No.

23 CIR VS MINDANAO SANITARIUM AND HOSPITAL The subject FLD did not make a clear and categorical demand for payment
FACTS:
Based on Mindanao’s Articles of Incorporation, it was formed for the
following purposes, namely: "to advance through medical missionary work
the cause and kingdom of Jesus Christ, the Great Physician; to further, by all
proper and legitimate agencies and means a better knowledge of the laws of
life and true hygiene, the relief of suffering, and the prevention or cure of
disease, subject to the condition that purely professional, medical or surgical
services in connection therewith shall be performed by duly qualified
physicians or surgeons who may or may not be connected with the
corporation and who shall be freely and individually contracted by patients;
to publish and circulate health literature dealing with diseases; hygiene and
kindred subjects; to educate and train nurses; to furnish lecturers and teachers
to instruct the people regarding the laws of life and the true methods of living;
to do benevolent, charitable, philanthropic, and Christian help work for the
good of humanity and the uplift of our fellow men; to receive for the
advancement of this work, gifts, legacies and donations, from any source
whatever."
of the alleged tax liabilities for it contains merely a request for payment. Also,
the date "10/16/09" cannot be considered a deadline for payment of the
alleged tax liabilities as the FLD itself refers to the enclosed assessment
notice for the due date.
It merely states that the amount of interest indicated therein runs only up to
October 16, 2009 and payment beyond the said date will require an
adjustment of the interest and, consequently, the total amount due.
Based on the records, the Court En Bane finds that there is no valid
assessment for failure to issue the required FAN to the taxpayer. The use of
the word "shall" under Paragraph 2 of Section 228 of the 1997 NIRC, as
implemented by Section 3.1.4 of Revenue Regulations No. 12-99,
underscores a mandatory, imperative and compulsory character; it is a word
of command. Due process requires service and receipt thereof by the
taxpayer.
The petition was dismissed

CIR issued Letter of Authority ("LOA") No. 00031914 dated June 16, 2008
for purposes of investigating all internal revenue tax liabilities of Mindanao
for the year ending December 31,2007. As a result of said investigation,
Mindanao received on November 6, 2009 a Formal Letter of Demand
("FLD") dated September 25, 2009, with attached annexes described as
"Computation of Discrepancies" and "Facts, Laws, Rules and Regulations as
basis of the assessment" issued by the Regional Director.

On November 27, 2009, Mindanao protested the foregoing FLD by filing a

protest letter dated November 25, 2009 with attached supporting documents
addressed to Esmeralda M. Tabule, the Regional Director of BIR Revenue
Region No. 16, praying that the assessment involving income tax and VAT
be withdrawn and the docket be remanded to the District Office for the
conduct of examination of the supporting documents involving withholding
taxes.

On December 16, 2009, Mindanao, through Francisco I. Naputo and Crispulo

T. Aguillon, Jr., verbally requested from BIR, through Adora L. Sijo, the
chief of the Assessment Division of the Cagayan de Oro Regional Office, a
copy of the 2007 Final Assessment Notice [("FAN")] that BIR allegedly
failed to attach to the FLD dated September 25, 2009. Subsequently, since
BIR failed to furnish Mindanao a copy of the FAN despite the said verbal
request, BIR again made a request for a copy of the FAN via a letter dated
April27, 2010 addressed to the Regional Director of BIR Revenue Region
No. 16-Cagayan de Oro.

ISSUE:
Whether there is a valid assessment against Mindanao

RULING of CTA:
The CTA discussed that a valid assessment contains not only a computation
of tax liabilities but also a demand for payment within a prescribed period.
The ultimate purpose thereof is to ascertain the amount that the taxpayer has
to pay. It signals the time when penalties and interests begin to accrue against
the taxpayer, and enables the taxpayer to determine his remedies thereon.

From the foregoing, it can be gathered that the elements of a valid assessment
are:
(1) a computation of tax liabilities;
(2) a demand for payment within the prescribed period; and
(3) a statement of the legal and factual basis/bases used.
A cursory reading of the FLD and its Annexes, as admittedly received by
respondent, prove that the first and third requirements are present in the
documents admittedly received by respondent, viz.:
1. The FLD provides the total amount due, as well as a table which
breaks down the basic taxes, surcharges, interests, compromise penalties and
the total amounts per tax type. Moreover, the "Computation of
Discrepancies" (Annex A) gives a detailed computation of the assessments
per tax type; and

2. The "Facts, Laws, Rules & Regulations as basis of the

assessment" (Annex B) provides the factual and legal bases of the
assessment.

As to the second requirement, records reveal that the FLD states that "[i]n
view thereof, you are requested to pay your aforesaid deficiency internal
revenue tax liabilities through the duly authorized agent bank in which you
are enrolled within the time shown in the enclosed assessment notice[;]" and
"[p]lease note that the interest and total amount due shall be adjusted if paid
beyond 10/16/09."
No. 24 DEREK ARTHUR RAMSAY VS CIR
FACTS:
On August 10, 2011, the Assistant Commissioner of Enforcement Service of
the BIR, Mr. James H. Roldan (" ASCOM") issued a Preliminary Assessment
Notice ("PAN") informing petitioner of its deficiency income tax in the total
amount of Php11,849,428.66 and Value Added Tax ("VAT") in the total
amount of Php6,381,069.80 for the taxable years 2006 to 2009, and
compromise penalty in the total of Php125,000.00.
On November 10, 2011, petitioner filed his Protest and alleged that he did
not receive any Letter of Authority ("LOA"); that he filed his return, but late;
and that he paid his income tax due for the taxable years 2006 to 2009 with
surcharge and penalties on October 19, 2010.
On January 4, 2014, a Formal Letter of Demand ("FLD") with the attached
Details of Discrepancies was issued by ASCOM informing petitioner again
of his deficiency income tax and VAT for the taxable years 2006 to 2009,
and compromise penalty.
On February 20, 2012, a Final Demand Letter was issued by the Chief,
National Investigation Division of the BIR, Mr. Sixto C. Dy, Jr., stating that
petitioner received a copy of the FLD with the attached Details of
Discrepancies on January 17, 2012, and that he was demanding payment for
the aforesaid deficiency internal revenue taxes.
On February 21, 2012, petitioner filed a Protest Letter to the FLD stating that
no notice of assessment was issued, therefore the issuance of the FLD was
illegal.
On February 27, 2012, ASCOM wrote a letter addressed to the counsels of
Ramsay alleging that the assessment had become final and executory as he
failed to file his protest within thirty (30) days from receipt of the FLD on
January 27, 2012.15
On April 11, 2012, unheeding the demands of respondent, petitioner filed the
instant Petition for Review.
ISSUE:
Whether petitioner was denied due process when respondent only sent the
FLD with attached Details of Discrepancies pursuant to Section 228 of the
NIRC as implemented by Section 3 of RR No. 12-99
RULING OF CTA:
Section 228 of the NIRC and Section 3 of RR No. 12-99 provide:
SEC. 228. Protesting of Assessment. - When the Commissioner or his duly
authorized representative finds that proper taxes should be assessed, he shall
first notify the taxpayer of his findings: Provided, however, that a pre-
assessment notice shall not be required in the following cases:
XXX XXX XXX
The taxpayers shall be informed in writing of the law and the facts on which
the assessment is made; otherwise, the assessment shall be void.
XXX XXX XXX
Section 3. Due Process Requirement in the Issuance of a Deficiency Tax
Assessment. -
3.1 Mode of procedures in the issuance of a deficiency tax assessment:
XXX XXX XXX
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 (see illustration in ANNEX A hereof). If the
taxpayer fails to respond within fifteen (15) days from date of receipt of the
PAN, he shall be considered in default, 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.
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 letter of demand calling for payment of
the taxpayer's deficiency tax or taxes shall state the facts, the law, rules and
regulations, or jurisprudence on which the assessment is based, otherwise,
the formal letter of demand and assessment notice shall be void (see
illustration in ANNEX B hereof). The same shall be sent to the taxpayer only
by registered mail or by personal delivery. If sent by personal delivery, the
taxpayer or his duly authorized representative shall acknowledge receipt
thereof in the duplicate copy of the letter of demand, showing the following:
(a) his name; (b) signature; (c) designation and authority to act for and in
behalf of the taxpayer, if acknowledged received by a person other than the
taxpayer himself; and (d) date of receipt thereof." (Emphasis supplied)
The law requires that the legal and factual bases of the assessment be
stated in the formal letter of demand and assessment notice. Thus, such
cannot be presumed. Otherwise, the express provisions of Article 228 of
the NIRC and RR No. 12-99 would be rendered nugatory.
It is clear that it is a requirement of due process that not only a FLD be
sent to a taxpayer but it must include an assessment notice.
An assessment notice has been described by the Supreme Court in the case
of Commissioner of Internal Revenue vs. Pascor Realty and Development
Corporation, Rogelio A. Dio and Virginia. Dio, as a "notice to the effect
that the amount therein stated is due as tax and a demand for payment
thereof."
In the FLD dated January 4, 2012 with the attached Details of Discrepancies
were:
1. computations and tabulations of the alleged deficiency taxes due,
together with interest, surcharge, penalty, and their respective basis in
law for taxable years 2006 to 2009;
2. a request to pay the deficiency internal revenue tax liabilities through
the duly authorized agent bank in which he is enrolled within the time
shown in the enclosed assessment notice; and
3. a note that the interest and total amount due shall be adjusted if paid
beyond February 8, 2012.
These statements do not amount to an assessment notice as there was no
mention of a definite time when payment was due and demandable.
In the case of Commissioner of Internal Revenue vs. Metro Star Superama,
Inc.3 8 it has been held that due process is satisfied if the FAN states the
computation of tax liabilities and a demand to pay within the prescribed
period was sent to the taxpayer.
In the present case, since there was no demand to pay within a specified
period of time to be found in the FLD and the attached Details of
Discrepancies, the issuance of the same did not amount to a FAN.
Therefore, the FLD together with the attached Details of Discrepancies are
VOID for being non-compliant with the mandatory requirements of Section
228 of the NIRC and Section 3 of the RR 12-99
Wherefore, the instant petition is granted.
No. 53 BRITISH AMERICAN TOBACCO VS CAMACHO
FACTS:
RA 8240, entitled "An Act Amending Sections 138, 139, 140, and 142 of the
NIRC, as Amended and For Other Purposes", took effect on January 1, 1997.
In the same year, Congress passed RA 8424 or The Tax Reform Act of 1997,
re-codifying the NIRC. Section 142 was renumbered as Section 145 of the
NIRC. Paragraph (c) of Section 145 provides for four tiers of tax rates based
on the net retail price per pack of cigarettes.
To determine the applicable tax rates of existing cigarette brands, a survey of
the net retail prices per pack of cigarettes was conducted As such, new brands
of cigarettes shall be taxed according to their current net retail price while
existing or "old" brands shall be taxed based on their net retail price as of
October 1, 1996.
To implement RA 8240, the Bureau of Internal Revenue (BIR) issued
Revenue Regulations No. 1-97, which classified the existing brands of
cigarettes as those duly registered or active brands prior to January 1, 1997.
New brands, or those registered after January 1, 1997, shall be initially
assessed at their suggested retail price until such time that the appropriate
survey to determine their current net retail price is conducted.
British American Tobacco introduced into the market Lucky Strike Filter,
Lucky Strike Lights and Lucky Strike Menthol Lights cigarettes, with a
suggested retail price of P9.90 per pack. Pursuant to Sec. 145 (c) quoted
above, the Lucky Strike brands were initially assessed the excise tax at P8.96
per pack.
Petitioner filed before the Regional Trial Court (RTC) of Makati, a petition
for injunction with prayer for the issuance of a temporary restraining order
(TRO) and/or writ of preliminary injunction. Said petition sought to enjoin
the implementation of Section 145 of the NIRC, Revenue Regulations Nos.
1-97, 9-2003, 22-2003 and Revenue Memorandum Order No. 6-2003 on the
ground that they discriminate against new brands of cigarettes, in violation
of the equal protection and uniformity provisions of the Constitution.
The trial court rendered a decision upholding the constitutionality of Section
145 of the NIRC, Revenue Regulations Nos. 1-97, 9-2003, 22-2003 and
Revenue Memorandum Order No. 6-2003. The trial court also lifted the writ
of preliminary injunction. The dispositive portion of the decision reads:
Petitioner brought the instant petition for review directly with this Court on
a pure question of law.
Intervenor Fortune Tobacco further contends that petitioner is estopped from
questioning the constitutionality of Section 145 and its implementing rules
and regulations because it entered into the cigarette industry fully aware of
the existing tax system and its consequences. Petitioner imported cigarettes
into the country knowing that its suggested retail price, which will be the
initial basis of its tax classification, will be confirmed and validated through
a survey by the BIR to determine the correct tax that would be levied on its
cigarettes.
ISSUE:
1. Whether the CTA has the jurisdiction to settle cases
regarding the validity of BIR issuances
2. Whether the RA and related issuances violated the equal
protection clause.
RULING:
1. RTC has the jurisdiction to settle cases regarding the validity
of BIR issuances
Fortune Tobacco claims that the challenge to the validity of the BIR
issuances should have been brought by petitioner before the Court of Tax
Appeals (CTA) and not the RTC because it is the CTA which has exclusive
appellate jurisdiction over decisions of the BIR in tax disputes.
The jurisdiction of the Court of Tax Appeals is defined in Republic Act No.
1125, as amended by Republic Act No. 9282. Section 7 thereof states, in
pertinent part:
Sec. 7. Jurisdiction. The CTA shall exercise:
a. Exclusive appellate jurisdiction to review by appeal, as herein provided:
1. Decisions of the Commissioner of Internal Revenue in cases involving
disputed assessments, refunds of internal revenue taxes, fees or other
charges, penalties in relation thereto, or other matters arising under the
National Internal Revenue or other laws administered by the Bureau of
Internal Revenue;
2. Inaction by the Commissioner of Internal Revenue in cases involving
disputed assessments, refunds of internal revenue taxes, fees or other
charges, penalties in relations thereto, or other matters arising under the
National Internal Revenue Code or other laws administered by the Bureau of
Internal Revenue, where the National Internal Revenue Code provides a
specific period of action, in which case the inaction shall be deemed a denial;
xxx.
While the above statute confers on the CTA jurisdiction to resolve tax
disputes in general, this does not include cases where the
constitutionality of a law or rule is challenged.
Where what is assailed is the validity or constitutionality of a law, or a rule
or regulation issued by the administrative agency in the performance of its
quasi-legislative function, the regular courts have jurisdiction to pass upon
the same.
The determination of whether a specific rule or set of rules issued by an
administrative agency contravenes the law or the constitution is within the
jurisdiction of the regular courts. Indeed, the Constitution vests the power of
judicial review or the power to declare a law, treaty, international or
executive agreement, presidential decree, order, instruction, ordinance, or
regulation in the courts, including the regional trial courts.
This is within the scope of judicial power, which includes the authority of the
courts to determine in an appropriate action the validity of the acts of the
political departments. Judicial power includes the duty of the courts of justice
to settle actual controversies involving rights which are legally demandable
and enforceable, and to determine whether or not there has been a grave
abuse of discretion amounting to lack or excess of jurisdiction on the part of
any branch or instrumentality of the Government.[26]
In Drilon v. Lim,[27] it was held:
We stress at the outset that the lower court had jurisdiction to consider the
constitutionality of Section 187, this authority being embraced in the general
definition of the judicial power to determine what are the valid and binding
laws by the criterion of their conformity to the fundamental law. Specifically,
B.P. 129 vests in the regional trial courts jurisdiction over all civil cases in
which the subject of the litigation is incapable of pecuniary estimation, even
as the accused in a criminal action has the right to question in his defense the
constitutionality of a law he is charged with violating and of the proceedings
taken against him, particularly as they contravene the Bill of Rights.
Moreover, Article X, Section 5(2), of the Constitution vests in the Supreme
Court appellate jurisdiction over final judgments and orders of lower courts
in all cases in which the constitutionality or validity of any treaty,
international or executive agreement, law, presidential decree, proclamation,
order, instruction, ordinance, or regulation is in question.
The petition for injunction filed by petitioner before the RTC is a direct attack
on the constitutionality of Section 145(C) of the NIRC, as amended, and the
validity of its implementing rules and regulations. In fact, the RTC limited
the resolution of the subject case to the issue of the constitutionality of the
assailed provisions. The determination of whether the assailed law and its
implementing rules and regulations contravene the Constitution is within the
jurisdiction of regular courts. The Constitution vests the power of judicial
review or the power to declare a law, treaty, international or executive
agreement, presidential decree, order, instruction, ordinance, or regulation in
the courts, including the regional trial courts.[28] Petitioner, therefore,
properly filed the subject case before the RTC.
2. No, RA and BIR issuance did not violate the equal protection
clause
A legislative classification that is reasonable does not offend the
constitutional guaranty of the equal protection of the laws.
The classification is considered valid and reasonable provided that:
(1) it rests on substantial distinctions;
(2) it is germane to the purpose of the law;
(3) it applies, all things being equal, to both present and future conditions;
and
(4) it applies equally to all those belonging to the same class.
The classification freeze provision uniformly applies to all newly
introduced brands in the market,
Whether Congress acted improvidently in derogating, to a limited extent, the
state's interest in promoting fair competition among the players in the
industry, while pursuing other state interests regarding the simplification of
tax administration of sin products, elimination of potential areas for abuse
and corruption in tax collection, buoyant and stable revenue generation, and
ease of projection of revenues through the classification freeze provision, and
whether the questioned provision is the best means to achieve these state
interests, necessarily go into the wisdom of the assailed law which we cannot
inquire into, much less overrule. The classification freeze provision has not
been shown to be precipitated by a veiled attempt, or hostile attitude on the
part of Congress to unduly favor older brands over newer brands.

On the contrary, we must reasonably assume, owing to the respect due a co-
equal branch of government and as revealed by the Congressional
deliberations, that the enactment of the questioned provision was impelled
by an earnest desire to improve the efficiency and effectivity of the tax
administration of sin products. For as long as the legislative classification is
rationally related to furthering some legitimate state interest, as here, the
rational-basis test is satisfied and the constitutional challenge is perfunctorily
defeated. We do not sit in judgment as a supra-legislature to decide, after a
law is passed by Congress, which state interest is superior over another, or
which method is better suited to achieve one, some or all of the state's
interests, or what these interests should be in the first place. This policy-
determining power, by constitutional fiat, belongs to Congress as it is its
function to determine and balance these interests or choose which ones to
pursue. Time and again we have ruled that the judiciary does not settle policy
issues. The Court can only declare what the law is and not what the law
should be. Under our system of government, policy issues are within the
domain of the political branches of government and of the people themselves
as the repository of all state power. Thus, the legislative classification under
the classification freeze provision, after having been shown to be rationally
related to achieve certain legitimate state interests and done in good faith,
must, perforce, end our inquiry.
No. 54 FITNESS BY DESIGN, INC VS COMMISSIONER ON
INTERNAL REVENUE
FACTS:
On March 17, 2004, the Commissioner on Internal Revenue (respondent)
assessed Fitness by Design, Inc. (petitioner) for deficiency income taxes for
the tax year 1995 in the total amount of P10,647,529.69.[1] Petitioner
protested the assessment on the ground that it was issued beyond the three-
year prescriptive period under Section 203 of the Tax Code. [2] Additionally,
petitioner claimed that since it was incorporated only on May 30, 1995, there
was no basis to assume that it had already earned income for the tax year
1995.[3]
On February 1, 2005, CIR issued a warrant of distraint and/or levy against
petitioner,[4] drawing petitioner to file on March 1, 2005 a Petition for Review
(with Motion to Suspend Collection of Income Tax, Value Added Tax,
Documentary Stamp Tax and Surcharges and Interests subject of this
Petition)[5] before the Court of Tax Appeals (CTA) before which it reiterated
its defense of prescription. The petition was docketed as CTA Case No. 7160.
The right of the CIR to assess petitioner for deficiency income tax, VAT and
Documentary Stamp Tax for the year 1995 has not prescribed pursuant to
Section 222(a) of the 1997 Tax Code. Petitioners 1995 Income Tax Return
(ITR) filed on April 11, 1996 was false and fraudulent for its deliberate
failure to declare its true sales. Fitness declared in its 1995 Income Tax
Return that it was on its pre-operation stage and has not declared its
income. Investigation by the revenue officers of the CIR, however, disclosed
that it has been operating/doing business and had sales operations for the year
1995 in the total amount of P7,156,336.08 which it failed to report in its 1995
ITR. Thus, for the year 1995, petitioner filed a fraudulent annual income
return with intent to evade tax. Likewise, petitioner failed to file Value-
Added Tax (VAT) Return and reported the amount of P7,156,336.08 as its
gross sales for the year 1995. Hence, for failure to file a VAT return and for
filing a fraudulent income tax return for the year 1995, the corresponding
taxes may be assessed at any time within ten (10) years after the discovery of
such omission or fraud pursuant to Section 222(a) of the 1997 Tax Code.
The subject deficiency tax assessments have already become final, executory
and demandable for failure of the petitioner to file a protest within the
reglementary period provided for by law. The alleged protest allegedly filed
on June 25, 2004 at the Legal Division, Revenue Region No. 8, Makati City
is nowhere to be found in the BIR Records nor reflected in the Record Book
of the Legal Division as normally done by our receiving clerk when she
receive[s] any document. The respondent, therefore, has legal basis to collect
the tax liability either by distraint and levy or civil action.[7] (Emphasis and
underscoring supplied)
The Bureau of Internal Revenue (BIR) in fact filed on March 10, 2005 a
criminal complaint before the Department of Justice against the officers and
accountant of Fitness for violation of the provisions of The National Internal
Revenue Code of 1977, as amended,[9] covering the taxable year 1995. The
criminal complaint was docketed as I.S. No. 2005-203.
On motion of petitioner in CTA Case No. 7160, a preliminary hearing on the
issue of prescription[10] was conducted during which petitioners former
bookkeeper attested that a former colleague certified public accountant
Leonardo Sablan (Sablan) illegally took custody of petitioners accounting
records, invoices, and official receipts and turned them over to the BIR.[11]
On Fitness request, a subpoena ad testificandum was issued to Sablan for the
hearing before the CTA scheduled on September 4, 2006 but he failed to
appear.[12]
Fitness thus requested for the issuance of another subpoena ad
testificandum to Sablan for the hearing scheduled on October 23,
2006,[13] and of subpoena duces tecum to the chief of the National
Investigation Division of the BIR for the production of the Affidavit of the
Informer bearing on the assessment in question.[14] Petitioners requests were
granted.[15]
During the scheduled hearing of the case on October 23, 2006, on CIR
counsels manifestation that he was not furnished a copy of Fitness motion
for the issuance of subpoenaes, the CTA ordered petitioner to file a motion
for the issuance of subpoenas and to furnish CIR counsel a copy
thereof.[16] Petitioner complied with the CTA order.[17]
In a related move, petitioner submitted written interrogatories addressed to
Sablan and to Henry Sarmiento and Marinella German, revenue officers of
the National Investigation Division of the BIR.[18]
CTA Decision:
In the Resolution, CTA denied petitioners Motion for Issuance of Subpoenas
and disallowed the submission by petitioner of written interrogatories to
Sablan, who is not a party to the case, and the revenue officers, [20] it finding
that the testimony, documents, and admissions sought are not
relevant.[21] Besides, the CTA found that to require Sablan to testify would
violate Section 2 of Republic Act No. 2338, as implemented by Section 12
of Finance Department Order No. 46-66, proscribing the revelation of
identities of informers of violations of internal revenue laws, except when
the information is proven to be malicious or false.[22]In any event, the CTA
held that there was no need to issue a subpoena duces tecum to obtain the
Affidavit of the Informer as the same formed part of the BIR records of the
case, the production of which had been ordered by it. [23]
ISSUE:
Whether CTA committed grave abuse of discretion in denying the appeal of
Fitness
RULING:
The Court finds that the issuance by the CTA of the questioned resolutions
was not tainted by arbitrariness.
The fact that Sablan was not a party to the case aside, the testimonies,
documents, and admissions sought by petitioner are not indeed relevant to
the issue before the CTA. For in requesting the issuance of the subpoenas
and the submission of written interrogatories, Fitness sought to establish that
its accounting records and related documents, invoices, and receipts which
were the bases of the assessment against it were illegally obtained.
Besides, as the CTA held, the subpoenas and answers to the written
interrogatories would violate Section 2 of Republic Act No. 2338 as
implemented by Section 12 of Finance Department Order No. 46-66.
Fitness impugns the manner in which the documents in question reached the
BIR, Sablan having allegedly submitted them to the BIR without its consent.
Fitness lack of consent does not, however, imply that the BIR obtained them
illegally or that the information received is false or malicious. Nor does the
lack of consent preclude the BIR from assessing deficiency taxes on
petitioner based on the documents. Thus Section 5 of the Tax Code provides:
In ascertaining the correctness of any return, or in making a return when none
has been made, or in determining the liability of any person for any internal
revenue tax, or in collecting any such liability, or in evaluating tax
compliance, the Commissioner is authorized:
A. To examine any book, paper, record or other data which may be
relevant or material to such query;
B. To obtain on a regular basis from any person other than the person
whose internal revenue tax liability is subject to audit or
investigation, or from any office or officer of the national and local
governments, government agencies and instrumentalities, including
the Bangko Sentral ng Pilipinas and government-owned and controlled
corporations, any information such as, but not limited to, costs and
volume of production, receipts or sales and gross incomes of taxpayers,
and the names, addresses, and financial statements of corporations,
mutual fund companies, insurance companies, regional operating
headquarters of multinational companies, joint accounts, associations,
joint ventures or consortia and registered partnerships and their
members;
C. To summon the person liable for tax or required to file a return, or any
officer or employee of such person, or any person having possession,
custody, or care of the books of accounts and other accounting records
containing entries relating to the business of the person liable for tax,
or any other person, to appear before the Commissioner or his duly
authorized representatives at a time and place specified in the summons
and to produce such books, papers, records, or other data, and to give
testimony;
x x x x (Emphasis and underscoring supplied)
The law thus allows the BIR access to all relevant or material records
and data in the person of the taxpayer, [32] and the BIR can accept
documents which cannot be admitted in a judicial proceeding where the
Rules of Court are strictly observed.[33] To require the consent of the
taxpayer would defeat the intent of the law to help the BIR assess and
collect the correct amount of taxes.
WHEREFORE, in light of the foregoing disquisition, the petition is
DISMISSED.