1125)
JURISDICTION:
e. Decisions of the Central Board of Assessment Appeals in the exercise of its appellate
jurisdiction over cases involving the assessment and taxation of real property originally
decided by the provincial or city board of assessment appeals
f. Decisions of the Secretary of Finance on customs cases elevated to him automatically for
review from decisions of the Commissioner of Customs which are adverse to the Government
under Section. 2315 of the Tariff and Customs Code
g. Decisions of the Secretary of Trade and Industry in the case of non-agricultural product,
commodity or article
i. In criminal offenses over appeals from the judgments, resolutions or orders of the RTC in tax
cases originally decided by them or in their appellate jurisdiction.
b. Tax collection cases involving final and executory assessments for taxes, fees, charges and
penalties where the principal amount of taxes and fees exclusive of charges and penalties
claimed is AT LEAST 1 million. (If principal amount is less than 1 million -- shall be tried by
the proper MTC/RTC.)
IMPORTANT TO REMEMBER:
1. The 30 day period for appeal to the CTA is jurisdictional and non-extendible.
2. Failure of the taxpayer to appeal to the CTA within the reglementary period makes a tax
assessment final, executory and demandable.
3. Appeal taken to the CTA does not automatically suspend the payment, levy, distraint, and/or sale
of any property of the taxpayer for the satisfaction of his tax liability
4. CIR may also make reassessment by increasing or decreasing a previous assessment even during
appeal
5. Section 218 – no court shall have authority to grant an injunction to restrain the collection of any
internal revenue tax, fee or charge – court refer only to ordinary courts.
ASSESSMENT
⇒ Merely a notice to the effect that the amount stated there in is due as a tax and containing a demand
for the payment thereof
⇒ Assessment is deemed made under sec. 203 and 222 when:
i. It is made within the period of 3 or 10 years as the case may be
ii. Notice to that effect is released, mailed or sent to the taxpayer also within the same
period.
FORMS OF ASSESSMENT
a. Formal Assessment Notice (FAN)
b. Letter Demanding Payment Of Erroneously Refunded Amount (Guagua Electric Co V. Cir),
Or Amount Paid By Bouncing Check (Republic V. Limaco & De Guzman)
c. Letter From Revenue Officer Granting Opportunity To Disprove Findings (Show-Cause
Letter)
d. Follow-Up Letter Duly Received By Taxpayer Within Prescriptive Period. (Taxpayer Denied
Receipt Of Original Demand Letter And Ass. Notice) (Republic V. Nielson & Co)
VALIDITY OF ASSESSMENT
⇒ Assessment is valid, even if notice merely contains the amount of taxes being assessed,
without any details on how said amounts were arrived at, provided:
a. The report of investigation on which assessment was based has been sent to
taxpayer; and
b. Said report details the findings, the facts and the law on which proposed
assessments were based. (Phil. Mining Service Corp. vs. CIR, CTA Case No. 5725,
July 25, 2002)
⇒ Sec. 228 of Tax Code requires BIR to inform taxpayer in writing of the laws and facts on
which assessment is made. Failure to do so shall void the assessment.
⇒ Rule runs parallel to the due process clause.
⇒ Insufficiency of assessment notice may be cured by the demand letter which shows the legal
and factual basis relied upon in issuance of assessment (PNZ Marketing vs. CIR, CTA Case
No. 5726, Dec. 14, 2001).
ASSESSMENT NOTICE
⇒ Preliminary collection letter presupposes the existence of valid assessment notice.
⇒ Preliminary collection letter shall serve as assessment notice, if it was initial notice received
by taxpayer, taxpayer did not receive any assessment notice, and no follow-up letter was
sent or preliminary conference was arranged.
⇒ 30-day period to protest shall commence from date of receipt of preliminary collection
letter. (United International Pictures vs. CIR, CTA Case No. 5884, Jan. 5, 2002)
⇒ If taxpayer denies having received the assessment notice, burden of proof is shifted to BIR.
⇒ Mere certification from Post Office on delivery of letter to taxpayer is not enough.
⇒ BIR should show that registered letter certified by PO actually contained assessment notice
(United International Pictures vs. CIR, supra).
GOVERNMENT REMEDIES:
I. Administrative Remedies
A. Summary Remedy
i. DISTRAINT OF PERSONAL PROPERTY -- Is the seizure by the government of personal property,
tangible or intangible to enforce the payment of taxes, to be followed by its public sale, if the taxes
are not voluntarily paid
a) 2 kinds of distraint
a. ACTUAL DISTRAINT – where there is a taking of possession of the personal property out
of the taxpayer into that of the government.
b. CONSTRUCTIVE DISTRAINT – owner is merely prohibited from disposing of his
personal property
b) Requisites
a. The taxpayer must be delinquent in the payment of tax
b. There must be a subsequent demand for its payment
c. Taxpayer must fail to pay the delinquent tax at the time required
d. The period within which to assess or collect the tax has not yet prescribed
e. Amount of tax exceeds Php100.00
**Note: for constructive distraint – tax delinquency is not essential
iii. LEVY OF REAL PROPERTY – refers to the same act of seizure of real property in order to enforce
the payment of taxes. As in distraint, the property may be sold at public sale, if after seizure, the
taxes are not voluntarily paid.
a) Requisites
a. The taxpayer must be delinquent in the payment of tax
b. There must be a subsequent demand for its payment
c. Taxpayer must fail to pay the delinquent tax at the time required
d. The period within which to assess or collect the tax has not yet prescribed
e. Amount of tax exceeds Php100.00
c) Procedure
a. Preparation of a duly authenticated certificate showing the name of the taxpayer and the
amount of the tax and penalty due. Certificate operates with the force of a legal execution
throughout the Philippines.
b. Certificate shall include a description of the property upon which levy is made
c. Service of written notice to the delinquent taxpayer or occupant of the property; and to the
Register of Deeds of the province where property is located
d. Advertisement of the time and place of sale of the property within 20 days after levy, and it
shall cover a period of 30 days.
e. Sale at public auction to the highest bidder
f. Disposition of proceeds of sale (excess shall be turned over to the owner of the property
d) Forfeiture by Government
a. In case there is no bidder for the property or if the highest bid is for an amount insufficient
to pay the taxes, penalties and costs, Internal Revenue Officer declare the property
forfeited in satisfaction of the claim
b. Register of Deeds transfer the title to the property without the necessity of an order from a
competent court.
c. LIABILTY FOR DEFICIENCY – forfeiture however does not operate as a total discharge
of the claim.
d. EXCESS – taxpayer is not entitled to the excess. He has a right of redemption
e. Right of redemption by delinquent taxpayer or any one for him.
f. Time of redemption – within one year from the date of sale (begins to run from the
registration of the deed of sale or declaration of forfeiture)
C. Tax Lien – a legal claim or charge on property, either real or personal, established by law as a security
in default of the payment of taxes
⇒ Lien attaches from time of assessment (not only from service of warrant of destraint/levy) until
paid
⇒ Lien on real property is not valid against mortgagee, purchaser, or judgment creditor until it is
filed with register of deeds (sec. 219, nirc)
⇒ Tax due on goods imported tax free is lien on goods superior to all charges, regardless of possessor
(sec. 131(a), nirc)
b) Criminal Cases
a. All criminal violations may be compromised, except those already filed in court or
involving fraud (Sec. 204(A), NIRC)
b) Criminal cases
a. Those already filed in court
b. Those involving fraud
i. When
a) The tax or any portion thereof appears to be unjustly or excessively assessed
b) The administration and collection costs involved do not justify the collection of the amount
due
G. Imposition of Surcharge – is the amount imposed by law as addition to the main tax in case of
delinquency
i. The following surcharge shall be imposed:
Important Notes:
• Substantial under-declaration PRIMA FACIE evidence of a false or fraudulent return
• Under the tax code, failure to report sales receipts, or income in an amount exceeding 30% of that
declared per return shall be considered substantial under declaration.
• The imposition of surcharge and interest in case of DELINQUENCY is MANDATORY
• False return – merely implies a deviation from the truth or fact whether intentional or not
• Fraudulent return – is intentional and deceitful with the aim of evading the correct tax due (Aznar vs.
CIR)
H. Imposition of Interest
i. Types of interest
a) Deficiency Interest
b) Delinquency Interest
a. Failure to pay the amount of the tax due on any return to be filed
b. Failure to pay the amount of the tax due for which no return is required
c. Failure to pay a deficient tax, or any surcharge or interest thereon.
⇒ Civil or criminal action for the collection of taxes may be pursued in the discretion of the authorities
charged with the collection of taxes without or together with the pursuit of distraint and levy.
⇒ Case to be filed in the name of the Government Of The Philippines (sec. 220, nirc)
⇒ No civil or criminal case may be filed without approval of the commissioner
⇒ Civil action is resorted to when tax liability becomes collectible
CIVIL ACTION
⇒ Final assessment is not protested within 30 days from date of receipt (marcos ii v. Cir), or
protested but BIR conditions are not complied with by taxpayer (dayrit v. Cruz; republic v.
Ledesma)
⇒ Self-assessed tax shown in return is not paid within date prescribed by law (2nd installment)
⇒ Protest against assessment is denied by BIR (basa v. Republic), or 180 day period lapses and
taxpayer failed to appeal to CTA within 30 days from date of receipt or from lapse of 180 day
period (lascona realty corp. V. Cir)
Who Approves?
⇒ CIR, REGIONAL DIRECTOR (Arches v. Bellosillo), OR LEGAL DIVISION (Republic v.
Hizon)
⇒ SOLGEN, OR BIR SPECIAL ATTORNEYS OUTSIDE METRO MANILA, AFFIRMED BY
SOLGEN (Republic v. Domecillo)
Where Filed?
⇒ RTC (less than P1 M)
⇒ CTA (P1 M or more)
CRIMINAL ACTION
Ordinary Criminal Cases
⇒ The civil liability is incurred by reason of the offender’s criminal act.
⇒ Every person criminally liable for a felony is also civilly liable (Art. 100, RPC)
Sec. 220, 2005 NIRC: Form and Mode of Proceeding in Actions Arising under this Code
⇒ Civil and criminal actions and proceedings instituted in behalf of the Government under the
authority of this Code or other law enforced by the BIR shall be brought in the name of the
Government of the Philippines and shall be conducted by legal officers of the BIR.
⇒ No civil or criminal action for the recovery of taxes or the enforcement of any fine, penalty or
forfeiture under this Code shall be filed in court without the approval of the Commissioner.
Sec. 7(b), RA 8292: Jurisdiction of CTA over Cases involving Criminal Offenses
⇒ Any provision of law or the Rules of Court to the contrary notwithstanding, the criminal action
and the corresponding civil action for the recovery of civil liability for taxes and penalties shall
at all times be simultaneously instituted with, and jointly determined in the same proceeding by
the CTA, the criminal action being deemed to necessarily carry with it the filing of the civil
action, and no right to reserve the filing of such civil action separately from the criminal action
will be recognized.
Sec. 205, 2005 NIRC: Remedies for the Collection of Delinquent Taxes
⇒ The judgment in the criminal case shall not only impose the penalty but shall also order
payment of the taxes subject of the criminal case as finally decided by the Commissioner.
How to Reconcile?
⇒ Fortune’s situation is factually apart from ungab
⇒ Reg. Wholesale price approved by bir presumed actual price
⇒ Not fraudulent unless bir has final determination of what is correct tax
⇒ Prel. Inv. May be enjoined under exceptional circumstances
REMEDIES OF TAXPAYERS
Administrative Remedy
JUDICIAL REMEDY
1. APPEAL TO COURT OF TAX APPEALS
2. Action to Contest forfeiture of chattel. When
a. Before sale or destruction of the property, bring an action against the person seizing the
property or having possession to recover the same and upon giving proper bond may
enjoin the sale
b. After the sale and within 6 months he may bring an action to recover the net proceeds
realized at the sale
⇒ Is an ordinary civil action for recovery of personal property under Rule 60 RoC, Ordinary
courts have jurisdiction and not CTA
⇒
3. Action for Damages
PROTEST
⇒ Valid protest of an assessment is one assailing the formal assessment notice (FAN) and the letter
of demand, not the preliminary assessment notice (PAN). PAN is required merely to inform the
taxpayer of the proposed assessment.
⇒ Failure to protest within 30 days will make the formal assessment notice final and executory.
⇒ Failure to respond to PAN within 15 days will render taxpayer in default and a FAN would
subsequently be issued (Cebu Rosver Pawnshop vs. CIR, CTA Case No. 6425, Mar. 17, 2003).
DENIAL OF PROTEST
⇒ Direct denial -- Letter of CIR states in clear terms his denial of protest.
⇒ Indirect denial
Final notice before seizure constitutes as a decision on a protested assessment; hence,
appealable to the CTA (CIR vs. Isabela cultural corp, 361 scra 71 (2004)
Issuance by BIR of warrant of distraint and levy constitutes a denial of the protest.
APPEALS
Administrative Appeal
⇒ Decision of regional director may be appealed to commissioner
⇒ Prior exhaustion of adm remedies gives adm authorities prior opportunity to decide
controversies within their competence (aguinaldo industries corp. V. Cir)
Judicial Appeal
⇒ Final decision of CIR may be appealed to CTA
⇒ Where a taxpayer filed a valid protest within 30 days from date of receipt of assessment and on
same day also filed with CTA a petition for review, there is yet no final decision of cir on the
protest that is appealable to CTA (moog controls corp vs. Cir, cta case no. 6700, oct 18, 2004)
⇒ CTA division decision is appealed to CTA en banc
⇒ CTA en banc decision appealed to supreme court
PRESCRIPTION
Sec. 203, 2005 NIRC: Period of Limitation upon Assessment and Collection
⇒ Except as otherwise provided in Sec. 222, taxes shall be assessed within three (3) years after the
last day prescribed by law for the filing of the return.
⇒ No proceeding in court without assessment for the collection of taxes shall be begun after the
expiration of prescriptive period.
Sec. 222(a), 2005 NIRC: Exceptions as to Period of Limitation of Assessment and Collection of Taxes
⇒ In case of a false or fraudulent return with intent to evade tax or of failure to file a return, the tax
may be assessed, or a proceeding in court for the collection of such tax may be filed without
assessment, at any time within ten (10) years after the discovery of the falsity, fraud or omission.
Sec. 281, 2005 NIRC: Prescription for Violations of any Provision of this Code
⇒ All violations of any provision of this Code shall prescribe after five (5) years.
⇒ Prescription shall begin to run from the day of the commission of the violation of the law, and if
the same be not known at the time, from the discovery thereof and the institution of judicial
proceedings for its investigation and punishment.
⇒ Prescription shall be interrupted when proceedings are instituted against the guilty persons and
shall begin to run again if the proceedings are dismissed for reasons not constituting jeopardy.
⇒ The term of prescription shall not run when the offender is absent from the Philippines.
VALIDITY OF WAIVER
⇒ Waiver signed by Comptroller is valid, even without letter or certificate of authority to execute
waiver. RMO 20-90 provides waiver must be signed by any of its responsible officials. Law merely
requires that waiver be signed by any of corporation’s responsible officials, not necessarily an
authorized representative or officer (Phil. Journalists vs. CIR, GR No. 162852, Dec 16, 2004)
⇒ Waiver is valid even if it did not specify the kind and amount of taxes covered, if at the time it was
executed, the BIR had not yet come up with preliminary findings. At that stage, the kind and
amount of tax due were still unascertainable (Oceanic Wireless Network vs. CIR, CTA Case No.
6111, Nov 3, 2004)
⇒ Waiver is not valid if signed only by the taxpayer and attested to by a RDO, not by the
Commissioner, or signed after the lapse of the 3-year period (Mirant Navotas Corp. vs. CIR, CTA
Case No. 5949, Feb. 3, 2003).
PROCEDURE
TAX RETURN FILED
(law prescribes due date, ex. Income tax April 15 of
following end of taxable year)
TAX AUDIT BY BIR
(120 days + additional 120 days may be requested by RO)
INFORMAL CONFERENCE
PRELIMINARY ASSESSMENT NOTICE (PAN)
Reply to PAN
(Within 15 days from Receipt)
FINAL ASSESSMENT NOTICE (FAN)
PROTEST TO FAN
(within 30 days from receipt of FAN)
SUPPLEMENTAL PROTEST/SUPPORTING
DOCUMENTS TO SUPPORT PROTEST
(within 60 days upon filing of protest/if no supporting
documents must inform CIR so that decision may be
rendered. Note that if no supporting documents is
submitted, the 180 days is reckoned from the date protest
was filed)
BIR ACTION:
1. Cancel assessment
2. Revise assessment
3. Deny protest
OR
BIR INACTION
APPEAL TO CTA
(Within 30 days from the decision of the BIR OR
within 180 days from the submission of the
supporting documents or if no supporting
documents from the date the protest was filed
whichever comes first)
APPEAL TO CTA EN BANC
(15 days from date of receipt; additional 15 days may be
granted by CTA after payment of docket fee.)
APPEAL TO SC
(Via petition for review on certiorari under Rule 45)
Within 15 days from notice of award/judgment