The Court of Tax Appeals (RA. 9282 which amended RA. 1125)

Level and composition1. Level of Court of Appeals2. 1 Presiding justice and 5 associate justices

Powers of the Court of Tax Appeals1. To administer oaths2. To receive evidence3. To summon witnesses by subpoena4. To require the production of papers or documents by subpoena duces tecum5. To punish for contempt6. To promulgate rules and regulations for the conduct of its business7. To assess damage against the appellant if the appeal to the CTA is found to be frivolous or

dilatory8. To suspend the collection of the tax pending appeal9. To render a decision on cases brought before it10. To issue an order authorizing distraint of personal property and/or levy on real property upon the

issuance of any rule, order or decision favorable to the government.

JURISDICTION:

I. Exclusive appellate jurisdiction to review by appeala. Decisions of he CIR in cases involving:

i. Disputed assessmentsii. Refunds of internal revenue taxes

iii. Fees or other chargesiv. Penalties in relation theretov. Other matters arising under the NIRC or other laws administered by the BIR

b. Inaction by the CIR in cases involving i. Disputed assessments

ii. Refunds of internal revenue taxesiii. Fees or other chargesiv. Penalties in relation theretov. Other matters arising under the NIRC or other laws administered by the BIR where

the NIRC provides specific period of action, in which case the inaction shall be deemed a denial.

c. Decisions, orders, resolution of the RTC in :i. Local tax cases originally decided or resolved by them in the exercise of their original or

appellate jurisdiction.ii. Tax collection cases originally decided by them in their respective territorial

jurisdictioniii. Tax collection cases decided by the RTC in its appellate jurisdiction originally decided

by the MTC, MCTC in their respective jurisdiction

d. Decisions of the Commissioner of Customs in cases involving liability for:i. Customs duties

ii. Fees or other money chargesiii. Seizuresiv. Detention or release of property affected

v. Finesvi. Forfeitures

vii. Other penalties in relation theretoviii. Other matters arising under the Customs law or other laws administered by the Bureau

of Customs

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

h. Decisions of the Secretary of Agriculture in the case of agricultural products, commodity or article involving dumping and countervailing duties

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.

II. Exclusive Original Jurisdictiona. Over all criminal offenses arising from violation of the NIRC or Tariff and Customs Code and

other laws administered by the BIR or the Bureau of Customs except where the principal amount of taxes and fees exclusive of charges and penalties claimed IS AT LEAST 1 million.

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

appeal5. 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.

CTA may suspend tax collection pending appeal, REQUISITES:1. In the opinion of the court, the collection pending appeal may jeopardize the interest of the

government and/or taxpayer2. The taxpayer is willing to deposit the amount claimed or to file a surety bond for not more than

double the amount of the tax with the Court3. The taxpayer shows that the appeal is not frivolous nor for the purpose merely to delay the

collection of the tax.

** CTA not authorized to issue writs of injunction or prohibition independently of and apart from an appealed case.

RENDITION and CONTENT1. cases appealed to the CTA must be decided within 12 moths from the date of submission – this

period is merely directory not mandatory.2. Decision must be :

a. IN WRITINGb. Stating CLEARLY and DISTINCTLY the FACTS and the LAW on which they are basedc. SIGNED by the justices concurring therein

Appeal from decision of CTA en banc: file with the Supreme Court verified petition for review on certiorari under Rule 45 of Rules of Court

within 15 days from the notice of the award judgment, final order or resolution.

POWERS of the COMMISSIONER (Sec. 6 and 7)1. Examination of Returns and determination of tax due2. Assess the proper tax on the best evidence obtainable in case taxpayer fails to submit required

returns, statements or when there is reason to believe that any report is false, incomplete or erroneous.

3. Amend the return from his own knowledge and from such information as he can obtain through testimony or otherwise when the taxpayer fails to file a required return or other documents at the time prescribed by law or willfully or otherwise files a false or fraudulent return or other document. Such amended return shal be prima facie correct and sufficient for al legal purposes

4. Authority to conduct inventory-taking and/or surveillance IF there is a reason to believe that such person is not declaring his correct income, sale or receipts for internal revenue tax purposes.

5. Prescribe presumptive gross sales and receipts when it is found that a taxpayer has failed to issue receipts and invoices in violation of the requirements of this code, or when there is reason to believe that the books of account or other records do not correctly reflect the declarations made.

6. Terminate the taxable period in the following circumstances comes to the knowledge of the Commissioner:

a. Taxpayer is retiring from business subject to taxb. Taxpayer is intending to leave the Philippinesc. Taxpayer is intending to remove his property therefrom or hide or conceald. Taxpayer is performing any act tending to obstruct the proceedings for the collection of the

tax or to render the same totally or partly ineffective unless such proceedings are begun immediately.

7. Prescribe real property values8. Inquire into bank deposit accounts of:

a. A decedent to determine his gross estateb. Any taxpayer who has filed an application for compromise of his tax liability under Sec.

204(A)(2) of the NIRC by reason of financial incapacity to pay his tax liability.9. Authority to accredit and register tax agents10. Prescribe additional procedural or documentary requirements11. The power to recommend the promulgation of rules and regulations by the Secretary of Finance12. The power to issue rulings of first impression or to reverse, revoke or modify any existing ruling of

the Bureau13. The power to comprise the payment of any internal revenue tax or abate or cancel any tax liability14. The power to credit or refund taxes erroneously or illegally received or penalties imposed without

authoryt. 15. The power to assign or reassign internal revenue officers to establishments where articles subject

to excise tax are produced or kept.

IMPORTANT NOTES:1. Under Sec. 6(1) a tax payer who filed a return/statement/declaration may within 3 years from

filing may amend, modify or change his return PROVIDED no notice for audit or investigation of such return has in the meantime been actually served upon the taxpayer.

2. Compromise – all criminal violations may be compromised EXCEPT: a. Those already filed in courtb. Those involving FRAUD

WHEN MAY BIR MAKE AN ASSESSMENT1. When a RETURN IS FILED. Within 3 years after the last day prescribed by law for the filing of

the return, or if filed beyond the period prescribed by law, counted from such period filed whichever is later

2. When a taxable period of a taxpayer is pre-terminated3. When no return is filed when due

WHEN A PRE-ASSESSMENT NOTICE NOT REQUIRED:1. When the finding for any deficiency tax is the result of mathematical error in the computation of

the tax as appearing on the face of the return2. When a discrepancy has been determined between the tax withheld and the amount actually

remitted by the withholding agent3. When a taxpayer who opted to claim a refund or tax credit of excess creditable withholding tax

for a taxable period was determined to have carried over and automatically applied the same amount claimed against the estimated tax liabilities for the taxable quarter or quarters of the succeeding taxable year

4. When the excise tax due on excisable articles has not been paid5. When an article locally purchased or imported by an exempt person has been sold, traded or

transferred to a non-exempt person

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 beii. Notice to that effect is released, mailed or sent to the taxpayer also within the same

period.

FORMS OF ASSESSMENTa. 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)

WHEN MUST ASSESSMENT BE MADE? (Sec. 203 & 222, NIRC)1. Return was filed

Not false or fraudulent – 3 yrs from filing False or fraudulent – 10 yrs from date of discovery of filing of false or fraudulent

return

2. No return was filed 10 years from date of discovery of omission If assessment due date falls on Saturday, government has next business day within

which to assess (cir v. Western pacific corp) Normal year has 365 days; leap year, 366 days (cir v. Namarco)

WHEN IS ASSESSMENT DEEMED MADE? Issue date of assessment notice is not reckoning point for prescription Date assessment notice and demand letter is released, mailed or sent to taxpayer constitutes

actual assessment (Republic v. Limaco & de Guzman) Presumption of receipt in regular course of mail applies, if it was properly addressed,

postage was prepaid, and was mailed. If one element is absent, presumption does not lie (enriquez v. Sunlife of canada)

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; andb. 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 distrainta. 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 taxb. There must be a subsequent demand for its paymentc. Taxpayer must fail to pay the delinquent tax at the time requiredd. The period within which to assess or collect the tax has not yet prescribede. Amount of tax exceeds Php100.00

**Note: for constructive distraint – tax delinquency is not essential

c) Property Subject to Distrainta. In general – all goods, chattels or effects and other personal property belonging to the

taxpayer or in which the taxpayer has na interest may be seized and distraint in such quantity sufficient to satisfy the tax or charge, the increments and the expenses of the distraint and the cost of the subsequent sale.

b. Bank accounts may be distraint notwithstanding RA 1405 since no inquiry in made

d) How Distraint Effected/Serveda. Tangible property

i. Officer serving the warrant of distrait shall make or cause to be made an account of the goods, chattels, effects or other personal property distraint

ii. The copy must be signed by such officeriii. Copy left wither with the owner or person from whose possession such goods were taken

or at the dwelling or place of business of such person and with someone of suitable age and discretion.

b. Intangible Propertyi. Stocks and other securities – serving a copy of the warrant of distraint upon the taxpayer

and upon the president, manager, treasurer or other responsible officer of the corporation, company or association which issued the said stocks and securities.

ii. Debts and credits – by leaving with the person owing the debts or having in his possession or under his control such credit or with his agent, a copy of the warrant of distraint. Service of the warrant of distraint on the taxpayer (creditor) is not required by law.

iii. Bank accounts – garnished by serving a warrant of garnishment upon the taxpayer and upon the president, manager, treasurer or other responsible officer of the bank.

e) Procedure for Distraint of Personal Propertya. Service of the warrant of distriant upon the taxpayer or upon the person in possession of

the taxpayer’s personal propertyb. Posting of notice in not less than 2 public places in the municipality or city and notice to the

taxpayer specifying the time and place of sale and the articles distrianedc. Sale at public auction to the highest bidderd. Disposition of the proceeds of the sale

f) Other Important Matters a. Residue to be returned to the owner of the property sold.

b. Expenses chargeable shall embrace only the actual expense of seizure and preservation of the property pending the sale

c. No right of redemption by the taxpayer after the sale pf personal property at public auction

d. CIR may purchase when the amount of the bid for the property under distraint is not equal to the amount of the tax or is very much less than the actual market value of the articles offered for sale – taxpayer is not liable for any deficiency.

ii. CONSTRUCTIVE DISTRAINT – purpose is to safeguard the interest of the government.

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) Requisitesa. The taxpayer must be delinquent in the payment of taxb. There must be a subsequent demand for its paymentc. Taxpayer must fail to pay the delinquent tax at the time requiredd. The period within which to assess or collect the tax has not yet prescribede. Amount of tax exceeds Php100.00

b) How Levy Effecteda. Serving upon the taxpayer a written notice of levy in the form of a duly authenticated

certificated prepared by the RDO containing:i. Description of the property upon which levy is made

ii. Name of taxpayeriii. Amount of the tax and penalty due

c) Procedurea. 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 madec. 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 locatedd. 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 bidderf. Disposition of proceeds of sale (excess shall be turned over to the owner of the property

d) Forfeiture by Governmenta. 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 redemptione. 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)

B. FORFEITURE – divestiture of property without compensation, in consequence of a default or offense. It id directed against the res, the property itself and its effect is to transfer the title to the specific thing from the owner to the government.

i. Specific Cases if Forfeiture:a) Real property levied upon for tax delinquency and exposed for sale, where there is no bidder

or if the highest bid is in an amount insufficient to pay the taxes, penalties, and costs. Here, a judgment of condemnation is not required since the taxpayer may exercise his right of redemption.

b) Unless otherwise specifically authorized, all articles subject to excise tax which are stored or allowed to remain in a distillery warehouse, bonded warehouse, or other place where made, after the tax theron has been paid; and such articles withdrawn from such place or from customs custody or imported into the country without the payment of the required.

c) All chattels, machinery and removable fixtures of any sort used in the unlicensed production of articles subject to excise tax

d) Dies and other instruments used for the printing or making of any internal revenue stamp, label or tag which is in imitation of or purports to be a lawful stamp, label or tag

e) Articles subject to excise taxes, the tax on which has not been paid found in the possession of any person

f) Liquor or tobacco shipped, transported or removed under a false name or brand.

ii. Other Important Pointsa) In case of sale of forfeited goods – all proceeds go to the governmentb) Summary detention prior to forfeiture – when revenue officer has reasons to believe that:

a. The lawful tax has not been paidb. Package has been or is being removed in violation of law

**BUT summary detention cannot continue beyond 7 days without due process of law or intervention of the officer to whom such detention is to be reported.

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)

i. Extinguishment or discharge of tax lien:a) Absolute – no more tax liability when:

a. Payment or remission of the taxb. Prescription of the right of the government to assess or collect

b) Just on the particular property – liability still exist:a. Failure to file notice of such lien in the office of the Register of Deeds, as against any

mortgagee, purchaser or judgment creditorb. By destruction of the property subject to the lien

D. Compromise – contract whereby the parties, by reciprocal concessions, avoid a lititgation or put an end to one already commenced (Art. 2028 NCC)

i. Requisites

a) Taxpayer must have a tax liabilityb) There must be an offer of an amount to be paid by the taxpayerc) There must be an acceptance of the offer in settlement of the original claim

ii. When Allowed:a) Civil Cases

a. When there is reasonable doubt as to the validity of the claim against the taxpayerb. The financial position of the taxpayer demonstrates a clear inability to pay the assessed tax

b) Criminal Casesa. All criminal violations may be compromised, except those already filed in court or

involving fraud (Sec. 204(A), NIRC)

iii. When Not Allowed:a) Civil Cases:

a. Liability of taxpayer with respect to surchargesb. Cases finally decided by the courts

b) Criminal casesa. Those already filed in courtb. Those involving fraud

iv. Minimum compromise rates:a) Financial incapacity – 10% of the basic assessed taxb) Other cases – 40% of basic assessed tax

v. Other Important Points:a) Power to compromise is not absolute. BOC commissioner is not authorized to accept anything

less than what is adjudicated by the court in favor of gov’t that has become final and executory (rovero v. Amparo)

b)

E. Abatement of Tax Liabilities -- means entire tax liability is cancelled

i. Whena) The tax or any portion thereof appears to be unjustly or excessively assessedb) The administration and collection costs involved do not justify the collection of the amount

due

ii. Power to compromise or abate shall not be delegated by CIR, except:a) Regional Assessments – P500T OR LESSb) Minor Criminal Violations (Sec. 204(B)& Sec. 7, NIRC)

F. Refund or Credit of Taxesi. What may be refunded/credited

a) Credit or refund taxes erroneously or illegally received or penalties imposed without authorityb) Refund the value of internal revenue stamps when they are returned in good conditions by the

purchaserc) In his (CIR) discretion, redeem or change unused stampt that have been rendered unfit for use

and refund their value upon proof of destruction

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:

CASES WHEN SURCHARGE MAY BE IMPOSED SURCHARGE

a) False or fraudulent return willfully made It must appear that the taxpayer had an intention to evade

the payment of tax in filing a false return. 50%

b) Willful neglect to file return (where BIR discovered before taxpayer could voluntarily file) 50%

c) Willful neglect to file return (BUT taxpayer voluntarily filed before BIR discovers and before notice)

25%d) Neglect to file a return and pay, BUT NOT

WILLFUL. In the following cases of failure:a) To file any return and pay the tax thereon as required

under the tax code or rules and regulations on the date prescribed

b) To pay the deficiency tax, within the time prescribed for its payment in the notice of assessment

c) To pay the full or part of the amount of tax shown on any return required to be filed under the tax code or rules and regulation, or the full amount of tax due for which no return is required to be filed

25%

e) Return is not filed with the proper officer designated by law 25%

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 filedb. Failure to pay the amount of the tax due for which no return is requiredc. Failure to pay a deficient tax, or any surcharge or interest thereon.

I. Deportation In Cases of Aleinsi. Grounds: Any alien who

a) Knowingly and fraudulently evades the payment of any internal revenue tax

b) Willfully refuses to pay such tax and its accessory penalties after the decision on his tax liability has become final and executory

II. Judicial Remedies – CRIMINAL or CIVIL ACTION

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

Collectibility Of Delinquent Tax

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)

How Civil Action Begun?1. File complaint with RTC2. File answer in CTA to taxpayer’s petition for review and pray for payment of tax; hence, even if no

RTC case was filed, right to collect has not prescribed (mambulao lumber v. Republic)

CRIMINAL ACTIONOrdinary 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)

Tax Evasion Cases The civil liability to pay taxes arises not because of any felony but upon the taxpayer’s failure to

pay taxes. Criminal liability in taxation arises as a result of one’s failure to pay his tax liabilities. Sec. 73 of the old Tax Code has provided the imposition of penalty of imprisonment or fine, or

both, for refusal or neglect to pay income tax or to make a return thereof, but it failed to provide the collection of said tax in criminal proceedings. The only remedies provided for collection of taxes are distraint of goods, etc. or by judicial action, which remedies are generally exclusive, in the absence of a contrary intent from the legislator (Republic vs. Patanao, 20 SCRA 712).

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.

Sec. 253(a), 2005 NIRC: General Provisions– Any person convicted of a crime penalized under this Code shall, in addition to being liable

for the payment of the tax, be subject to the penalties imposed herein: Provided, That payment of the tax due after apprehension shall not constitute a valid defense in any prosecution for violation of any provision of this Code or in any action for the forfeiture of untaxed articles.

Other Important Points to Remember• Subsequent payment of tax liability or extinguishment of tax liability thru prescription will not

operate to absolve taxpayer’s criminal liability (people v. Tierra)• Subsidiary imprisonment can be imposed in case of insolvency of taxpayer as regards tax he is

sentenced to pay (1 day for every 8.50)• Penalty shall be imposed on partner, president, Gen. Mgr., treasurer, or officer responsible for

violation

FILING OF CRIMINAL ACTION DURING PENDENCY OF PROTEST Assessment is not necessary to criminal prosecution for willful attempt to evade tax Crime is complete when violator has knowingly and willfully filed fraudulent return with intent

to evade tax What is involved here is not collection of taxes where assessment may be reviewed by rtc but

criminal prosecution for violation of tax code There is no precise computation and assessment of tax before there can be criminal prosecution There can be no civil action to enforce collection before assessment procedures have been

followed [ungab v. Cusi (1980)]

CRIMINAL CHARGE WITHOUT ASSESSMENT Assessment is not necessary before criminal charge (for non-filing of return) is filed Criminal charge need only be proved by prima facie showing of failure to file required return

and such fact need not be proved by an assessment Issuance of assessment is different from filing of complaint for criminal prosecution [cir v.

Pascor realty & dev corp (1999)]

CRIMINAL CHARGE MUST HAVE ASSESSMENT

For criminal prosecution to proceed before assessment, prima facie showing of willful attempt to evade tax must exist. Here the Court held that an assessment is essential before a criminal action may be instituted because without an assessment, there can be no cause of action since don’t know yet what the liability is or if there is a liability and how much the liability is. [CIR v. Fortune Tobacco (1997)]

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

1. Before Payment Of Taxa) PROTEST OF ASSESSMENT

Filing a petition or request for reconsideration or reinvestigationb) Enter Into Compromise

2. After Payment Of Taxa) TAX CREDIT

where taxpayer asks that the money so paid be applied to his existing tax liabilityb) REFUND

where taxpayer asks for restitution of the money paid as tax

Requisites for Tax Refund/Credit1. Claim for refund/credit must be in writing2. It must be filed with the CIR within 2 years after the payment of the tax or penalty3. It should:

a. Clearly state the amount being claimed and the ground/s relied uponb. Be accompanied with all pertinent papers in support of the claim

** Mere objection does not amount to a request for refund/credit BUT a return filed showing an overpayment shall be considered a written claim for tax refund/credit

When Written Claim NOT NECESSARY Where on the face of the return upon which payment was made, such tax appears clearly to

have been erroneously paid (Sec. 229)

JUDICIAL REMEDY1. APPEAL TO COURT OF TAX APPEALS2. 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.

COUNTING OF 180-DAY PERIOD Since the petitioner did not submit any document in support of his protest within sixty days

from the filing of its protest, the counting of the 180-day period was from the filing of the protest. Accordingly, when respondent failed to render his decision within 180 days from the filing of his protest, petitioner has 30 days therefrom to file an appeal to CTA (Oceanic Wireless Network vs. CIR, CTA Case No. 6111, Nov. 3, 2004)

APPEALSAdministrative 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

PETITION FOR REVIEW The 30-day period to appeal is jurisdictional and failure to comply would bar the appeal and

deprive the CTA of its jurisdiction. Such period is mandatory, and it is beyond the power of the courts to extend the same (Chan Kian vs CTA, 105 Phil 906 (1959).

The options granted to the taxpayer in case of inaction by the CIR is mutually exclusive and resort to one bars the application of the other. Petition for review was filed out of time (more than 30 days after lapse of 180 days), and petitioner did not file MR or appeal; hence, disputed assessment became final and executory

After availing of the first option (filing petition for review with CTA), petitioner cannot successfully resort to the second option (awaiting final decision of CIR) on the pretext that there is yet no final decision on the disputed assessment because of CIR’s inaction.

Assessments are presumed to be correct unless otherwise proven (RCBC vs CIR, GR No. 168498, Apr 24, 2007).

PRESCRIPTIONSec. 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.

Other Important Points to Remember The 3-year period within which to assess any deficiency tax commences after the last day

prescribed by law for the filing of the income tax return or the actual date of filing whichever is LATER.

For VAT, each taxable quarter shall have its own prescriptive period. VAT return is filed quarterly and a final return is not required at the end of the year.

In case of creditable withholding taxes, the 3-year period shall be counted shall be counted from the last day required by law for filing monthly remittance return. Each monthly return is already a complete return. The annual information return submitted to BIR is just an annual report of income payments and taxes withheld and is not in the nature of a final adjustment return.

Request for clarification on the assessment made by the taxpayer does not suspend the running of the statute of limitations

Mere filing of the protest letter without requesting for a reinvestigation does not suspend the running of the prescriptive period to collect (Phil Global Communications vs. CIR, CTA EB Case No. 37, Feb. 2005)

REQUISITES OF A VALID WAIVER Waiver must be in the form identified in RMO 20-90; Expiry date of period agreed upon is indicated in the waiver; Waiver form requires statement of the kind of tax and amount of tax due; if not indicated in the

waiver, there is no agreement; Waiver is signed by taxpayer or his authorized representative. In case of corporation, waiver is

signed by any responsible official. CIR or his authorized representative shall sign waiver indicating that BIR has accepted and

agreed to the waiver; Date of acceptance by BIR is indicated; Date of execution and acceptance by BIR should be before expiration of prescriptive period; Waiver is executed in 3 copies; second copy is for taxpayer. Fact of receipt by the taxpayer should

be indicated in the original copy.

(Pfizer, Inc. vs. CIR, CTA Case No. 6135, Apr. 21, 2003; FMF Dev. Corp. vs. CIR, CTA Case No. 6153, Mar. 20, 2003)

Phil. Journalists vs. CIR, supra). Waiver must indicate definite expiration date agreed upon by CIR and taxpayer Waiver should state date of acceptance by BIR. Without the date, it cannot be determined

whether waiver was accepted before expiration of 3-year period. Taxpayer must be furnished copy of accepted waiver. Under RMO 20-90, second copy of waiver

is for taxpayer. Fact of receipt by taxpayer of his copy should be indicated in the original copy (

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).

Important Case Law

Aznar vs. CIR Distinction between false return and fraudulent return Here the return was merely false which implies a mere deviation from the truth or fact whether

intentional or not.

CIR vs. Toda Illustrates clear example of tax evasion Tax evasion connotes the integration of 3 factors:

1. The end to be achieve, i.e. the payment of loess than that known by the taxpayer to be legally due, or the non-payment of tax when it is shown that a tax is due;

2. An accompanying state of mind which is described as being “evil”, in “bad faith”, “willful”, “deliberate” and “not accidental”

3. A course of action or failure of action which is unlawful Court held that the sale was merely a tax ploy, a sham and without business purpose and

economic substance. Doubtless, the execution of the two sales was calculated to mislead the BIR with the end in view of reducing the consequent tax liability.

Philippine Journalist, Inc. vs. CIR Issue is WON the waiver of Statute of limitation covering the period during which the BIR may

assess is valid and binding on the petitioner – NO The Court pointed out the following defect in the waiver which violated BIR RMO 20-90:

1. It did not specify a definite agreed date between the BIR and petitioner, within which the former may assess and collect revenue taxes.

2. The waiver was not signed by the CIR considering the amount involved is more than P1M.3. The taxpayer was not furnished a copy of the wavier.

Republic vs. CA (Philippine Global)

If the taxpayer denies ever having received an assessment from the BIR, it is incumbent upon the latter to prove by competent evidence that such notice was indeed received by the addressee.

The Court held that while a mailed letter is deemed received by the addressee in the course of mail this is merely a disputable presumption, subject to controversy and a direct denial therof shifts the burden on the party favored by the presumption to prove that the mailed letter was indeed received by the addressee.

CIR vs. Isabela Cultural Corporation Non-reply of CIR to request for reconsideration construed as denial of request for reconsideration

when a final notice to pay has been given without the CIR actually responding to taxpayer that MR was denied.

The Court held that the final notice before seizure cannot but be considered as the Com’s decision disposing of the request for reconsideration filed by respondent, who received no other response to its request. Not only was the Notice the only response received; its content and tenor supported the theory that it was the Com’s final act regarding the request for reconsideration. The very title expressly indicated that it was a final notice prior to seizure of property. The letter itself clearly stated that respondent was being given “this last opportunity” to pay.

CIR vs. Algue A deviation from the general rule, in this case the Court ruled that while ordinarily a warrant of

distraint and levy, following a request for reconsideration of an assessment is considered the CIR’s final decision, the receipt of which triggers the start of the 30 day period of appeal, where however, the warrant was issued without taking into account the request for reconsideration (since the request apparently was mislaid by the BIR), the 30 day period should start only after the CIR acts on the request for reconsideration (BUT NOTE that now, if the CIR fails to render decision within 180 days after the MR or the submission of the supporting documents (60) was made, then APPEAL TO CTA MUST BE MADE, otherwise the right to appeal will be lost)

PROCEDURETAX 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 assessment2. Revise assessment3. Deny protest

ORBIR INACTION

(CIR has only 180 days to make decision, if no decision is made within that period, APPEAL to

CTA without waiting for decision of CTA)

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)

IMPORTANT: This is jurisdiction, if appeal not made within the period prescribe, right to appeal is

lost and decision of CIR becomes, final and executory!!!

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