4, '*5, the private respondent, a do2esti11orporation enaed in enineerin, 1onstru1tion and other allied a1tivities,

re1eived a letter fro2 the petitioner assessin it in the total a2ount of P+,'+.+5as delinuen1- in1o2e ta>es for the -ears '*5+ and '*5*. 1 On 0anuar- '+, '*5,"lue ied a letter of protest or reuest for re1onsideration, whi1h letter was sta2pre1eived on the sa2e da- in the o1e of the petitioner. 2 On ar1h '(, '*5, awarrant of distraint and lev- was presented to the private respondent, throuh its1ounsel, "tt-. "l:erto &uevara, 0r., who refused to re1eive it on the round of thependin protest. ) " sear1h of the protest in the do1!ets of the 1ase proved fruitless."tt-. &uevara produ1ed his ?le 1op- and ave a photostat to BIR aent Ra2onRe-es, who deferred servi1e of the warrant. 4 On "pril ), '*5, "tt-. &uevara was?nall- infor2ed that the BIR was not ta!in an- a1tion on the protest and it was onl-then that he a11epted the warrant of distraint and lev- earlier souht to :eserved. + Si>teen da-s later, on "pril (, '*5, "lue ?led a petition for review of thede1ision of the Co22issioner of Internal Revenue with the Court of 6a> "ppeals. *

6he a:ove 1hronolo- shows that the petition was ?led seasona:l-. "11ordin toRep. "1t No. ''(5, the appeal 2a- :e 2ade within thirt- da-s after re1eipt of thede1ision or rulin 1hallened. 7 It is true that as a rule the warrant of distraint andlev- is proof of the ?nalit- of the assess2ent 8 and renders hopeless a reuest forre1onsideration, 9:ein tanta2ount to an outriht denial thereof and 2a!es thesaid reuest dee2ed ree1ted. 10 But there is a spe1ial 1ir1u2stan1e in the 1ase at:ar that prevents appli1ation of this a11epted do1trine.

6he proven fa1t is that four da-s after the private respondent re1eived thepetitioner3s noti1e of assess2ent, it ?led its letter of protest. 6his was apparentl- notta!en into a11ount :efore the warrant of distraint and lev- was issuedG indeed, su1hprotest 1ould not :e lo1ated in the o1e of the petitioner. It was onl- after "tt-.&uevara ave the BIR a 1op- of the protest that it was, if at all, 1onsidered :- theta> authorities. Durin the intervenin period, the warrant was pre2ature and 1ould

therefore not :e served.

"s the Court of 6a> "ppeals 1orre1tl- noted, 11 the protest ?led :- privaterespondent was not pro "or&a and was :ased on stron leal 1onsiderations. It thushad the e<e1t of suspendin on 0anuar- '+, '*5, when it was ?led, therele2entar- period whi1h started on the date the assess2ent was re1eived, vi;.,

0anuar- '4, '*5. 6he period started runnin aain onl- on "pril ), '*5, when theprivate respondent was de?nitel- infor2ed of the i2plied ree1tion of the saidprotest and the warrant was ?nall- served on it. 8en1e, when the appeal was ?ledon "pril (, '*5, onl- (/ da-s of the rele2entar- period had :een 1onsu2ed.

Now for the su:stantive uestion.

6he petitioner 1ontends that the 1lai2ed dedu1tion of P)5,///.// was properl-disallowed :e1ause it was not an ordinar- reasona:le or ne1essar- :usinesse>pense. 6he Court of 6a> "ppeals had seen it di<erentl-. "reein with "lue, itheld that the said a2ount had :een leiti2atel- paid :- the private respondent fora1tual servi1es rendered. 6he pa-2ent was in the for2 of pro2otional fees. 6hesewere 1olle1ted :- the Pa-ees for their wor! in the 1reation of the Qeeta:le OilInvest2ent Corporation of the Philippines and its su:seuent pur1hase of theproperties of the Philippine Suar Estate Develop2ent Co2pan-.

Parentheti1all-, it 2a- :e o:served that the petitioner had Oriinall- 1lai2ed thesepro2otional fees to :e personal holdin 1o2pan- in1o2e 12 :ut later 1onfor2ed tothe de1ision of the respondent 1ourt ree1tin this assertion. 1) In fa1t, as the said1ourt found, the a2ount was earned throuh the oint e<orts of the persons a2onwho2 it was distri:uted It has :een esta:lished that the Philippine Suar EstateDevelop2ent Co2pan- had earlier appointed "lue as its aent, authori;in it tosell its land, fa1tories and oil 2anufa1turin pro1ess. Pursuant to su1h authorit-,"l:erto &uevara, 0r., Eduardo &uevara, Isa:el &uevara, Edith, O3arell, and Pa:loSan1he;, wor!ed for the for2ation of the Qeeta:le Oil Invest2ent Corporation,indu1in other persons to invest in it. 14 =lti2atel-, after its in1orporation larel-throuh the pro2otion of the said persons, this new 1orporation pur1hased thePSEDC properties. 1+ or this sale, "lue re1eived as aent a 1o22ission of P'(,///.//, and it was fro2 this 1o22ission that the P)5,///.// pro2otional feeswere paid to the aforena2ed individuals. 1*

6here is no dispute that the pa-ees dul- reported their respe1tive shares of the feesin their in1o2e ta> returns and paid the 1orrespondin ta>es thereon. 17 6he Court of

6a> "ppeals also found, after e>a2inin the eviden1e, that no distri:ution of dividends was involved. 18

6he petitioner 1lai2s that these pa-2ents are ?1titious :e1ause 2ost of the pa-eesare 2e2:ers of the sa2e fa2il- in 1ontrol of "lue. It is arued that no indi1ationwas 2ade as to how su1h pa-2ents were 2ade, whether :- 1he1! or in 1ash, andthere is not enouh su:stantiation of su1h pa-2ents. In short, the petitionersuests a ta> dode, an atte2pt to evade a leiti2ate assess2ent :- involvin ani2ainar- dedu1tion.

e ?nd that these suspi1ions were adeuatel- 2et :- the private respondent whenits President, "l:erto &uevara, and the a11ountant, Ce1ilia Q. de 0esus, testi?ed thatthe pa-2ents were not 2ade in one lu2p su2 :ut periodi1all- and in di<erenta2ounts as ea1h pa-ee3s need arose. 19 It should :e re2e2:ered that this was afa2il- 1orporation where stri1t :usiness pro1edures were not applied and i22ediateissuan1e of re1eipts was not reuired. Even so, at the end of the -ear, when the

:oo!s were to :e 1losed, ea1h pa-ee 2ade an a11ountin of all of the fees re1eived:- hi2 or her, to 2a!e up the total of P)5,///.//. 20 "d2ittedl-, ever-thin see2ed



to :e infor2al. 6his arrane2ent was understanda:le, however, in view of the 1loserelationship a2on the persons in the fa2il- 1orporation.

e aree with the respondent 1ourt that the a2ount of the pro2otional fees was note>1essive. 6he total 1o22ission paid :- the Philippine Suar Estate Develop2entCo. to the private respondent was P'(5,///.//. 21"fter dedu1tin the said fees,"lue still had a :alan1e of P5/,///.// as 1lear pro?t fro2 the transa1tion. 6hea2ount of P)5,///.// was /9 of the total 1o22ission. 6his was a reasona:leproportion, 1onsiderin that it was the pa-ees who did pra1ti1all- ever-thin, fro2the for2ation of the Qeeta:le Oil Invest2ent Corporation to the a1tual pur1hase :-

it of the Suar Estate properties. 6his ?ndin of the respondent 1ourt is in a11ordwith the followin provision of the 6a> Code

SEC. /. Deductions "ro& gross inco&e.%%In 1o2putin net in1o2e there shall :eallowed as dedu1tions L

#a$ E>penses

#'$ n genera#.%%"ll the ordinar- and ne1essar- e>penses paid or in1urred durin theta>a:le -ear in 1arr-in on an- trade or :usiness, in1ludin a reasona:le allowan1efor salaries or other 1o2pensation for personal servi1es a1tuall- renderedG ... 22

and Revenue Reulations No. (, Se1tion )/ #'$, readin as follows

SEC. )/. Co&pensation "or persona# services.%%"2on the ordinar- and ne1essar-

e>penses paid or in1urred in 1arr-in on an- trade or :usiness 2a- :e in1luded areasona:le allowan1e for salaries or other 1o2pensation for personal servi1esa1tuall- rendered. 6he test of dedu1ti:ilit- in the 1ase of 1o2pensation pa-2ents iswhether the- are reasona:le and are, in fa1t, pa-2ents purel- for servi1e. 6his testand dedu1ti:ilit- in the 1ase of 1o2pensation pa-2ents is whether the- arereasona:le and are, in fa1t, pa-2ents purel- for servi1e. 6his test and its pra1ti1alappli1ation 2a- :e further stated and illustrated as follows

"n- a2ount paid in the for2 of 1o2pensation, :ut not in fa1t as the pur1hase pri1eof servi1es, is not dedu1ti:le. #a$ "n ostensi:le salar- paid :- a 1orporation 2a- :ea distri:ution of a dividend on sto1!. 6his is li!el- to o11ur in the 1ase of a1orporation havin few sto1!holders, Pra1ti1all- all of who2 draw salaries. If in su1ha 1ase the salaries are in e>1ess of those ordinaril- paid for si2ilar servi1es, and thee>1essive pa-2ent 1orrespond or :ear a 1lose relationship to the sto1!holdins of

the o1ers of e2plo-ees, it would see2 li!el- that the salaries are not paid wholl-for servi1es rendered, :ut the e>1essive pa-2ents are a distri:ution of earninsupon the sto1!. . . . #Pro2ulated e:. '', '*', / O.&. No. '+, (5.$

It is worth notin at this point that 2ost of the pa-ees were not in the reulare2plo- of "lue nor were the- its 1ontrollin sto1!holders. 2)

6he Soli1itor &eneral is 1orre1t when he sa-s that the :urden is on the ta>pa-er toprove the validit- of the 1lai2ed dedu1tion. In the present 1ase, however, we ?ndthat the onus has :een dis1hared satisfa1toril-. 6he private respondent has provedthat the pa-2ent of the fees was ne1essar- and reasona:le in the liht of the e<ortse>erted :- the pa-ees in indu1in investors and pro2inent :usiness2en to venturein an e>peri2ental enterprise and involve the2selves in a new :usiness reuirin2illions of pesos. 6his was no 2ean feat and should :e, as it was, su1ientl-

re1o2pensed.

It is said that ta>es are what we pa- for 1ivili;ation so1iet-. ithout ta>es, theovern2ent would :e paral-;ed for la1! of the 2otive power to a1tivate and operateit. 8en1e, despite the natural relu1tan1e to surrender part of one3s hard earnedin1o2e to the ta>in authorities, ever- person who is a:le to 2ust 1ontri:ute hisshare in the runnin of the overn2ent. 6he overn2ent for its part, is e>pe1ted torespond in the for2 of tani:le and intani:le :ene?ts intended to i2prove the livesof the people and enhan1e their 2oral and 2aterial values. 6his s-2:ioti1relationship is the rationale of ta>ation and should dispel the erroneous notion that itis an ar:itrar- 2ethod of e>a1tion :- those in the seat of power.

But even as we 1on1ede the inevita:ilit- and indispensa:ilit- of ta>ation, it is areuire2ent in all de2o1rati1 rei2es that it :e e>er1ised reasona:l- and ina11ordan1e with the pres1ri:ed pro1edure. If it is not, then the ta>pa-er has a rihtto 1o2plain and the 1ourts will then 1o2e to his su11or. or all the aweso2e powerof the ta> 1olle1tor, he 2a- still :e stopped in his tra1!s if the ta>pa-er 1ande2onstrate, as it has here, that the law has not :een o:served.

e hold that the appeal of the private respondent fro2 the de1ision of the petitionerwas ?led on ti2e with the respondent 1ourt in a11ordan1e with Rep. "1t No. ''(5."nd we also ?nd that the 1lai2ed dedu1tion :- the private respondent wasper2itted under the Internal Revenue Code and should therefore not have :eendisallowed :- the petitioner.

"CCORDIN&7Y, the appealed de1ision of the Court of 6a> "ppeals is "IRED intoto, without 1osts.

SO ORDERED.



G.R. No. 148)80 De5ember 9, 200+

!CEANIC 6IRELESS NET6!R>, INC., Petitioner,vs.C!MMISSI!NER !F INTERNAL RE&ENE, THE C!RT !F TA= APPEALS, #$%

THE C!RT !F APPEALS,Respondents.

D E C I S I O N

ACNA, J.?

6his is a Petition for Review on Certiorari see!in to reverse and set aside theDe1ision of the Court of "ppeals dated O1to:er ', (///, and its Resolution dateda- , (//', in O1eani1 ireless Networ!, In1. v. Co22issioner of InternalRevenue do1!eted as C"%&.R. SP No. 55+', upholdin the De1ision of the Court of

6a> "ppeals dis2issin the Petition for Review in C6" Case No. 4+ for la1! of urisdi1tion.

Petitioner O1eani1 ireless Networ!, In1. 1hallenes the authorit- of the Chief of the"11ounts Re1eiva:le and Billin Division of the Bureau of Internal Revenue #BIR$National O1e to de1ide and@or a1t with ?nalit- on :ehalf of the Co22issioner of Internal Revenue #CIR$ on protests aainst disputed ta> de?1ien1- assess2ents.

6he fa1ts of the 1ase are as follows

On ar1h '), '*++, petitioner re1eived fro2 the Bureau of Internal Revenue #BIR$de?1ien1- ta> assess2ents for the ta>a:le -ear '*+4 in the total a2ountof P+,44,**+.)', :ro!en down as follows

Kind of 6a> "ssess2ent No. "2ount

De?1ien1- In1o2e 6a> "R%4%'*+4%++%//''/ P+,+',54.//

Penalties for late pa-2ent "R%4%'*+4%++%//''' ,///.//

of in1o2e and failure to

?le uarterl- returns

De?1ien1- Contra1torAs "R%4%'*+4%++%//''( (*,+4*./

6a>

De?1ien1- i>ed 6a> "R%4%%++%//'' '(,/+.5

De?1ien1- ran1hise 6a> "R%4L+4%++%//''4 WWW((),)'(.//

6 o t a l %%%%%%%% P+,44,**+.)'

Petitioner ?led its protest aainst the ta> assess2ents and reuested are1onsideration or 1an1ellation of the sa2e in a letter to the BIR Co22issionerdated "pril '(, '*++.

"1tin in :ehalf of the BIR Co22issioner, then Chief of the BIR "11ounts Re1eiva:leand Billin Division, r. Severino B. Buot, reiterated the ta> assess2ents while

den-in petitionerAs reuest for reinvestiation in a letter

'

dated 0anuar- (4, '**',thus

Note Your reuest for re%investiation has :een denied for failure to su:2it thene1essar- supportin papers as per endorse2ent letter fro2 the o1e of theSpe1ial Operation Servi1e dated '(%'(%*/.

Said letter li!ewise reuested petitioner to pa- the total a2ount of P+,44,**+.)'within ten #'/$ da-s fro2 re1eipt thereof, otherwise the 1ase shall :e referred to theColle1tion Enfor1e2ent Division of the BIR National O1e for the issuan1e of awarrant of distraint and lev- without further noti1e.

=pon petitionerAs failure to pa- the su:e1t ta> assess2ents within the pres1ri:ed

period, the "ssistant Co22issioner for Colle1tion, a1tin for the Co22issioner of Internal Revenue, issued the 1orrespondin warrants of distraint and@or lev- andarnish2ent. 6hese were served on petitioner on O1to:er '/, '**' and O1to:er '),'**', respe1tivel-.(

On Nove2:er +, '**', petitioner ?led a Petition for Review with the Court of 6a>"ppeals #C6"$ to 1ontest the issuan1e of the warrants to enfor1e the 1olle1tion of theta> assess2ents. 6his was do1!eted as C6" Case No. 4+.

6he C6" dis2issed the petition for la1! of urisdi1tion in a de1ision dated Septe2:er', '**4, de1larin that said petition was ?led :e-ond the thirt- #/$%da- periodre1!oned fro2 the ti2e when the de2and letter of 0anuar- (4, '**' :- the Chief of the BIR "11ounts Re1eiva:le and Billin Division was presu2a:l- re1eived :-petitioner, i!e., within a reasona:le ti2e fro2 said date in the reular 1ourse of 2ailpursuant to Se1tion (#v$ of Rule '' of the Rules of Court.

6he de1ision 1ited Surigao #ectric Co!, nc! v! Court o" Ta Appea#s4 wherein thisCourt 1onsidered a 2ere de2and letter sent to the ta>pa-er after his protest of theassess2ent noti1e as the ?nal de1ision of the Co22issioner of Internal Revenue onthe protest. 8en1e, the ?lin of the petition on Nove2:er +, '**' was held 1learl-:e-ond the rele2entar- period.5

6he court a .uo li!ewise stated that the ?nalit- of the denial of the protest :-petitioner aainst the ta> de?1ien1- assess2ents was :olstered :- the su:seuentissuan1e of the warrants of distraint and@or lev- and arnish2ent to enfor1e the1olle1tion of the de?1ien1- ta>es. 6he issuan1e was not :arred :- pres1ription:e1ause the 2ere ?lin of the letter of protest :- petitioner whi1h was iven due1ourse :- the Bureau of Internal Revenue suspended the runnin of the pres1riptionperiod as e>pressl- provided under the then Se1tion ((4 of the 6a> Code

SEC. ((4. Se$o$ o< R$$$@ o< e S#e o< Lm#o$ ! / 6he runninof the Statute of 7i2itations provided in Se1tion (/ and (( on the 2a!in of assess2ent and the :einnin of distraint or lev- or a pro1eedin in 1ourt for1olle1tion, in respe1t of ande?1ien1-, shall :e suspended for the period durinwhi1h the Co22issioner is prohi:ited fro2 2a!in the assess2ent or :einnindistraint or lev- or a pro1eedin in 1ourt and for si>t- #/$ da-s thereafterG when theta>pa-er reuests for a reinvestiation whi1h is ranted :- the Co22issionerG whenthe ta>pa-er 1annot :e lo1ated in the address iven :- hi2 in the return ?les uponwhi1h a ta> is :ein assessed or 1olle1ted Provided, 6hat if the ta>pa-er infor2 theCo22issioner of an- 1hane of address, the runnin of the statute of li2itations willnot :e suspendedG when the warrant of distraint and lev- is dul- served upon theta>pa-er, his authori;ed representative, or a 2e2:er of his household withsu1ient dis1retion, and no propert- 1ould lo1atedG and when the ta>pa-er is out of

the Philippines. #=nders1orin supplied.$


















Petitioner ?led a otion for Re1onsideration aruin that the de2and letter of 0anuar- (4, '**' 1annot :e 1onsidered as the ?nal de1ision of the Co22issioner of Internal Revenue on its protest :e1ause the sa2e was sined :- a 2ere su:ordinateand not :- the Co22issioner hi2self.)

ith the denial of its 2otion for re1onsideration, petitioner 1onseuentl- ?led aPetition for Review with the Court of "ppeals 1ontendin that there was no ?nalde1ision to spea! of :e1ause the Co22issioner had -et to 2a!e a personaldeter2ination as reards the 2erits of petitionerAs 1ase.+

6he Court of "ppeals denied the petition in a de1ision dated O1to:er ', (///, thedispositive portion of whi1h reads

8EREORE, the petition is DISISSED for la1! of 2erit.

SO ORDERED.

PetitionerAs otion for Re1onsideration was li!ewise denied in a resolution dated a-, (//'.

8en1e, this petition with the followin assin2ent of errors*

I

68E 8ONOR"B7E RESPONDEN6 C" ERRED IN INDIN& 68"6 68E DE"ND 7E66ERISS=ED BY 68E #68EN$ "CCO=N6S RECEIQ"B7E@BI77IN& DIQISION O 68E BIRN"6ION"7 OICE "S 68E IN"7 DECISION O 68E RESPONDEN6 CIR ON 68EDISP=6ED "SSESSEN6S, "ND 8ENCE CONS6I6=6ED 68E DECISION "PPE"7"B7E 6O

68E 8ONOR"B7E RESPONDEN6 C6"G "ND,

II

68E 8ONOR"B7E RESPONDEN6 C" ERRED IN DEC7"RIN& 68"6 68E DENI"7 O 68EPRO6ES6 O 68E S=B0EC6 "77E&ED DEICIENCY 6"J "SSESSEN6S 8"D 7ON&BECOE IN"7 "ND EJEC=6ORY OR "I7=RE O 68E PE6I6IONER 6O INS6I6=6E

68E "PPE"7 RO 68E DE"ND 7E66ER O 68E C8IE O 68E "CCO=N6SRECEIQ"B7E@BI77IN& DIQISION, BIR N"6ION"7 OICE, 6O 68E 8ONOR"B7ERESPONDEN6 C6", I68IN 68IR6Y #/$ D"YS RO RECEIP6 68EREO.

6hus, the 2ain issue is whether or not a de2and letter for ta> de?1ien1-

assess2ents issued and sined :- a su:ordinate o1er who was a1tin in :ehalf of the Co22issioner of Internal Revenue, is dee2ed ?nal and e>e1utor- and su:e1t toan appeal to the Court of 6a> "ppeals.

e rule in the ar2ative.

" de2and letter for pa-2ent of delinuent ta>es 2a- :e 1onsidered a de1ision on adisputed or protested assess2ent. 6he deter2ination on whether or not a de2andletter is ?nal is 1onditioned upon the lanuae used or the tenor of the letter :einsent to the ta>pa-er.

e laid down the rule that the Co22issioner of Internal Revenue should alwa-sindi1ate to the ta>pa-er in 1 lear and uneuivo1al lanuae what 1onstitutes his ?naldeter2ination of the disputed assess2ent, thus

. . . we dee2 it appropriate to state that the Co22issioner of Internal Revenueshould alwa-s indi1ate to the ta>pa-er in 1lear and uneuivo1al lanuae wheneverhis a1tion on an assess2ent uestioned :- a ta>pa-er 1onstitutes his ?naldeter2ination on the disputed assess2ent, as 1onte2plated :- Se1tions ) and '' of Repu:li1 "1t No. ''(5, as a2ended. On the :asis of his state2ent indu:ita:l-showin that the Co22issionerAs 1o22uni1ated a1tion is his ?nal de1ision on the1ontested assess2ent, the arieved ta>pa-er would then :e a:le to ta!e re1ourseto the ta> 1ourt at the opportune ti2e. ithout needless di1ult-, the ta>pa-erwould :e a:le to deter2ine when his riht to appeal to the ta> 1ourt a11rues.

6he rule of 1ondu1t would also o:viate all desire and opportunit- on the part of theta>pa-er to 1ontinuall- dela- the ?nalit- of the assess2ent H and, 1onseuentl-, the1olle1tion of the a2ount de2anded as ta>es H :- repeated reuests forre1o2putation and re1onsideration. On the part of the Co22issioner, this woulden1ourae his o1e to 1ondu1t a 1areful and thorouh stud- of ever- uestionedassess2ent and render a 1orre1t and de?nite de1ision thereon in the ?rst instan1e.

6his would also deter the Co22issioner fro2 unfairl- 2a!in the ta>pa-er rope inthe dar! and spe1ulate as to whi1h a1tion 1onstitutes the de1ision appeala:le to theta> 1ourt. Of reater i2port, this rule of 1ondu1t would 2eet a pressin need for fairpla-, reularit-, and orderliness in ad2inistrative a1tion.'/

In this 1ase, the letter of de2and dated 0anuar- (4, '**', unuestiona:l-1onstitutes the ?nal a1tion ta!en :- the Bureau of Internal Revenue on petitionerAsreuest for re1onsideration when it reiterated the ta> de?1ien1- assess2ents due

fro2 petitioner, and reuested its pa-2ent. ailure to do so would result in theissuan1e of a warrant of distraint and lev- to enfor1e its 1olle1tion without furthernoti1e.'' In addition, the letter 1ontained a notation indi1atin that petitionerAsreuest for re1onsideration had :een denied for la1! of supportin do1u2ents.

6he a:ove 1on1lusion ?nds support in Co&&issioner o" nterna# 'evenue v! Aa#aSecurities Corporation,'(where we held

6he letter of e:ruar- '+, '* #E>h. &$, in the view of the Court, is tanta2ount to adenial of the re1onsideration or respondent 1orporationAsF[protest ofF theassess2ent 2ade :- the petitioner, 1onsiderin that the said letter wasF in itself areiteration of the de2and :- the Bureau of Internal Revenue for the settle2ent of the assess2ent alread- 2ade, and for the i22ediate pa-2ent of the su2 of P)5+,+)./4 in spite of the vehe2ent protest of the respondent 1orporation on "pril(', '*'. 6his 1ertainl- is a 1lear indi1ation of the ?r2 stand of petitioner aainstthe re1onsideration of the disputed assess2ent[6his :ein so, the said lettera2ountedF to a de1ision on a disputed or protested assess2ent, and, there, the1ourt a uo did not err in ta!in 1oni;an1e of this 1ase.

Si2ilarl-, in Surigao #ectric Co!, nc v! Court o" Ta Appea#s,' and in C' v! 0nionShipping Corporation,'4 we held

. . . In this letter, the 1o22issioner not onl- in e<e1t de2anded that the petitionerpa- the a2ount of P'',5.5 :ut also ave warnin that in the event it failed topa-, the said 1o22issioner would :e 1onstrained to enfor1e the 1olle1tion thereof :- 2eans of the re2edies provided :- law. 6he tenor of the letter, spe1i?1all- thestate2ent reardin the resort to leal re2edies, un2ista!a:l- indi1atedF the ?nalnature of the deter2ination 2ade :- the 1o22issioner of the petitionerAs de?1ien1-fran1hise ta> lia:ilit-.



















6he de2and letter re1eived :- petitioner veril- sini?ed a 1hara1ter of ?nalit-. 6herefore, it was tanta2ount to a ree1tion of the reuest for re1onsideration. "s1orre1tl- held :- the Court of 6a> "ppeals, while the denial of the protest was in thefor2 of a de2and letter, the notation in the said letter 2a!in referen1e to theprotest ?led :- petitioner 1learl- shows the intention of the respondent to 2a!e it ashisF ?nal de1ision.'5

6his now :rins us to the 1ru> of the 2atter as to whether said de2and letterindeed attained ?nalit- despite the fa1t that it was issued and sined :- the Chief of the "11ounts Re1eiva:le and Billin Division instead of the BIR Co22issioner.

6he eneral rule is that the Co22issioner of Internal Revenue 2a- deleate an-power vested upon hi2 :- law to Division Chiefs or to o1ials of hiher ran!. 8e1annot, however, deleate the four powers ranted to hi2 under the NationalInternal Revenue Code #NIRC$ enu2erated in Se1tion ).

"s a2ended :- Repu:li1 "1t No. +4(4, Se1tion ) of the Code authori;es the BIRCo22issioner to deleate the powers vested in hi2 under the pertinent provisionsof the Code to an- su:ordinate o1ial with the ran! euivalent to a division 1hief orhiher, e>1ept the followin

#a$ 6he power to re1o22end the pro2ulation of rules and reulations :- theSe1retar- of inan1eG

#:$ 6he power to issue rulins of ?rst i2pression or to reverse, revo!e or 2odif- an-

e>istin rulin of the BureauG

#1$ 6he power to 1o2pro2ise or a:ate under Se1tion (/4#"$ and #B$ of this Code,an- ta> de?1ien1- Provided, however, that assess2ents issued :- the ReionalO1es involvin :asi1 de?1ien1- ta>es of ?ve hundred thousand pesos #P5//,///$or less, and 2inor 1ri2inal violations as 2a- :e deter2ined :- rules and reulationsto :e pro2ulated :- the Se1retar- of inan1e, upon the re1o22endation of theCo22issioner, dis1overed :- reional and distri1t o1ials, 2a- :e 1o2pro2ised :-a reional evaluation :oard whi1h shall :e 1o2posed of the Reional Dire1tor asChair2an, the "ssistant Reional Dire1tor, heads of the 7eal, "ssess2ent andColle1tion Divisions and the Revenue Distri1t O1er havin urisdi1tion over theta>pa-er, as 2e2:ersG and

#d$ 6he power to assin or reassin internal revenue o1ers to esta:lish2ents

where arti1les su:e1t to e>1ise ta> are produ1ed or !ept.

It is 1lear fro2 the a:ove provision that the a1t of issuan1e of the de2and letter :-the Chief of the "11ounts Re1eiva:le and Billin Division does not fall under an- of the e>1eptions that have :een 2entioned as non%delea:le.

Se1tion of the Code further provides

SEC. . Power of the Co22issioner to a!e "ssess2ents and Pres1ri:e "dditionalReuire2ents for 6a> "d2inistration and Enfor1e2ent. H

#"$ E>a2ination of Returns and Deter2ination of 6a> Due. - "fter a return has :een?led as reuired under the provisions of this Code, the Commo$er or %:-

#ore% reree$#ve 2a- authori;e the e>a2ination of an- ta>pa-er andthe assess2ent of the 1orre1t a2ount of ta>G Provided, however, 6hat failure to ?le a

return shall not prevent the Co22issioner fro2 authori;in the e>a2ination of an-ta>pa-er.

6he ta> or ande?1ien1- ta> so assessed shall :e paid upon noti1e and de2andfro2 the Commo$er or <rom %:- #ore%

reree$#ve. . . .B #E2phasis supplied$

6hus, the authorit- to 2a!e ta> assess2ents 2a- :e deleated to su:ordinateo1ers. Said assess2ent has the sa2e for1e and e<e1t as that issued :- theCo22issioner hi2self, if not reviewed or revised :- the latter su1h as in this 1ase.'

" reuest for re1onsideration 2ust :e 2ade within thirt- #/$ da-s fro2 theta>pa-erAs re1eipt of the ta> de?1ien1- assess2ent, otherwise, the de1ision:e1o2es ?nal, unappeala:le and therefore, de2anda:le. " ta> assess2ent that has:e1o2e ?nal, e>e1utor- and enfor1ea:le for failure of the ta>pa-er to assail thesa2e as provided in Se1tion ((+ 1an no loner :e 1ontested, thus

SEC. ((+. Proe$@ o< Aeme$. hen the Co22issioner or his dul-authori;ed representative ?nds that proper ta>es should :e assessed, he shall ?rstnotif- the ta>pa-er of his ?ndinsSu1h assess2ent 2a- :e protestedad2inistrativel- :- ?lin a reuest for re1onsideration or reinvestiation withinthirt- #/$ da-s fro2 re1eipt of the assess2ent in su1h for2 and 2anner as 2a- :epres1ri:ed :- i2ple2entin rules and reulations. ithin si>t- #/$ da-s fro2 ?linof the protest, all relevant supportin do1u2ents shall have :een su:2ittedGotherwise, the assess2ent shall :e1o2e ?nal.

If the protest is denied in whole or in part, or is not a1ted upon within one hundred#'+/$ da-s fro2 su:2ission of do1u2ents, the ta>pa-er adversel- a<e1ted :- the

de1ision or ina1tion 2a- appeal to the Court of 6a> "ppeals within thirt- #/$ da-sfro2 re1eipt of the said de1ision, or fro2 the lapse of the one hundred eiht- #'+/$ %da- periodG otherwise, the de1ision shall :e1o2e ?nal, e>e1utor- and de2anda:le.

8ere, petitioner failed to avail of its riht to :rin the 2atter :efore the Court of 6a>"ppeals within the rele2entar- period upon the re1eipt of the de2and letterreiteratin the assessed delinuent ta>es and den-in its reuest for re1onsiderationwhi1h 1onstituted the ?nal deter2ination :- the Bureau of Internal Revenue onpetitionerAs protest. Bein a ?nal disposition :- said aen1-, the sa2e would have:een a proper su:e1t for appeal to the Court of 6a> "ppeals.

6he rule is that for the Court of 6a> "ppeals to a1uire urisdi1tion, an assess2ent2ust ?rst :e disputed :- the ta>pa-er and ruled upon :- the Co22issioner of Internal Revenue to warrant a de1ision fro2 whi1h a petition for review 2a- :e

ta!en to the Court of 6a> "ppeals. here an adverse rulin has :een rendered :-the Co22issioner of Internal Revenue with referen1e to a disputed assess2ent or a1lai2 for refund or 1redit, the ta>pa-er 2a- appeal the sa2e within thirt- #/$ da-safter re1eipt thereof.')

e aree with the fa1tual ?ndins of the Court of 6a> "ppeals that the de2andletter 2a- :e presu2ed to have :een dul- dire1ted, 2ailed and was re1eived :-petitioner in the reular 1ourse of the 2ail in the a:sen1e of eviden1e to the1ontrar-. 6his is in a11ordan1e with Se1tion (#v$, Rule '' of the Rules of Court, andin this 1ase, sin1e the period to appeal has 1o22en1ed to run fro2 the ti2e theletter of de2and was presu2a:l- re1eived :- petitioner within a reasona:le ti2eafter 0anuar- (4, '**', the period of thirt- #/$ da-s to appeal the adverse de1isionon the reuest for re1onsideration had alread- lapsed when the petition was ?ledwith the Court of 6a> "ppeals onl- on Nove2:er +, '**'. 8en1e, the Court of 6a>

"ppeals properl- dis2issed the petition as the ta> delinuen1- assess2ent had lon:e1o2e ?nal and e>e1utor-.









6HEREF!RE, pre2ises 1onsidered, the De1ision of the Court of "ppeals datedO1to:er ', (/// and its Resolution dated a- , (//' in C"%&.R. SP No. 55+' arehere:- AFFIRMED. 6he petition is a11ordinl-DENIED for la1! of 2erit.

S! !RDERED.



G.R. No. 1)+210 ':- 11, 2001

C!MMISSI!NER !F INTERNAL RE&ENE, petitioner,vs.ISA3ELA CLTRAL C!RP!RATI!N, respondent.

PANGANI3AN, J.:

" ?nal de2and letter fro2 the Bureau of Internal Revenue, reiteratin to theta>pa-er the i22ediate pa-2ent of a ta> de?1ien1- assess2ent previousl- 2ade, istanta2ount to a denial of the ta>pa-er3s reuest for re1onsideration. Su1h letter

a2ounts to a ?nal de1ision on a disputed assess2ent and is thus appeala:le to theCourt of 6a> "ppeals #C6"$.

Te C#e

Before this Court is a Petition for Review on Certiorari' pursuant to Rule 45 of theRules of Court, see!in to set aside the "uust '*, '**+ De1ision ( of the Court of "ppeals #C"$ in C"%&R SP No. 4+ and ulti2atel- to ar2 the dis2issal of C6"Case No. 5(''. 6he dispositive portion of the assailed De1ision reads as follows

8EREORE, the assailed de1ision is REQERSED and SE6 "SIDE. "11ordinl-, ud2ent is here:- rendered RE"NDIN& the 1ase to the C6" for properdisposition.4

Te F#5

6he fa1ts are undisputed. 6he Court of "ppeals uoted the su22ar- of the C6" asfollows

"s su11in1tl- su22ari;ed :- the Court of 6a> appeals #C6" for :revit-$, theante1edent fa1ts are as follows

3In an investiation 1ondu1ted on the '*+ :oo!s of a11ount of respondent,petitionerF had the preli2inar- ?ndinF that respondentF in1urred a total in1o2eta> de?1ien1- of P*,*+5,*(.'5, in1lusive of in1re2ents. =pon protest :-respondent3sF 1ounsel, the said preli2inar- assess2ent was redu1ed to the a2ountof P(5,+*.44, a :rea!down of whi1h follows

De?1ien1- In1o2e 6a> P(',/((.+

De?1ien1- E>panded ithholdin 6a> 4,+4.)

6otal P(5,+*.44

#pp. '+)%'+*, BIR re1ords$3

On e:ruar- (, '**/, respondentF re1eived fro2 petitionerF an assess2ent letter,dated e:ruar- *, '**/, de2andin pa-2ent of the a2ounts of P,'*.+ andP4,+*).)* as de?1ien1- in1o2e ta> and e>panded withholdin ta> in1lusive of sur1hare and interest, respe1tivel-, for the ta>a:le period fro2 0anuar- ', '*+ toDe1e2:er ', '*+. #pp. (/4 and (/5, BIR re1.$

In a letter, dated ar1h ((, '**/, ?led with the petitioner3sF o1e on ar1h (,'**/ #pp. (*%'', BIR re1.$, respondentF reuested > > > a re1onsideration of thesu:e1t assess2ent.

Supple2ental to its protest was a letter, dated "pril (, '**/, ?led with thepetitioner3sF o1e on "pril '+, '**/ #pp. ((4 ((5, BIR re1.$, to whi1h > > > wereatta1hed 1ertain do1u2ents supportive of its protest, as well as a aiver of Statuteof 7i2itation, dated "pril '), '**/, where it was indi1ated that petitionerF wouldonl- have until "pril 5, '**' within whi1h to asses and 1olle1t the ta>es that 2a- :efound due fro2 respondentF after the re%investiation.

On e:ruar- *, '**5, respondentF re1eived fro2 petitionerF a inal Noti1e BeforeSei;ure, dated De1e2:er ((, '**4 #p. 4/, BIR re1.$. In said letter, petitionerFde2anded pa-2ent of the su:e1t assess2ent within ten #'/$ da-s fro2 re1eiptthereof. Otherwise, failure on its part would 1onstrain petitionerF to 1olle1t thesu:e1t assess2ent throuh su22ar- re2edies.

RespondentF 1onsidered said ?nal noti1e of sei;ure as petitioner3sF ?nal de1ision.8en1e, the instant petition for review ?led with this Court on ar1h *, '**5.

6he C6" havin rendered ud2ent dis2issin the petition, respondentF ?led theinstant petition an1hored on the aru2ent that petitioner3sF issuan1e of the inalNoti1e Before Sei;ure 1onstitutes itsF de1ision on respondent3sF reuest forreinvestiation, whi1h the respondentF 2a- appeal to the C6".5

R:$@ o< e Cor o< Ae#:

In its De1ision, the Court of "ppeals reversed the Court of 6a> "ppeals. 6he C"1onsidered the ?nal noti1e sent :- petitioner as the latter3s de1ision, whi1h wasappeala:le to the C6". 6he appellate 1ourt reasoned that the ?nal Noti1e :eforesei;ure had e<e1tivel- denied petitioner3s reuest for a re1onsideration of the1o22issioner3s assess2ent. 6he C" relied on the lon%settled ta> urispruden1e thata de2and letter reiteratin pa-2ent of delinuent ta>es a2ounted to a de1ision ona disputed assess2ent.

8en1e, this re1ourse.

Ie

In his e2orandu2,) petitioner presents for this Court3s 1onsideration a solitar-issue

hether or not the inal Noti1e Before Sei;ure dated e:ruar- *, '**5 sined :-"1tin Chief Revenue Colle1tion O1er ilaros "1evedo aainst ICC 1onstitutes the?nal de1ision of the CIR appeala:le to the C6".+

Te Cor R:$@

6he Petition is not 2eritorious.

So:e Ie?

The Nature of the Final Notice Before Seizure

6he inal Noti1e Before Sei;ure sent :- the Bureau of Internal Revenue #BIR$ torespondent reads as follows



On e:. *, '**/, thisF O1e sent -ou a letter reuestin -ou to settle the a:ove%1aptioned assess2ent. 6o date, however, despite the lapse of a 1onsidera:le lenthof ti2e, we have not :een honored with a repl- fro2 -ou.

In this 1onne1tion, we are ivin -ou this 7"S6 OPPOR6=NI6Y to settle the advertedassess2ent within ten #'/$ da-s after re1eipt hereof. Should -ou aain fail, andrefuse to pa-, this O1e will :e 1onstrained to enfor1e its 1olle1tion :- su22ar-re2edies of arrant of 7ev- of Road Propert-, Distraint of Personal Propert- orarrant of &arnish2ent, and@or si2ultaneous 1ourt a1tion.

Please ive this 2atter -our preferential attention.

Qer- trul- -ours,

ISIDRO B. 6ECSON, 0R.Revenue Distri1t O1er

B-

#Sined$I7"&ROS . "CEQEDO"1t. Chief Revenue Colle1tion O1er*

Petitioner 2aintains that this inal Noti1e was a 2ere reiteration of the delinuentta>pa-er3s o:liation to pa- the ta>es due. It was supposedl- a 2ere de2and thatshould not have :een 2ista!en for a de1ision on a protested assess2ent. Su1hde1ision, the 1o22issioner 1ontends, 2ust uneuivo1a:l- indi1ate that it is theresolution of the ta>pa-er3s reuest for re1onsideration and 2ust li!ewise state thereason therefor.

Respondent, on the other hand, points out that the inal Noti1e Before Sei;ureshould :e 1onsidered as a denial of its reuest for re1onsideration of the disputedassess2ent. 6he Noti1e should :e dee2ed as petitioner3s last a1t, sin1e failure to1o2pl- with it would lead to the distraint and lev- of respondent3s properties, asindi1ated therein.

e aree with respondent. In the nor2al 1ourse, the revenue distri1t o1er sendsthe ta>pa-er a noti1e of delinuent ta>es, indi1atin the period 1overed, the a2ountdue in1ludin interest, and the reason for the delinuen1-. If the ta>pa-er disareeswith or wishes to protest the assess2ent, it sends a letter to the BIR indi1atin itsprotest, statin the reasons therefor, and su:2ittin su1h proof as 2a- :ene1essar-. 6hat letter is 1onsidered as the ta>pa-er3s reuest for re1onsideration of the delinuent assess2ent. "fter the reuest is ?led and re1eived :- the BIR, theassess2ent :e1o2es a disputed assess2ent on whi1h it 2ust render a de1ision.

6hat de1ision is appeala:le to the Court of 6a> "ppeals for review.

Prior to the de1ision on a disputed assess2ent, there 2a- still :e e>1hanes:etween the 1o22issioner of internal revenue #CIR$ and the ta>pa-er. 6he for2er2a- as! 1lari?1ator- uestions or reuire the latter to su:2it additional eviden1e.8owever, the CIR3s position reardin the disputed assess2ent 2ust :e indi1ated in

the ?nal de1ision. It is this de1ision that is properl- appeala:le to the C6" for review.

Indisputa:l-, respondent re1eived an assess2ent letter dated e:ruar- *, '**/,statin that it had delinuent ta>es dueG and it su:seuentl- ?led its 2otion forre1onsideration on ar1h (, '**/. In support of its reuest for re1onsideration, itsent to the CIR additional do1u2ents on "pril '+, '**/. 6he ne>t 1o22uni1ationrespondent re1eived was alread- the inal Noti1e Before Sei;ure dated Nove2:er'/, '**4.

In the liht of the a:ove fa1ts, the inal Noti1e Before Sei;ure 1annot :ut :e1onsidered as the 1o22issioner3s de1ision disposin of the reuest forre1onsideration ?led :- respondent, who re1eived no other response to its reuest.

Not onl- was the Noti1e the onl- response re1eivedG its 1ontent and tenor supportedthe theor- that it was the CIR3s ?nal a1t reardin the reuest for re1onsideration. 6he ver- title e>pressl- indi1ated that it was ana# noti1e prior to sei;ure of propert-. 6he letter itself 1learl- stated that respondent was :ein iven this 7"S6OPPOR6=NI6Y to pa-G otherwise, its properties would :e su:e1ted to distraint andlev-. 8ow then 1ould it have :een 2ade to :elieve that its reuest forre1onsideration was still pendin deter2ination, despite the a1tual threat of sei;ureof its properties

urther2ore, Se1tion ((+ of the National Internal Revenue Code states that adelinuent ta>pa-er 2a- nevertheless direct# appea# a disputed assess2ent, if itsreuest for re1onsideration re2ains una1ted upon '+/ da-s after su:2issionthereof. e uote

Se1. ((+. Protesting an Assessment . H > > >

ithin a period to :e pres1ri:ed :- i2ple2entin rules and reulations, theta>pa-er shall :e reuired to respond to said noti1e. If the ta>pa-er fails to respond,the Co22issioner or his dul- authori;ed representative shall issue an assess2ent:ased on his ?ndins.

Su1h assess2ent 2a- :e protested ad2inistrativel- :- ?lin a reuest forre1onsideration or reinvestiation within thirt- #/$ da-s fro2 re1eipt of theassess2ent in su1h for2 and 2anner as 2a- :e pres1ri:ed :- i2ple2entin rulesand reulations. ithin si>t- #/$ da-s fro2 ?lin of the protest, all relevantsupportin do1u2ents shall have :e1o2e ?nal.

If the protest is denied in whole or in part, or is not a1ted upon within one hundredeiht- #'+/$ da-s fro2 su:2ission of do1u2ents, the ta>pa-er adversel- a<e1ted

:- the de1ision or ina1tion 2a- appeal to the Court of 6a> "ppeals within #/$ da-sfro2 re1eipt of the said de1ision, or fro2 the lapse of the one hundred eiht- #'+/$%da- periodG otherwise the de1ision shall :e1o2e ?nal, e>e1utor- and de2anda:le.'/

In this 1ase, the said period of '+/ da-s had alread- lapsed when respondent ?ledits reuest for re1onsideration on ar1h (, '**/, without an- a1tion on the part of the CIR.

7astl-, urispruden1e di1tates that a ?nal de2and letter for pa-2ent of delinuentta>es 2a- :e 1onsidered a de1ision on a disputed or protested assess2ent.In Co&&issioner o" nterna# 'evenue v! Aa#a Securities Corporation, this Court held

6he letter of e:ruar- '+, '* #E>h. &$, in the view of the Court, is tanta2ount toa denial of the re1onsideration or respondent 1orporation3sF > > > protest ofF theassess2ent 2ade :- the petitioner, 1onsiderin that the said letter wasF in itself areiteration of the de2and :- the Bureau of Internal Revenue for the settle2ent of



the assess2ent alread- 2ade, and for the i22ediate pa-2ent of the su2 of P)5+,+)./4 in spite of the vehe2ent protest of the respondent 1orporation on "pril(', '*'. 6his 1ertainl- is a 1lear indi1ation of the ?r2 stand of petitioner aainstthe re1onsideration of the disputed assess&ent , in view of the 1ontinued refusal of the respondent 1orporation to e>e1ute the waiver of the period of li2itation uponthe assess2ent in uestion.

6his :ein so, the said letter a2ountedF to a de1ision on a disputed or protestedassess2ent and, there, the 1ourt a .uo did not err in ta!in 1oni;an1e of this1ase.''

Si2ilarl-, in Surigao #ectric Co!, nc! v! Court o" Ta Appea#s '( and aain in C' v!0nion Shipping Corp!,' we ruled

> > >. 6he letter of de2and dated "pril (*, '* unuestiona:l- 1onstitutes the?nal a1tion ta!en :- the 1o22issioner on the petitioner3s several reuests forre1onsideration and re1o2putation. In this letter the 1o22issioner not onl- in e<e1tde2anded that the petitioner pa- the a2ount of P'',5.5 :ut also ave warninthat in the event it failed to pa-, the said 1o22issioner would :e 1onstrained toenfor1e the 1olle1tion thereof :- 2eans of the re2edies provided :- law. 6he tenorof the letter, spe1i?1all- the state2ent reardin the resort to leal re2edies,un2ista!a:l- indi1atedF the ?nal nature of the deter2ination 2ade :- the1o22issioner of the petitioner3s de?1ien1- fran1hise ta> lia:ilit-.

"s in C' v! 0nion Shipping,'4 petitioner failed to rule on the otion for

Re1onsideration ?led :- private respondent, :ut si2pl- 1ontinued to de2andpa-2ent of the latter3s alleed ta> delinuen1-. 6hus, the Court reiterated thedi1tu2 that the BIR should alwa-s indi1ate to the ta>pa-er in 1lear and uneuivo1allanuae what 1onstitutes ?nal a1tion on a disputed assess2ent. 6he o:e1t of thispoli1- is to avoid repeated reuests for re1onsideration :- the ta>pa-er, there:-dela-in the ?nalit- of the assess2ent and, 1onseuentl-, the 1olle1tion of the ta>esdue. urther2ore, the ta>pa-er would not :e ropin in the dar!, spe1ulatin as towhi1h 1o22uni1ation or a1tion of the BIR 2a- :e the de1ision appeala:le to the ta>1ourt.'5

In the instant 1ase, the se1ond noti1e re1eived :- private respondent veril-indi1ated its nature H that it was na#. =neuivo1a:l-, therefore, it was tanta2ountto a ree1tion of the reuest for re1onsideration.

Co&&issioner v! A#gue'

is not in point here. In that 1ase, the arrant of Distraintand 7ev-, issued to the ta>pa-er without an- 1ateori1al rulin on its reuest forre1onsideration, was not dee2ed euivalent to a denial of the reuest. Be1ausesu1h reuest 1ould not in fa1t :e found in its re1ords, the BIR 1annot :e presu2ed tohave ta!en it into 1onsideration. 6he reuest was 1onsidered onl- when theta>pa-er ave a 1op- of it, dul- sta2p%re1eived :- the BIR. 8en1e, the arrant wasdee2ed pre2ature.1âwphi1!n2t

In the present 1ase, petitioner does not den- re1eipt of private respondent3s protestletter. "s a 2atter of fa1t, it 1ateori1all- relates the followin in its State2ent of Relevant a1ts')

. On ar1h (, '**/, respondent ICC wrote the CIR reuestin for are1onsideration of the assess2ent on the round that there was an error 1o22itted

in the 1o2putation of interest and that there were e>penses whi1h were disallowed#I:id., pp. (*%''$.

4. On "pril (, '**/, respondent ICC sent the CIR additional do1u2ents in support of its protest@re1onsideration. 6he letter was re1eived :- the BIR on "pril '+, '**/.Respondent ICC further e>e1uted a aiver of Statute of 7i2itation #dated "pril '),'**/$ where:- it 1onsented to the BIR to assess and 1olle1t an- ta>es that 2a- :edis1overed in the pro1ess of reinvestiation, until "pril , '**' #I:id., pp. (*%''$. "1op- of the waiver is hereto atta1hed as "nne> 3C3.

8avin ad2itted as a "act private respondent3s reuest for re1onsideration,petitioner 2ust have passed upon it prior to the issuan1e of the inal Noti1e BeforeSei;ure.

8EREORE, the Petition is here:- DENIED and the assailed De1ision AFFIRED!

SO ORDERED.



G.R. No. 128)1+ '$e 29, 1999

C!MMISSI!NER !F INTERNAL RE&ENE, petitioner,vs.PASC!R REALT" AND DE&EL!PMENT C!RP!RATI!N, R!GELI! A. DI! #$%

&IRGINIA S. DI!,respondents.

PANGANI3AN, J.:

"n assess2ent 1ontains not onl- a 1o2putation of ta> lia:ilities, :ut also a de2andfor pa-2ent within a pres1ri:ed period. It also sinals the ti2e when penalties andprotests :ein to a11rue aainst the ta>pa-er. 6o ena:le the ta>pa-er to deter2inehis re2edies thereon, due pro1ess reuires that it 2ust :e served on and re1eived:- the ta>pa-er. "11ordinl-, an adavit, whi1h was e>e1uted :- revenue o1ersstatin the ta> lia:ilities of a ta>pa-er and atta1hed to a 1ri2inal 1o2plaint for ta>evasion, 1annot :e dee2ed an assess2ent that 1an :e uestioned :efore the Courtof 6a> "ppeals.

State&ent o" the Case

Before this Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court pra-in for the nulli?1ation of the O1to:er /, '**De1ision 1 of the Court of "ppeals 2 in C"%&R SP No. 4/+5, whi1h e<e1tivel-

ar2ed the 0anuar- (5, '** Resolution)

of the Court of 6a> "ppeals4

C6" Case No.5()'. 6he C6" disposed as follows

8EREORE, ?ndin the herein petitioner3sF otion to Dis2iss as=NERI6ORIO=S, the sa2e is here:- DENIED. 6he CIRF is here:- iven a period of thirt- #/$ da-s fro2 re1eipt hereof to ?le her answer.

Petitioner also see!s to nullif- the e:ruar- ', '**) Resolution + of the Court of "ppeals den-in re1onsideration.

The 3acts

"s found :- the Court of "ppeals, the undisputed fa1ts of the 1ase are as follows

It appears that :- virtue of 7etter of "uthorit- No. //''*+, then BIR Co22issioner

0ose =. On authori;ed Revenue O1ers 6ho2as 6. Vue, Sonia 6. Estor1o andE22anuel . Savellano to e>a2ine the :oo!s of a11ounts and other a11ountinre1ords of Pas1or Realt- and Develop2ent Corporation. #PRDC$ for the -ears endin'*+, '*+) and '*++. 6he said e>a2ination resulted in a re1o22endation for theissuan1e of an assess2ent in the a2ounts of P),4*+,44.5 and P,/'5,(.5 forthe -ears '*+ and '*+), respe1tivel-.

On ar1h ', '**5, the Co22issioner of Internal Revenue ?led a 1ri2inal 1o2plaint:efore the Depart2ent of 0usti1e aainst the PRDC, its President Roelio ". Dio, andits 6reasurer Qirinia S. Dio, allein evasion of ta>es in the total a2ount of P'/,5',)' .//. Private respondents PRDC, et .a#. ?led an =rent Reuest forRe1onsideration@Reinvestiation disputin the ta> assess2ent and ta> lia:ilit-.

On ar1h (, '**5, private respondents re1eived a su:poena fro2 the DO0 in

1onne1tion with the 1ri2inal 1o2plaint ?led :- the Co22issioner of InternalRevenue #BIR$ aainst the2.1âwphi1!n2t

In a letter dated a- '), '**5, the CIR denied the urent reuest forre1onsideration@reinvestiation of the private respondents on the round that nofor2al assess2ent of the has as -et :een issued :- the Co22issioner.

Private respondents then elevated the De1ision of the CIR dated a- '), '**5 to theCourt of 6a> "ppeals on a petition for review do1!eted as C6" Case No. 5()' on 0ul-(', '**5. On Septe2:er , '**5, the CIR ?led a otion to Dis2iss the petition onthe round that the C6" has no urisdi1tion over the su:e1t 2atter of the petition,as there was no for2al assess2ent issued aainst the petitioners. 6he C6" deniedthe said 2otion to dis2iss in a Resolution dated 0anuar- (5, '** and ordered the

CIR to ?le an answer within thirt- #/$ da-s fro2 re1eipt of said resolution. 6he CIRre1eived the resolution on 0anuar- ', '** :ut did not ?le an answer nor did she2ove to re1onsider the resolution.

Instead, the CIR ?led this petition on 0une ), '**, allein as rounds that

Respondent Court of 6a> "ppeals a1ted with rave a:use of dis1retion and without urisdi1tion in 1onsiderin the adavit@report of the revenue o1er and theindorse2ent of said report to the se1retar- of usti1e as assess2ent whi1h 2a- :eappealed to the Court of 6a> "ppealsG

Respondent Court 6a> "ppeals a1ted with rave a:use of dis1retion in 1onsiderinthe denial :- petitioner of private respondents3 otion for Re1onsideration as aF?nal de1ision whi1h 2a- :e appealed to the Court of 6a> "ppeals.

In den-in the 2otion to dis2iss ?led :- the CIR, the Court of 6a> "ppeals stated

e aree with petitioners3 1ontentions, that the 1ri2inal 1o2plaint for ta> evasion isthe assess2ent issued, and that the letter denial of a- '), '**5 is the de1isionproperl- appeala:le to uFs. Respondent3s round of denial, therefore, that there wasno for2al assess2ent issued, is untena:le.

It is the Court3s honest :elief, that the 1ri2inal 1ase for ta> evasion is alread-anassess2ent. 6he 1o2plaint, 2ore parti1ularl-, the 0oint "davit of RevenueE>a2iners 7a2a- and Savellano atta1hed thereto, 1ontains the details of theassess2ent li!e the !ind and a2ount of ta> due, and the period 1overed

Petitioners are riht, in 1lai2in that the provisions of Repu:li1 "1t No. ''(5,relatin to e>1lusive appellate urisdi1tion of this Court, do not, 2a!e an- 2ention of for2al assess2ent. 6he law 2erel- states, that this Court has e>1lusive appellate

urisdi1tion over de1isions of the Co22issioner of Internal Revenue on disputedassess&ents, and other &atters arisin under the National Internal Revenue Code,other law or part ad2inistered :- the Bureau of Internal Revenue Code.

"s far as this Court is 1on1erned, the a2ount and !ind of ta> due, and the period1overed, are su1ient details needed for an assess2ent. 6hese details are 2orethan 1o2plete, 1o2pared to the followin de?nitions of the ter2 as uotedhereunder. 6hus

Assess&ent is la-in a ta>. 0ohnson Cit- v. Clin1h?eld R. Co., 4 S.. #(d$ +, +),' 6enn. (. #4ords and Phrases, Per2anent Edition, Qol. 4, p. 44$.

6he word assess&ent when used in 1onne1tion with ta>ation, 2a- have 2ore thanone 2eanin.The u#ti&ate purpose o" an assess&ent to such a connection is to

ascertain the a&ount that each tapaer is to pa . ore 1o22onl-, the wordassess2ent 2eans the o1ial valuation of a ta>pa-er3s propert- for purpose of



ta>ation. State v. New Yor!, N.8. and 8.R. Co. (( ". )5, )+, / Conn. (, (5.#5id. p. 445$

ro2 the a:ove, it 1an :e leaned that an assess2ent si2pl- states how 2u1h ta>is due fro2 a ta>pa-er. 6hus, :ased on these de?nitions, the details of the ta> asiven in the 0oint "davit of respondent3s e>a2iners, whi1h was atta1hed to the ta>evasion 1o2plaint, 2ore than su1e to ualif- as an assess2ent. 6herefore, thisassess2ent havin :een disputed :- petitioners, and there :ein a denial of theirletter disputin su1h assess2ent, this Court unuestiona:l- a1uired urisdi1tionover the instant petition for review. *

"s earlier o:served, the Court of "ppeals sustained the C6" and dis2issed thepetition.

8en1e, this re1ourse to this Court. 7

'u#ing o" the Court o" Appea#s

6he Court of "ppeals held that the ta> 1ourt 1o22itted no rave a:use of dis1retionin rulin that the Cri2inal Co2plaint for ta> evasion ?led :- the Co22issioner of Internal Revenue with the Depart2ent of 0usti1e 1onstituted an assess2ent of theta> due, and that the said assess2ent 1ould :e the su:e1t of a protest. B-de?nition, an assess2ent is si2pl- the state2ent of the details and the a2ount of ta> due fro2 a ta>pa-er. Based on this de?nition, the details of the ta> 1ontained inthe BIR e>a2iners3 0oint "davit, 8 whi1h was atta1hed to the 1ri2inal Co2plaint,

1onstituted an assess2ent. Sin1e the assailed Order of the C6" was 2erel-interlo1utor- and devoid of rave a:use of dis1retion, a petition for certiorari did notlie.

ssues

Petitioners su:2it for the 1onsideration of this Court followin issues

#'$ hether or not the 1ri2inal 1o2plaint for ta> evasion 1an :e 1onstrued as anassess2ent.

#($ hether or not an assess2ent is ne1essar- :efore 1ri2inal 1hares for ta>evasion 2a- :e instituted.

#$ hether or not the C6" 1an ta!e 1oni;an1e of the 1ase in the a:sen1e of an

assess2ent. 9

In the 2ain, the Court will resolve whether the revenue o1ers3 "davit%Report,whi1h was atta1hed to 1ri2inal revenue Co2plaint ?led the Depart2ent of 0usti1e,1onstituted an assess2ent that 1ould :e uestioned :efore the Court of 6a> "ppeals.

The Court6s 'u#ing

6he petition is 2eritorious.

Main ssue7 Assess&ent

Petitioner arues that the ?lin of the 1ri2inal 1o2plaint with the Depart2ent of 0usti1e 1annot in an- wa- :e 1onstrued as a for2al assess2ent of privaterespondents3 ta> lia:ilities. 6his position is :ased on Se1tion (/5 of the National

Internal Revenue Code 10 #NIRC$, whi1h provides that re2edies for the 1olle1tion of

de?1ient ta>es 2a- :e :- either 1ivil or 1ri2inal a1tion. 7i!ewise, petitioner 1itesSe1tion ((#a$ of the sa2e Code, whi1h states that in 1ase of failure to ?le a return,the ta> 2a- :e assessed or a pro1eedin in 1ourt 2a- :e :eun withoutassess2ent.

Respondents, on the other hand, 2aintain that an assess2ent is not an a1tion orpro1eedin for the 1olle1tion of ta>es, :ut 2erel- a noti1e that the a2ount statedtherein is due as ta> and that the ta>pa-er is reuired to pa- the sa2e. 6hus,ualif-in as an assess2ent was the BIR e>a2iners3 0oint "davit, whi1h 1ontainedthe details of the supposed ta>es due fro2 respondent for ta>a:le -ears endin

'*+) and '*++, and whi1h was atta1hed to the ta> evasion Co2plaint ?led with theDO0. Conseuentl-, the denial :- the BIR of private respondents3 reuest forreinvestiation of the disputed assess2ent is properl- appeala:le to the C6".

e aree with petitioner. Neither the NIRC nor the reulations overnin the protestof assess2ents 11 provide a spe1i?1 de?nition or for2 of an assess2ent. 8owever,the NIRC de?nes the spe1i?1 fun1tions and e<e1ts of an assess2ent. 6o 1onsider theadavit atta1hed to the Co2plaint as a proper assess2ent is to su:vert the natureof an assess2ent and to set a :ad pre1edent that will preudi1e inno1ent ta>pa-ers.

6rue, as pointed out :- the private respondents, an assess2ent infor2s theta>pa-er that he or she has ta> lia:ilities. But not all do1u2ents 1o2in fro2 theBIR 1ontainin a 1o2putation of the ta> lia:ilit- 1an :e dee2ed assess2ents.

6o start with, an assess2ent 2ust :e sent to and re1eived :- a ta>pa-er, and 2ust

de2and pa-2ent of the ta>es des1ri:ed therein within a spe1i?1 period. 6hus, theNIRC i2poses a (5 per1ent penalt-, in addition to the ta> due, in 1ase the ta>pa-erfails to pa- de?1ien1- ta> within the ti2e pres1ri:ed for its pa-2ent in the noti1e of assess2ent. 7i!ewise, an interest of (/ per1ent per annu&, or su1h hiher rates as2a- :e pres1ri:ed :- rules and reulations, is to :e 1olle1ted for2 the datepres1ri:ed for its pa-2ent until the full pa-2ent. 12

6he issuan1e of an assess2ent is vital in deter2inin, the period of li2itationreardin its proper issuan1e and the period within whi1h to protest it. Se1tion(/ 1) of the NIRC provides that internal revenue ta>es 2ust :e assessed withinthree -ears fro2 the last da- within whi1h to ?le the return. Se1tion (((, 14 on theother hand, spe1i?es a period of ten -ears in 1ase a fraudulent return with intent toevade was su:2itted or in 1ase of failure to ?le a return. "lso, Se1tion ((+ 1+ of thesa2e law states that said assess2ent 2a- :e protested onl- within thirt- da-s fro2

re1eipt thereof. Ne1essaril-, the ta>pa-er 2ust :e 1ertain that a spe1i?1 do1u2ent1onstitutes an assess2ent. Otherwise, 1onfusion would arise reardin the periodwithin whi1h to 2a!e an assess2ent or to protest the sa2e, or whether interest andpenalt- 2a- a11rue thereon.

It should also :e stressed that the said do1u2ent is a noti1e dul- sent to theta>pa-er. Indeed, an assess2ent is dee2ed 2ade onl- when the 1olle1tor of internalrevenue releases, 2ails or sends su1h noti1e to the ta>pa-er. 1*

In the present 1ase, the revenue o1ers3 "davit 2erel- 1ontained a 1o2putationof respondents3 ta> lia:ilit-. It did not state a de2and or a period for pa-2ent.orse, it was addressed to the usti1e se1retar-, not to the ta>pa-ers.

Respondents 2aintain that an assess2ent, in relation to ta>ation, is si2pl-

understood3 to 2ean



" noti1e to the e<e1t that the a2ount therein stated is due as ta> and a de2and forpa-2ent thereof.17

i>es the lia:ilit- of the ta>pa-er and as1ertains the fa1ts and furnishes the data forthe proper presentation of ta> rolls. 18

Even these de?nitions fail to advan1e private respondents3 1ase. 6hat the BIRe>a2iners3 0oint "davit atta1hed to the Cri2inal Co2plaint 1ontained so2e detailsof the ta> lia:ilities of private respondents does not ipso "acto2a!e it anassess2ent. 6he purpose of the 0oint "davit was 2erel- to support andsu:stantiate the Cri2inal Co2plaint for ta> evasion. Clearl-, it was not 2eant to :ea noti1e of the ta> due and a de2and to the private respondents for pa-2entthereof.

6he fa1t that the Co2plaint itself was spe1i?1all- dire1ted and sent to theDepart2ent of 0usti1e and not to private respondents shows that the intent of the1o22issioner was to ?le a 1ri2inal 1o2plaint for ta> evasion, not to issue anassess2ent. "lthouh the revenue o1ers re1o22ended the issuan1e of anassess2ent, the 1o22issioner opted instead to ?le a 1ri2inal 1ase for ta> evasion.hat private respondents re1eived was a noti1e fro2 the DO0 that a 1ri2inal 1asefor ta> evasion had :een ?led aainst the2, not a noti1e that the Bureau of InternalRevenue had 2ade an assess2ent.

In addition, what private respondents sent to the 1o22issioner was a 2otion for are1onsideration of the ta> evasion 1hares ?led, not of an assess2ent, as shown

thus

6his is to reuest for re1onsideration of the ta> evasion 1hares aainst 2- 1lient,P"SCOR Realt- and Develop2ent Corporation and for the sa2e to :e referred to the"ppellate Division in order to ive 2- 1lient the opportunit- of a fair and o:e1tivehearin. 19

Additiona# ssues

Assess&ent Not

Necessar *e"ore 3i#ing o"

Cri&ina# Co&p#aint

Private respondents 2aintain that the ?lin of a 1ri2inal 1o2plaint 2ust :epre1eded :- an assess2ent. 6his is in1orre1t, :e1ause Se1tion ((( of the NIRCspe1i?1all- states that in 1ases where a false or fraudulent return is su:2itted or in1ases of failure to ?le a return su1h as this 1ase, pro1eedins in 1ourt 2a- :e1o22en1ed without an assess2ent. urther2ore, Se1tion (/5 of the sa2e Code1learl- 2andates that the 1ivil and 1ri2inal aspe1ts of the 1ase 2a- :e pursuedsi2ultaneousl-. In 0nga5 v! Cusi, 20 petitioner therein souht the dis2issal of the1ri2inal Co2plaints for :ein pre2ature, sin1e his protest to the C6" had not -et:een resolved. 6he Court held that su1h protests 1ould not stop or suspend the1ri2inal a1tion whi1h was independent of the resolution of the protest in the C6".

6his was :e1ause the 1o22issioner of internal revenue had, in su1h ta> evasion1ases, dis1retion on whether to issue an assess2ent or to ?le a 1ri2inal 1aseaainst the ta>pa-er or to do :oth.

Private respondents insist that Se1tion ((( should :e read in relation to Se1tion (55of the N7RC, 21 whi1h penali;es failure to ?le a return. 6he- add that a ta>

assess2ent should pre1ede a 1ri2inal indi1t2ent. e disaree. 6o reiterate, saidSe1tion ((( states that an assess2ent is not ne1essar- :efore a 1ri2inal 1hare 1an:e ?led. 6his is the eneral rule. Private respondents failed to show that the- areentitled to an e>1eption. oreover, the 1ri2inal 1hare need onl- :e supported :-a pri&a "acie showin of failure to ?le a reuired return. 6his fa1t need not :eproven :- an assess2ent.

6he issuan1e of an assess2ent 2ust :e distinuished fro2 the ?lin of a 1o2plaint.Before an assess2ent is issued, there is, :- pra1ti1e, a pre%assess2ent noti1e sentto the ta>pa-er. 6he ta>pa-er is then iven a 1han1e to su:2it position papers and

do1u2ents to prove that the assess2ent is unwarranted. If the 1o22issioner isunsatis?ed, an assess2ent sined :- hi2 or her is then sent to the ta>pa-erinfor2in the latter spe1i?1all- and 1learl- that an assess2ent has :een 2adeaainst hi2 or her. In 1ontrast, the 1ri2inal 1hare need not o throuh all these.

6he 1ri2inal 1hare is ?led dire1tl- with the DO0. 6hereafter, the ta>pa-er is noti?edthat a 1ri2inal 1ase had :een ?led aainst hi2, not that the 1o22issioner hasissued an assess2ent. It 2ust :e stressed that a 1ri2inal 1o2plaint is instituted notto de2and pa-2ent, :ut to penali;e the ta>pa-er for violation of the 6a> Code.

8EREORE, the petition is here:- &R"N6ED. 6he assailed De1ision is REQERSEDand SE6 "SIDE. C6" Case No. 5()' is li!ewise DISISSED. No 1osts.

SO ORDERED.



G.R. No. 1**)87 '#$#r- 19, 2009

C!MMISSI!NER !F INTERNAL RE&ENE, Petitioners,vs.ENR!N S3IC P!6ERC!RP!RATI!N, Respondents.

R E S ! L T I ! N

C!R!NA, J.:

In this petition for review on 1ertiorari under Rule 45 of the Rules of Court, petitioner

Co22issioner of Internal Revenue #CIR$ assails the Nove2:er (4, (//4 de1ision' of the Court of "ppeals #C"$ annullin the for2al assess2ent noti1e issued :- the CIRaainst respondent Enron Su:i1 Power Corporation #Enron$ for failure to state theleal and fa1tual :ases for su1h assess2ent.

Enron, a do2esti1 1orporation reistered with the Su:i1 Ba- etropolitan "uthorit-as a freeport enterprise,( ?led its annual in1o2e ta> return for the -ear '** on "pril'(, '**). It indi1ated a net loss of P),+4,*4+. Su:seuentl-, the Bureau of InternalRevenue, throuh a preli2inar- ?ve%da- letter, infor2ed it of a proposedassess2ent of an alleed P(,++/,+').(5 de?1ien1- in1o2e ta>.4 Enron disputed theproposed de?1ien1- assess2ent in its ?rst protest letter.5

On a- (, '***, Enron re1eived fro2 the CIR a for2al assess2ent noti1e reuirinit to pa- the alleed de?1ien1- in1o2e ta> of P(,++/,+').(5 for the ta>a:le -ear

'**. Enron protested this de?1ien1- ta> assess2ent.)

Due to the non%resolution of its protest within the '+/%da- period, Enron ?led apetition for review in the Court of 6a> "ppeals #C6"$. It arued that the de?1ien1-ta> assess2ent disrearded the provisions of Se1tion ((+ of the National InternalRevenue Code #NIRC$, as a2ended,+and Se1tion .'.4 of Revenue Reulations #RR$No. '(%*** :- not providin the leal and fa1tual :ases of the assess2ent. Enronli!ewise uestioned the su:stantive validit- of the assess2ent.'/

In a de1ision dated Septe2:er '(, (//', the C6" ranted EnronAs petition andordered the 1an1ellation of its de?1ien1- ta> assess2ent for the -ear '**. 6he C6"reasoned that the assess2ent noti1e sent to Enron failed to 1o2pl- with thereuire2ents of a valid written noti1e under Se1tion ((+ of the NIRC and RR No. '(%**. 6he CIRAs 2otion for re1onsideration of the C6" de1ision was denied in aresolution dated Nove2:er '(, (//'.

6he CIR appealed the C6" de1ision to the C" :ut the C" ar2ed it. 6he C" held thatthe audit wor!in papers did not su:stantiall- 1o2pl- with Se1tion ((+ of the NIRCand RR No. '(%** :e1ause the- failed to show the appli1a:ilit- of the 1ited law tothe fa1ts of the assess2ent. 6he CIR ?led a 2otion for re1onsideration :ut this wasdee2ed a:andoned when he ?led a 2otion for e>tension to ?le a petition for reviewin this Court.

6he CIR now arues that respondent was infor2ed of the leal and fa1tual :ases of the de?1ien1- assess2ent aainst it.

e adopt in toto the ?ndins of fa1t of the C6", as ar2ed :- the C". In Co&pagnie3inanciere Sucres et Denrees v! C','' we held

e reiterate the well%esta:lished do1trine that as a 2atter of pra1ti1e and prin1iple,weF will not set aside the 1on1lusion rea1hed :- an aen1-, li!e the C6", espe1iall-

if ar2ed :- the C"F. B- the ver- nature of its fun1tion, it has dedi1ated itself tothe stud- and 1onsideration of ta> pro:le2s and has ne1essaril- developed ane>pertise on the su:e1t, unless there has :een an a:use or i2provident e>er1ise of authorit- on its part, whi1h is not present here.

6he CIR errs in insistin that the noti1e of assess2ent in uestion 1o2plied with thereuire2ents of the NIRC and RR No. '(%**.

" noti1e of assess2ent is

"F de1laration of de?1ien1- ta>es issued to a tFa>pa-er who fails to respond to a

Pre%"ssess2ent Noti1e #P"N$ within the pres1ri:ed period of ti2e, or whose repl- tothe P"N was found to :e without 2erit. 6he Noti1e of "ssess2ent shall infor2 thetFa>pa-er of this fa1t, and that the report of investiation su:2itted :- the RevenueO1er 1ondu1tin the audit shall :e iven due 1ourse.

6he for2al letter of de2and 1allin for pa-2ent of the ta>pa-erAs de?1ien1- ta> orta>es #:: #e e <#5, e :#/, r:e #$% re@:#o$ or rr%e$5e o$

/5 e #eme$ b#e%, oer/e e <orm#: :eer o< %em#$% #$%

e $o5e o< #eme$ #:: be vo%. #e2phasis supplied$'(

Se1tion ((+ of the NIRC provides that the ta>pa-er shall :e infor2ed in writin of the law and the fa1ts on whi1h the assess2ent is 2ade. Otherwise, the assess2entis void. 6o i2ple2ent the provisions of Se1tion ((+ of the NIRC, RR No. '(%** wasena1ted. Se1tion .'.4 of the revenue reulation reads

.'.4. 3or&a# Letter o" De&and and Assess&ent Notice! H 6he for2al letter of de2and and assess2ent noti1e shall :e issued :- the Co22issioner or his dul-authori;ed representative. Te :eer o< %em#$% 5#::$@ <or #-me$ o< e

#;#-er %e5e$5- #; or #;e #:: #e e <#5, e :#/, r:e #$%

re@:#o$, or rr%e$5e o$ /5 e #eme$ b#e%,

oer/e, e <orm#: :eer o< %em#$% #$% #eme$ $o5e #:: be

vo%. 6he sa2e shall :e sent to the ta>pa-er onl- :- reistered 2ail or :- personaldeliver-. >>> #e2phasis supplied$

It is 1lear fro2 the foreoin that a ta>pa-er 2ust :e infor2ed in writin of the lealand fa1tual :ases of the ta> assess2ent 2ade aainst hi2. 6he use of the word\shall] in these leal provisions indi1ates the 2andator- nature of the reuire2entslaid down therein. e note the C6"As ?ndins

In thisF 1ase, the CIRF 2erel- issued a for2al assess2ent and indi1ated therein thesupposed ta>, sur1hare, interest and 1o2pro2ise penalt- due thereon. 6heRevenue O1ers of the the CIRF in the issuan1e of the inal "ssess2ent Noti1e didnot provide Enron with the written :ases of the law and fa1ts on whi1h the su:e1tassess2ent is :ased. 6he CIRF did not :other to e>plain how it arrived at su1h anassess2ent. oreso, he failed to 2ention the spe1i?1 provision of the 6a> Code orrules and reulations whi1h were not 1o2plied with :- Enron.'

Both the C6" and the C" 1on1luded that the de?1ien1- ta> assess2ent 2erel-ite2i;ed the dedu1tions disallowed and in1luded these in the ross in1o2e. It alsoi2posed the preferential rate of 59 on so2e ite2s 1ateori;ed :- Enron as 1osts.

6he leal and fa1tual :ases were, however, not indi1ated.

6he CIR insists that an e>a2ination of the fa1ts shows that Enron was properl-

apprised of its ta> de?1ien1-. Durin the pre%assess2ent stae, the CIR advised

http://www.lawphil.net/judjuris/juri2009/jan2009/gr_166387_2009.html#fnt1








































EnronAs representative of the ta> de?1ien1-, infor2ed it of the proposed ta>de?1ien1- assess2ent throuh a preli2inar- ?ve%da- letter and furnished Enron a1op- of the audit wor!in paper'4 alleedl- showin in detail the leal and fa1tual:ases of the assess2ent. 6he CIR arues that these steps su1ed to infor2 Enron of the laws and fa1ts on whi1h the de?1ien1- ta> assess2ent was :ased.

e disaree. 6he advi1e of ta> de?1ien1-, iven :- the CIR to an e2plo-ee of Enron,as well as the preli2inar- ?ve%da- letter, were not valid su:stitutes for the2andator- noti1e in writin of the leal and fa1tual :ases of the assess2ent. 6hesesteps were 2ere perfun1tor- dis1hares of the CIRAs duties in 1orre1tl- assessin a

ta>pa-er.

'5

6he reuire2ent for issuin a preli2inar- or ?nal noti1e, as the 1ase 2a-:e, infor2in a ta>pa-er of the e>isten1e of a de?1ien1- ta> assess2ent is 2ar!edl-di<erent fro2 the reuire2ent of what su1h noti1e 2ust 1ontain. 0ust :e1ause theCIR issued an advi1e, a preli2inar- letter durin the pre%assess2ent stae and a?nal noti1e, in the order reuired :- law, does not ne1essaril- 2ean that Enron wasinfor2ed of the law and fa1ts on whi1h the de?1ien1- ta> assess2ent was 2ade.

6he law reuires that the leal and fa1tual :ases of the assess2ent :e stated in thefor2al letter of de2and and assess2ent noti1e. 6hus, su1h 1annot :e presu2ed.Otherwise, the e>press provisions of "rti1le ((+ of the NIRC and RR No. '(%** would:e rendered nuator-. 6he alleed \fa1tual :ases] in the advi1e, preli2inar- letterand \audit wor!in papers] did not su1e. 6here was no oin around the 2andateof the law that the leal and fa1tual :ases of the assess2ent :e stated in writin inthe for2al letter of de2and a11o2pan-in the assess2ent noti1e.

e note that the old law 2erel- reuired that the ta>pa-er :e noti?ed of theassess2ent 2ade :- the CIR. 6his was 1haned in '**+ and the ta>pa-er 2ust now:e infor2ed not onl- of the law :ut also of the fa1ts on whi1h the assess2ent is2ade.' Su1h a2end2ent is in !eepin with the 1onstitutional prin1iple that noperson shall :e deprived of propert- without due pro1ess.') In view of the a:sen1e of a fair opportunit- for Enron to :e infor2ed of the leal and fa1tual :ases of theassess2ent aainst it, the assess2ent in uestion was void. e reiterate our rulinin 'ees v! A#&an%or, et a#!'+

Qeril-, ta>es are the life:lood of the &overn2ent and so should :e 1olle1ted withoutunne1essar- hindran1e. 8owever, su1h 1olle1tion should :e 2ade in a11ordan1ewith law as an- ar:itrariness will neate the ver- reason for the &overn2ent itself.

6HEREF!RE, the petition is here:- DENIED. 6he Nove2:er (4, (//4 de1ision of

the Court of "ppeals isAFFIRMED.


















G.R. No. 198*77 November 2*, 2014

C!MMISSI!NER !F INTERNAL RE&ENE, Petitioner,vs.3ASF C!ATING IN>S PHILS., INC., Respondent.

D E C I S I O N

PERALTA, J.:

Before the Court is a petition for review on 1ertiorari assailin the De1ision' of the

Court of 6a> "ppeals #C6"$ En Ban1, dated 0une ', (/'', and Resolution(

datedSepte2:er ', (/'', in C.6.". EB No. 4 #C.6.". Case No. )'(5$.

6he pertinent fa1tual and pro1edural ante1edents of the 1ase are as follows

Respondent was a 1orporation whi1h was dul- orani;ed under and :- virtue of thelaws of the Repu:li1 of the Philippines on "uust ', '**/ with a ter2 of e>isten1e of ?ft- #5/$ -ears. Its BIR%reistered address was at '/' ar1os "lvare; "venue, Barrio

6alon, 7as Piâs Cit-. In a oint spe1ial 2eetin held on ar1h '*, (//', 2aorit-of the 2e2:ers of the Board of Dire1tors and the sto1!holders representin 2ore thantwo%thirds #(@$ of the entire su:s1ri:ed and outstandin 1apital sto1! of hereinrespondent 1orporation, resolved to dissolve the 1orporation :- shortenin its1orporate ter2 to ar1h ', (//'. Su:seuentl-, respondent 2oved out of itsaddress in 7as Piâs Cit- and transferred to Car2elra- Industrial Par!, Canlu:an,

Cala2:a, 7auna.

On 0une (, (//', respondent su:2itted two #($ letters to the Bureau of InternalRevenue #BIR$ Revenue Distri1t O1er of Revenue Distri1t O1e #RDO$ No. 5,Reion +, in "la:an, untinlupa Cit-. 6he ?rst letter, dated "pril (, (//', was anoti1e of respondent3s dissolution, in 1o2plian1e with the reuire2ents of Se1tion5(#1$ of the National Internal Revenue Code.4 On the other hand, the se1ond letter,dated 0une ((, (//', was a 2anifestation indi1atin the su:2ission of variousdo1u2ents supportin respondent3s dissolution, a2on whi1h was BIR or2 No.'*/5, whi1h refers to an update of infor2ation 1ontained in its ta> reistration.5

6hereafter, in a or2al "ssess2ent Noti1e #" N$ dated 0anuar- '), (//, petitionerassessed respondent the areate a2ount of P'+,)',4.'4 representinde?1ien1ies in in1o2e ta>, value added ta>, withholdin ta> on 1o2pensation,e>panded withholdin ta> and do1u2entar- sta2p ta>, in1ludin in1re2ents, for theta>a:le -ear '***. 6he "N was sent :- reistered 2ail on 0anuar- (4, (// torespondent3s for2er address in 7as Piâs Cit-.

On ar1h 5, (//4, the Chief of the Colle1tion Se1tion of BIR Revenue Reion No. ),RDO No. *, South Vue;on Cit-, issued a irst Noti1e Before Issuan1e of arrant of Distraint and 7ev-, whi1h was sent to the residen1e of one of respondent3sdire1tors.)

On ar1h '*, (//4, respondent ?led a protest letter 1itin la1! of due pro1ess andpres1ription as rounds.+ On "pril ', (//4, respondent ?led a supple2ental letter of protest.* Su:seuentl-, on 0une '4, (//4, respondent su:2itted a letter wherein itatta1hed do1u2ents to prove the defenses raised in its protest letters.'/

On 0anuar- '/, (//5, after '+/ da-shad lapsed without a1tion on the part of

petitioner on respondent3s protest, the latter ?led a Petition for Review '' with theC6".

6rial on the 2erits ensued.

On e:ruar- '), (/'/, the C6" Spe1ial irst Division pro2ulated its De1ision,'( thedispositive portion of whi1h reads, thus

8EREORE, the Petition for Review is here:- &R"N6ED. 6he assess2ents forde?1ien1- in1o2e ta> in the a2ount of P'4,((),4(5.*, de?1ien1- value%added ta>of P,*+',(45., de?1ien1- withholdin ta> on 1o2pensation of P4*,*)).(',de?1ien1- e>panded withholdin ta> of P'5,('.*) and de?1ien1- do1u2entar-sta2p ta> of P(5,4(.*', in1ludin in1re2ents, in the areate a2ountof P'+,)',4.'4 for the ta>a:le -ear '*** are here:- C"NCE77ED and SE6 "SIDE.

SO ORDERED.'

6he C6" Spe1ial irst Division ruled that sin1e petitioner was a1tuall- aware of respondent3s new address, the for2er3s failure to send the Preli2inar- "ssess2entNoti1e and "N to the said address should not :e ta!en aainst the latter.Conseuentl-, sin1e there are no valid noti1es sent to respondent, the su:seuentassess2ents aainst it are 1onsidered void. "rieved :- the De1ision, petitioner?led a otion for Re1onsideration, :ut the C6" Spe1ial irst Division denied it in itsResolution'4 dated 0ul- ', (/'/.

Petitioner then ?led a Petition for Review with the C6" En Ban1. '5

On 0une ', (/'', the C6" En Ban1 pro2ulated its assailed De1ision den-in

petitioner3s Petition for Review for la1! of 2erit. 6he C6" En Ban1 held thatpetitioner3s riht to assess respondent for de?1ien1- ta>es for the ta>a:le -ear '***has alread- pres1ri:ed and that the "N issued to respondent never attained ?nalit-:e1ause respondent did not re1eive it.

Petitioner ?led a otion for Re1onsideration, :ut the C6" En Ban1 denied it in itsResolution dated Septe2:er ', (/''.

8en1e, the present petition with the followin "ssin2ent of Errors

I

68E 8ONOR"B7E C6" EN B"NC ERRED IN R=7IN& 68"6 68E RI&86 O PE6I6IONER 6O "SSESS 8EREIN RESPONDEN6 OR DEICIENCY INCOE 6"J, Q"7=E"DDED 6"J,I688O7DIN& 6"J ON COPENS"6ION, EJP"NDED I688O7DIN& 6"J "ND

DOC=EN6"RY S6"P 6"J, OR 6"J"B7E YE"R '*** IS B"RRED BY PRESCRIP6ION.

II

68E 8ONOR"B7E CO=R6 O 6"J "PPE"7S, EN B"NC, ERRED IN R=7IN& 68"6 68EOR"7 "SSESSEN6 NO6ICE #"N$ OR RESPONDEN63S DEICIENCY INCOE 6"J,Q"7=E%"DDED 6"J, I688O7DIN& 6"J ON COPENS"6ION, EJP"NDEDI688O7DIN& 6"J "ND DOC=EN6"RY S6"P 6"J OR 6"J"B7E YE"R '*** 8"SNO6 YE6 BECOE IN"7, EJEC=6ORY "ND DE"ND"B7E.'

6he petition la1!s 2erit.

Petitioner 1ontends that, insofar as respondent3s alleed de?1ien1- ta>es for theta>a:le -ear'*** are 1on1erned, the runnin of the three%-ear pres1riptive period toassess, under Se1tions (/ and ((( of the National Internal Revenue "1t of '**)#6a> Refor2 "1t of '**)$ was suspended when respondent failed to notif- petitioner,









































in writin, of its 1hane of address, pursuant to the provisions of Se1tion (( of thesa2e "1t and Se1tion '' of BIR Revenue Reulation No. '(%+5.

Se1tions (/, ((( and (( of the 6a> Refor2 "1t of '**) provide, respe1tivel-

Se1. (/. Period of 7i2itation =pon "ssess2ent and Colle1tion.H E>1ept as providedin Se1tion (((,internal revenue ta>es shall :e assessed within three #$ -ears afterthe last da- pres1ri:ed :- law for the ?lin of the return, and no pro1eedin in 1ourtwithout assess2ent for the 1olle1tion of su1h ta>es shall :e :eun after thee>piration of su1h period Provided, 6hat in a 1ase where a return is ?led :e-ond theperiod pres1ri:ed :- law, the three #$%-ear period shall :e 1ounted fro2 the da- the

return was ?led. or purposes of this Se1tion, a return ?led :efore the last da-pres1ri:ed :- law for the ?lin thereof shall :e 1onsidered as ?led on su1h last da-.#e2phasis supplied$

Se1. (((. E>1eptions as to Period of 7i2itation of "ssess2ent and Colle1tion of 6a>es. %

#a$ In the 1ase of a false or fraudulent return with intent to evade ta> or of failure to?le a return, the ta> 2a- :e assessed, or a pro1eedin in 1ourt for the 1olle1tion of su1h ta> 2a- :e ?led without assess2ent, at an- ti2e within ten #'/$ -ears afterthe dis1over- of the falsit-, fraud or o2ission Provided, 6hat in a fraud assess2entwhi1h has :e1o2e ?nal and e>e1utor-, the fa1t of fraud shall :e udi1iall- ta!en1oni;an1e of in the 1ivil or 1ri2inal a1tion for the 1olle1tion thereof.

#:$ If :efore the e>piration of the ti2e pres1ri:ed in Se1tion (/ for the assess2entof the ta>, :oth the Co22issioner and the ta>pa-er have areed in writin to itsassess2ent after su1h ti2e, the ta> 2a- :e assessed within the period areedupon.

6he period so areed upon 2a- :e e>tended :- su:seuent written aree2ent2ade :efore the e>piration of the period previousl- areed upon.

#1$ "n- internal revenue ta> whi1h has :een assessed within the period of li2itationas pres1ri:ed in pararaph #a$ hereof 2a- :e 1olle1ted :- distraint or lev- or :- apro1eedin in 1ourt within ?ve #5$ -ears followin the assess2ent of the ta>.

#d$ "n- internal revenue ta>, whi1h has :een assessed within the period areedupon as provided in pararaph #:$ hereina:ove, 2a- :e 1olle1ted :-distraint or lev-or :- a pro1eedin in 1ourt within the period areed upon in writin :efore thee>piration of the ?ve #5$ %-ear period. 6he period so areed upon 2a- :e e>tended:- su:seuent written aree2ents 2ade :efore the e>piration of the periodpreviousl- areed upon.

#e$ Provided, however, 6hat nothin in the i22ediatel- pre1edin and pararaph #a$hereof shall :e 1onstrued to authori;e the e>a2ination and investiation or inuir-into an- ta> return ?led in a11ordan1e with the provisions of an- ta> a2nest- law orde1ree.

Se1. ((. Suspension of Runnin of Statute of 7i2itations. % 6he runnin of theStatute of 7i2itations provided in Se1tions (/ and ((( on the 2a!in of assess2ent and the :einnin of distraint or lev- a pro1eedin in 1ourt for1olle1tion, in respe1t of ande?1ien1-, shall :e suspended for the period durinwhi1h the Co22issioner is prohi:ited fro2 2a!in the assess2ent or :einnin

distraint or lev- or a pro1eedin in 1ourt and for si>t- #/$ da-s thereafterG when the

ta>pa-er reuests for a reinvestiation whi1h is ranted :- the Co22issionerG whenthe ta>pa-er 1annot :e lo1ated in the address iven :- hi2 in the return ?led uponwhi1h a ta> is :ein assessed or 1olle1ted Provided, that, if the ta>pa-er infor2s theCo22issioner of an- 1hane in address, the runnin of the Statute of 7i2itationswill not :e suspendedG when the warrant of distraint or lev- is dul- served upon theta>pa-er, his authori;ed representative, or a 2e2:er of his household withsu1ient dis1retion, and no propert- 1ould :e lo1atedG and when the ta>pa-er is outof the Philippines. #e2phasis supplied$

In addition, Se1tion '' of BIR Revenue Reulation No. '(%+5 states

Se1. ''. Chane of "ddress. H In 1ase of 1hane of address, the ta>pa-er 2ust ivea written noti1e thereof to the Revenue Distri1t O1er or the distri1t havin

urisdi1tion over his for2erleal residen1e and@or pla1e of :usiness, 1op- furnishedthe Revenue Distri1t O1er havin urisdi1tion over his new leal residen1e or pla1eof :usiness, the Revenue Co2puter Center and the Re1eiva:le "11ounts Division,BIR, National O1e, Vue;on Cit-, and in 1ase of failure to do so, an- 1o22uni1ationreferred to in these reulations previousl- sent to his for2er leal residen1e or:usiness address as appear in is ta> return for the period involved shall :e1onsidered valid and :indin for purposes of the period within whi1h to repl-.

It is true that, under Se1tion (( of the 6a> Refor2 "1t of '**), the runnin of theStatute of 7i2itations provided under the provisions of Se1tions (/ and ((( of thesa2e "1t shall :e suspended when the ta>pa-er 1annot :e lo1ated in the addressiven :- hi2 in the return ?led upon whi1h a ta> is :ein assessed or 1olle1ted. In

addition, Se1tion '' of Revenue Reulation No. '(%+5 states that, in 1ase of 1haneof address, the ta>pa-er is reuired to ive a written noti1e thereof to the RevenueDistri1t O1er or the distri1t havin urisdi1tion over his for2er leal residen1eand@or pla1e of :usiness. 8owever, this Court arees with :oth the C6" Spe1ial irstDivision and the C6" En Ban1 in their rulin that the a:ove 2entioned provisions onthe suspension of the three%-ear period to assess appl- onl- if the BIR Co22issioneris not aware of the wherea:outs of the ta>pa-er.

In the present 1ase, petitioner, :- all indi1ations, is well aware that respondent had2oved to its new address in Cala2:a, 7auna, as shown :- the followin do1u2entswhi1h for2 partof respondent3s re1ords with the BIR

'$ Che1!list on In1o2e 6a>@ithholdin 6a>@Do1u2entar- Sta2p 6a>@Qalue%"dded 6a> and Other Per1entae 6a>esG')

($ &eneral Infor2ation #BIR or2 No. (%/($G '+

$ Report on 6a>pa-er3s Delinuent "11ount, dated 0une (), (//(G '*

4$ "1tivit- Report, dated O1to:er '), (//(G(/

5$ e2orandu2 Report of E>a2iner, dated 0une (), (//(G('

$ Revenue O1er3s "udit Report on In1o2e 6a>G((

)$ Revenue O1er3s "udit Report on Qalue%"dded 6a>G (

+$ Revenue O1er3s "udit Report on Co2pensation ithholdin 6a>esG(4

*$ Revenue O1er3s "udit Report on E>panded ithholdin 6a>esG

(5






















'/$ Revenue O1er3s "udit Report on Do1u2entar- Sta2p 6a>es. (

6he a:ove do1u2ents, all of whi1h were a11o2plished and sined :- o1ers of theBIR, 1learl- show that respondent3s address is at Car2elra- Industrial Par!,Canlu:an, Cala2:a, 7auna. 6he C6" also found that BIR o1ers, at various ti2esprior to the issuan1e of the su:e1t "N, 1ondu1ted e>a2ination and investiation of respondent3s ta> lia:ilities for '*** at the latter3s new address in 7auna aseviden1ed :- the followin, in addition to the a:ove 2entioned re1ords

'$ 7etter, dated Septe2:er (), (//', sined :- Revenue O1er I Euene R.&ar1iaG()

($ inal Reuest for Presentation of Re1ords Before Su:poena Du1es 6e1u2, datedar1h (/, (//(, sined :- Revenue O1er I Euene R. &ar1ia. (+

oreover, the C6" found that, :ased on re1ords, the RDO sent respondent a letterdated "pril (4, (//( infor2in the latter of the results of their investiation andinvitin it to an infor2al 1onferen1e. (* Su:seuentl-, the RDO also sent respondentanother letter dated a- /, (//(, a1!nowledin re1eipt of the latter3s repl- to his"pril (4, (//( letter./ 6hese two letters were sent to respondent3s new address in7auna. 8ad the RDO not :een infor2ed or was not aware of respondent3s newaddress, he 1ould not have sent the said letters to the said address.

urther2ore, petitioner should have :een alerted :- the fa1t that prior to 2ailinthe "N, petitioner sent to respondent3s old address a Preli2inar- "ssess2ent

Noti1e :ut it was returned to sender. 6his was testi?ed to :- petitioner3s RevenueO1er II at its Revenue Distri1t O1e * in Vue;on Cit-.' Yet, despite thiso11urren1e, petitioner still insisted in 2ailin the "N to respondent3s old address.

8en1e, despite the a:sen1e of a for2al written noti1e of respondent3s 1hane of address, the fa1t re2ains that petitioner :e1a2e aware of respondent3s new addressas shown :- do1u2ents replete in its re1ords. "s a 1onseuen1e, the runnin of thethree%-ear period to assess respondent was not suspended and has alread-pres1ri:ed.

It :ears stressin that, in a nu2:er of 1ases, this Court has e>plained that thestatute of li2itations on the 1olle1tion of ta>es pri2aril- :ene?ts the ta>pa-er. Inthese 1ases, the Court e>e2pli?ed the detri2ental e<e1ts that the dela- in theassess2ent and 1olle1tion of ta>es ini1ts upon the ta>pa-ers. 6hus, in

Co22issioner of Internal Revenue v. Philippine &lo:al Co22uni1ation, In1.,

(

thisCourt e1hoed 0usti1e onte2a-or3s disuisition in his dissentin opinion in Colle1torof Internal Revenue v. Su-o1 Consolidated inin Co2pan-, reardin thepotential loss to the ta>pa-er if the assess2ent and 1olle1tion of ta>es are notpro2ptl- 2ade, thus

Pres1ription in the assess2ent and in the 1olle1tion of ta>es is provided :- the7eislature for the :ene?t of :oth the &overn2ent and the ta>pa-erG for the&overn2ent for the purpose of e>peditin the 1olle1tion of ta>es, so that the aen1-1hared with the assess2ent and 1olle1tion 2a- not tarr- too lon or inde?nitel-tothe preudi1e of the interests of the &overn2ent, whi1h needs ta>es to run itG andfor the ta>pa-er so that within a reasona:le ti2e after ?lin his return, he2a- !nowthe a2ount of the assess2ent he is reuired to pa-, whether or not su1hassess2ent is well founded and reasona:le so that he 2a- either pa- the a2ount of

the assess2ent or 1ontest its validit- in1ourt > > >. It would surel- :e preudi1ial tothe interest of the ta>pa-er for the &overn2ent 1olle1tin aen1- to undul- dela-

the assess2ent and the 1olle1tion :e1ause :- the ti2e the 1olle1tin aen1- ?nall-ets around to 2a!in the assess2ent or 2a!in the 1olle1tion, the ta>pa-er 2a-then have lost his papers and :oo!s to support his 1lai2 and 1ontest that of the&overn2ent, and what is 2ore, the ta> is in the 2eanti2e a11u2ulatin interestwhi1h the ta>pa-er eventuall- has to pa-.4

7i!ewise, in Repu:li1 of the Philippines v. ":la;a,5 this Court elu1idated that thepres1riptive period for the ?lin of a1tions for 1olle1tion of ta>es is usti?ed :- theneed to prote1t law%a:idin 1iti;ens fro2 possi:le harass2ent. "lso, in Ban! of thePhilippine Islands v. Co22issioner of Internal Revenue, it was held that the statuteof li2itations on the assess2ent and 1olle1tion of ta>es is prin1ipall- intended toa<ord prote1tion to the ta>pa-er aainst unreasona:le investiations as theinde?nite e>tension of the period for assess2ent deprives the ta>pa-er of theassuran1e that he will no loner :e su:e1ted to further investiation for ta>es afterthe e>piration of a reasona:le period of ti2e. 6hus, in Co22issioner of InternalRevenue v. B.. &oodri1h Phils., In1.,) this Court ruled that the leal provisions onpres1ription should :e li:erall- 1onstrued to prote1t ta>pa-ers and that, as a1orollar-, the e>1eptions to the rule on pres1ription should :e stri1tl- 1onstrued.

It 2iht not also :e a2iss to point out that petitioner3s issuan1e of the irst Noti1eBefore Issuan1e of arrant of Distraint and 7ev-+ violated respondent3s riht to duepro1ess :e1ause no valid noti1e of assess2ent was sent to it. "n invalid assess2ent:ears no valid fruit. 6he law i2poses a su:stantive, not 2erel- a for2al,reuire2ent. 6o pro1eed heedlessl- with ta> 1olle1tion without ?rst esta:lishin avalid assess2ent is evidentl- violative of the 1ardinal prin1iple inad2inistrativeinvestiations that ta>pa-ers should :e a:le to present their 1ase and addu1esupportin eviden1e.* In the instant 1ase, respondent has not properl- :eeninfor2ed of the :asis of its ta> lia:ilities. ithout 1o2pl-in with the uneuivo1al2andate of ?rst infor2in the ta>pa-er of the overn2entAs 1lai2, there 1an :e nodeprivation of propert-, :e1ause no e<e1tive protest 1an :e 2ade.

It is true that ta>es are the life:lood of the overn2ent. 8owever, in spite of all itsplenitude, the power to ta> has its li2its.4/ 6hus, in Co22issioner of InternalRevenue v. "lue, In1.,4' this Court held

6a>es are the life:lood of the overn2ent and so should :e 1olle1ted withoutunne1essar- hindran1e.1âwphi1 On the other hand, su1h 1olle1tion should :e 2adein a11ordan1e with law as an- ar:itrariness will neate the ver- reason forovern2ent itself. It is therefore ne1essar- to re1on1ile the apparentl- 1oni1tin

interests of the authorities and the ta>pa-ers so that the real purpose of ta>ation,whi1h is the pro2otion of the 1o22on ood, 2a- :e a1hieved.

> > > >

It is said that ta>es are what we pa- for 1ivili;ed so1iet-. ithout ta>es, theovern2ent would :e paral-;ed for the la1! of the 2otive power to a1tivate andoperate it. 8en1e, despite the natural relu1tan1e to surrender part of oneAs hard%earned in1o2e to ta>in authorities, ever- person who is a:le to 2ust 1ontri:ute hisshare in the runnin of the overn2ent. 6he overn2ent for its partis e>pe1tedtorespond in the for2 of tani:le and intani:le :ene?ts intended to i2prove thelives of the people and enhan1e their 2oral and 2aterial values. 6his s-2:ioti1relationship is the rationale of ta>ation and should dispel the erroneous notion that itis an ar:itrar- 2ethod of e>a1tion :- those in the seat of power.
















































But even as we 1on1ede the inevita:ilit- and indispensa:ilit- of ta>ation, it is areuire2ent in all de2o1rati1 rei2es that it :e e>er1ised reasona:l- and ina11ordan1e with the pres1ri:ed pro1edure. If it is not, then the ta>pa-er has a rihtto 1o2plain and the 1ourts will then 1o2e to his su11or. or all the aweso2e powerof the ta> 1olle1tor, he 2a- still :e stopped in his tra1!s if the ta>pa-er 1ande2onstrate > > > that the law has not :een o:served.4(

It is an ele2entar- rule enshrined in the '*+) Constitution that no person shall :edeprived of propert- without due pro1ess of law. In :alan1in the s1ales :etween thepower of the State to ta> and its inherent riht to prose1ute per1eived transressorsof the law on one side, and the 1onstitutional rihts of a 1iti;en todue pro1ess of lawand the eual prote1tion of the laws on the other, the s1ales 2ust tilt in favor of theindividual, for a 1iti;enAs riht is a2pl- prote1ted :- the Bill of Rihts under theConstitution.4

"s to the se1ond assined error, petitioner3s relian1e on the provisions of Se1tion.'.) of BIR Revenue Reulation No. '(%**44 as well as on the 1ase of Nava v.Co22issioner of Internal Revenue45 is 2ispla1ed, :e1ause in the said 1ase, one of the reuire2ents ofa valid assess2ent noti1e is that the letter or noti1e 2ust :eproperl- addressed. It is not enouh that the noti1e is sent :- reistered 2ail asprovided under the said Revenue Reulation. In the instant 1ase, the "N was senttothe wron address. 6hus, the C6" is 1orre1t in holdin that the "N never attained?nalit- :e1ause respondent never re1eived it, either a1tuall- or 1onstru1tivel-.

8EREORE, the instant petition is DENIED. 6he De1ision of the Court of 6a>"ppeals En Ban1, dated 0une ', (/'', and its Resolution dated Septe2:er ',(/'', in C.6.". EB No. 4 #C.6.". Case No. )'(5$, are "IRED.

SO ORDERED.










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