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China

 Banking  v.  CIR  


 
Facts:  
CBC  received  an  assessment  from  the  BIR  finding  CBC  liable  for  deficiency  DST  on  the  sales  
of  foreign  bills  of  exchange  to  Central  Bank.  CBC  sent  a  letter  of  protest  to  the  BIR,  stating  
that  there  was  double  taxation,  as  the  bank  had  previously  paid  DST  already,  absence  of  
liability,  since  Central  Bank  was  supposed  to  pay  for  the  DST,  violation  of  due  process,  since  
the  bank’s  records  were  never  formally  examined,  validity  of  the  assessment,  as  there  was  
no  factual  basis,  and  tax  exemption  by  virtue  of  P.D.  Nos.  1177  and  1931.  They  requested  
for  a  reinvestigation.  More  than  12  years  after  the  protest  was  filed,  the  CIR  reiterated  the  
deficiency  DST  assessment  and  ordered  its  payment.  After  being  denied  a  petition  for  
review,  CBC  now  raised  the  argument  of  prescription  for  the  first  time,  stating  that  the  
government  only  had  three  years  from  the  assessment  of  the  CIR  to  collect  tax,  but  within  
that  time  frame,  no  warrant  of  distraint  or  levy,  nor  a  collection  case  was  filed  in  court.    
 
Issue:  
Whether  collection  of  the  DST  assessment  is  barred  by  prescription  
 
Held:  
Yes,  prescription  has  already  set  in.  The  BIR  issued  the  assessment  in  April  1989  when  the  
applicable  rule  was  Section  319  of  the  NIRC,  which  gives  a  time  limit  of  three  years  to  
collect  the  assessed  tax,  to  be  reckoned  from  the  date  when  the  BIR  sends  the  assessment  
notice  to  the  taxpayer.  The  assessed  tax  must  be  collected  by  distraint  or  levy  and/or  court  
proceeding  within  the  three-­‐year  period.  While  there  are  no  records  to  show  when  exactly  
the  assessment  was  sent,  the  latest  possible  date  it  could  have  been  sent  was  April  1989.  
No  warrant  of  distraint  or  levy,  nor  a  collection  case  was  filed  within  three  years  of  such  
date.  The  BIR’s  attempt  to  collect  the  tax  was  only  done  almost  thirteen  years  from  the  
assessment  notice.  The  request  for  reinvestigation  did  not  suspend  the  limitation  of  
statutes,  because  Sec.  320  states  that  such  request  must  be  granted  by  the  Comissioner.  
There  are  no  records  showing  that  the  Comissioner  granted  such  request.  There  was  only  
silence  and  inaction  on  their  part.  Lastly,  failure  to  raise  prescription  at  the  lower  court  is  
not  an  absolute  defense.  Since  the  government  failed  to  invoke  the  rule  against  setting  up  
the  defense  of  prescription  only  upon  appeal,  they  are  also  barred  from  questioning  the  
defense  of  prescription.      
PNB  v.  CIR  
 
Facts:  
Gotesco  Tyan  Ming  Development  entered  into  a  syndicated  loan  agreement  with  PNB  and  
three  other  banks.  To  secure  the  loan,  it  mortgaged  Ever  Ortigas  Commercial  Complex  in  
favor  of  PNB.  It  then  defaulted  on  its  loan  obligations  and  PNB  foreclosed  the  mortgaged  
property  through  a  notarial  foreclosure  sale.  Gotesco  filed  a  civil  case  against  PNB  for  
annulment  of  the  foreclosure  proceedings.  The  RTC  ruled  against  PNB,  but  the  CA  ruled  in  
favor  of  PNB.  PNB  then  paid  the  BIR  a  documentary  stamp  tax  and  withheld  and  remitted  
withholding  taxes.  The  BIR  then  informed  PNB  that  it  was  imposing  interests,  penalties,  
and  surcharges  on  capital  gains  tax  and  the  DST.  PNB  complied  but  filed  an  administrative  
claim  for  refund  of  excess  withholding  taxes  with  the  BIR  and  another  claim  for  refund  
claiming  erroneous  assessment  and  payment  of  surcharges,  penalties,  and  interests.  The  
CTA  granted  the  latter  but  not  the  former  for  insufficiency  of  evidence.    
 
Issue:  
Whether  PNB  is  entitled  to  refund  of  credible  withholding  taxes  erroneously  paid  to  the  
BIR  
 
Held:  
Yes.  It  has  presented  sufficient  evidence  showing  entitlement  to  the  refund.  When  the  CTA  
stated  that  PNB  should  have  presented  the  income  tax  return  of  Gotesco  to  show  the  excess  
withholding  tax  payments,  PNB  presented  such.  It  also  presented  additional  evidence,  such  
as  Gotesco’s  certificates  of  creditable  taxes  withheld  when  it  was  required  to  do  so.  Such  
evidence  shows  that  Gotesco  continued  to  assert  ownership  over  the  complex  and  refused  
to  recognize  the  validity  of  the  foreclosure  sale.  This  means  that  it  refused  to  recognize  the  
payment  of  the  withholding  tax  that  was  due  on  the  sale.  Its  relentless  refusal  to  transfer  
ownership  constitutes  proof  that  it  will  not  do  any  act  inconsistent  with  its  claim  of  
ownership  over  the  property,  including  claiming  the  creditable  tax  as  tax  credit  and  
utilizing  it  to  offset  tax  liabilities.      
CBK  Power  Company  v.  CIR  
 
Facts:  
CBK  Power  obtained  a  syndicated  loan  from  several  foreign  banks.  Certain  portions  of  the  
loan  were  subsequently  assigned  by  the  original  lenders  to  various  other  banks.  CBK  power  
then  borrowed  money  from  some  of  the  banks  again,  for  which  it  remitted  payments  for  
two  years.  It  allegedly  withheld  final  taxes  from  said  payments.  According  to  CBK,  under  
the  relevant  tax  treaties  between  the  Philippines  and  the  countries  of  the  banks,  namely  
Belgium,  Japan,  and  Austria,  the  interest  income  are  subject  to  a  lower  tax  rate  of  10%.  It  
filed  a  claim  for  refund  of  its  excess  final  withholding  taxes  erroneously  withheld  and  
collected  for  three  years.  The  CIR  did  not  act,  so  CBK  filed  petitions  for  review  before  the  
CTA,  which  granted  such  petitions.  The  CIR  argues  that  they  are  not  entitled  to  the  tax  
refund  because  they  did  not  exhaust  the  administrative  remedies.  
 
Issue:  
Whether  CBK  is  entitled  to  a  tax  refund  
 
Held:  
Yes.  Section  2014  and  229  of  the  NIRC  pertain  to  the  administrative  and  judicial  claims  for  
refund,  respectively.  In  both  instances,  the  claim  must  be  filed  within  two  years  from  the  
date  of  payment  of  the  tax  or  penalty.  It  also  states  that  a  judicial  claim  for  refund  cannot  be  
admitted  until  a  claim  has  been  duly  filed  with  the  Commissioner.  CBK’s  claims  were  filed  
within  the  prescriptive  period.  It  would  be  unjust  for  CBK  to  have  to  wait  for  the  
Commissioner  to  act  on  the  administrative  claim,  since  the  prescriptive  period  is  running  at  
the  moment.  To  wait  for  the  Commissioner  would  mean  that  it  would  lose  its  right  to  seek  
judicial  recourse  and  recover  the  erroneously  paid  taxes.  There  was  no  violation  of  the  
NIRC  as  the  only  requirement  for  filing  in  court  would  be  to  have  an  administrative  claim  
priorly  filed  as  well.      
CIR  v.  Nagase  
 
Facts:  
Nagase  filed  its  annual  income  tax  return.  It  received  from  the  CIR  a  formal  assessment  
notice  alleging  that  it  has  deficiency  income  tax  liability  inclusive  of  surcharge  and  interest.  
It  filed  its  protest  to  the  FAN,  arguing  that  there  was  no  legal  and  factual  basis.  When  
Nagase  filed  a  petition  for  review  and  the  CIR  filed  her  answer  stating  that  the  assessments  
were  made  in  accordance  with  the  law.  After  trial  on  the  merits,  the  CTA  ruled  in  favor  of  
Nagase  and  cancelled  the  tax  liability.  The  CIR  filed  a  petition  for  review  before  the  court  en  
banc,  arguing  that  her  right  to  make  an  assessment  had  not  yet  prescribed,  that  she  need  
not  present  proof  that  Nagase  filed  a  false  return,  and  that  a  re-­‐investigation  was  conducted  
after  Nagase  requested  such.    
 
Issue:  
Whether  the  CTA  in  division  erred  in  cancelling  the  assessment  for  deficiency  income  tax  
including  the  surcharge  and  interest  
 
Held:  
While  the  CIR  argues  that  Nagase  requested  for  reinvestigation  and  it  was  this  request  
which  lead  to  the  issuance  of  the  FAN  at  a  later  date,  there  is  a  need  to  acknowledge  the  
difference  between  a  reconsideration  and  reinvestigation.  The  main  difference  lies  in  the  
evidence  to  be  examined.  In  the  latter,  newly  discovered  or  additional  evidence  is  
presented,  which  is  why  it  suspends  the  statute  of  limitations.  The  PAN  and  Nagase’s  
protest  were  not  presented  in  evidence.  What  is  on  record  is  Nagase’s  protest  letter  to  the  
FAN,  which  reads  that  the  same  be  reconsidered.  It  is  then  very  clear  that  no  
reinvestigation  was  requested.  As  for  the  prescription  of  the  period  to  assess,  since  there  is  
no  request  for  reinvestigation,  the  FAN  issued  beyond  the  three  year  period  from  the  time  
Nagase  filed  its  ITR  is  void.      
CIR  v.  GJM    
 
Facts:  
GJM  filed  its  annual  income  tax  return.  Its  parent  company  underwent  bankruptcy  
proceedings,  resulting  in  the  transfer  of  ownership  over  GJM  to  another  company.  The  BIR  
sent  a  letter  of  informal  conference  informing  GJM  that  the  report  of  investigation  on  its  
income  and  business  tax  liabilities.  It  disclosed  that  GJM  was  still  liable  for  income  tax  
deficiency.  The  BIR  then  issued  a  PAN  and  after  that  an  undated  assessment  notice.  When  
GJM  received  a  warrant  of  distraint  and/or  levy,  the  company  filed  a  letter  protest,  which  
was  denied.  GJM  filed  a  petition  for  review  before  the  CTA,  which  cancelled  the  warrant  of  
distraint  and  /or  levy.    
 
Issue:  
Whether  the  FAN  was  sent  within  the  3-­‐year  prescriptive  period    
 
Held:  
No.  Section  203  states  that  the  CIR  has  3  years  from  the  date  of  the  actual  filing  of  the  
return  or  from  the  last  day  prescribed  by  law  for  the  filing  of  the  return,  whichever  is  later,  
to  assess  internal  revenue  taxes.  Records  reveal  that  the  BIR  sent  the  FAN  within  the  
required  period.  If  the  taxpayer  denies  having  received  an  assessment  from  the  BIR,  it  
becomes  incumbent  upon  the  latter  to  prove  that  such  notice  was  received  by  the  
addressee.  Since  GJM  denies  having  received  any  FAN  and  BIR  failed  to  prove  the  receipt  of  
the  assessment,  the  assessment  is  deemed  not  issued.      
CIR  v.  Fabtech  
 
Facts:  
The  BIR  issued  a  letter  of  authority  for  the  examination  of  FEI’s  books  of  accounts  and  
other  accounting  records  for  all  internal  revenue  taxes  for  the  year  for  deficiency  VAT,  
withholding  tax,  and  compromise  penalty.  A  notice  for  informal  conference  and  PAN  was  
also  issued.  FEI  received  a  FAN  and  it  filed  its  formal  protest  for  the  withdrawal  and  
cancellation  of  the  FAN.  Despite  the  cancellation  of  the  FAN,  BIR  still  issued  the  formal  
letter  of  demand.  FEI  filed  its  formal  protest  against  the  FLD,  but  the  CIR  failed  to  act  on  the  
protest  within  the  180-­‐day  period  from  the  date  when  FEI  submitted  documents  in  support  
of  its  protest.  FEI  filed  a  petition  for  review.  The  CTA  cancelled  the  FLD.    
 
Issue:  
Whether  the  CIR  fully  observed  the  due  process  requirements  when  she  issued  the  PAN  
and  sent  it  through  registered  mail  
 
Held:  
Section  228  of  the  NIRC  states  that  the  taxpayer  must  first  be  informed  in  writing  of  the  
facts  and  the  law  on  which  the  assessment  is  made  through  the  issuance  and  receipt  of  the  
PAN.  Fabtech  claims  that  it  did  not  receive  a  PAN  for  one  of  the  letters  of  authority,  while  
the  CIR  asserts  that  one  was  sent  through  registered  mail.  When  such  is  sent  by  registered  
mail,  a  direct  denial  of  receipt  thereof  shifts  the  burden  upon  the  CIR  to  prove  that  such  
was  indeed  sent  and  received  by  the  addressee.  The  CIR  failed  to  present  substantial  
evidence  that  the  PAN  was  indeed  mailed  or  sent  and  that  such  was  received  by  Fabtech.  In  
the  absence  if  a  valid  PAN,  Fabtech’s  right  to  due  process  was  violated,  rendering  the  
assessment  null  and  void.      
CIR  v.  Pilipinas  Shell  
 
Facts:  
A  portion  of  Pilipinas  Shell’s  sales  and  deliveries  were  sourced  from  Petron  by  virtue  of  a  
loan  or  borrow  agreement  between  them.  The  excise  taxes  paid  by  Petron  were  passed  on  
to  Pilipinas  Shell,  and  the  latter  sold  these  net  of  excise  taxes.  Pilipinas  Shell  then  filed  two  
separate  claims  for  the  refund  or  credit  of  the  excise  taxes  paid  on  the  sales.  Due  to  the  
inaction  of  the  BIR,  it  filed  a  petition  for  review  with  the  CTA.  The  CTA  granted  such  claim.  
The  CIR  filed  a  petition  for  review  stating  that  excise  taxes  are  levied  on  the  
manufacturer/producer  prior  to  the  sale  and  delivery  to  international  carriers  which  
means  that  such  must  be  shouldered  by  Pilipinas  Shell.    
 
Issue:  
Whether  Pilipinas  Shell  is  entitled  to  the  refund  
 
Held:  
Yes.  as  previously  held  in  CIR  v.  Pilipinas  Shell,  which  has  primarily  the  same  facts  and  
circumstances,  there  is  a  need  to  examine  the  effect  of  denying  the  domestic  
manufacturers/sellers’  claim  for  refund  as  it  might  have  broad  implications  on  our  
commitment  under  international  agreements.  Sec.  135  of  the  NIRC  grants  international  
carriers  exemption  from  imposition  of  excise  taxes.  Petroleum  products  sold  by  local  
manufacturers/sellers  to  international  carriers  are  then  also  exempted.      
Raymundo  v.  De  Joya  
 
Facts:  
This  is  a  petition  for  review  of  a  decision  ordering  Raymundo  to  pay  deficiency  tax.  Rafael  
Cavanna  acquired  from  Anastacio  Teodoro,  Jr.  a  car,  with  Cayanna  assuming  whatever  tax  
liability  was  due.  In  registering  the  car,  he  made  it  appear  that  he  had  paid  customs  duties.  
He  then  executed  a  deed  of  sale  in  favor  of  his  wife.  Since  there  was  an  anomaly  in  the  
informal  entry  number  for  the  car,  a  warrant  of  seizure  was  issued.  The  wife  sold  the  car  to  
Renato  Raymundo.  The  Collector  of  Customs  then  ordered  the  payment  of  deficiency  taxed  
due  to  the  government.  The  Commissioner  of  Customs  also  sustained  such.  When  
Raymundo  filed  a  petition  for  review,  the  CTA  also  affirmed  such  ruling.  He  now  questions  
the  decision.  
 
Issue:  
Whether  the  finding  of  facts  of  the  CTA  can  be  disturbed  on  appeal  
 
Held:  
No.  The  Supreme  Court  has  made  it  clear  over  and  over  again  that  the  CTA  is  entitled  to  the  
highest  respect.  The  finding  of  facts  of  the  CTA  should  not  be  disturbed  and  the  language  it  
used  as  to  the  existence  of  fraud  must  be  given  weight  and  force.  It  found  such  nefarious  
intent  on  the  part  of  the  vendor.  Only  by  showing  that  there  was  no  substantial  evidence  
could  a  due  process  question  be  raised.      
CIR  v.  Stemiko  
 
Facts:  
Stemiko  received  a  preliminary  collection  letter  for  the  collection  of  his  alleged  unpaid  tax  
liability.  The  CIR  then  issued  a  warrant  of  distraint  and/or  levy,  and  after  that,  two  notices  
of  tax  lien.  Stemiko  filed  a  letter-­‐protest  protesting  the  preliminary  collection  letter.  When  
the  CIR  failed  to  act  on  the  letter-­‐protest,  it  filed  a  petition  for  review  with  the  CTA.  It  
cancelled  the  PAN,  the  FAN,  and  the  warrant  for  distraint  and/or  levy.  The  CIR  filed  a  
petition  for  review,  arguing  that  Stemiko’s  right  to  due  process  was  not  violated  because  
the  assessment  notices  were  properly  received  by  its  employee,  while  the  amended  PAN  
and  FAN  were  sent  through  registered  mail.    
 
Issue:  
Whether  the  PAN  and  FAN  were  delivered  properly  
 
Held:  
Basic  is  the  rule  in  evidence  that  the  burden  of  proof  lies  upon  him  who  asserts  it.  Since  the  
CIR  is  the  one  insisting  that  the  assessment  notices  were  received  by  Stemiko  through  its  
employee,  she  bears  the  burden  of  proving  the  same.  She  miserably  failed  to  discharge  this  
burden  of  proof.  A  perusal  of  the  evidence  reveals  nothing  about  the  identity  and  authority  
oft  eh  employee  who  received  the  PAN.  The  name  and  signature  in  the  PAN  does  not  prove  
that  she  is  actually  Stemiko’s  employee.  As  for  the  amended  PAN  and  the  FAN  sent  by  
registered  mail,  since  Stemiko  denied  having  received  such,  it  is  up  to  the  CIR  to  prove  that  
the  mailed  letter  was  indeed  received  by  Stemiko.  Presentation  of  unauthenticated  registry  
receipts  in  this  case  does  not  constitute  proper  proof,  since  they  must  be  properly  
authenticated.      
Tridharma  v.  CTA  
 
Facts:  
Tridharma  received  a  PAN  from  the  BIR  assessing  it  with  various  deficiency  taxes,  inclusive  
of  surcharge  and  interest.  After  about  a  month,  it  received  from  the  BIR  a  formal  letter  of  
demand  assessing  it  with  deficiency  taxes  for  the  year.  It  filed  a  protest  against  the  FLD.  
The  CIR  required  it  to  submit  additional  documents  in  support  of  its  protest  and  it  
complied.  It  received  a  final  decision  on  disputed  assessment  and  it  filed  a  protest  through  
a  request  for  reconsideration.  The  CIR  denied  such.  Tridharma  appealed  the  decision  to  the  
CTA  through  a  motion  for  suspension  of  collection,  since  its  net  worth  was  not  sufficient  to  
cover  the  amount.  The  CTA  granted  such  and  suspended  the  collection  of  tax,  but  ordered  it  
to  submit  documents  along  with  the  surety  bond  worth  150%  of  the  assessment.  
Tridharma  appealed  the  amount,  and  it  was  reduced  to  the  equivalent  of  the  deficiency  
assessment.    
 
Issue:  
Whether  the  CTA  erred  in  requiring  a  surety  bond  despite  the  patent  illegality  of  the  
assessment  beyond  Tridharma’s  net  worth  but  equivalent  to  the  deficiency  assessment  
 
Held:  
Yes.  While  the  NIRC  states  that  in  requiring  the  taxpayer  to  file  a  surety  bond,  such  must  
not  be  more  than  double  the  amount  with  the  Court,  the  CTA  must  also  consider  other  
factors  recognized  by  law  towards  suspending  collection,  such  as  whether  the  assessment  
would  jeopardize  the  interest  of  the  taxpayer  or  whether  the  means  adopted  by  the  CIR  in  
ascertaining  liability  is  valid.  Prescribing  such  a  high  amount  of  the  bond  would  practically  
deny  the  taxpayer  the  opportunity  to  contest  the  validity  of  the  assessment.  Since  
Tridharma’s  net  worth  cannot  even  cover  the  amount  of  the  deficiency  assessment,  such  is  
considered  too  high  and  unjust.  Also,  the  requirement  that  a  bond  be  a  condition  precedent  
to  suspension  of  collection  applies  only  when  collection  is  made  in  consonance  with  the  
law,  not  when  it  will  be  suspended  for  jeopardizing  the  interests  of  the  taxpayer.