TodayisSaturday,July23,2016

RepublicofthePhilippines
SUPREMECOURT
Manila
SECONDDIVISION
G.R.No.175097
ALLIEDBANKINGCORPORATION,Petitioner,
vs.
COMMISSIONEROFINTERNALREVENUE,Respondent.
DECISION
DELCASTILLO,J.:
Thekeytoeffectivecommunicationisclarity.
TheCommissionerofInternalRevenue(CIR)aswellashisdulyauthorizedrepresentativemustindicateclearly
andunequivocallytothetaxpayerwhetheranactionconstitutesafinaldeterminationonadisputedassessment.1
Wordsmustbecarefullychoseninordertoavoidanyconfusionthatcouldadverselyaffecttherightsandinterest
ofthetaxpayer.
AssailedinthisPetitionforReviewonCertiorari2underSection12ofRepublicAct(RA)No.9282,3inrelationto
Rule 45 of the Rules of Court, are the August 23, 2006 Decision4 of the Court of Tax Appeals (CTA) and its
October17,2006Resolution5denyingpetitionersMotionforReconsideration.
FactualAntecedents
On April 30, 2004, the Bureau of Internal Revenue (BIR) issued a Preliminary Assessment Notice (PAN) to
petitioner Allied Banking Corporation for deficiency Documentary Stamp Tax (DST) in the amount of
P12,050,595.60andGrossReceiptsTax(GRT)intheamountofP38,995,296.76onindustryissueforthetaxable
year2001.6PetitionerreceivedthePANonMay18,2004andfiledaprotestagainstitonMay27,2004.7
OnJuly16,2004,theBIRwroteaFormalLetterofDemandwithAssessmentNoticestopetitioner,whichpartly
readsasfollows:8
It is requested that the above deficiency tax be paid immediately upon receipt hereof, inclusive of penalties
incidenttodelinquency.Thisisourfinaldecisionbasedoninvestigation.Ifyoudisagree,youmayappealthefinal
decisionwithinthirty(30)daysfromreceipthereof,otherwisesaiddeficiencytaxassessmentshallbecomefinal,
executoryanddemandable.
PetitionerreceivedtheFormalLetterofDemandwithAssessmentNoticesonAugust30,2004.9
ProceedingsbeforetheCTAFirstDivision
OnSeptember29,2004,petitionerfiledaPetitionforReview10withtheCTAwhichwasraffledtoitsFirstDivision
anddocketedasCTACaseNo.7062.11
OnDecember7,2004,respondentCIRfiledhisAnswer.12OnJuly28,2005,hefiledaMotiontoDismiss13on
thegroundthatpetitionerfailedtofileanadministrativeprotestontheFormalLetterofDemandwithAssessment
Notices.PetitioneropposedtheMotiontoDismissonAugust18,2005.14
On October 12, 2005, the First Division of the CTA rendered a Resolution15 granting respondents Motion to
Dismiss.Itruled:
Clearly, it is neither the assessment nor the formal demand letter itself that is appealable to this Court. It is the
decisionoftheCommissionerofInternalRevenueonthedisputedassessmentthatcanbeappealedtothisCourt

(Commissioner of Internal Revenue vs. Villa, 22 SCRA 3). As correctly pointed out by respondent, a disputed
assessment is one wherein the taxpayer or his duly authorized representative filed an administrative protest
againsttheformalletterofdemandandassessmentnoticewithinthirty(30)daysfromdate[of]receiptthereof.In
thiscase,petitionerfailedtofileanadministrativeprotestontheformalletterofdemandwiththecorresponding
assessment notices. Hence, the assessments did not become disputed assessments as subject to the Courts
reviewunderRepublicActNo.9282.(SeealsoRepublicv.LiamTianTengSons&Co.,Inc.,16SCRA584.)
WHEREFORE, the Motion to Dismiss is GRANTED. The Petition for Review is hereby DISMISSED for lack of
jurisdiction.
SOORDERED.16
Aggrieved,petitionermovedforreconsiderationbutthemotionwasdeniedbytheFirstDivisioninitsResolution
datedFebruary1,2006.17
ProceedingsbeforetheCTAEnBanc
OnFebruary22,2006,petitionerappealedthedismissaltotheCTAEnBanc.18ThecasewasdocketedasCTA
EBNo.167.
Finding no reversible error in the Resolutions dated October 12, 2005 and February 1, 2006 of the CTA First
Division,theCTAEnBancdeniedthePetitionforReview19aswellaspetitionersMotionforReconsideration.20
TheCTAEnBancdeclaredthatitisabsolutelynecessaryforthetaxpayertofileanadministrativeprotestinorder
fortheCTAtoacquirejurisdiction.Itemphasizedthatanadministrativeprotestisanintegralpartoftheremedies
given to a taxpayer in challenging the legality or validity of an assessment. According to the CTA En Banc,
althoughthereareexceptionstothedoctrineofexhaustionofadministrativeremedies,theinstantcasedoesnot
fallinanyoftheexceptions.
Issue
Hence, the present recourse, where petitioner raises the lone issue of whether the Formal Letter of Demand
datedJuly16,2004canbeconstruedasafinaldecisionoftheCIRappealabletotheCTAunderRA9282.
OurRuling
Thepetitionismeritorious.
Section 7 of RA 9282 expressly provides that the CTA exercises exclusive appellate jurisdiction to review by
appealdecisionsoftheCIRincasesinvolvingdisputedassessments
The CTA, being a court of special jurisdiction, can take cognizance only of matters that are clearly within its
jurisdiction.21Section7ofRA9282provides:
Sec.7.Jurisdiction.TheCTAshallexercise:
(a)Exclusiveappellatejurisdictiontoreviewbyappeal,ashereinprovided:
(1)DecisionsoftheCommissionerofInternalRevenueincasesinvolvingdisputedassessments,refundsof
internalrevenuetaxes,feesorothercharges,penaltiesinrelationthereto,orothermattersarisingunder
theNationalInternalRevenueCodeorotherlawsadministeredbytheBureauofInternalRevenue
(2)InactionbytheCommissionerofInternalRevenueincasesinvolvingdisputedassessments,refundsof
internalrevenuetaxes,feesorothercharges,penaltiesinrelationthereto,orothermattersarisingunder
theNationalInternalRevenueCodeorotherlawsadministeredbytheBureauofInternalRevenue,where
theNationalInternalRevenueCodeprovidesaspecificperiodofaction,inwhichcasetheinactionshallbe
deemedadenial(Emphasissupplied)
xxxx
Theword"decisions"intheabovequotedprovisionofRA9282hasbeeninterpretedtomeanthedecisionsofthe
CIR on the protest of the taxpayer against the assessments.22 Corollary thereto, Section 228 of the National
InternalRevenueCode(NIRC)providesfortheprocedureforprotestinganassessment.Itstates:
SECTION228.ProtestingofAssessment.WhentheCommissionerorhisdulyauthorizedrepresentativefinds
thatpropertaxesshouldbeassessed,heshallfirstnotifythetaxpayerofhisfindings:Provided,however,Thata
preassessmentnoticeshallnotberequiredinthefollowingcases:

(a)Whenthefindingforanydeficiencytaxistheresultofmathematicalerrorinthecomputationofthetax
asappearingonthefaceofthereturnor
(b)Whenadiscrepancyhasbeendeterminedbetweenthetaxwithheldandtheamountactuallyremitted
bythewithholdingagentor
(c) When a taxpayer who opted to claim a refund or tax credit of excess creditable withholding tax for a
taxable period was determined to have carried over and automatically applied the same amount claimed
againsttheestimatedtaxliabilitiesforthetaxablequarterorquartersofthesucceedingtaxableyearor
(d)Whentheexcisetaxdueonexcisablearticleshasnotbeenpaidor
(e) When an article locally purchased or imported by an exempt person, such as, but not limited to,
vehicles, capital equipment, machineries and spare parts, has been sold, traded or transferred to non
exemptpersons.
Thetaxpayersshallbeinformedinwritingofthelawandthefactsonwhichtheassessmentismadeotherwise,
theassessmentshallbevoid.
Withinaperiodtobeprescribedbyimplementingrulesandregulations,thetaxpayershallberequiredtorespond
tosaidnotice.Ifthetaxpayerfailstorespond,theCommissionerorhisdulyauthorizedrepresentativeshallissue
anassessmentbasedonhisfindings.
Such assessment may be protested administratively by filing a request for reconsideration or reinvestigation
within thirty (30) days from receipt of the assessment in such form and manner as may be prescribed by
implementing rules and regulations. Within sixty (60) days from filing of the protest, all relevant supporting
documentsshallhavebeensubmittedotherwise,theassessmentshallbecomefinal.
If the protest is denied in whole or in part, or is not acted upon within one hundred eighty (180) days from
submissionofdocuments,thetaxpayeradverselyaffectedbythedecisionorinactionmayappealtotheCourtof
TaxAppealswithinthirty(30)daysfromreceiptofthesaiddecision,orfromthelapseoftheonehundredeighty
(180)dayperiodotherwise,thedecisionshallbecomefinal,executoryanddemandable.
Intheinstantcase,petitionertimelyfiledaprotestafterreceivingthePAN.Inresponsethereto,theBIRissueda
FormalLetterofDemandwithAssessmentNotices.PursuanttoSection228oftheNIRC,theproperrecourseof
petitionerwastodisputetheassessmentsbyfilinganadministrativeprotestwithin30daysfromreceiptthereof.
Petitioner, however, did not protest the final assessment notices. Instead, it filed a Petition for Review with the
CTA.Thus,ifwestrictlyapplytherules,thedismissalofthePetitionforReviewbytheCTAwasproper.
Thecaseisanexceptiontothe
ruleonexhaustionofadministrativeremedies
However, a careful reading of the Formal Letter of Demand with Assessment Notices leads us to agree with
petitionerthattheinstantcaseisanexceptiontotheruleonexhaustionofadministrativeremedies,i.e.,estoppel
onthepartoftheadministrativeagencyconcerned.
In the case of Vda. De Tan v. Veterans Backpay Commission,23 the respondent contended that before filing a
petitionwiththecourt,petitionershouldhavefirstexhaustedalladministrativeremediesbyappealingtotheOffice
of the President. However, we ruled that respondent was estopped from invoking the rule on exhaustion of
administrativeremediesconsideringthatinitsResolution,itsaid,"TheopinionspromulgatedbytheSecretaryof
Justiceareadvisoryinnature,whichmayeitherbeacceptedorignoredbytheofficeseekingtheopinion,andany
aggrieved party has the court for recourse". The statement of the respondent in said case led the petitioner to
concludethatonlyafinaljudicialrulinginherfavorwouldbeacceptedbytheCommission.
Similarly, in this case, we find the CIR estopped from claiming that the filing of the Petition for Review was
prematurebecausepetitionerfailedtoexhaustalladministrativeremedies.
TheFormalLetterofDemandwithAssessmentNoticesreads:
BasedonyourletterprotestdatedMay26,2004,youallegedthefollowing:
1.ThatthesaidassessmenthasalreadyprescribedinaccordancewiththeprovisionsofSection203ofthe
TaxCode.
2. That since the exemption of FCDUs from all taxes found in the Old Tax Code has been deleted, the
wordingofSection28(A)(7)(b)disclosesthattherearenoothertaxesimposableuponFCDUsasidefrom
the10%FinalIncomeTax.

Contrarytoyourallegation,theassessmentscoveringGRTandDSTfortaxableyear2001hasnotprescribedfor
[sic]simplybecausenoreturnswerefiled,thus,thethreeyearprescriptiveperiodhasnotlapsed.
With the implementation of the CTRP, the phrase "exempt from all taxes" was deleted. Please refer to Section
27(D)(3)and28(A)(7)ofthenewTaxCode.Accordingly,youwereassessedfordeficiencygrossreceiptstaxon
onshore income from foreign currency transactions in accordance with the rates provided under Section 121 of
thesaidTaxCode.Likewise,deficiencydocumentarystamptaxeswas[sic]alsoassessedonLoanAgreements,
Bills Purchased, Certificate of Deposits and related transactions pursuant to Sections 180 and 181 of NIRC, as
amended.
The25%surchargeand20%interesthavebeenimposedpursuanttotheprovisionofSection248(A)and249(b),
respectively,oftheNationalInternalRevenueCode,asamended.
It is requested that the above deficiency tax be paid immediately upon receipt hereof, inclusive of penalties
incidenttodelinquency.Thisisourfinaldecisionbasedoninvestigation.Ifyoudisagree,youmayappealthisfinal
decisionwithinthirty(30)daysfromreceipthereof,otherwisesaiddeficiencytaxassessmentshallbecomefinal,
executoryanddemandable.24(Emphasissupplied)
ItappearsfromtheforegoingdemandletterthattheCIRhasalreadymadeafinaldecisiononthematterandthat
theremedyofpetitioneristoappealthefinaldecisionwithin30days.
InOceanicWirelessNetwork,Inc.v.CommissionerofInternalRevenue,25weconsideredthelanguageusedand
thetenorofthelettersenttothetaxpayerasthefinaldecisionoftheCIR.
Inthiscase,recordsshowthatpetitionerdisputedthePANbutnottheFormalLetterofDemandwithAssessment
Notices. Nevertheless, we cannot blame petitioner for not filing a protest against the Formal Letter of Demand
withAssessmentNoticessincethelanguageusedandthetenorofthedemandletterindicatethatitisthefinal
decisionoftherespondentonthematter.WehavetimeandagainremindedtheCIRtoindicate,inaclearand
unequivocallanguage,whetherhisactiononadisputedassessmentconstituteshisfinaldeterminationthereonin
orderforthetaxpayerconcernedtodeterminewhenhisorherrighttoappealtothetaxcourtaccrues.26Viewed
inthelightoftheforegoing,respondentisnowestoppedfromclaimingthathedidnotintendtheFormalLetterof
DemandwithAssessmentNoticestobeafinaldecision.
Moreover,wecannotignorethefactthatintheFormalLetterofDemandwithAssessmentNotices,respondent
usedtheword"appeal"insteadof"protest","reinvestigation",or"reconsideration".Althoughtherewasnodirect
referenceforpetitionertobringthematterdirectlytotheCTA,itcannotbedeniedthattheword"appeal"under
prevailing tax laws refers to the filing of a Petition for Review with the CTA. As aptly pointed out by petitioner,
under Section 228 of the NIRC, the terms "protest", "reinvestigation" and "reconsideration" refer to the
administrative remedies a taxpayer may take before the CIR, while the term "appeal" refers to the remedy
availabletothetaxpayerbeforetheCTA.Section9ofRA9282,amendingSection11ofRA1125,27likewiseuses
theterm"appeal"whenreferringtotheactionataxpayermusttakewhenadverselyaffectedbyadecision,ruling,
orinactionoftheCIR.Asweseeitthen,petitionerinappealingtheFormalLetterofDemandwithAssessment
NoticestotheCTAmerelytookthecuefromrespondent.Besides,anydoubtintheinterpretationoruseofthe
word"appeal"intheFormalLetterofDemandwithAssessmentNoticesshouldberesolvedinfavorofpetitioner,
andnottherespondentwhocausedtheconfusion.
Tobeclear,wearenotdisregardingtherulesofprocedureunderSection228oftheNIRC,asimplementedby
Section 3 of BIR Revenue Regulations No. 1299.28 It is the Formal Letter of Demand and Assessment Notice
thatmustbeadministrativelyprotestedordisputedwithin30days,andnotthePAN.Neitherarewedeviatingfrom
ourpronouncementinSt.StephensChineseGirlsSchoolv.CollectorofInternalRevenue,29thatthecountingof
the30dayswithinwhichtoinstituteanappealintheCTAcommencesfromthedateofreceiptofthedecisionof
theCIRonthedisputedassessment,notfromthedatetheassessmentwasissued.
1 a v v p h i1

Whatwearesayinginthisparticularcaseisthat,theFormalLetterofDemandwithAssessmentNoticeswhich
was not administratively protested by the petitioner can be considered a final decision of the CIR appealable to
theCTAbecausethewordsused,specificallythewords"finaldecision"and"appeal",takentogetherledpetitioner
tobelievethattheFormalLetterofDemandwithAssessmentNoticeswasinfactthefinaldecisionoftheCIRon
theletterprotestitfiledandthattheavailableremedywastoappealthesametotheCTA.
Wenote,however,thatduringthependencyoftheinstantcase,petitioneravailedoftheprovisionsofRevenue
Regulations No. 302002 and its implementing Revenue Memorandum Order by submitting an offer of
compromiseforthesettlementoftheGRT,DSTandVATfortheperiod19982003,asevidencedbyaCertificate
ofAvailmentdatedNovember21,2007.30Accordingly,thereisnoreasontoreinstatethePetitionforReviewin
CTACaseNo.7062.
WHEREFORE, the petition is hereby GRANTED. The assailed August 23, 2006 Decision and the October 17,

2006 Resolution of the Court of Tax Appeals are REVERSED and SETASIDE. The Petition for Review in CTA
CaseNo.7062isherebyDISMISSEDbasedsolelyontheBureauofInternalRevenuesacceptanceofpetitioners
offerofcompromiseforthesettlementofthegrossreceiptstax,documentarystamptaxandvalueaddedtax,for
theyears19982003.
SOORDERED.
MARIANOC.DELCASTILLO
AssociateJustice
WECONCUR:
ANTONIOT.CARPIO
AssociateJustice
Chairperson
ARTUROD.BRION
AssociateJustice

ROBERTOA.ABAD
AssociateJustice
JOSEP.PEREZ
AssociateJustice
ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case was
assignedtothewriteroftheopinionoftheCourtsDivision.
ANTONIOT.CARPIO
AssociateJustice
Chairperson,SecondDivision
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairpersons attestation, it is hereby
certified that the conclusions in the above Decision had been reached in consultation before the case was
assignedtothewriteroftheopinionoftheCourtsDivision.
REYNATOS.PUNO
ChiefJustice

Footnotes
1SurigaoElectricCo.,Inc.v.CourtofTaxAppeals,156Phil.517,522523(1974).
2Rollo,pp.721.
3AnActExpandingtheJurisdictionoftheCourtofTaxAppeals(CTA),ElevatingitsRanktotheLevelofa

CollegiateCourtwithSpecialJurisdictionandEnlargingitsMembership,AmendingforthePurposeCertain
Sections of Republic Act No. 1125, As Amended, otherwise known as the Law Creating the Court of Tax
Appeals,andforOtherPurposes.
4Rollo,pp.2330pennedbyAssociateJusticeErlindaP.UyandconcurredinbyPresidingJusticeErnesto

D.Acosta,andAssociateJusticesJuanitoC.Castaeda,Jr.,LovellR.Bautista,andCaesarA.Casanova.
AssociateJusticeOlgaPalancaEnriquezinhibitedherselfanddidnottakepart.
5Id.at3234.
6Id.at5354.
7Id.at24.
8Id.at3536.
9Id.at24.

10Id.at3761.
11Id.at24.
12Id.
13Id.at6266.
14Id.at25.
15Id.at6772.
16Id.at7172.
17Id.at25.
18Id.at23.
19Id.at29.
20Id.at34.
21RizalCommercialBankingCorporationv.CommissionerofInternalRevenue,G.R.No.168498,April24,

2007,522SCRA144,150.
22CommissionerofInternalRevenuev.Villa,130Phil.3,6(1968).
23105Phil.377,383(1959).
24Rollo,p.36.
25G.R.No.148380,December9,2005,477SCRA205,211.
26SurigaoElectricCo.,Inc.v.CourtofTaxAppeals,supranote1.
27 Section 11. Who may Appeal Mode of Appeal Effect of Appeal Any party adversely affected by a

decision, ruling or inaction of the Commissioner of Internal Revenue, the Commissioner of Customs, the
Secretary of Finance, the Secretary of Trade and Industry or the Secretary of Agriculture or the Central
BoardofAssessmentAppealsortheRegionalTrialCourtsmayfileanappealwiththeCTAwithinthirty(30)
daysafterthereceiptofsuchdecisionorrulingoraftertheexpirationoftheperiodfixedbylawforactionas
referredtoinSection7(a)(2)herein.
xxxx
28Section3.DueProcessRequirementintheIssuanceofaDeficiencyTaxAssessment.

xxxx
3.1.2 Preliminary Assessment Notice (PAN). If after review and evaluation by the Assessment
Division or by the Commissioner or his duly authorized representative, as the case may be, it is
determined that there exists sufficient basis to assess the taxpayer for any deficiency tax or taxes,
the said Office shall issue to the taxpayer, at least by registered mail, a Preliminary Assessment
Notice (PAN) for the proposed assessment, showing in detail, the facts and the law, rules and
regulations, or jurisprudence on which the proposed assessment is based. If the taxpayer fails to
respondwithinfifteen(15)daysfromdateofreceiptofthePAN,heshallbeconsideredindefault,in
which case, a formal letter of demand and assessment notice shall be caused to be issued by the
said Office, calling for payment of the taxpayer's deficiency tax liability, inclusive of the applicable
penalties.
xxxx
3.1.4 Formal Letter of Demand and Assessment Notice. The formal letter of demand and
assessment notice shall be issued by the Commissioner or his duly authorized representative. The
letterofdemandcallingforpaymentofthetaxpayer'sdeficiencytaxortaxesshallstatethefacts,the
law,rulesandregulations,orjurisprudenceonwhichtheassessmentisbased,otherwise,theformal

letterofdemandandassessmentnoticeshallbevoid.Thesameshallbesenttothetaxpayeronly
byregisteredmailorbypersonaldelivery.xxx
3.1.5 Disputed Assessment The taxpayer or his duly authorized representative may protest
administratively against the aforesaid formal letter of demand and assessment notice within thirty
(30)daysfromdateofreceiptthereofxxx.
The taxpayer shall state the facts, the applicable law, rules and regulations, or jurisprudence on
which his protest is based, otherwise, his protest shall be considered void and without force and
effectxxx.
Thetaxpayershallsubmittherequireddocumentsinsupportofhisprotestwithinsixty(60)daysfrom
thedateoffilingofhisletterofprotest,otherwise,theassessmentshallbecomefinalandexecutory
anddemandablexxx
Ifthetaxpayerfailstofileavalidprotestagainsttheformalletterofdemandandassessmentnotice
withinthirty(30)daysfromdateofreceiptthereof,theassessmentshallbecomefinal,executoryand
demandable.
If the protest is denied, in whole or in part, by the Commissioner, the taxpayer may appeal to the
CourtofTaxAppealswithinthirty(30)daysfromdateofreceiptofthesaiddecision,otherwise,the
assessmentshallbecomefinal,executoryanddemandable.
In general, if the protest is denied, in whole or in part, by the Commissioner or his duly authorized
representative, the taxpayer may appeal to the Court of Tax Appeals, within thirty (30) days from
date of receipt of the said decision, otherwise, the assessment shall become final, executory and
demandable:Provided,however,thatifthetaxpayerelevateshisprotesttotheCommissionerwithin
thirty (30) days from date of receipt of the final decision of the Commissioners duly authorized
representative, the latters decision shall not be considered final, executory and demandable, in
whichcase,theprotestshallbedecidedbytheCommissioner.
IftheCommissionerorhisdulyauthorizedrepresentativefailstoactonthetaxpayersprotestwithin
onehundredeighty(180)daysfromdateofsubmission,bythetaxpayer,oftherequireddocuments
insupportofhisprotest,thetaxpayermayappealtotheCourtofTaxAppealswithinthirty(30)days
fromthelapseofsaid180dayperiod,otherwise,theassessmentshallbecomefinal,executoryand
demandable.
xxxx
29104Phil.314,317(1958).
30Annex"A"ofpetitionersMemorandum.
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