23. COMMISSIONER OF INTERNAL REVENUE, 24. Winebrenner & Iñigo Insurance Brokers, Inc. v.
CIR
petitioner, vs. MICHEL J. LHUILLIER PAWNSHOP, INC.,
respondent.
[G.R. No. 150947. July 15, 2003] 406 scra 178
FACTS:
Revenue Memorandum Orders (RMOs) were issued
imposing a 5% lending investor’s tax on pawnshop.
Pursuant to this, the BIR issued an assessment against
Michel J. Lhuillier Pawnshop, Inc. (hereafter Lhuillier)
demanding payment of deficiency percentage tax. Lhuillier
filed an administrative protest, contending, inter alia, that
pawnshops are different from lending investors, which are
subject to the 5% percentage tax under the specific
provision of the Tax Code. Its protest having been unacted
upon, Lhuillier with the CTA which declared the RMO’s in
question null and void insofar as they classify pawnshops
as lending investors subject to 5% percentage tax.
ISSUE: Are pawnshops included in the term lending
investors for the purpose of imposing the 5% percentage
tax under then Section 116 of the NIRC?
HELD: NO. While it is true that pawnshops are engaged in
the business of lending money, they are not considered
“lending investors” for the purpose of imposing the 5%
percentage taxes since: (1) prior to its amendment the
NIRC, pawnshops and lending investors were subjected to
different tax treatments; (2) Congress never intended
pawnshops to be treated in the same way as lending
investors, since the amendment of the NIRC treated both
tax subjects differently’ (3) Under the maxim expressio
unius est exclusio alterius, the mention of one thing
implies the exclusion of another thing not mentioned, Sec.
116 subjects to percentage tax dealers in securities and
lending investors only.
ISSUE: Whether or not the RMOs in question are valid
HELD: NO. There are two kinds of administrative
issuances: the legislative rule and the interpretative rule. A
legislative rule is in the nature of subordinate legislation,
designed to implement a primary legislation by providing
the details thereof. An interpretative rule, on the other
hand, is designed to provide guidelines to the law which
the administrative agency is in charge of enforcing
When an administrative rule is merely interpretative in
nature, its applicability needs nothing further than its bare
issuance, for it gives no real consequence more than what
the law itself has already prescribed. When, on the other
hand, the administrative rule goes beyond merely
providing for the means that can facilitate or render least
cumbersome the implementation of the law but
substantially increases the burden of those governed, it
behooves the agency to accord at least to those directly
affected a chance to be heard, and thereafter to be duly
informed, before that new issuance is given the force and
effect of law.[15]
RMO No. 15-91 and RMC No. 43-91 cannot be viewed
simply as implementing rules or corrective measures
revoking in the process the previous rulings of past
Commissioners. Specifically, they would have been
amendatory provisions applicable to pawnshops. Without
these disputed CIR issuances, pawnshops would not be
liable to pay the 5% percentage tax, considering that they
were not specifically included in Section 116 of the NIRC
of 1977, as amended. In so doing, the CIR did not simply
interpret the law. The due observance of the requirements
of notice, hearing, and publication should not have been
ignored.
(G.R. No. 206526, January 28, 2015)
RE: Proving that no carry-over has been made does not
absolutely require the presentation of the quarterly ITRs
FACTS:
April 7, 2006, petitioner applied for the administrative tax
credit/refund claiming entitlement to the refund of its
excess or unutilized CWT for CY 2003.
When CTA initially granted partially the claim for refund,
CIR moved for reconsideration, praying for the denial of
the entire amount of refund because petitioner failed to
present the quarterly Income Tax Returns (ITRs) for CY
2004. To the CIR, the presentation of the 2004 quarterly
ITRs was indispensable in proving petitioner's entitlement
to the claimed amount because it would prove that no
carry-over of unutilized and excess CWT for the four (4)
quarters of CY 2003 to the succeeding four (4) quarters of
CY 2004 was made. In the absence of said ITRs, no
refund could be granted in accordance with the
irrevocability rule under Section 76 of the NIRC.
CTA then denied the entire claim of petitioner. It reasoned
out that petitioner should have presented as evidence its
first, second and third quarterly ITRs for the year 2004 to
prove that the unutilized CWT being claimed had not been
carried over to the succeeding quarters. It stated that
before a cash refund or an issuance of tax credit certificate
for unutilized excess tax credits could be granted, it was
essential for petitioner to establish and prove, by
presenting the quarterly ITRs of the succeeding years, that
the excess CWT was not carried over to the succeeding
taxable quarters considering that the option to carry over
in the succeeding taxable quarters could not be modified
in the final adjustment returns (FAR). Because petitioner
did not present the first, second and third quarterly ITRs
for CY 2004, despite having offered and submitted the
Annual ITR/FAR for the same year, the CTA-En Banc
stated that the petitioner failed to discharge its burden,
hence, no refund could be granted
ISSUE:
Whether the submission and presentation of the quarterly
ITRs of the succeeding quarters of a taxable year is
indispensable in a claim for refund
RULING:
The logic in not requiring quarterly ITRs of the succeeding
taxable years to be presented remains true to this day.
What Section 76 requires, just like in all civil cases, is to
prove the prima facie entitlement to a claim, including the
fact of not having carried over the excess credits to the
subsequent quarters or taxable year. It does not say that
to prove such a fact, succeeding quarterly ITRs are
absolutely needed.
This simply underscores the rule that any document, other
than quarterly ITRs may be used to establish that indeed
the non-carry over clause has been complied with,
provided that such is competent, relevant and part of the
records.
It goes without saying that the annual ITR (including any
other proof that may be sufficient to the Court)can
sufficiently reveal whether carry over has been made in
subsequent quarters even if the petitioner has chosen the
option of tax credit or refund in the immediately 2003
annual ITR.
It must be remembered that taxes computed in the
quarterly returns are mere estimates. It is the annual ITR
which shows the aggregate amounts of income,
deductions, and credits for all quarters of the taxable year.
It is the final adjustment return which shows whether a
corporation incurred a loss or gained a profit during the
taxable quarter. Thus, the presentation of the annual ITR
would suffice in proving that prior year's excess credits
were not utilized for the taxable year in order to make a
final determination of the total tax due.
The absence of any amount written in the Prior Year
excess Credit — Tax Withheld portion of petitioner's 2004
annual ITR clearly shows that no prior excess credits were
carried over in the first four quarters of 2004 . And since
petitioner was able to sufficiently prove that excess tax
credits in 2003 were not carried over to taxable year 2004
by leaving the item "Prior Year's Excess Credits" as blank
in its 2004 annual ITR, then petitioner is entitled to a
refund.
It must be emphasized that once the requirements laid
down by the NIRC have been met, a claimant should be
considered successful in discharging its burden of proving
its right to refund. Thereafter, the burden of going forward
with the evidence, as distinct from the general burden of
proof, shifts to the opposing party that is, the CIR. It is then
the turn of the CIR to disprove the claim by presenting
contrary evidence which could include the pertinent ITRs
easily obtainable from its own files.
25. REPUBLIC OF THE PHILIPPINES represented by
the COMMISSIONER OF INTERNAL REVENUE,
Petitioner VS. TEAM (PHILS.) ENERGY
CORPORATION (formerly MIRANT (PHILS.) ENERGY
CORPORATION), Respondent (G.R. No. 188016,
January 14, 2015)
FACTS:
Respondent, a domestic corporation, is primarily
engaged in the business of developing, designing,
constructing, erecting, assembling, commissioning,
owning, operating, maintaining, rehabilitating, and
managing
gas turbine and other power generating plants and related
facilities for conversion into electricity, coal, distillate and
other fuel provided by and under contract with the
Government, or any subdivision, instrumentality or agency
thereof, or any government-owned or controlled
corporations or any entity engaged in the development,
supply or distribution of energy.
The respondent filed its annual income tax return (ITR)
for calendar years 2002 and 2003 on April 15, 2003 and
April 15, 2004, respectively, reflecting overpaid income
taxes or excess creditable withholding taxes in the
amounts of P6,232,003.00 and P10,134,410.00 for taxable
years 2002 and 2003, respectively.
On March 22, 2005, the respondent filed an
administrative claim for refund or issuance of tax credit
certificate with the Bureau of Internal Revenue (BIR) in the
total amount of P16,366,413.00, representing the overpaid
income tax or the excess creditable withholding tax of the
respondent for calendar years 2002 and 2003.
Due to the inaction of the BIR and in order to toll the
running of the two-year prescriptive period for claiming a
refund under Section 229 of the National Internal Revenue
Code (NIRC) of 1997, the respondent filed a petition for
review in the Court of Tax Appeals (CTA) on April 14, 2005.
On May 15, 2008, the CTA in Division rendered its
decision in favor of the respondent. It ordered the
petitioner to refund or to issue a tax credit certificate in
favor of the respondent. The CTA in Division found that the
respondent had signified in its ITRs for the same years its
intent to have its excess creditable tax withheld for
calendar years 2002 and 2003 be refunded, and that the
respondent’s administrative and judicial claims for refund
had been timely filed within the two-year prescriptive
period under Section 204 (C) in relation to Section 229 of
the NIRC
The petitioner then filed a motion for reconsideration,
but the CTA in Division denied the motion on September 5,
2008. The petitioner brought a petition for review before
the CTA En Banc. On April 15, 2009, the CTA En Banc
rendered a decision dismissing the Petition for Review.
The petitioner asserts the necessity of submission of
the quarterly return of the respondent to prove its
entitlement to the refund pursuant to Sec. 76 of the NIRC
because such quarterly returns would establish the
correctness of the total amount of payments made and the
taxes due as reported on the adjusted return at the end of
the year. Petitioner has brought this appeal.
“Section 76. Final Adjusted Return- Every corporation
liable to tax under Section 27 shall file a final adjustment
return covering the total taxable income for the preceding
calendar of fiscal year. If the sum of the quarterly tax
payments made during the said taxable year is not equal
to the total tax due on the entire taxable income of that
year, the corporation shall either:
(A) Pay the balance of the tax still due; or
(B) Carry over the excess credit; or
(C) Be credited or refunded withthe excess amount paid,
as the case may be.”
ISSUE: Whether or not the respondent proved it’s
entitlement to the refund?
RULING:
The court denied the petition for review on certiorari.
The requirements for entitlement of a corporate taxpayer
for a refund or the issuance of tax credit certificate
involving excess withholding taxes are as follows:
1. That the claim for refund was filed within the two-year
reglementary period pursuant to Section 229 of the NIRC;
2. When it is shown on the ITR that the income payment
received is being declared part of the taxpayer’s gross
income; and
3. When the fact of withholding is established by a copy of
the withholding tax statement, duly issued by the payor to
the payee, showing the amount paid and income tax
withheld from that amount.
The court do not expound anymore on the first
requirement because even the petitioner does not contest
that the respondent filed its administrative and judicial
claim for refund within the statutory period.
With regard to the second requirement, it is fundamental
that the findings of fact by the CTA in Division are not to be
disturbed without any showing of grave abuse of discretion
considering that the members of the Division are in the
best position to analyze the documents presented by the
parties. Consequently, we adopt the findings of the CTA in
Division, which the CTA En Banc cited, as follows:
“that the total amount of Creditable Withholding Tax per
Annual ITRs for calendar years ended December 31, 2002
and December 31, 2003 agrees with the total amount of
Creditable Withholding Tax presented on petitioner’s
Schedule of Creditable Withholding Tax Certificates for the
calendar years ended December 31, 2002 and December
31, 2003.”
With respect to the third requirement, the respondent
proved that it had met the requirement by presenting the
10 certificates of creditable taxes withheld at source. The
petitioner did not challenge the respondent’s compliance
with the requirement.
When the respondent was able to establish prima facie its
right to the refund by testimonial and object evidence, the
petitioner should have presented rebuttal evidence to shift
the burden of evidence back to the respondent. Indeed,
the petitioner ought to have its own copies of the
respondent’s quarterly returns on file, on the basis of
which it could rebut the respondent's claim that it did not
carry over its unutilized and excess creditable withholding
taxes for the immediately succeeding quarters. The BIR's
failure to present such vital document during the trial in
order to bolster the petitioner's contention against the
respondent's claim for the tax refund was fatal.
26. People of the Philippine vs. Mendez, CTA
Criminal Case No. 0-013 & 0-015, January 11, 2011
Castañeda, J.
Willfull blindness as defined by the Black’s Law
Dictionary as- deliberate avoidance of knowledge of a
crime especially by failing to make reasonable inquiry
about suspected wrongdoing despite being aware that it
is highly probable.
Facts:
Mendez was charged with a crime for violation of Sec. 255
of the NIRC. Two information were subsequently filed;
a. For failure to file his ITR amounting to P
1,522,152.14 for the year 2002
b. For failure to supply the correct information in his
ITR for the year 2003
Accused voluntary surrendered and posted bail, after
pleading “Not Guilty. The prosecution contends that
accused has willfully and feloniously failed to pay his AITR
from 1995-2000.
The Prosecution contends, on the basis of the initial
investigation and recommendation, a Letter of Authority
(LOA) No. 2001-00002438 dated November 8, 2004 was
issued for the examination of books of accounts and other
accounting records for the period covering taxable years
2001, 2002 and 2003 of accused Dr. Joel Cortez Mendez.
According to Atty. Cruz, the said LOA was served on
November 10, 2004 together with the First Letter-Notice
for the production of books of accounts and accounting
records. Cherry Perez, who allegedly represented herself
as the authorized representative of accused Dr. Mendez,
duly received the said LOA. Despite receipt of the First
Letter-Notice, accused Dr. Mendez did not submit the
required documents, as specified in the said notice. As a
consequence, a Second Letter-Notice and a Final Request
for presentation and/or production of the required
records/documents were served upon -the accused Dr.
Mendez, and duly received on November 24, 2004 and
January 11, 2005, respectively, thru his accountant and
employee named Richard Bianan and Carla Yadao.
Due to the failure of the accused to present or produce the
needed records and documents for examination despite
several notices, the investigation proceeded through
"Third Party Information" and the "Best Evidence
Obtainable Rule" allowed under Section 5(B), in relation to
Section 6(A) and (B) of the Tax Code of 1997.
In the course of gathering information and best obtainable
evidence pertaining to the accused, the team verified
certain data and information from the BIR Integrated Tax
System (BIR-ITS) and different government agencies,
including private offices and entities.
During the investigation, it was further gathered that the
accused filed his income tax return for taxable year 2003
with Revenue District Office (ROO) No. 4-Calasiao,
Pangasinan, for his Mendez Weigh Less Center located at
CSI City Mall, Lucao District, Oagupan City despite the
existence of his principal place of business at 31 Races
Avenue, Quezon City, as evidenced by the Certification
dated February 23, 2005 and the letter dated
August 15, 2006 issued by Mr. Joseph M. Catapia,
Revenue District Officer of ROO No. 4, and income tax
return of the accused. Said certification was also identified
during trial by Mr. Joseph M. Catapia himself.
Defendant however refuted the claims. By presenting
Cherry Perez, who was then a medical staff on the
issuance of the assessment notice, representatives looked
for the accused. Since the latter was not present, the BIR
examiners gave the letter to Perez instead. Perez then
gave the letter to their accountant, Richard Bianan, who
deliberately concealed the documents from Mendez.
Accused further testified that Mr. Richard Bianan has been
charged with multiple counts of Estafa. He also stated that
he issued checks and vouchers in Mr. Richard Bianan's
name for the payment of taxes and other obligations.
In addition, he also testified that he leased the property
located in A. Roces Avenue, Quezon City on July 12,
2001 , but Weigh Less Center-Roces Avenue Branch only
started its operation on or about March 4, 2003. The delay
in operation was supposedly due to the fact that the
property is a two- floor residential unit that is not designed
at all as office space and that he had to cause its
renovation as his personal funds would allow. Due to
limited funds, the construction took a while before the
same was completed. The delay was also caused by the
problem with building authorities inasmuch as the
renovation was done without a permit.
Accused also made a statement that the idea of putting up
clinics came up in 1996, but due to financial problems and
because his focus then was art, the clinics materialized
only after several years. As regards the vehicles he
allegedly purchased from the years 2001 to 2003, he said
that the said vehicles were obtained through bank loans.
He explained that the newspaper advertisements were
intended to generate public awareness in the business.
While he did attend to some celebrities, he did not charge
them any fee. They had a simple understanding that he
would do certain medical services for his celebrity clients
and in return, they would endorse his future business. The
idea is that his future business is advertised through the
publicity generated by the treatments of celebrities.
Issue:
WHETHER OR NOT ACCUSED DR. JOEL C. MENDEZ
IS LIABLE FOR VIOLATION OF SECTION 255 OF THE
1997 NATIONAL INTERNAL REVENUE CODE, AS
AMENDED, FOR FAILURE TO FILE INCOME TAX
RETURN AND FOR FAILURE TO SUPPLY CORRECT
AND ACCURATE INFORMATION.
Held:
The accused is found guilty of the alleged violation.
In his defense, accused avers that he was not able to
personally receive the notices issued by the BIR. The
accused alleges that it was his former accountant, Mr.
Richard Bianan, who received the notices and that Mr.
Bianan concealed said notices from the accused.
It must be pointed out that, as narrated by the accused in
his Affidavit and as confirmed by him during the
cross-examination, Mr. Richard Bianan was authorized by
him to receive documents and notices on his behalf,
including the notices issued by the BIR. Hence, the
notification requirement was deemed substantially
complied with by the BIR, considering that the subject
notices were admittedly received by Mr. Bianan.
Before going one by one with the foregoing elements, it
may be relevant to emphasize that direct evidence is not
the sole means of establishing guilt beyond reasonable
doubt. Established facts that form a chain of
circumstances can lead the mind intuitively or impel a
conscious process of reasoning towards a conviction.
Indeed, rules on evidence and principles in jurisprudence
have long recognized that the accused may be convicted
through circumstantial evidence.
ON CRIMINAL CASE NO. 0-015
First Element:
He is a person required under this code or by rules and
regulations to pay any tax, make a return, keep any record,
or supply correct and accurate information
Second Element:
He fails to supply correct and accurate information at the
time or times required by law or rules and regulation.
Anent the second element, the prosecution has the burden
to prove that the accused, as a duly registered taxpayer
and as a sole proprietor of various branches of Weigh
Less Center, failed to supply the correct and accurate
information in his income tax return for taxable year 2003
due to his failure to declare and indicate in his return all his
income from all sources for taxable year 2003.
During the investigation, it was found that accused filed his
income tax return for taxable year 2003 with Revenue
District Office No. 4-Calasiao, Pangasinan, for his Mendez
Weigh Less Center located at CSI City Mall, Lucao District,
Dagupan City, as evidenced by the Certification dated
February 23, 2005 issued by Mr. Joseph M. Catapia,
Revenue District Officer of ROO No. 4. In the said Annual
Income Tax Return submitted for taxable year 2003, the
accused declared a net loss of P38,893.91.
However, based on the documents gathered by the BIR
Revenue District Officers during the investigation, it was
discovered that there are several other branches
registered with the BIR having the trade/business names
"Weigh Less Center", "Mendez Body and Face Salon and
Spa" and "Mendez Body and Face Skin Clinic" under the
name of the accused Dr. Mendez as the sole
proprietor/owner. This fact was evidenced by the
Certifications issued by the duly authorized Revenue
District Officers who certified the registration of said
branches with the BIR.
There were also several leasing receipts/documents that
is circumstantial evidence that may adduce that the
accused has financial capacity.
Moreover, if the accused claims that he suffered a net loss
from the operation of his Mendez Weigh Less Center
Dagupan branch during taxable year 2003, then the
substantial income found to have been earned by the
accused during the same year can be attributed to the
operation of his other branches for taxable year 2003;
which were not reflected in the Annual Income Tax Return
submitted by the accused for the same year.
Furthermore, verification of the tax records from the SIR
Integrated Tax System revealed that accused Dr. Mendez
did not file his income tax returns for taxable year 2003 on
its income earned from these other branches.
Third Element: Such failure is willful.
As regards the third element, this Court finds the failure of
the accused to supply the correct information in his return
to be willful.
In case of People of the Philippines vs. Estelita Delos
Angeles, this Court defined the term "willful" in this wise:
"Willful in the tax crimes statutes means a voluntary,
intentional violation of a known legal duty and bad faith or
bad purpose need not be shown [Mertens (Law of Federal
Income Taxation) Chapter 47.05, page 28, Volume 13, see
U.S. v. Green, 757 F2d 116, 85-1 USTC 9178 (CA 1985),
in which the Court, citing U.S. v. Moore, 627 F2d 830 (CA
1980) and U.S. v. Verkuilen, 690 F2d 648, 82-2 USTC
9618 (CA7 1982), upheld the conviction of a tax protester
for willful failure to file returns]. "
In this case, the accused is considered to have knowledge
that he has
 the obligation to declare and file income tax
return for taxes from all sources.
 This may be confirmed
by his act of filing his income tax return declaring his
income from the operation of his Dagupan branch.
Notwithstanding said knowledge of the operation of his
other branches as well as his obligation to
 file income tax
return or at least consolidate and reflect his income from
his other branches in his income tax return filed in taxable
year 2003, the accused still failed to file his income tax
return on his income from these other Weigh Less Center
branches for taxable year 2003; making it appear that his
only source of income was from the operation of his Weigh
Less Center in Dagupan City.
"Willful Blindness" is defined in Black's Law Dictionary as
"deliberate avoidance of knowledge of a crime, esp. by
failing to make a reasonable inquiry about suspected
wrongdoing despite being aware that it is highly probable."
It "creates an inference of knowledge of the crime in
question."
 In this case, even if the allegations of the
accused were true, his failure to examine his income tax
return for 2003 and verify whether the same contains
correct and accurate information would still render the
commission of the offense charged willful.
It must be emphasized that denials by the accused of the
crimes herein charged, while failing to provide clear and
convincing evidence to support the same, clearly deserve
no weight and should not be given any probative value.
Notes as emphasized by Atty. Lock:
Plainly, an assessment of the tax before there can be a
criminal prosecution is not necessary. Whereas, in case of
a civil action for collection of the tax, the assessment
procedures provided by the NIRC of 1997, as amended,
should be complied with.
Accordingly, considering that there was no assessment
issued by the BIR against the accused, the foregoing
computations presented by the prosecution to prove the
civil liabilities of the accused for the taxable years 2002
and 2003 may not be used by this Court as its basis to
impose the civil liabilities prayed for by the prosecution.
Therefore, a proper determination of the civil liabilities for
the non-payment of tax based on the computations
submitted by the prosecution may not be achieved.
(Section 205, NIRC)
27. COMMISSIONER OF INTERNAL REVENUE,
Petitioner VS.
NEXT MOBILE, INC., Respondent (G.R. No. 212825,
December 7, 2015)
FACTS:
On April 15, 2002, respondent Next Mobile filed with the
BIR its Annual Income Tax Return for taxable year
ending December 31, 2001. Respondent also filed its
Monthly Remittance Returns of Final Income Taxes
Withheld, its Monthly Remittance Return of Expanded
Withholding Taxes and its Monthly Remittance Returns of
Income Taxes Withheld on Compensation.
Respondent received a copy of the Letter of Authority
from the Regional Director Nestor S. Valeroso to examine
respondent’s books of accounts and other accounting
records and withholding taxes for the period covering
January 1, 2001 – December 31, 2001.
Ma. Lida Sarmiento, respondent’s Director of Finance,
subsequently executed several waivers of the Statute of
Limitations to extend the prescriptive period of
assessment of taxes due in taxable year ending 2001.
On September 26, 2005, respondent received from the
BIR Preliminary Assessment Notice dated September 16,
2005 to which it filed a Reply. On October 25, 2005,
respondent received a Formal Letter of Demand and
Assessment Notices/Demand, demanding the payment of
deficiency income tax, final withholding tax, expanded
withholding tax, increments for late remittance of taxes
withheld, and compromise penalty for failure to file
returns/late filing/late remittance of taxes withheld.
CTA Former First Division Ruling – Granted
respondent’s Petition for Review and declared the FLD
and Assessment Notices/Demand cancelled and
withdrawn for being issued beyond the three-year
prescriptive period provided by law. It was held that the
adverted FLD and the FAN were issued beyond the
three-year prescriptive period. Petitioner failed to
substantiate its allegation by clear and convincing proof
that respondent filed a false or fraudulent return. Also, the
Waivers executed by Sarmiento did not validly extend the
three-year prescriptive period to assess respondent for
deficiency income tax.
CTA En Banc Ruling – Denied Petition for Review and
affirmed the Decision of the former CTA First Division.
ISSUE: 1.) Whether or not the CIR’s right to assess
respondent’s deficiency taxes had already prescribed.
RULING:
Section 203 of NIRC mandates BIR to assess internal
revenue taxes within 3 years from the last day prescribed
by law for the filing of the tax return. Hence, an
assessment notice issued after the three-year prescriptive
period is not valid and effective but with exceptions
provided.
Section 222(b) of the NIRC provides that the period to
assess and collect taxes may only be extended upon a
written agreement between the CIR and the taxpayer
executed before the expiration of the three-year
prescriptive period.
In the instant case, the CTA found the Waivers
defective because of the following:
a. They were executed without a notarized board authority;
b. The dates of acceptance by the BIR were not indicated
therein; and
c. The fact of receipt by respondent of its copy of the
Second Waiver was not indicated on the face of the
original Second Waiver.
Here, respondent through Sarmiento, executed five
Waivers in favour of petitioner. However, her authority to
sign these Waivers was not presented upon their
submission to the BIR. In fact, later on, her authority to
sign was questioned by respondent itself, the very same
entity that caused her to sign such in the first place. Thus it
is clear that respondent violated RMO No. 20-90 which
stated that in case of a corporate taxpayer, the waiver
must be signed by its responsible officials and RDAO
01-05 which requires presentation of a written and
notarized authority to the BIR.
In this case, respondent, after deliberately executing
defective waivers, raised the very same deficiencies it
caused to avoid the tax liability determined by the BIR
during the extended assessment period. It must be
remembered that by virtue of these waivers, respondent
was given the opportunity to gather and submit documents
to substantiate its claims before the CIR during the
investigation. It was able to postpone the payment of taxes,
as well as contest negotiate the assessment against it. Yet
after enjoying these benefits, respondent challenged the
validity of the Waivers when the consequences thereof
were not in its favour.
It is true that petitioner was also at fault here because it
was careless in complying with the requirements of RMO
No. 20-90 and RDAO 01-05. Nevertheless, petitioner’s
negligence may be addressed by enforcing the provisions
imposing administrative liabilities upon the officers
responsible for these errors. The BIR’s right to assess and
collect taxes should not be jeopardized merely because of
the mistakes and lapses of its officers, especially in cases
like this where the taxpayer is obviously in bad faith.

The Court resolves to GRANT the petition and let this

case be remanded to the Court of Tax Appeals for
further proceedings.