2nd Batch of Cases Tax I

Case List
1. Silicon Phil. Inc vs CIR. GR 182737 3/2/16

2. GJM Phil. Mfg Inc vs CIR GR 202695. 2/29/16

3. Spouses Pacquiao vs CIR. GR 213394. 4/6/16

4.San Roque Power Corp vs CIR. GR 203249. 7/23/18

5. Covanta Energy Phil. Holdings Inc. vs CIR. GR 203160. 1/24/18

6. Bank of the Phil. Islands vs CIR GR 224327. 6/11/18

Full Cases
1. Silicon Phil. Inc vs CIR. GR 182737 3/2/16

FIRST DIVISION

G.R. No. 182737, March 02, 2016

SILICON PHILIPPINES, INC. (FORMERLY INTEL PHILIPPINES MANUFACTURING,

INC.), Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent.

DECISION

SERENO, C.J.:

Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court assailing the Court of Tax
Appeals (CTA) En Banc Decision1 dated 18 January 2008 and Resolution2 dated 30 April 2008 in CTA EB No.
298.

The CTA En Banc affirmed the CTA Second Division Decision3 dated 5 February 2007 and Resolution4dated
29 June 2007 in CTA Case Nos. 6741, 6800 & 6841. That Decision denied the claim for tax refund or
issuance of tax credit certificates corresponding to petitioner's excess/unutilized input value-added tax (VAT)
for the 2nd, 3rd and 4th quarters of taxable year 2001. The CTA En Banc Resolution denied petitioner's motion
for reconsideration.

FACTS

Petitioner is a corporation engaged in the business of designing, developing, manufacturing and exporting
integrated circuit components.5 It is a preferred pioneer enterprise registered with the Board of
Investments.6 It is likewise registered with the Bureau of Internal Revenue (BIR) as a VAT taxpayer by
virtue of its sale of goods and services7 with a permit to print accounting documents like sales invoices and
official receipts.8

On 24 July 2001, petitioner filed its 2nd Quarter VAT Return reporting the amount of P765,696,325.68 as its
zero-rated sales.9

Its 3rd Quarter VAT Return filed on 23 October 2001 indicated zero-rated sales in the amount of
P571,812,011.26.10 This amount was increased to P678,418,432.83 in the Amended 3rd Quarter VAT Return
filed on 29 October 2001.11

The 4th Quarter VAT Return filed on 15 January 2002 reported zero-rated sales in the amount of
P1,000,052,659.89.12 This amount remained unchanged in the Amended 4th Quarter VAT Return filed on 22
May 2002.13

Petitioner sought to recover the VAT it paid on imported capital goods for the 2nd quarter of 2001. On 16
October 2001, it filed with the One-Stop Shop Inter-Agency Tax Credit and Duty Drawback Center,
Department of Finance, an application for a tax credit/refund in the amount of P9,038,279.56.14

On 4 September 2002, petitioner also filed for a tax credit/refund of the VAT it had paid on imported capital
goods for the 3rd and 4th quarters of 2001 in the amounts of P1,420,813.0415 and
P14,582,023.62,16 respectively.

Because of the continuous inaction by respondent on the administrative claims of petitioner for a tax
credit/refund in the total amount of P25,041,116.22,17 the latter filed separate petitions for review before
the CTA.

CTA Case No. 6741 filed on 30 July 2003 sought to recover P9,038,279.56 for the 2nd quarter of 2001;18CTA
Case No. 6800 filed on 20 October 2003, the amount of P1,420,813.04 for the 3rd quarter of 2001;19 and
CTA Case No. 6841 filed on 30 December 2003, P14,582,023.62 for the 4th quarter of 2001.20

The three cases were consolidated by the CTA Second Division in a Resolution dated 20 February
2004.21Trial on the merits ensued, and the case was submitted for decision on 23 August 2007.22

RULING OF THE CTA SECOND DIVISION

In a Decision23 dated 5 February 2007, the CTA Second Division dismissed the petitions for lack of merit.

It ruled that pursuant to Section 112 of the National Internal Revenue Code (NIRC), the refund/tax credit of
unutilized input VAT is allowed (a) when the excess input VAT is attributable to zero-rated or effectively
zero-rated sales; and (b) when the excess input VAT is attributable to capital goods purchased by a VAT-
registered person.24

In order to prove zero-rated export sales,25 a VAT-registered person must present the following: (1) the
sales invoice as proof of the sale of goods; (2) the export declaration or bill of lading/airway bill as proof of
actual shipment of the goods from the Philippines to a foreign country; and (3) bank credit advice or
certificate of remittance or any other document proving payment for the goods in acceptable foreign
currency or its equivalent in goods and services.26

The CTA Second Division found that petitioner presented nothing more than a certificate of inward
remittances for the entire year 2001, in compliance with the third requirement only.27 That being the case,
petitioner's reported export sales in the total amount of P2,444,167,418.4028 cannot qualify as VAT zero-
rated sales.29

On the other hand, a taxpayer claiming a refund/tax credit of input VAT paid on purchased capital goods
must prove all of the following: (1) that it is a VAT-registered entity; (2) that it paid input VAT on cap ital
goods purchased; (3) that its input VAT payments on capital goods were duly supported by VAT invoices or
official receipts; (4) that it did not offset or apply the claimed input VAT payments on capital goods against
any output VAT liability; and (5) that the administrative and judicial claims for a refund were filed within the
two-year prescriptive period.30

The CTA Second Division found that petitioner was able to prove the first and the fifth requisites for the
pertinent quarters of the year 2001.31

However, petitioner was not able to prove the fourth requisite with regard to the claimed input VAT
payments for the 3rd and the 4th quarters of 2001. The evidence purportedly showing that it had not offset or
applied the claimed input VAT payment against any output VAT liability was denied admission as evidence
for being a mere photocopy.32

Petitioner also failed to prove the second and the third requisite with regard to the claimed input VAT
payment for the 2nd quarter of 2001. Specifically, it failed to prove that the purchases were capital goods.33

For purchases to fall under the definition of capital goods or properties, the following conditions must be
present: (1) the goods or properties have an estimated useful life of more than one year; (2) they are
treated as depreciable assets under Section 29(f) of Revenue Regulations No. 7-95; and (3) they are used
directly or indirectly in the production or sale of taxable goods or services.34

The CTA Second Division perused the Summary List of Importations on Capital Goods for the 2nd quarter of
2001 presented by petitioner and found items therein that could not be considered as depreciable
assets.35 As to the rest of the items, petitioner failed to present the detailed general ledgers and audited
financial statements to show that those goods were capitalized in the books of accounts and subjected to
depreciation.36

Petitioner filed a Motion for Reconsideration, which was denied in the Resolution dated 29 June 2007.37 It
then filed before the CTA En Banc a petition for review challenging the CTA Second Division Decision and
Resolution.

RULING OF THE CTA EN BANC

The CTA En Banc issued the assailed Decision38 dated 18 January 2008 dismissing the petition for lack of
merit.

It affirmed the finding of the CTA Second Division that petitioner had failed to prove its capital goods
purchases for the 2nd quarter of the year 2001.39 The CTA En Banc emphasized the evidentiary nature of a
claim that a VAT-registered person made capital goods purchases.40 It is necessary to ascertain the
treatment of the purported capital goods as depreciable assets, which can only be determined through the
examination of the detailed general ledgers and audited financial statements, including the person's income
tax return.41 In view of petitioner's lack of evidence on this point, the claim for the refund or the issuance of
tax credit certificates must be denied.

Petitioner's Motion for Reconsideration was denied in the challenged Resolution dated 30 April 2008.42

Issues

Petitioner now comes before us raising the following issues for our consideration:
chanRoble svirtual Lawlib ra ry

I.

[WHETHER] THE COURT OF TAX APPEALS ERRED IN DENYING [PETITIONER'S] CLAIM FOR REFUND OF ITS
EXCESS / UNUTILIZED INPUT VAT DERIVED FROM IMPORTATION OF CAPITAL GOODS DUE TO ITS FAILURE
TO PROVE THE EXISTENCE OF ZERO-RATED EXPORT SALES.

II.

[WHETHER] THE COURT OF TAX APPEALS ERRED IN FINDING THAT [PETITIONER] FAILED TO COMPLY WITH
THE REQUIREMENTS OF A VALID CLAIM FOR REFUND / TAX CREDIT OF INPUT VAT PAID ON ITS
IMPORTATION OF CAPITAL GOODS.

III.

[WHETHER] THE COURT OF TAX APPEALS ERRED IN RULING THAT [PETITIONER] FAILED TO PROVE THAT
THE GOODS IMPORTED ARE CAPITAL GOODS

IV.

[WHETHER] THE INPUT VAT ON THE ALLEGED NON-CAPITAL GOODS ARE STILL REFUNDABLE BECAUSE
THEY ARE ATTRIBUTABLE TO THE ZERO RATED SALES OF [PETITIONER, A 100% EXPORT ENTERPRISE]43 ChanRoblesVirtualawl ibra ry

In the Resolution dated 30 July 2008, we required respondent to comment on the petition. The Comment
44

dated 21 January 200945 was filed by the Office of the Solicitor General as counsel.

OUR RULING

The applicable provision of the NIRC, as amended, is Section 112,46 which provides:
chanRoble svirtual Lawlib ra ry

SEC 112. Refunds or Tax Credits of Input Tax. —

(A) Zero-rated or Effectively Zero-rated Sales. — Any VAT-registered person, whose sales are zero-
rated or effectively zero-rated may, within two (2) years after the close of the taxable quarter
when the sales were made, apply for the issuance of a tax credit certificate or refund of
creditable input tax due or paid attributable to such sales, except transitional input tax, to the extent
that such input tax has not been applied against output tax: Provided, however, That in the case of zero-
rated sales under Section 106(A)(2)(a)(1), (2) and (B) and Section 108 (B)(1) and (2), the acceptable
foreign currency exchange proceeds thereof had been duly accounted for in accordance with the rules and
regulations of the Bangko Sentral ng Pilipinas (BSP): Provided, further, That where the taxpayer is engaged
in zero-rated or effectively zero-rated sale and also in taxable or exempt sale of goods or properties or
services, and the amount of creditable input tax due or paid cannot be directly and entirely attributed to any
one of the transactions, it shall be allocated proportionately on the basis of the volume of sales.

(B) Capital Goods. — A VAT-registered person may apply for the issuance of a tax credit certificate
or refund of input taxes paid on capital goods imported or locally purchased, to the extent that such
input taxes have not been applied against output taxes. The application may be made only within two
(2) years after the close of the taxable quarter when the importation or purchase was made.

(C) Cancellation of VAT Registration. — A person whose registration has been cancelled due to retirement
from or cessation of business, or due to changes in or cessation of status under Section 106(C) of this Code
may, within two (2) years from the date of cancellation, apply for the issuance of a tax credit certificate for
any unused input tax which may be used in payment of his other internal revenue taxes.

(D) Period within which Refund or Tax Credit of Input Taxes shall be Made. — In proper cases, the
Commissioner shall grant a refund or issue the tax credit certificate for creditable input taxes
within one hundred twenty (120) days from the date of submission of complete documents in
support of the application filed in accordance with [Subsections] (A) [and (B)] hereof.

In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part of the
Commissioner to act on the application within the period prescribed above, the taxpayer affected
may, within thirty (30) days from the receipt of the decision denying the claim or after the
expiration of the one hundred twenty day-period, appeal the decision or the unacted claim with
the Court of Tax Appeals.

(E) Manner of Giving Refund. — Refunds shall be made upon warrants drawn by the Commissioner or by his
duly authorized representative without the necessity of being countersigned by the Chairman, Commission
on Audit, the provisions of the Administrative Code of 1987 to the contrary notwithstanding: Provided, That
refunds under this paragraph shall be subject to post audit by the Commission on Audit. (Emphases
supplied)
Under the foregoing provision, the administrative claim of a VAT-registered person for the issuance by
respondent of tax credit certificates or the refund of input taxes paid on zero-rated sales or capital goods
imported may be made within two years after the close of the taxable quarter when the sale or
importation/purchase was made.

In the case of petitioner, its administrative claim for the 2nd quarter of the year 2001 was filed on 16
October 2001, well within the two-year period provided by law. The same is true with regard to the
administrative claims for the 3rd and the 4th quarters of 2001, both of which were filed on 4 September
2002.

Upon the filing of an administrative claim, respondent is given a period of 120 days within which to (1) grant
a refund or issue the tax credit certificate for creditable input taxes; or (2) make a full or partial denial of
the claim for a tax refund or tax credit. Failure on the part of respondent to act on the application within the
120-day period shall be deemed a denial.

Note that the 120-day period begins to run from the date of submission of complete documents supporting
the administrative claim. If there is no evidence showing that the taxpayer was required to submit47 - or
actually submitted - additional documents after the filing of the administrative claim, it is presumed that the
complete documents accompanied the claim when it was filed.48

Considering that there is no evidence in this case showing that petitioner made later submissions of
documents in support of its administrative claims, the 120-day period within which respondent is allowed to
act on the claims shall be reckoned from 16 October 2001 and 4 September 2002.

Whether respondent rules in favor of or against the taxpayer - or does not act at all on the administrative
claim - within the period of 120 days from the submission of complete documents, the taxpayer may resort
to a judicial claim before the CTA.

Section 7 of Republic Act No. (R.A.) 1125 (An Act Creating the Court of Tax Appeals), as amended,
provides:
chanRoble svirtual Lawlib ra ry

SECTION 7. Jurisdiction. — The CTA shall exercise:

a. Exclusive appellate jurisdiction to review by appeal, as herein provided:

1. Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments,

refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters
arising under the National Internal Revenue Code or other laws administered by the Bureau of Internal
Revenue;

2. Inaction by the Commissioner of Internal Revenue in cases involving disputed assessments, refunds
of internal revenue taxes, fees or other charges, penalties in relations thereto, or other matters arising
under the National Internal Revenue Code or other laws administered by the Bureau of Internal
Revenue, where the National Internal Revenue Code provides a specific period of action, in which
case the inaction shall be deemed a denial; (Emphasis supplied)
The judicial claim shall be filed within a period of 30 days after the receipt of respondent's decision or ruling
or after the expiration of the 120-day period, whichever is sooner.49

Aside from a specific exception to the mandatory and jurisdictional nature of the periods provided by the
law,50 any claim filed in a period less than or beyond the 120+30 days provided by the NIRC is outside the
jurisdiction of the CTA.51

As shown by the table below, the judicial claims of petitioner were filed beyond the 120+30 day period:
chanRoble svirtual Lawlib ra ry

End of End of
Taxable Judicial Number
Administrative the 120- the 30-
Quarter Claim of Days
Claim Filed day day
of 2001 Filed Late
Period Period

13
15 March 30 July
2nd 16 October 2001 February 502 days
2002 2003
2002

2 1 20
4 September
3rd January February October 261 days
2002
2003 2003 2003

2 1 30
4 September
4th January February December 332 days
2002
2003 2003 2003
The judicial claim for the 4th quarter of 2001, while filed within the period 10 December 2003 up to 6
October 2010, cannot find solace in BIR Ruling No. DA-489-03. The general interpretative rule allowed the
premature filing of judicial claims by providing that the "taxpayer-claimant need not wait for the lapse of the
120-day period before it could seek judicial relief with the CTA by way of Petition for Review."52 The rule
certainly did not allow the filing of a judicial claim long after the expiration of the 120+30 day period.53

As things stood, the CTA had no jurisdiction to act upon, take cognizance of, and render judgment upon the
petitions for review filed by petitioner. For having been rendered without jurisdiction, the decision of the CTA
Second Division in this case - and consequently, the decision of the CTA En Banc - is a total nullity that
creates no rights and produces no effect.54
Section 19 of R.A. 1125 provides that parties adversely affected by a decision or ruling of the CTA En Banc
may file before us a verified petition for review on certiorari pursuant to Rule 45 of the 1997 Rules of Civil
Procedure. In this case, the assailed CTA rulings are not decisions in contemplation of law55 that can serve
as the subject of this Court's exercise of its power of review.

Given the foregoing, there is no reason for this Court to rule upon the issues raised by petitioner in the
instant petition. chanro bleslaw

WHEREFORE, this Court hereby SETS ASIDE the assailed Court of Tax Appeals En Banc Decision dated 18
January 2008 and Resolution dated 30 April 2008 in CTA EB No. 298; and the Court of Tax Appeals Second
Division Decision dated 5 February 2007 and Resolution dated 29 June 2007 in CTA CaseNos. 6741, 6800 &
6841.

The judicial claims filed by petitioner with the Court of Tax Appeals for the refund of the input value-added
tax paid on imported capital goods for the 2nd, 3rd and 4th quarters of 2001 are DISMISSED for lack of
jurisdiction.

SO ORDERED. cralawlawlibra ry

2. GJM Phil. Mfg Inc vs CIR GR 202695. 2/29/16

THIRD DIVISION

G.R. No. 202695, February 29, 2016

COMMISSIONER OF INTERNAL REVENUE, Petitioner, v. GJM PHILIPPINES MANUFACTURING,

INC., Respondent.

DECISION

PERALTA, J.:

For resolution is a Petition for Review under Rule 45 of the Rules of Court which petitioner Commissioner of
Internal Revenue (CIR) filed, praying for the reversal of the Decision1 of the Court of Tax Appeals (CTA) En
Banc dated March 6, 2012 and its Resolution2 dated July 12, 2012 in CTA EB CASE No. 637. The CTA En
Banc affirmed the Decision3 of the CTA First Division dated January 26, 2010 and its Resolution4 dated May
4, 2010 in favor of respondent GJM Philippines Manufacturing, Inc. (GJM).

The facts, as culled from the records, are as follows:

On April 12, 2000, GJM filed its Annual Income Tax Return for the year 1999. Thereafter, its parent
company, Warnaco (ITK) Ltd., underwent bankruptcy proceedings, resulting in the transfer of ownership
over GJM and its global affiliates to Luen Thai Overseas Limited in December 2001. On August 26, 2002,
GJM informed the Revenue District Officer of Trece Martirez, through a letter, that on April 29, 2002, it
would be canceling its registered address in Makati and transferring to Rosario, Cavite, which is under
Revenue District Office (RDO) No. 54. On August 26, 2002, GJM's request for transfer of its tax registration
from RDO No. 48 to RDO No. 54 was confirmed through Transfer Confirmation Notice No. OCN ITR
000018688.

On October 1 8, 2002, the Bureau of Internal Revenue (BIR) sent a letter of informal conference informing
GJM that the report of investigation on its income and business tax liabilities for 1999 had been submitted.
The report disclosed that GJM was still liable for an income tax deficiency and the corresponding 20%
interest, as well as for the compromise penalty in the total amount of P1,192,541.51. Said tax deficiency
allegedly resulted from certain disallowances/understatements, to wit: (a) Loading and Shipment/Freight
Out in the amount of P2,354,426.00; (b) Packing expense, P8,859,975.00; (c) Salaries and Wages,
P2,717,910.32; (d) Staff Employee Benefits, P1,191,965.87; and (e) Fringe Benefits Tax, in the amount of
P337,814.57. On October 24, 2002, GJM refuted said findings through its Financial Controller.
On February 12, 2003, the Bureau of Internal Revenue (BIR) issued a Pre-Assessment Notice and Details of
Discrepancies against GJM. On April 14, 2003, it issued an undated Assessment Notice, indicating a
deficiency income tax assessment in the amount of PI,480,099.29. On July 25, 2003, the BIR issued a
Preliminary Collection Letter requesting GJM to pay said income tax deficiency for the taxable year 1999.
Said letter was addressed to GJM's former address in Pio del Pilar, Makati. On August 18, 2003, although the
BIR sent a Final Notice Before Seizure to GJM's address in Cavite, the latter claimed that it did not receive
the same.

On December 8, 2003, GJM received a Warrant of Distraint and/or Levy from the BIR RDO No. 48-West
Makati. The company then filed its Letter Protest on January 7, 2004, which the BIR denied on January 15,
2004. Hence, GJM filed a Petition for Review before the CTA.

On January 26, 2010, the CTA First Division rendered a Decision in favor of GJM, the dispositive portion of
which reads:

WHEREFORE, the deficiency income tax assessment in the amount of PI,480,099.29, inclusive of interest,
for taxable year 1999, covered by Formal Assessment Notice No. IT-1731 6-99-03-282 and the Warrant of
Distraint and/or Levy dated November 27, 2003, both issued against petitioner by respondent, are
hereby CANCELLED and WITHDRAWN.

Accordingly, respondent is hereby ORDERED to cease and desist from implementing the said assessment
and Warrant.

SO ORDERED.5 ChanRoblesVi rtual awlib rary

When its Motion for Reconsideration was denied, the CIR brought the case to the CTA En Banc.

On March 6, 2012, the CTA En Banc denied the CIR's petition, thus:

WHEREFORE, the Petition for Review is hereby DENIED. Accordingly, the impugned Decision dated
January 26, 2010 and Resolution dated May 4, 2010 are hereby AFFIRMEDin toto.

SO ORDERED.6 ChanRoblesVirtualawl ibra ry

The CIR filed a Motion for Reconsideration but the same was denied for lack of merit. Thus, the instant
petition.

The CIR raised the following issues:

I.

WHETHER OR NOT THE FORMAL ASSESSMENT NOTICE (FAN) FOR DEFICIENCY INCOME TAX ISSUED TO
GJM FOR TAXABLE YEAR 1999 WAS RELEASED, MAILED, AND SENT WITHIN THE THREE (3)-YEAR
PRESCRIPTIVE PERIOD UNDER SECTION 203 OF THE NIRC OF 1997.

II.

WHETHER OR NOT THE BIR'S RIGHT TO ASSESS GJM FOR DEFICIENCY INCOME TAX FOR TAXABLE YEAR
1999 HAS ALREADY PRESCRIBED.

The petition lacks merit.

Section 203 of the 1997 National Internal Revenue Code (NIRC), as amended, specifically provides for the
period within which the C1R must make an assessment. It provides:

SEC. 203. Period of Limitation Upon Assessment and Collection. - Except as provided in Section 222,
internal revenue taxes shall be assessed within three (3) years after the last day prescribed by law for the
filing of the return, and no proceeding in court without assessment for the collection of such taxes shall be
begun after the expiration of such period: Provided, That in a case where a return is filed beyond the period
prescribed by law, the three (3)-year period shall be counted from the day the return was filed. For
purposes of this Section, a return filed before the last day prescribed by law for the filing thereof shall be
considered as filed on such last day. (Emphasis supplied)

Thus, the CIR has three (3) years from the date of the actual filing of the return or from the last day
prescribed by law for the filing of the return, whichever is later, to assess internal revenue taxes. Here, GJM
filed its Annual Income Tax Return for the taxable year 1999 on April 12, 2000. The three (3)-year
prescriptive period, therefore, was only until April 15, 2003. The records reveal that the BIR sent the FAN
through registered mail on April 14, 2003, well-within the required period. The Court has held that when an
assessment is made within the prescriptive period, as in the case at bar, receipt by the taxpayer may or
may not be within said period. But it must be clarified that the rule does not dispense with the requirement
that the taxpayer should actually receive the assessment notice, even beyond the prescriptive period.7 GJM,
however, denies ever having received any FAN.

If the taxpayer denies having received an assessment from the BIR, it then becomes incumbent upon the
latter to prove by competent evidence that such notice was indeed received by the addressee.8 Flere,
the onus probandi has shifted to the BIR to show by contrary evidence that GJM indeed received the
assessment in the due course of mail. It has been settled that while a mailed letter is deemed received by
the addressee in the course of mail, this is merely a disputable presumption subject to controversion, the
direct denial of which shifts the burden to the sender to prove that the mailed letter was, in fact, received by
the addressee.9

To prove the fact of mailing, it is essential to present the registry receipt issued by the Bureau of Posts or
the Registry return card which would have been signed by the taxpayer or its authorized representative. And
if said documents could not be located, the CIR should have, at the very least, submitted to the Court a
certification issued by the Bureau of Posts and any other pertinent document executed with its intervention.
The Court does not put much credence to the self-serving documentations made by the BIR personnel,
especially if they are unsupported by substantial evidence establishing the feet of mailing. While it is true
that an assessment is made when the notice is sent within the prescribed period, the release, mailing, or
sending of the same must still be clearly and satisfactorily proved. Mere notations made without the
taxpayer's intervention, notice or control, and without adequate supporting evidence cannot suffice.
Otherwise, the defenseless taxpayer would be unreasonably placed at the mercy of the revenue offices.10

The BIR's failure to prove GJM's receipt of the assessment leads to no other conclusion but that no
assessment was issued. Consequently, the government's right to issue an assessment for the said period
has already prescribed. The CIR offered in evidence Transmittal Letter No. 282 dated April 14, 2003
prepared and signed by one Ma. Nieva A. Guerrero, as Chief of the Assessment Division of BIR Revenue
Region No. 8-Makati, to show that the FAN was actually served upon GJM. However, it never presented
Guerrero to testify on said letter, considering that GJM vehemently denied receiving the subject FAN and the
Details of Discrepancies. Also, the CIR presented the Certification signed by the Postmaster of Rosario,
Cavite, Nicarter Looc, which supposedly proves the fact of mailing of the FAN and Details of Discrepancy. It
also adduced evidence of mail envelopes stamped February 17, 2003 and April 14, 2003, which were meant
to prove that, on said dates, the Preliminary Assessment Notice (PAN) and the FAN were delivered,
respectively. Said envelopes also indicate that they were posted from the Makati Central Post Office.
However, according to the Postmaster's Certification, of all the mail matters addressed to GJM which were
received by the Cavite Post Office from February 12, 2003 to September 9, 2003, only two (2) came from
the Makati Central Post Office. These two (2) were received by the Cavite Post Office on February 12, 2003
and May 13, 2003. But the registered mail could not have been the PAN since the latter was mailed only on
February 17, 2003, and the FAN, although mailed on April 14, 2003, was not proven to be the mail received
on May 13, 2003. The CIR likewise failed to show that said mail matters received indeed came from it. It
could have simply presented the registry receipt or the registry return card accompanying the envelope
purportedly containing the assessment notice, but it offered no explanation why it failed to do so. Hence, the
CTA aptly ruled that the CIR failed to discharge its duty to present any evidence to show that GJM indeed
received the FAN sent through registered mail on April 14, 2003.

The Court wishes to note and reiterate that it is not a trier of facts. The CIR mainly raised issues on factual
findings which have already been thoroughly discussed below by both the CTA First Division and the CTA En
Banc. Oft-repeated is the rule that the Court will not lightly set aside the conclusions reached by the CTA
which, by the very nature of its function of being dedicated exclusively to the resolution of tax problems, has
accordingly developed an expertise on the subject, unless there has been an abuse or improvident exercise
of authority. This Court recognizes that the CTA's findings can only be disturbed on appeal if they are not
supported by substantial evidence, or there is a showing of gross error or abuse on the part of the Tax
Court. In the absence of any clear and convincing proof to the contrary, the Court must presume that the
CTA rendered a decision which is valid in every respect. It has been the Court's long-standing policy and
practice to respect the conclusions of quasi-judicial agencies such as the CTA, a highly specialized body
specifically created for the purpose of reviewing tax cases.11

The Court hereby sustains the order of cancellation and withdrawal of the Formal Assessment Notice No. IT-
17316-99-03-282, and the Warrant of Distraint and/or Levy dated November 27, 2003.

WHEREFORE, PREMISES CONSIDERED, the petition is DENIED. The Decision of the Court of Tax
Appeals En Banc dated March 6, 2012 and its Resolution dated July 12, 2012 in CTA EB CASE No. 637 are
hereby AFFIRMED.

SO ORDERED

3. Spouses Pacquiao vs CIR. GR 213394. 4/6/16

SECOND DIVISION

G.R. No. 213394, April 06, 2016

SPOUSES EMMANUEL D. PACQUIAO AND JINKEE J. PACQUIAO, Petitioners, v. THE COURT OF

TAX APPEALS - FIRST DIVISION AND THE COMMISSION OF INTERNAL
REVENUE, Respondents.

DECISION

MENDOZA, J.:

Before this Court is a petition for review on certiorari1 under Rule 65 of the Rules of Court filed by
petitioner spouses, now Congressman Emmanuel D. Pacquiao (Pacquiao) and Vice-Governor Jinkee J.
Pacquiao (Jinkee), to set aside and annul the April 22, 2014 Resolution2 and the July 11, 2014
Resolution3 of the Court of Tax Appeals (CTA), First Division, in CTA Case No. 8683.

Through the assailed issuances, the CTA granted the petitioners' Urgent Motion to Lift Warrants of
Distraint & Levy and Garnishment and for the Issuance of an Order to Suspend the Collection of Tax
(with Prayer for the Issuance of a Temporary Restraining Order4[Urgent Motion], dated October 18,
2013, but required them, as a condition, to deposit a cash bond in the amount of P3,298,514,894.35-
or post a bond of P4,947,772,341.53.

The Antecedents

The genesis of the foregoing controversy began a few years before the petitioners became elected
officials in their own right. Prior to their election as public officers, the petitioners relied heavily on
Pacquiao's claim to fame as a world-class professional boxer. Due to his success, Pacquiao was able to
amass income from both the Philippines and the United States of America (US). His income from the
US came primarily from the purses he received for the boxing matches he took part under Top Rank,
Inc. On the other hand, his income from the Philippines consisted of talent fees received from various
Philippine corporations for product endorsements, advertising commercials and television
appearances.

In compliance with his duty to his home country, Pacquiao filed his 2008 income tax return on April
15, 2009 reporting his Philippine-sourced income.5 It was subsequently amended to include his US-
sourced income.6

The controversy began on March 25, 2010, when Pacquiao received a Letter of Authority 7(March
LA) from the Regional District Office No. 43 (RDO) of the Bureau of Internal Revenue (BIR) for the
examination of his books of accounts and other accounting records for the period covering January 1,
2008 to December 31, 2008.

On April 15, 2010, Pacquiao filed his 2009 income tax return,8 which although reflecting his
Philippines-sourced income, failed to include his income derived from his earnings in the US.9 He also
failed to file his Value Added Tax (VAT) returns for the years 2008 and 2009.10

Finding the need to directly conduct the investigation and determine the tax liabilities of the
petitioners, respondent Commissioner on Internal Revenue (CIR) issued another Letter of Authority,
dated July 27, 2010 (July LA), authorizing the BIR's National Investigation Division (NID) to examine
the books of accounts and other accounting records of both Pacquiao and Jinkee for the last 15 years,
from 1995 to 2009.11 On September 21, 2010 and September 22, 2010, the CIR replaced the July LA
by issuing to both Pacquiao12 and Jinkee13separate electronic versions of the July LA pursuant to
Revenue Memorandum Circular (RMC) No. 56-2010.14

Due to these developments, the petitioners, through counsel, wrote a letter15 questioning the propriety
of the CIR investigation. According to the petitioners, they were already subjected to an earlier
investigation by the BIR for the years prior to 2007, and no fraud was ever found to have been
committed. They added that pursuant to the March LA issued by the RDO, they were already being
investigated for the year 2008.

In its letter,16 dated December 13, 2010, the NID informed the counsel of the petitioners that the July
LA issued by the CIR had effectively cancelled and superseded the March LA issued by its RDO. The
same letter also stated that:

Although fraud had been established in the instant case as determined by the
Commissioner, your clients would still be given the opportunity to present documents as part of their
procedural rights to due process with regard to the civil aspect thereof. Moreover, any tax credits
and/or payments from the taxable year 2007 & prior years will be properly considered and credited in
the current investigation.17

[Emphasis Supplied]

The CIR informed the petitioners that its reinvestigation of years prior to 2007 was justified because
the assessment thereof was pursuant to a "fraud investigation" against the petitioners under the "Run
After Tax Evaders" (RATE) program of the BIR.

On January 5 and 21, 2011, the petitioners submitted various income tax related documents for the
years 2007-2009.18 As for the years 1995 to 2006, the petitioners explained that they could not
furnish the bureau with the books of accounts and other, tax related documents as they had already
been disposed in accordance with Section 235 of the Tax Code.19They added that even if they wanted
to, they could no longer find copies of the documents because during those years, their accounting
records were then managed by previous counsels, who had since passed away. Finally, the petitioners
pointed out that their tax liabilities for the said years had already been fully settled with then CIR Jose
Mario Buñag, who after a review, found no fraud against them.20

On June 21; 2011, on the same day that the petitioners made their last compliance in submitting their
tax-related documents, the CIR issued a subpoena duces tecum21 requiring the petitioners to submit
additional income tax and VAT-related documents for the years 1995-2009.

After conducting its own- investigation, the CIR made its initial assessment finding that the petitioners
were unable to fully settle their tax liabilities. Thus, the CIR issued its Notice of Initial Assessment-
Informal Conference (NIC),22 dated January 31, 2012, directly addressed to the
petitioners, informing them that based on the best evidence obtainable, they were liable for
deficiency income taxes in the amount of P714,061,116.30 for 2008 and P1,446,245,864.33 for
2009, inclusive of interests and surcharges. After being informed of this development, the counsel for
the petitioners sought to have the conference reset but he never received a response.
Then, on "February 20, 2012, the CIR issued the Preliminary Assessment Notice 23(PAN), informing the
petitioners that based on third-party information allowed under Section 5(B)24and 6 of the National
Internal Revenue Code (NIRC),25 they found the petitioners liable not only for deficiency income
taxes in the amount of P714,061,116.30 for 2008 and P1,446;245,864.33 for 2009, but aiso for their
non-payment of their VAT liabilities in the amount P4,104,360.01 for 2008 and P 24,901,276.77 for
2009.

The petitioners filed their protest against the PAN.26

After denying the protest, the BIR issued its Formal Letter Demand27(FLD), dated May 2, 2012, finding
the petitioners liable for deficiency income tax and VAT amounting to P766,899,530.62 for taxable
years 2008 and P1,433,421,214.61 for 2009, inclusive of interests and surcharges. Again, the
petitioners questioned the findings of the CIR.28

On May 14, 2013, the BIR issued its Final Decision on Disputed Assessment (FDDA),29 addressed
to Pacquiao only, informing him that the CIR found him liable for deficiency income tax and VAT for
taxable years 2008 and 2009 which, inclusive of interests and surcharges, amounted to a total of
P2,261,217,439.92.

Seeking to collect the total outstanding tax liabilities of the petitioners, the Accounts Receivable
Monitoring Division of the BIR (BIR-ARMD), issued the Preliminary Collection Letter (PCL),30 dated July
19, 2013, demanding that both Pacquiao and Jinkee pay the amount of P2,261,217,439.92, inclusive
of interests and surcharges.

Then, on August 7, 2013, the BIR-ARMD sent Pacquiao and Jinkee the Final Notice Before
Seizure (FNBS),31 informing the petitioners of their last opportunity to make the necessary settlement
of deficiency income and VAT liabilities before the bureau would proceed against their property.

Although they no longer questioned the BIR's assessment of their deficiency VAT liability, the
petitioners requested that they be allowed to pay the same in four (4) quarterly installments.
Eventually, through a series of installments, Pacquiao and Jinkee paid a total P32,196,534.40 in
satisfaction of their liability for deficiency VAT.32

Proceedings at the CTA

Aggrieved that they were being made liable for deficiency income taxes for the years 2008 and
2009, the petitioners sought redress and filed a petition for review33 with the CTA.

Before the CTA, the petitioners contended that the assessment of the CIR was defective because it
was predicated on its mere allegation that they were guilty of fraud.34

They also questioned the validity of the attempt by the CIR to collect deficiency taxes from Jinkee,
arguing that she was denied due process. According to the petitioners, as all previous communications
and notices from the CIR were addressed to both petitioners, the FDDA was void because it was only
addressed to Pacquiao. Moreover, considering that the PCL and FNBS were based on the FDDA, the
same should likewise be declared void.35

The petitioners added that the CIR assessment, which was not based on actual transaction
documents but simply on "best possible sources," was not sanctioned by the Tax Code. They
also argue that the assessment failed to consider not only the taxes paid by Pacquiao to the US
authorities for his fights, but also the deductions claimed by him for his expenses.36

Pending the resolution by the CTA of their appeal, the petitioners sought the suspension of the
issuance of warrants of distraint and/or levy and warrants of garnishment.37

Meanwhile, in a letter,38 dated October 14, 2013, the BIR-ARMD informed the petitioners that they
were denying their request to defer the collection enforcement action for lack of legal basis. The same
letter also informed the petitioners that despite their initial payment, the amount to be collected from
both of them still amounted to P3,259,643,792.24, for deficiency income tax for taxable years
2008 and 2009, and P46,920,235.74 for deficiency VAT for the same period. A warrant of distraint
and/or levy39 against Pacquiao and Jinkee was included in the letter.

Aggrieved, the petitioners filed the subject Urgent Motion for the CTA to lift the warrants of distraint,
levy and garnishments issued by the CIR against their .assets and to enjoin the CIR from collecting
the assessed deficiency taxes pending the resolution of their appeal. As for- the cash deposit and bond
requirement under Section 11 of Republic Act (R.A.) No. 1125, the petitioners question the necessity
thereof, arguing that the CIR's assessment of their tax liabilities was highly questionable. At the same
time, the petitioners manifested that they were willing to file a bond for such reasonable amount to be
fixed by the tax court.

On April 22, 2014, the CTA issued the first assailed resolution granting the petitioner's Urgent Motion,
ordering the CIR to desist from collecting on the deficiency tax assessments against the petitioners. In
its resolution, the CTA noted that the amount sought to be collected was way beyond the petitioners'
net worth, which, based on Pacquiao's Statement of Assets, Liabilities and Net Worth (SALN), only
amounted to P1,185,984,697.00. Considering that the petitioners still needed to cover the costs of
their daily subsistence, the CTA opined that the collection of the total amount of P3,298,514,894.35
from the petitioners would be highly prejudicial to their interests and should, thus, be suspended
pursuant to Section 11 of R.A. No. 1125, as amended.

The CTA, however, saw no justification that the petitioners should deposit less than the disputed
amount. They were, thus, required to deposit the amount of P3,298,514,894.35 or post a bond in the
amount of P4,947,772,341.53.

The petitioners sought partial reconsideration of the April 22, 2014 CTA resolution, praying for the
reduction of the amount of the bond required or an extension of 30 days to file the same. On July 11,
2014, the CTA issued the second assailed resolution40 denying the petitioner's motion to reduce the
required cash deposit or bond, but allowed them an extension of thirty (30) days within which to file
the same.

Hence, this petition, raising the following

GROUNDS

A.

Respondent Court acted with grave abuse of discretion amounting to lack or excess of
jurisdiction in presuming the correctness of a fraud assessment without evidentiary support
other than the issuance of the fraud assessments themselves, thereby violating Petitioner's
constitutional right to due process.

B.

Respondent Court acted with grave abuse of discretion amounting to lack or excess of
jurisdiction when it required the Petitioners to post a bond even if the tax collection
processes employed by Respondent Commissioner against Petitioners was patently in
violation of law thereby blatantly breaching Petitioners' constitutional right to due process,
to wit:

Respondent Commissioner commenced tax collection process against Jinkee without

issuing or serving an FDDA against her.

Respondent Commissioner failed to comply with the procedural due process requirements
for summary tax collection remedies under Sections 207(A) and (B) of the Tax Code when
she commenced summary collection remedies before the expiration of the period for
Petitioners to pay the assessed deficiency taxes.

Respondent Commissioner failed to comply with the procedural due process requirements
for summary tax collection remedies under Section 208 of the Tax Code when she failed to
serve Petitioners with warrants of garnishment against their bank accounts.

The Chief of the ARMD, without any authority from Respondent Commissioner, increased
the aggregate amount of deficiency income tax and VAT assessed against Petitioners from
P2,261,217,439.92 to P3,298,514,894.35 after the filing of the Petition for Review with the
Court of Tax Appeals.

Respondent Commissioner arbitrarily refused to admit that Petitioners had already paid the
deficiency VAT assessments for the years 2008 and 2009.

C.

Respondent Court acted with grave abuse of discretion amounting to lack or excess of
jurisdiction in requiring Petitioners to post a cash bond in the amount of P3,298,514,894.35
or a surety bond in the amount of P4,947,772,341.53, which is effectively an impossible
condition given that their undisputed net worth is only P1,185,984,697.00.

D.

Respondent Court acted with grave abuse of discretion amounting to lack or excess of
jurisdiction when it imposed a bond requirement which will effectively prevent Petitioners
from continuing the prosecution of its appeal from the arbitrary and bloated assessments
issued by Respondent Commissioner.41

Arguments of the Petitioners

Contending that the CTA En Bane has no certiorari jurisdiction over interlocutory orders issued by its
division, the petitioners come before the Court, asking it to 1] direct the CTA to dispense with the
bond requirement imposed under Section 11 of R.A. No. 1125, as amended; and 2] direct the CIR to
suspend the collection of the deficiency income tax and VAT for the years 2008 and 2009. The
petitioners also pray that a temporary restraining order (TRO) be issued seeking a similar relief
pending the disposition of the subject petition.

In support of their position, the petitioners assert that the CTA acted with grave abuse of discretion
amounting to lack or excess of jurisdiction in requiring them to provide security required under
Section 11 of R.A. No. 1125. Under the circumstances, they claim that they should not be required to
make a cash deposit or post a bond to stay the collection of the questioned deficiency taxes
considering that the assessment and collection efforts of the BIR was marred by both procedural and
substantive errors. They are synthesized as follows:

First. The CTA erred when it required them to make a cash deposit or post a bond on the basis of the
fraud assessment by the CIR. Similar to the argument they raised in their petition for review with the
CTA, they insist that the fraud assessment by the CIR could not serve as basis for security because
the amount assessed by the CIR was made without evidentiary basis,42 but just grounded on the "best
possible sources," without any detail.

Second... The BIR failed to accord them procedural due process when it initiated summary collection
remedies even before the expiration of the period allowed for them to pay the assessed deficiency
taxes.43 They also claimed that they were not served with warrants of garnishment and that the
warrants of garnishment served on their banks of account were made even before they received the
FDDA and PCL.44

Third. The BIR only served the FDDA to Pacquiao. There was no similar notice to Jinkee. Considering
such failure, the CIR effectively did not find Jinkee liable for deficiency taxes. The collection of
deficiency taxes against Jinkee was improper as it violated her right to due process of
law.45 Accordingly, the petitioners question the propriety of the CIR's attempt to collect deficiency
taxes from Jinkee.
Fourth. The amount assessed by the BIR as deficiency taxes included the deficiency VAT for the years
2008 and 2009 which they had already paid, albeit in installments.

Fifth. The posting of the required security is effectively an impossible condition given that their
undisputed net worth is only P1,185,984,697.00

Considering the issues raised, it is the position of the petitioners that the circumstances of the case
warrant the application of the exception provided under Section 11 of R.A. No. 1125 as affirmed by
the ruling of the Court in Collector of Internal Revenue v. Avelino46 (Avelino) and Collector of Internal
Revenue v. Zulueta,47 (Zulueta) and that they should have been exempted from posting the required
security as a prerequisite to suspend the collection of deficiency taxes from them.

On August 18, 2014, the Court resolved to grant the petitioners' prayer for the issuance of a TRO and
to require the CIR to file its comment.48

Arguments of the CIR

For its part,- the CIR asserts that the CTA was correct in insisting that the petitioners post the
required cash deposit or bond as a condition to suspend the collection of deficiency taxes. According
to. the tax administrator, Section 11 of R.A. No. 1125, as amended, is without exception when it
states that notwithstanding an appeal to the CTA, a taxpayer, in order to suspend the payment of his
tax liabilities, is required to deposit the amount claimed by the CIR or to file a surety bond for not
more than double the amount due.49

As for the Court's rulings in Avelino and Zulueta invoked by the petitioners, the CIR argues that they
are inapplicable considering that in the said cases, it was ruled that the requirement of posting a bond
to suspend the collection of taxes could be dispensed with only if the methods employed by the CIR in
the tax collection were clearly null and void and prejudicial to the taxpayer.50 The CIR points out that,
in this case, the CTA itself made, no finding that its collection by summary methods was void and even
ruled that "the alleged illegality of the methods employed by the respondent (CIR) to effect the
collection of tax [is] not at all patent or evident xxx" and could only be determined after a full-blown
trial.51The CIR even suggests that the Court revisit its ruling in Avelino and Zulueta as Section 11 of
R.A. No. 1125, as amended, gives the CTA no discretion to allow the dispensation of the required bond
as a condition to suspend the collection of taxes.

Finally, the CIR adds that whether the assessment and collection of the petitioners' tax liabilities were
proper as to justify the application of Avelino and Zulueta is a question of fact which is not proper in a
petition for certiorari under Rule 65, considering that the rule is only confined to issues of
jurisdiction.52

The Court's Ruling

Appeal will not suspend

the collection of tax;
Exception

Section 11 of R.A. No. 1125, as amended by R.A. No. 9282,53 embodies the rule that an appeal to the
CTA from the decision of the CIR will not suspend the payment, levy, distraint, and/or sale of any
property of the taxpayer for the satisfaction of his tax liability as provided by existing law. When, in
the view of the CTA, the collection may jeopardize the interest of the Government and/or the
taxpayer, it may suspend the said collection and require the taxpayer either to deposit the amount
claimed or to file a surety bond.

The application of the exception to the rule is the crux of the subject controversy. Specifically, Section
11 provides:

SEC. 11. Who May Appeal; Mode of Appeal; Effect of Appeal. - Any party adversely affected by a
decision, ruling or inaction of the Commissioner of Internal Revenue, the Commissioner of Customs,
the Secretary of Finance, the Secretary of Trade and Industry or the Secretary of Agriculture or the
Central Board of Assessment Appeals or the Regional Trial Courts may file an appeal with the CTA
within thirty (30) days after the receipt of such decision or ruling or after the expiration of the period
fixed by law for action as referred to in Section 7(a)(2) herein.

xxxx

No appeal taken to the CTA from the decision of the Commissioner of Internal Revenue or the
Commissioner of Customs or the Regional Trial Court, provincial, city or municipal treasurer or the
Secretary of Finance, the Secretary of Trade and Industry and Secretary of Agriculture, as the case
may be shall suspend the payment, levy, distraint, and/or sale of any property of the taxpayer for the
satisfaction of his tax liability as provided by existing law:

Provided, however, That when in the opinion of the Court the collection by the
aforementioned government agencies may jeopardize the interest of the Government
and/or the taxpayer, the Court at any stage of the proceeding may suspend the said
collection and require the taxpayer either to deposit the amount claimed or to file a surety
bond for not more than double the amount with the Court.

xxxx

[Emphasis Supplied]

Essentially, the petitioners ascribe grave abuse of discretion on the part of the CTA when it issued the
subject resolutions requiring them to deposit-the amount of P3,298,514,894.35 or post a bond in the
amount of P4,947,772,341.53 as a condition for its order enjoining the CIR from collecting the taxes
from them. The petitioners anchor their contention on the premise that the assessment and collection
processes employed by the CIR in exacting their tax liabilities were in patent violation of their
constitutional right to due process of law. They, thus, posit that pursuant to Avelino and Zulueta, the
tax court should have not only ordered the CIR to suspend the collection efforts it was pursuing in
satisfaction of their tax liability, but also dispensed with the requirement of depositing a cash or filing
a surety bond.

To recall, the Court in Avelino upheld the decision of the CTA to declare the warrants of garnishment,
distraint and levy and the notice of sale of the properties of Jose Avelino null and void and ordered the
CIR to desist from collecting the deficiency income taxes which were assessed for the years 1946 to
1948 through summary administrative methods. The Court therein found that the demand of the then
CIR was made without authority of law because it was made five (5) years and thirty-five (35) days
after the last two returns of Jose Avelino were filed - clearly beyond the three (3)-year prescriptive
period provided under what was then Section 51(d) of the National Internal Revenue Code. Dismissing
the contention of the CIR that the deposit of the amount claimed or the filing of a bond as required by
law was a requisite before relief was granted, the Court therein concurred with the opinion of the CTA
that the courts were clothed with authority to dispense with the requirement "if the method employed
by the Collector of Internal Revenue in the collection of tax is not sanctioned by law."54

In Zulueta, the Court likewise dismissed the argument that the CTA erred in issuing the injunction
without requiring the taxpayer either to deposit the amount claimed or to file a surety bond for an
amount not more than double the tax sought to be collected. The Court cited Collector of Internal
Revenue v. Aurelio P. Reyes and the Court of Tax Appeals55 where it was written:

Xxx. At first blush it might be as contended by the Solicitor General, but a careful analysis of the
second paragraph of said Section 11 will lead Us to the conclusion that the requirement of the bond as
a condition precedent to the issuance of a writ of injunction applies only in cases where the processes
by which the collection sought to be made by means thereof are carried out in consonance with law
for such cases provided and not when said processes are obviously in violation of the law to the
extreme that they have to be SUSPENDED for jeopardizing the interests of the taxpayer.56

[Italics included]
The Court went on to explain the reason for empowering the courts to issue such injunctive writs. It
wrote:

"Section 11 of Republic Act No. 1125 is therefore premised on the assumption that the collection
by summary proceedings is by itself in accordance with existing laws; and then what is suspended is
the act of collecting, whereas, in the case at bar what the respondent Court suspended was the use of
the method employed to verify the collection which was evidently illegal after the lapse of the three-
year limitation period. The respondent Court issued the injunction in question on the basis of its
findings that the means intended to be used by petitioner in the collection of the alleged deficiency
taxes were in violation of law. It would certainly be an absurdity on the part of the Court of Tax
Appeals to declare that the collection by the summary methods of distraint and levy was
violative of the law, and then, on the same breath require the petitioner to deposit or file a
bond as a prerequisite of the issuance of a writ of injunction. Let us suppose, for the sake of
argument, that the Court a quo would have required the petitioner to post the bond in question and
that the taxpayer would refuse or fail to furnish said bond, would the Court a quo be obliged to
authorize or allow the Collector of Internal Revenue to proceed with the collection from the petitioner
of the taxes due by a means it previously declared to be contrary to law?"57

[Italics included. Emphases and Underlining Supplied]

Thus, despite the amendments to the law, the Court still holds that the CTA has ample authority to
issue injunctive writs to restrain the collection of tax and to even dispense with the deposit of the
amount claimed or the filing of the required bond, whenever the method employed by the CIR
in the collection of. tax jeopardizes the interests of a taxpayer for being patently in violation of the
law. Such authority emanates from the jurisdiction conferred to it not only by Section 11 of R.A. No.
1125, but also by Section 7 of the same law, which, as amended provides:

Sec. 7. Jurisdiction. - The Court of Tax Appeals shall exercise:

a. Exclusive appellate jurisdiction to review by appeal, as herein provided:

l. Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds
of internal revenue taxes, fees or other charges, penalties imposed in relation thereto, or other
matters arising under the National Internal Revenue or other laws administered by the
Bureau of Internal Revenue;

xxxx

[Emphasis Supplied]

From all the foregoing, it is clear that the authority of the courts to issue injunctive writs to restrain
the collection of tax and to dispense with the deposit of the amount claimed or the filing of the
required bond is not simply confined to cases where prescription has set in. As explained by
the Court in those cases, whenever it is determined by the courts that the method employed
by the Collector of Internal Revenue in the collection of tax is not sanctioned by
law, the bond requirement under Section 11 of R.A. No. 1125should be dispensed with. The
purpose of the rule is not only to prevent jeopardizing the interest of the taxpayer, but more
importantly, to prevent the absurd situation wherein the court would declare "that the collection by
the summary methods of distraint and levy was violative of law, and then, in the same breath require
the petitioner to deposit or file a bond as a prerequisite for the issuance of a writ of injunction."58

The determination of whether

the petitioners.' case falls
within the exception provided
under Section 11, R.A No. 1125
cannot be determined
at this point

Applying the foregoing precepts to the subject controversy, the Court finds no sufficient basis in the
records for the Court to determine whether the dispensation of the required cash deposit or bond
provided under Section 11, R.A No. 1125 is appropriate.

It should first be highlighted that in rendering the assailed resolution, the CTA, without stating the
facts and law, made a determination that the illegality of the methods employed by the CIR to effect
the collection of tax was not patent. To quote the CTA:

In this case, the alleged illegality of the methods employed by respondent to effect the collection of
tax is not at all patent or evident as in the foregoing cases. At this early stage of the
proceedings, it is premature for this Court to rule on the issues of whether or not the warrants were
defectively issued; or whether the service thereof was done in violation of the rules; or whether or not
respondent's assessments were valid. These matters are evidentiary in nature, the resolution of
which can only be made after a full blown trial.

Apropos, the Court finds no legal basis to apply Avelino and Zulueta to the instant case and exempt
petitioners from depositing a cash bond or filing a surety bond before a suspension order may be
effected.59
ChanRoblesVi rtua lawlib rary

Though it may be true that it would have been premature for the CTA to immediately determine
whether the assessment made against the petitioners was valid or whether the warrants were properly
issued and served, still, it behooved upon the CTA to properly determine, at least preliminarily,
whether the CIR, in its assessment of the tax liability of the petitioners, and its effort of collecting
the same, complied with the law and the pertinent issuances of the BIR itself. The CTA should
have conducted a preliminary hearing and received evidence so it could have properly determined
whether the requirement of providing the required security under Section 11, R.A. No. 1125 could be
reduced or dispensed withpendente lite.

The Court cannot make a

preliminary determination
on whether the CIR used
methods not sanctioned by law

Absent any evidence and preliminary determination by the CTA, the Court cannot make any factual
finding and settle the issue of whether the petitioners should comply with the security requirement
under Section 11, R.A. No. 1125. The determination of whether the methods, employed by the CIR in
its assessment, jeopardized the interests of a taxpayer for being patently in violation of the law is a
question of fact that calls for the reception of evidence which would serve as basis. In this
regard, the CTA is in a better position to initiate this given its time and resources. The remand of the
"case to the CTA on this question is, therefore, more sensible and proper.

For the Court to make any finding of fact on this point would be premature. As stated earlier, there is
no evidentiary basis. All the arguments are mere allegations from both sides. Moreover, any finding
by the Court would pre-empt the CTA from properly exercising its jurisdiction and settle the main
issues presented before it, that is, whether the petitioners were afforded due process; whether the
CIR has valid basis for its assessment; and whether the petitioners should be held liable for the
deficiency taxes.

Petition to be remanded to
the CTA; CTA to conduct
preliminary hearing

As the CTA is in a better, position to make such a preliminary determination, a remand to the CTA is
in order. To resolve the issue of whether the petitioners should be required to post the security bond
under Section 11 of R.A. No. 1125, and, if so, in what, amount, the CTA must take into account,
among others, the following:
First. Whether the requirement of a Notice of Informal Conference was complied with - The
petitioners contend that the BIR issued the PAN without first sending a NIC to petitioners. One of the
first requirements of Section 3 of Revenue Regulation (R.R.) No. 12-99,60 the then prevailing
regulation on the due process requirement in tax audits and/or investigation,61is that a NIC be first
accorded to the taxpayer. The use of the word "shall" in subsection 3.1.1 describes the mandatory
nature of the service of a NIC. As with the other notices required under the regulation, the purpose of
sending a NIC is but part of the "due process requirement in the issuance of a deficiency tax
assessment," the absence of which renders nugatory any assessment made by the tax authorities.62

Second. Whether the 15-year period subject of the CIR's investigation is arbitrary and excessive. -
Section 20363 of the Tax Code provides a 3-year limit for the assessment. of internal revenue taxes.
While the prescriptive period to assess deficiency taxes may be extended to 10 years in cases where
there is false, fraudulent, or non-filing of a tax return - the fraud contemplated by law must be actual.
It must be intentional, consisting of deception willfully and deliberately done or resorted to in order to
induce another to give up some right.64

Third. Whether fraud was duly established. - In its letter, dated December 13, 2010, the NID had
been conducting a fraud investigation against the petitioners under its RATE program and that it found
that "fraud had been established in the instant case as determined by the Commissioner." Under
Revenue Memorandum Order (RMO) No. 27-10, it is required that a preliminary investigation must
first be conducted before a LA is issued.65

Fourth. Whether the FLD issued against the petitioners was irregular. - The FLD issued against the
petitioners allegedly stated that the amounts therein were "estimates based on best possible
sources." A taxpayer should be informed in writing of the law and the facts on which the assessment
is made, otherwise, the assessment is void.66 An assessment, in order to stand judicial scrutiny, must
be based on facts. The presumption of the correctness of an assessment, being a mere presumption,
cannot be made to rest on another presumption.67

To stress, the petitioners had asserted that the assessment of the CIR was not based on actual
transactions but on "estimates based on best possible sources." This assertion has not been
satisfactorily addressed by the CIR in detail. Thus, there is a need for the CTA to conduct a preliminary
hearing.

Fifth. Whether the FDDA, the PCL, the FNBS, and the Warrants of Distraint and/or Levy were validly
issued. In its hearing, the CTA must also determine if the following allegations of the petitioners have
merit:,

a. The FDDA and PCL were issued against petitioner Pacquiao only. The Warrant of Distraint and/or
Levy/Garnishment issued by the CIR, however, were made against the assets of both petitioners;

b. The warrants of garnishment had been served on the banks of both petitioners even before the
petitioners received the FDDA and PCL;

c. The Warrant of Distraint and/or Levy/Garnishment against the petitioners was allegedly made prior
to the expiration of the period allowed for the petitioners to pay the assessed deficiency
taxes;

d. The Warrant of Distraint and/or Levy/Garnishment against petitioners failed to take into
consideration that the deficiency VAT was already paid in full; and

e. Petitioners were not given a copy of the Warrants. Sections 20768 and 20869 of the Tax Code
require the Warrant of Distraint and/or Levy/Garnishment be served upon the taxpayer.

Additional Factors

In case the CTA finds that the petitioners should provide the necessary security under Section 11 of
R.A. 1125, a recomputation of the amount thereof is in order.- If there would be a need for a bond or
to reduce the same, the CTA should take note that the Court, in A.M. No. 15-92-01-CTA, resolved to
approve the CTA En Banc Resolution No. 02-2015, where the phrase "amount claimed" stated in
Section 11 of R.A. No. 1125 was construed to refer to the principal amount of the deficiency
taxes, excluding penalties, interests and surcharges.

Moreover, the CTA should.also consider the claim of the petitioners that they already paid a total of
P32,196,534.40 deficiency VAT assessed against' them.. Despite said payment, the CIR still assessed
them the total amount of P3,298,514,894.35, including the amount assessed as VAT deficiency, plus
surcharges, penalties and interest. If so, these should also be deducted from the.amount of the bond
to be computed and required.

In the conduct of its preliminary hearing, the CTA must balance the scale between the inherent power
of the State to tax and its right to prosecute perceived transgressors of the law, on one side; and the
constitutional rights of petitioners to due process of law and the equal protection of the laws, on the
other. In case of doubt, the tax court must remember that as in all tax cases, such scale should favor
the taxpayer, for a citizen's right to due process and equal protection of the law is amply protected by
the Bill of Rights under the Constitution.70

In view of all the foregoing, the April 22, 2014 and July 11, 2014 Resolutions of the CTA, in so far as it
required the petitioners to deposit first a cash bond in the amount of P3,298,514,894.35 or post a
bond of P4,947,772,341.53, should be further enjoined until the issues aforementioned are settled in
a preliminary hearing to be conducted by it. Thereafter, it should make a determination if the posting
of a bond would still be required and, if so, compute it taking into account the CTA En
Banc Resolution, which was approved by the Court in A.M. No. 15-02-01-CTA, and the claimed
payment of P32,196,534.40, among others. chanrobles law

WHEREFORE, the petition is PARTIALLY GRANTED. Let a Writ of Preliminary Injunction be issued,
enjoining the implementation of the April 22, 2014 and July 11, 2014 Resolutions of the Court of Tax
Appeals, First Division, in CTA Case No. 8683, requiring the petitioners to first deposit a cash bond in
the amount of P3,298,514,894.35 or post a bond of P4,947,772,341.53, as a condition to restrain the
collection of the deficiency taxes assessed against them.

The writ shall remain in effect until the issues aforementioned are settled in a preliminary hearing to
be conducted by the Court of Tax Appeals, First Division.

Accordingly, the case is hereby REMANDED to the Court of Tax Appeals, First Division, which is
ordered to conduct a preliminary hearing to determine whether the dispensation or reduction of the
required cash deposit or bond provided under Section 11, Republic Act No. 1125 is proper to restrain
the collection of deficiency taxes assessed against the petitioners.

If required, the Court of Tax Appeals, First Division, shall proceed to compute the amount of the bond
in accordance with the guidelines aforestated, particularly the provisions of A.M. No. 15-02-01-CTA. It
should also take into account the amounts already paid by the petitioners.

After the posting of the required bond, or if the Court of Tax Appeals, First Division, determines that
no bond is necessary, it shall proceed to hear and resolve the petition for review pending before it.

SO ORDERED.

4.San Roque Power Corp vs CIR. GR 203249. 7/23/18

THIRD DIVISION

G.R. No. 203249, July 23, 2018

 SAN ROQUE POWER CORPORATION, Petitioner, v. COMMISSIONER OF INTERNAL
REVENUE, Respondent.

DECISION

MARTIRES, J.:

The application of the 120-day and 30-day periods provided in Section 112 (D) [later renumbered as Section
112 (C)] of the National Internal Revenue Code (NIRC) is at the heart of the present case.

In Commissioner of Internal Revenue v. Aichi Forging Company of Asia, Inc. (Aichi),1 the Court considered
whether the simultaneous filing of both the administrative claim (before the Bureau of Internal
Revenue [BIR]) and judicial claim (before the Court of Tax Appeals [CTA]) for refund/credit of input VAT
under the cited law is permissible. In that case, the respondent asserted that the non-observance of the
120-day period is not fatal to the filing of a judicial claim as long as both the administrative and the judicial
claims are filed within the two-year prescriptive period. We held that the premature filing of respondent's
claim for refund/credit before the CTA warrants a dismissal inasmuch as no jurisdiction was acquired by that
court.

In the case before us, San Roque Power Corporation (petitioner) brought its judicial claims before the CTA
prior to the promulgation of the Aichi ruling. Yet, the lower court (CTA En Banc) dismissed the petitioner's
judicial claims on the ground of prematurity, a decision that happily coincided with the Court's ruling
in Aichi. In its petition, San Roque Power Corporation rues the retroactive application of Aichi to taxpayers
who merely relied on the alleged prevailing rule of procedure antecedent to Aichi that allowed the filing of
judicial claims before the expiration of the 120-day period.

We hold that there is no established precedence prior to Aichi that permits the simultaneous filing of
administrative and judicial claims for refund/credit under Section 112 of the NIRC. Nonetheless, we concede
that the CTA has jurisdiction over the claims in this case in view of our pronouncement in Commissioner of
Internal Revenue v. San Roque Power Corporation (San Roque).2 In said case, the Court, while
upholding Aichi, recognized an exception to the mandatory and jurisdictional character of the 120-day
period: taxpayers who relied on BIR Ruling DA-489-03, issued on 10 December 2003, until its reversal
in Aichi on 6 October 2010, are shielded from the vice of prematurity. The said ruling expressly stated that
"a taxpayer-claimant need not wait for the lapse of the 120-day period before it could seek judicial relief
with the CTA by way of a Petition for Review."

THE FACTS

This is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the 4 April 2012
Decision3 of the CTA En Banc in CTA EB No. 657. The CTA En Banc dismissed the petitioner's judicial claims
on the ground of prematurity, thus, setting aside the CTA Second Division's partial grant of the refund
claims in the consolidated CTA Case Nos. 7424 and 7492. In the subsequent 17 August 2012 Resolution4 of
the CTA En Banc, the court a quo denied the petitioner's motion for reconsideration.

The Antecedents

San Roque Power Corporation is a VAT-registered taxpayer which was granted by the BIR a zero-rating on
its sales of electricity to National Power Corporation (NPC) effective 14 January 2004, up to 31 December
2004.5

On 22 December 2005 and 27 February 2006, the petitioner filed two separate administrative claims for
refund of its alleged unutilized input tax for the period 1 January 2004 up to 31 March 2004, and 1 April
2004 up to 31 December 2004, respectively.6

Due to the inaction of respondent CIR, the petitioner filed petitions for review before the CTA (raffled to the
Second Division): (1) on 30 March 2006, for its unutilized input VAT for the period 1 January 2004 to 31
March 2004, amounting to P17,017,648.31, docketed as CTA Case No. 7424; and (2) on 20 June 2006, for
the unutilized input VAT for the period 1 April 2004 to 31 December 2004, amounting to P14,959,061.57,
docketed as CTA Case No. 7492.
The Ruling of the CTA Division

During trial, the petitioner presented documentary and testimonial evidence to prove its claim. On the other
hand, respondent CIR was deemed to have waived its right to present evidence due to its failure to appear
in the two scheduled hearings on the presentation of evidence for the defense. In due course, the CTA
Division partially granted the refund claim of the petitioner in the total amount of P29,931,505.18 disposing
as follows:

WHEREFORE, premises considered, the instant Petitions for Review are hereby PARTIALLY
GRANTED. Accordingly, respondent Commissioner of Internal Revenue is hereby ORDERED TO
REFUND or TO ISSUE A TAX CREDIT CERTIFICATE in the reduced amount of TWENTY-NINE MILLION
NINE HUNDRED THIRTY-ONE THOUSAND FIVE HUNDRED FIVE PESOS AND 18/100
(P29,931,505.18) in favor of petitioner, representing unutilized input VAT attributable effectively zero-
rated sales of electricity to NPC for the four quarters of 2004.

SO ORDERED.7

The CIR moved for reconsideration but to no avail. Thus, on 4 August 2010, the CIR filed a petition for
review with the CTA En Banc.

The Petition for Review before

the CTA En Banc

Among other issues, the CIR questioned the claimant's judicial recourse to the CTA as inconsistent with the
procedure prescribed in Section 112 (D) of the NIRC. The CIR asserted that the petitions for review filed
with the CTA were premature, and thus, should be dismissed.

The Ruling of the CTA En Banc

The CTA En Banc sided with the CIR in ruling that the judicial claims of the petitioner were prematurely filed
in violation of the 120-day and 30-day periods prescribed in Section 112 (D) of the NIRC. The court held
that by reason of prematurity of its petitions for review, San Roque Power Corporation failed to exhaust
administrative remedies which is fatal to its invocation of the court's power of review. The dispositive portion
of the CTA En Banc's assailed decision reads:

WHEREFORE, the Petition for Review filed by petitioner Commissioner of Internal Revenue is
hereby GRANTED. Accordingly, the Petition for Review filed by respondent on March 30, 2006 docketed as
CTA Case No. 7424, as well as the Petition tor Review filed on June 20, 2006 docketed as CTA Case No.
7492 are hereby DISMISSED on ground of prematurity.

SO ORDERED.8

The Present Petition for Review

The petitioner argues that at the time it filed the petitions for review before the CTA on 30 March 2006 and
20 June 2006, no ruling yet was laid down by the Supreme Court concerning the 120-day and 30-day
periods provided in Section 112 of the NIRC. Instead, taxpayers such as the petitioner were guided only by
the rulings of the CTA9 which consistently adopted the interpretation that a claimant is not bound by the
120-day and 30-day periods but by the two-year prescriptive period as provided in Section 112 (A) of the
NIRC. Such CTA decisions, according to the petitioner, are recognized interpretations of Philippines' tax laws.

The petitioner also asserts that the CTA En Banc erred in applying retroactively the Aichi ruling as regards
the 120-day and 30-day periods under Section 112 of the NIRC for the following
reasons: (1) the Aichi ruling laid down a new rule of procedure which cannot be given retroactive effect
without impairing vested rights; (2) a judicial ruling overruling a previous one cannot be applied
retroactively before its abandonment; and (3) a judicial decision which declares an otherwise permissible act
as impermissible violates the ex post facto rule under the Constitution.
 THE COURT'S RULING

We grant the petition.

I.

No retroactive application of
the Aichi ruling

At the outset, it bears stressing that while Aichi was already firmly established at the time the CTA En Banc
promulgated the assailed decision, nowhere do we find in such assailed decision, however, that the court a
quo cited or mentioned the Aichi case as basis for dismissing the subject petitions for review. As we see it,
the CTA En Banc merely relied on Section 112 (D) of the NIRC, which provides –

SEC. 112. Refunds or Tax Credits of Input Tax. –

(A) Zero-rated or Effectively Zero-rated Sales.- Any VAT-registered person, whose sales are zero-rated or
effectively zero-rated may, within two (2) years after the close of the taxable quarter when the
sales were made, apply for the issuance of a tax credit certificate or refund of creditable input tax due or
paid attributable to such sales, except transitional input tax, to the extent that such input tax has not been
applied against output tax:
xxxx

(D) Period within which Refund or Tax Credit of Input Taxes shall be Made. - In proper cases, the
Commissioner shall grant a refund or issue the tax credit certificate for creditable input taxes within one
hundred twenty (120) days from the date of submission of complete documents in support of the
application filed in accordance with Subsections (A) and (B) hereof:

In case of full or partial denial of the claim tor tax refund or tax credit, or the failure on the part of the
Commissioner to act on the application within the period prescribed above, the taxpayer affected
may, within thirty (30) days from the receipt of the decision denying the claim or after the
expiration of the one hundred twenty-day period, appeal the decision or the unacted claim with
the Court of Tax Appeals. (emphases supplied)

– correctly interpreting the 120-day and 30-day periods prescribed therein as mandatory and jurisdictional.
Thus, it cannot appropriately be insisted that the CTA En Banc's imputed error may be traced to a misplaced
invocation of Aichi.

Be that as it may, the petitioner cannot find solace in the various CTA decisions that allegedly dispense with
the timeliness of the judicial claim for as long as it is within the two-year prescriptive period. Such legal
posturing has already been passed upon.

Thus, in San Roque,10 a case involving the same parties and substantially the same factual antecedents as in
the present petition, we rejected the claim that the CTA decisions may be relied upon as binding precedents.
We said –

There is also the claim that there are numerous CTA decisions allegedly supporting the argument that the
filing dates of the administrative and judicial claims are inconsequential, as long as they are within the two-
year prescriptive period. Suffice it to state that CTA decisions do not constitute precedents, and do not bind
this Court or the public. That is why CTA decisions are appealable to this Court, which may affirm, reverse or
modify the CTA decisions as the facts and the law may warrant. Only decisions of this Court constitute
binding precedents, forming part of the Philippine legal system. As held by this Court in The Philippine
Veterans Affairs Office v. Segundo:

x x x Let it be admonished that decisions or the Supreme Court "applying or interpreting the laws or the
Constitution . . . form part of the legal system of the Philippines," and, as it were, "laws" by their own right
because they interpret what the laws say or mean. Unlike rulings of the lower courts, which bind the
parties to specific cases alone, our judgments are universal in their scope and application, and
equally mandatory in character. Let it be warned that to defy our decisions is to court
contempt.11 (emphasis supplied)

We further held in said case that Article 8 of the Civil Code12 enjoins adherence to judicial precedents. The
law requires courts to follow a rule already established in a final decision of the Supreme Court.Contrary
to the petitioner's view, the decisions of the CTA are not given the same level of recognition.

Concerning the 120-day period in Section 112 (D) of the NIRC, there was no jurisprudential rule prior
to Aichi interpreting such provision as permitting the premature filing of a judicial claim before the
expiration of the 120-day period. The alleged CTA decisions that entertained the judicial claims despite their
prematurity are not to be relied upon because they are not final decisions of the Supreme Court worthy of
according binding precedence. That Aichi was yet to be promulgated at that time did not mean that the
premature filing of a petition for review before the CTA was a permissible act.

It was only in Aichi that this Court directly tackled the 120-day period in Section 112 (D) of the NIRC and
declared it to be mandatory and jurisdictional. In particular, Aichi brushed aside the contention that the non-
observance of the 120-day period is not fatal to the filing of a judicial claim as long as both the
administrative and judicial claims are filed within the two-year prescriptive period provided in Section 112
(A) of the NIRC.

The mandatory and jurisdictional nature of the 120-day period first expressed in Aichi, however, is not
a new rule of procedure to be followed in pursuit of a refund claim of unutilized creditable input VAT
attributable to zero-rated sales. As suggested above, the pronouncement in Aichi regarding the mandatory
and jurisdictional nature of the 120-day period was the Court's interpretation of Section 112 (D) of the
NIRC. It is that law, Section 112 (D) of the NIRC, that laid the rule of procedure for maintaining a refund
claim of unutilized creditable input VAT attributable to zero-rated sales. In said provision, the Commissioner
has 120 days to act on an administrative claim.

Hence, from the effectivity of the 1997 NIRC on 1 January 1998, the procedure has always been definite:
the 120-day period is mandatory and jurisdictional. Accordingly, a taxpayer can file a judicial claim (1)only
within thirty days after the Commissioner partially or fully denies the claim within the 120-day
period, or (2) only within thirty days from the expiration of the 120- day period if the Commissioner
does not act within such period.13 This is the rule of procedure beginning 1 January 1998
as interpreted in Aichi.

Given all the foregoing, it is indubitable that, subject to our discussion below on the reason why the present
petition should nonetheless be granted, the petitioner's arguments have no leg to stand on –

(1)
The Aichi ruling laid down a new rule of procedure which cannot be given retroactive effect without impairing
vested rights.

-
Section 112 (D) of the NIRC, not the Aichi ruling, lays down the rule of procedure governing refund claims of
unutilized creditable input VAT attributable to zero-rated sales; Aichi is merely an interpretation of an
existing law; there is no vested right to speak of respecting a wrong construction of the law[14 (permitting a
premature filing of judicial claim);

(2)
A judicial ruling overruling a previous one cannot be applied retroactively before its abandonment.

-
There was no established doctrine abandoned or overturned by Aichi; the petitioner merely harps on CTA
decisions that cannot be relied on as binding precedents; and
(3)
A judicial decision which declares an otherwise permissible act as impermissible violates the ex post facto
rule under the Constitution –

-
Prior to Aichi, there was no law or jurisprudence permitting the premature filing of a judicial claim of
creditable input VAT; Aichi did not declare as impermissible that which was previously recognized by law or
jurisprudence as a permissible act; it is, therefore, inconsequential to consider the ex post facto provision of
the Constitution.

To reiterate, the 120-day and 30-day periods, as held in the case

of Aichi, are mandatory and jurisdictional. Thus, noncompliance with the mandatory 120+30-day period
renders the petition before the CTA void. The ruling in said case as to the mandatory and jurisdictional
character of said periods was reiterated in San Roque and a host of succeeding similar cases.

Significantly, a taxpayer can file a judicial claim only within thirty (30) days from the expiration of the
120-day period if the Commissioner does not act within the 120-day period. The taxpayer cannot file such
judicial claim prior to the lapse of the 120-day period, unless the CIR partially or wholly denies the claim
within such period. The taxpayer-claimant must strictly comply with the mandatory period by filing an
appeal to the CTA within thirty days from such inaction; otherwise, the court cannot validly acquire
jurisdiction over it.

In this case, the petitioner timely filed its administrative claims for refund/credit of its unutilized input VAT
for the first quarter of 2004, and for the second to fourth quarters of the same year, on 22 December
2005 and 27 February 2006, respectively, or within the two-year prescriptive period. Counted from such
dates of submission of the claims (with supporting documents), the CIR had 120 days, or until 13 April
2006, with respect to the first administrative claim, and until 27 June 2006, on the second administrative
claim, to decide.

However, the petitioner, without waiting for the full expiration of the 120-day periods and without any
decision by the CIR, immediately filed its petitions for review with the CTA on 30 March 2006, or a
mere ninety-eight (98) days for the first administrative claim; and on 20 June 2006, or only one
hundred thirteen (113) days for the second administrative claim, from the submission of the said claims.
In other words, the judicial claims of the petitioner were prematurely filed as correctly found by the CTA En
Banc.

II.

Ordinarily, a prematurely filed appeal is to be dismissed for lack of jurisdiction in line with our ruling
in Aichi. But, as stated in the premises, we shall accord to the CTA jurisdiction over the claims in this case
due to our ruling in San Roque.

BIR Ruling No. DA-489-03

constitutes an exception to
the mandatory and
jurisdictional nature of the
120+30-day period.

In the consolidated cases of San Roque , the Court en banc recognized an exception to the mandatory and
jurisdictional nature of the 120+30-day period. It was noted that BIR Ruling No. DA-489-03, which
expressly stated –

[A] taxpayer-claimant need not wait for the lapse of the 120-day period before it could seek judicial relief
with the CTA by way of Petition for Review.
– is a general interpretative rule issued by the CIR pursuant to its power under Section 4 of the NIRC,
hence, applicable to all taxpayers. Thus, taxpayers can rely on this ruling from the time of its issuance on
10 December 2003. The conclusion is impelled by the principle of equitable estoppel enshrined in Section
24615 of the NIRC which decrees that a BIR regulation or ruling cannot adversely prejudice a taxpayer who
in good faith relied on the BIR regulation or ruling prior to its reversal.

Then, in Taganito Mining Corporation v. CIR,16 the Court further clarified the doctrines in Aichi and San
Roque explaining that during the window period from 10 December 2003, upon the issuance of BIR Ruling
No. DA-489-03 up to 6 October 2010, or date of promulgation of Aichi, taxpayers need not observe the
stringent 120-day period.17

In other words, the 120+30-day period is generally mandatory and jurisdictional from the effectivity of the
1997 NIRC on 1 January 1998, up to the present. By way of an exception, judicial claims filed during the
window period from 10 December 2003 to 6 October 2010, need not wait for the exhaustion of the 120-day
period. The exception in San Roque has been applied consistently in numerous decisions of this Court.

In this case, the two judicial claims filed by the petitioner fell within the window period, thus, the CTA can
take cognizance over them.

The petitioner is similarly situated as Taganito Mining Corporation (Taganito) in the consolidated cases
of San Roque. In that case, Taganito prematurely filed on 14 February 2007 its petition for review with the
CTA, or within the window period from 10 December 2003, with the issuance of BIR Ruling DA-489-03 and 6
October 2010, when Aichi was promulgated. The Court considered Taganito to have filed its administrative
claim on time. Similarly, the judicial claims in this case were filed on 30 March 2006 and 20 June 2006, or
within the said window period. Consequently, the exception to the mandatory and jurisdictional character of
the 120-day and 30-day periods is applicable.

What this means is that the CTA can validly take cognizance over the two judicial claims filed in this case.
The CTA Division, in fact, did this, which eventually led to the partial grant of the refund claims in favor of
the petitioner. In reversing the CTA Division for lack of jurisdiction, the CTA En Banc failed to consider BIR
Ruling No. DA-489-03.

III.

It is imperative, however, to point out that the petitioner did not actually invoke BIR Ruling No. DA-489-03
in all its pleadings to justify the timeliness of its judicial claims with the CTA. To recall, the petitioner
vociferously insisted on the propriety of its judicial claims in view of the prevailing interpretations of the CTA
prior to Aichi that allowed premature filing of petitions for review before the CTA. This apparently also
explains the silence on the end of the CTA En Banc regarding such BIR ruling in disposing of the matter on
jurisdiction.

Hence, whether the petitioner can benefit from BIR Ruling DA-489-03 even if it did not invoke it is a
question worthy of consideration.

The beneficiaries of BIR

Ruling No. DA-489-03 include
those who did not specifically
invoke it.

We resolve to apply the exception recognized in San Roque, which we quote, viz:

x x x BIR Ruling No. DA-489-03 is a general interpretative rule. Thus, all taxpayers can rely on BIR Ruling
No. DA-489-03 from the time of its issuance on 10 December 2003 up to its reversal by this Court
in Aichi on 6 October 2010, where this Court held that the 120+30-day periods are mandatory and
jurisdictional.18 (emphasis supplied)

As previously stated, San Roque has been consistently applied in a long line of cases that recognized the
exception to the mandatory and jurisdictional nature of the 120+30-day period. To limit the application of
BIR Ruling No. DA-489-03 only to those who invoked it specifically would unduly strain the pronouncements
in San Roque. To provide jurisprudential stability, it is best to apply the benefit of BIR Ruling No. DA-489-03
to all taxpayers who filed their judicial claims within the window period from 10 December 2003 until 6
October 2010.

We said the same in Commissioner of Internal Revenue v. Air Liquide Philippines. Inc.,19 thus –

The Court agrees with ALPI in its survey of cases which shows that BIR Ruling No. DA-489-03 was applied
even though the taxpayer did not specifically invoke the same. As long as the judicial claim was filed
between December 10, 2003 and October 6, 2010, then the taxpayer would not be required to wait for the
lapse of 120-day period. This doctrine has been consistently upheld in the recent decisions of the Court. On
the other hand, in Nippon Express v. CIR, Applied Food Ingredients v. CIR and Silicon Philippines v. CIR, the
taxpayer did not benefit from BIR Ruling No. DA-489-03 because they filed their precipitate judicial claim
before December 10, 2003.

Indeed, BIR Ruling No. DA-489-03 is a general interpretative law and it applies to each and every taxpayer.
To subscribe to the contention of the CIR would alter the Court's ruling in San Roque. It will lead to an
unreasonable classification of the beneficiaries of BIR Ruling No. DA-489-03 and further complicate the
doctrine. ALPI cannot be faulted for not specifically invoking BIR Ruling No. DA-489-03 as the rules for its
application were not definite until the San Roque case was promulgated.

In the furtherance of the doctrinal pronouncements in San Roque, the better approach would be to apply
BIR Ruling No. DA-489-03 to all taxpayers who filed their judicial claim for VAT refund within the period of
exception from December 10, 2003 to October 6, 2010.20 (citations omitted)

Moreover, in Procter and Gamble Asia Pte Ltd. v. Commissioner of Internal Revenue,21 we considered as
insignificant the failure of a taxpayer to invoke BIR Ruling No. DA-489-03 before the CTA. Our reason was
that the said ruling is an official act emanating from the BIR. We can take judicial notice of such issuance
and its consistent application in past rulings of the Court relating to the timeliness of judicial claims which
makes it even more mandatory in taking cognizance of the same.

All told, the CTA has jurisdiction over the judicial claims filed by the petitioner in this case. The CTA En Banc,
thus, erred in setting aside the decision of the CTA Division on the ground of lack of jurisdiction.
Consequently, the decision of the CTA Division partially granting the claim for refund/credit in favor of the
petitioner must be reinstated.

WHEREFORE, the petition is GRANTED. The 4 April 2012 Decision and 17 August 2012 Resolution of the
Court of Tax Appeals En Banc in CTA EB No. 657 are REVERSED and SET ASIDE. The 8 January 2010
Decision and 28 June 2010 Resolution of the CTA Former Second Division in CTA Cases Nos. 7424 and 7492
are hereby REINSTATED.

The public respondent Commissioner of Internal Revenue is hereby ORDERED TO REFUND or, in the
alternative, TO ISSUE A TAX CREDIT CERTIFICATE in favor of the petitioner in the total sum of Twenty-
Nine Million Nine Hundred Thirty-One Thousand Five Hundred Five Pesos and 18/100 Centavos
(P29,931,505.18) representing unutilized input VAT attributable to zero-rated sales to the NPC for the four
taxable quarters of2004.

SO ORDERED.

5. Covanta Energy Phil. Holdings Inc. vs CIR. GR 203160. 1/24/18

SECOND DIVISION

G.R. No. 203160, January 24, 2018

COMMISSIONER OF INTERNAL REVENUE, Petitioner, v. COVANTA ENERGY PHILIPPINE HOLDINGS,

INC., Respondent.
 DECISION

REYES, JR., J.:

This is a petition for review on certiorari1 under Rule 45 of the Rules of Court, seeking to reverse and set
aside the Decision2 dated March 30, 2012 and Resolution3 dated August 16, 2012 of the Court of Tax
Appeals (CTA) en banc in CTA EB Case No. 713.

The CTA en banc denied the appeal of the Commissioner of Internal Revenue (CIR) and affirmed the
cancellation and withdrawal of the deficiency tax assessments on respondent Covanta Energy Philippine
Holdings, Inc. (CEPHI). The CIR avers, however, that CEPHI failed to comply with the requirements of the
tax amnesty law, or Republic Act (R.A.) No. 9480.4

Factual Antecedents

On December 6, 2004, the CIR issued Formal Letters of Demand and Assessment Notices against CEPHI for
deficiency value-added tax (VAT) and expanded withholding tax (EWT). The deficiency assessments were
respectively in the amounts of P465,593.21 and P288,903.78, or an aggregate amount of P754,496.99,
representing CEPHI's VAT and EWT liabilities for the taxable year 2001.5

CEPHI protested the assessments by filing two (2) separate Letters of Protest on January 19, 2005.
However, the CIR issued another Formal Letter of Demand and Assessment Notice dated January 11, 2005,
assessing CEPHI for deficiency minimum corporate income tax (MCIT) in the amount of P467,801.99,
likewise for the taxable year 2001. This assessment lead to CEPHI filing a Letter of Protest on the MCIT
assessment on February 16, 2005.6

The protests remained unacted upon. Thus, CEPHI filed separate petitions before the CTA, seeking the
cancellation and withdrawal of the deficiency assessments. The petitions were filed on October 10, 2005, for
the deficiency VAT and EWT, which was docketed as CTA Case No. 7338; and on November 9, 2005, for the
deficiency MCIT, which was docketed as CTA Case No. 7365.7

On December 6, 2005, the CIR filed an Answer for CTA Case No. 7338, while the Answer for CTA Case No.
7365 was filed on January 10, 2006. The cases were eventually consolidated upon the CIR's motion.8

After the parties' respective submission of their fonnal offer of evidence, CEPHI filed a Supplemental Petition
on October 7, 2008, informing the CTA that it availed of the tax amnesty under R.A. No. 9480. CEPHI
afterwards submitted a Supplemental Formal Offer of Evidence, together with the documents relevant to its
tax amnesty.9

The CTA then required the parties to submit their respective memoranda within 30 days. The case was
submitted for decision upon the parties' compliance.10

Ruling of the CTA Second Division

In a Decision dated July 27, 2010, the CTA Second Division partially granted the petitions of CEPHI with
respect to the deficiency VAT and MCIT assessments for 2001. Since tax amnesty does not extend to
withholding agents with respect to their withholding tax liabilities,11 the CTA Second Division ruled, after
computation, that CEPHI is liable to pay the amount of P131,791.02 for the deficiency EWT assessment, plus
additional deficiency and delinquency interest. The dispositive portion of this decision states:12

WHEREFORE, the instant Petitions for Review are hereby PARTIALLY GRANTED. Accordingly, the deficiency
[VAT] and deficiency [MCIT] assessments for taxable year 2001 issued against petitioner are CANCELLED
and WITHDRAWN.

However, petitioner is ORDERED TO PAY respondent the amount of ONE HUNDRED THIRTY-ONE THOUSAND
SEVEN HUNDRED NINETY-ONE PESOS AND 02/100 (P131,791.02), representing deficiency [EWT], including
the twenty-five percent (25%) surcharge imposed thereon.

Likewise, petitioner is ORDERED TO PAY:

(a) deficiency interest at the rate of twenty percent (20%) per annum on the basic deficiency EWT of
P29,415.00 computed from November 16, 2005 until full payment thereof pursuant to Section 249(B) of the
NIRC of 1997; and

(b) delinquency interest at the rate of 20% per annum of P131,791.02 which is the total amount still due
and on the 20% deficiency interest which have accrued as afore-stated in paragraph (a) computed from
January 10, 2005 until full payment thereof, pursuant to Section 249(C) of the NIRC of 1997.

SO ORDERED.13

The CIR moved for the reconsideration of this decision, which the CTA Second Division denied in its
Resolution14 dated December 13, 2010:

WHEREFORE, premises considered, respondent's "Motion for Reconsideration" is hereby DENIED for lack of
merit.

SO ORDERED.15

Unsatisfied with the ruling of the CTA Second Division, the CIR elevated the matter to the CTA en
bancthrough a Petition for Review dated January 4, 2011, pursuant to R.A. No. 1125,16 as amended by R.A.
No. 928217 and R.A. No. 9503.18 The sole issue raised in the CIR's appeal was whether the CTA Second
Division erred in upholding the validity of the tax amnesty availed by CEPHI. The CIR was of the position
that CEPHI is not entitled to the immunities and privileges under R.A. No. 9480 because its documentary
submissions failed to comply with the requirements under the tax amnesty law.19

Ruling of the CTA En Banc

Finding the CIR's petition for review unmeritorious, the CTA en banc denied the appeal in the assailed
Decision20 dated March 30, 2012:

WHEREFORE, the Petition for Review filed by [CIR] is hereby DENIED for lack of merit. The Decision dated
July 27, 2010 and Resolution dated December 13, 2010 are hereby AFFIRMED. Deficiency [VAT] and
Deficiency [MCIT] in taxable year 2001 remain CANCELLED and WITHDRAWN. Respondent, however, is
ORDERED TO PAY the amount of ONE HUNDRED THIRTY-ONE THOUSAND SEVEN HUNDRED NINETY-ONE
PESOS AND 02/100 (P131,791.02), representing deficiency [EWT], including the twenty-five (25%)
surcharge imposed thereon. Likewise, respondent is ORDERED TO PAY:

(a) deficiency interest at the rate of twenty percent (20%) per annum on
the basic deficiency EWT of P29,415.00 computed from November
16, 2005 until full payment thereof pursuant to Section 249(B) of the
NIRC of 1997; and

(b) delinquency interest at the rate of 20% per annum of P131,791.02

which is the total amount still due and on the 20% deficiency interest
which have accrued as afore-stated in paragraph (a) computed from
January 10, 2005 until full payment thereof, pursuant to Section
249(c) of the NIRC of 1997.
SO ORDERED.21

The CTA en banc upheld the ruling that, without any evidence that CEPHI's net worth was underdeclared by
at least 30%, there is a presumption of compliance with the requirements of the tax amnesty law. For this
reason, CEPHI may immediately enjoy the privileges of the tax amnesty program.22 The CIR disagreed with
this decision, and on April 23, 2012, it moved for the reconsideration of the CTA en banc's decision.

The CIR's motion for reconsideration was denied in the assailed CTA en banc Resolution23 dated August 16,
2012:

WHEREFORE, premises considered, the Motion for Reconsideration is hereby DENIED for lack of merit.

SO ORDERED.24

Prompted by the denial of their petition for review and motion for reconsideration, the CIR elevated the
matter to this Court, by again assailing the validity of CEPHI's tax amnesty. The CIR reiterated its argument
that CEPHI's failure to provide complete information in its Statement of Assets, Liabilities and Net worth
(SALN), particularly the columns requiring the Reference and Basis of Valuation, is sufficient basis to
disqualify CEPHI from the tax amnesty program.25 The CIR also alleged that there is no period of limitation
in challenging CEPHI's compliance with the requirements of the tax amnesty program.26

Ruling of this Court

The Court dismisses the petition.

CEPHI is entitled to the immunities

and privileges of the tax amnesty
program upon full compliance with
the requirements of R.A. No. 9480.

R.A. No. 9480 governs the tax amnesty program for national internal revenue taxes for the taxable year
2005 and prior years.27 Subject to certain exceptions,28 a taxpayer may avail of this program by complying
with the documentary submissions to the Bureau of Internal Revenue (BIR) and thereafter, paying the
applicable amnesty tax.29

The implementing rules and regulations of R.A. No. 9480, as embodied in Department of Finance (DOF)
Department Order No. 29-07,30 laid down the procedure for availing of the tax amnesty:

SEC. 6. Method of Availment of Tax Amnesty. –

1. Forms/Documents to be filed. – To avail of the general tax amnesty, concerned

taxpayers shall file the following documents/requirements:

a. Notice of Availment in such forms as may be prescribed by the BIR.

b. [SALN] as of December 31, 2005 in such forms, as may be prescribed by the BIR.
c. Tax Amnesty Return in such form as may be prescribed by the BIR.

2. Place of Filing of Amnesty Tax Return. – The Tax Amnesty Return, together with the
other documents stated in Sec. 6 (1) hereof, shall be filed as follows:

a. Residents shall file with the Revenue District Officer (RDO)/Large Taxpayer District
Office of the BIR which has jurisdiction over the legal residence or principal place of
business of the taxpayer, as the case may be.
b. Non-residents shall file with the office of the Commissioner of the BIR, or with the
RDO.
c. At the option of the taxpayer, the RDO may assist the taxpayer in accomplishing
the forms and computing the taxable base and the amnesty tax payable, but may
not look into, question or examine the veracity of the entries contained in the Tax
Amnesty Return, [SALN], or such other documents submitted by the taxpayer.
 3. Payment of Amnesty Tax and Full Compliance. – Upon filing of the Tax Amnesty
Return in accordance with Sec. 6 (2) hereof, the taxpayer shall pay the amnesty tax to the
authorized agent bank or in the absence thereof, the Collection Agents or duly authorized
Treasurer of the city or municipality in which such person has his legal residence or
principal place of business.

The RDO shall issue sufficient Acceptance of Payment Forms, as may be prescribed by the
BIR for the use of-or to be accomplished by – the bank, the collection agent or the
Treasurer, showing the acceptance by the amnesty tax payment. In case of the authorized
agent bank, the branch manager or the assistant branch manager shall sign the acceptance
of payment form.

The Acceptance of Payment Form, the Notice of Availment, the SALN, and the Tax Amnesty
Return shall be submitted to the RDO, which shall be received only after complete
payment. The completion of these requirements shall be deemed full compliance
with the provisions of RA 9480.

4. Time for Filing and Payment of Amnesty Tax. – The filing of the Tax Amnesty Return,
together with the SALN, and the payment of the amnesty tax shall be made within six (6)
months from the effectivity of these Rules.31 (Emphasis and underscoring Ours)

Upon the taxpayer's full compliance with these requirements, the taxpayer is immediately entitled to the
enjoyment of the immunities and privileges of the tax amnesty program.32 But when: (a) the taxpayer fails
to file a SALN and the Tax Amnesty Return; or (b) the net worth of the taxpayer in the SALN as of
December 31, 2005 is proven to be understated to the extent of 30% or more, the taxpayer shall cease to
enjoy these immunities and privileges.33

The underdeclaration of a taxpayer's net worth, as referred in the second instance above, is proven through:
(a) proceedings initiated by parties other than the BIR or its agents, within one (1) year from the filing of
the SALN and the Tax Amnesty Return; or (b) findings or admissions in congressional hearings or
proceedings in administrative agencies, and in courts. Otherwise, the taxpayer's SALN is presumed true and
correct.34 The tax amnesty law thus places the burden of overturning this presumption to the parties who
claim that there was an underdeclaration of the taxpayer's net worth.

In this case, it is undisputed that CEPHI submitted all the documentary requirements for the tax amnesty
program.35 The CIR argued, however, that CEPHI cannot enjoy the privileges attendant to the tax amnesty
program because its SALN failed to comply with the requirements of R.A. No. 9480. The CIR specifically
points to CEPHI's supposed omission of the information relating to the Reference and Basis for
Valuation columns in CEPHI's original and amended SALNs.36

The required information that should be reflected in the taxpayer's SALN is enumerated in Section 3 of R.A.
No. 9480.37 The essential contents of the SALN are also itemized under the implementing rules and
regulations as follows:

SEC. 8. Contents of the SALN. – The SALN shall contain a true and complete declaration of assets,
liabilities and networth of the taxpayer as of December 31, 2005, as follows:

1. Assets within or without the Philippines, whether real or personal, tangible or intangible,
whether or not used in trade or business:

a. Real properties shall be accompanied by a description of their classification, exact

location, and valued at acquisition cost, if acquired by purchase or the zonal
valuation or fair market value, whichever is higher, if acquired through inheritance
or donation;
b. Personal properties other than money, shall be accompanied by a specific
description of the kind and number of assets (i.e. automobiles, shares of stock,
etc.) or other investments, indicating the acquisition cost less depreciation or
 amortization, in proper cases, if acquired by purchase, or the fair market price or
value at the time of receipt, if acquired through inheritance or donations;
c. Assets denominated in foreign currency shall be converted into the corresponding
Philippine currency equivalent, at the rate of exchange prevailing as of December
31, 2005; and
d. Cash on hand and in bank in peso as of December 31, 2005, as well as Cash on
Hand and in Bank in foreign currency, converted to peso as of December 31, 2005.

2. All existing liabilities which are legitimate and enforceable, secured and unsecured, whether
or not incurred in trade or business, disclosing or indicating clearly the name and address of
the creditor and the amount of the corresponding liability.

3. The total networth of the taxpayer, which shall be difference between the total assets and
total liabilities.

It is evident from CEPHI's original and amended SALN that the information statutorily mandated in R.A. No.
9480 were all reflected in its submission to the BIR. While the columns for Reference and Basis for
Valuation were indeed left blank, CEPHI attached schedules to its SALN (Schedules 1 to 7), both
original and amended, which provide the required information under R.A. No. 9480 and its
implementing rules and regulations.38 A review of the SALN form likewise reveals that the information
required in the Reference and Basis for Valuation columns are actually the specific description of the
taxpayer's declared assets. As such, these were deemed filled when CEPHI referred to the attached
schedules in its SALN. On this basis, the CIR cannot disregard or simply set aside the SALN submitted by
CEPHI.

More importantly, CEPHI's SALN is presumed true and correct, pursuant to Section 4 of R.A. No. 9480.39This
presumption may be overturned if the CIR is able to establish that CEPHI understated its net worth by the
required threshold of at least 30%.

However, aside from the bare allegations of the CIR, there is no evidence on record to prove that the
amount of CEPHI's net worth was understated. Parties other than the BIR or its agents did not initiate
proceedings within one year from the filing of the SALN or Tax Amnesty Return, in order to challenge the net
worth of CEPHI. Neither was the CIR able to establish that there were findings or admissions in a
congressional, administrative, or court proceeding that CEPHI indeed understated its net worth by 30%.

As the Court previously held in CS Garment, Inc. v. CIR,40 taxpayers are eligible to the immunities of the tax
amnesty program as soon as they fulfill the suspensive conditions imposed under R.A. No. 9480:

A careful scrutiny of the 2007 Tax Amnesty Law would tell us that the law contains two types of conditions
one suspensive, the other resolutory. Borrowing from the concepts under our Civil Code, a condition may be
classified as suspensive when the fulfillment of the condition results in the acquisition of rights. On the other
hand, a condition may be considered resolutory when the fulfillment of the condition results in the
extinguishment of rights. In the context of tax amnesty, the rights referred to are those arising out of the
privileges and immunities granted under the applicable tax amnesty law.

xxxx

This clarification, however, does not mean that the amnesty taxpayers would go scot-free in case
they substantially understate the amounts of their net worth in their SALN. The 2007 Tax Amnesty
Law imposes a resolutory condition insofar as the enjoyment of immunities and privileges under the law is
concerned. Pursuant to Section 4 of the law, third parties may initiate proceedings contesting the declared
amount of net worth of the amnesty taxpayer within one year following the date of the filing of the tax
amnesty return and the SALN. Section 6 then states that "All these immunities and privileges shall not apply
x x x where the amount of networth as of December 31, 2005 is proven to be understated to the extent of
thirty percent (30%) or more, in accordance with the provisions of Section 3 hereof." Accordingly, Section
10 provides that amnesty taxpayers who willfully understate their net worth shall be (a) liable for perjury
under the Revised Penal Code; and (b) subject to immediate tax fraud investigation in order to collect all
taxes due and to criminally prosecute those found to have willfully evaded lawful taxes due.41 (Emphasis
Ours)

Considering that CEPHI completed the requirements and paid the corresponding amnesty tax, it is
considered to have totally complied with the tax amnesty program. As a matter of course, CEPHI is entitled
to the immediate enjoyment of the immunities and privileges of the tax amnesty program.42Nonetheless, the
Court emphasizes that the immunities and privileges granted to taxpayers under R.A. No. 9480
is not absolute. It is subject to a resolutory condition insofar as the taxpayers' enjoyment of the
immunities and privileges of the law is concerned. These immunities cease upon proof that they
underdeclared their net worth by 30%.

Unfortunately for the CIR, however, there is no such proof in CEPHI's case. The Court, thus, finds it
necessary to deny the present petition. While tax amnesty is in the nature of a tax exemption, which is
strictly construed against the taxpayer,43 the Court cannot disregard the plain text of R.A. No. 9480.

WHEREFORE, premises considered, the petition is DENIED for lack of merit. The Decision dated March 30,
2012 and Resolution dated August 16, 2012 of the CTA en banc in CTA EB Case No. 713 are AFFIRMED.

SO ORDERED.

6. Bank of the Phil. Islands vs CIR GR 224327. 6/11/18

SECOND DIVISION

G.R. No. 224327, June 11, 2018

COMMISSIONER OF INTERNAL REVENUE, Petitioner, v. BANK OF THE PHILIPPINE

ISLANDS, Respondent.

DECISION

PERALTA, J.:

For this Court’s resolution is the Petition for Review on Certiorari1 under Rule 45 of the Revised Rules of Civil
Procedure assailing the Decision2 dated September 16, 2015 and Resolution3 dated April 21, 2016 of the
Court of Tax Appeals (CTA) En Banc in CTA EB No. 1173 (CTA CASE No. 8350) on petitioner Commissioner
of Internal Revenue's (CIR) tax assessment against respondent Bank of the Philippine Islands (BPI).

The facts follow.

Citytrust Banking Corporation (CBC) filed its Annual Income Tax Returns for its Regular Banking Unit, and
Foreign Currency Deposit Unit for taxable year 1986 on April 15, 1987.

Thereafter, on August 11, 1989, July 12, 1990 and November 8, 1990, CBC executed Waivers of the Statute
of Limitations under the National Internal Revenue Code (NIRC).

On March 7, 1991, petitioner CIR issued a Pre-Assessment Notice (PAN) against CBC for deficiency taxes,
among which is for deficiency Income Tax for taxable year 1986 in the total amount of P19,202,589.97. The
counsel for CBC filed its protest against the PAN on April 22, 1991.

Petitioner, on May 6, 1991, issued a Letter, with attached Assessment Notices, demanding for the payment
of the deficiency taxes within thirty (30) days from receipt thereof. The counsel for CBC filed its Protest
against the assessments on May 27, 1991 and another Protest on February 17, 1992.
A Letter was again issued by petitioner on February 5, 1992 requesting for the payment of CBC's tax
liabilities, within ten (10) days from receipt thereof.

The counsel for CBC, on March 29, 1994, issued a Letter addressed to petitioner offering a compromise
settlement on its deficiency Income Tax assessment for Taxable year 1986, with an attached Application for
Compromise Settlement/Abatement of Penalties under Revenue Memorandum Order (RMO) No. 45-93, in
the amount of P1,721,503.40, or twenty percent (20%) of the subject assessment, which was received on
March 30, 1994. On May 2, 1994, the counsel for CBC issued a Letter addressed to petitioner, reiterating its
Letter of offer of compromise settlement dated March 29, 1994 and Application for Compromise
Settlement/Abatement under RMO No. 45-93.

Petitioner, on October 12, 1994, approved the earlier mentioned Application for Compromise Settlement of
CBC, provided that one hundred percent (100%) of its deficiency Income Tax assessment for the year 1986,
or in the amount of P8,607,517.00, be paid within fifteen (15) days from receipt thereof.

The counsel for CBC, on November 28, 1994, issued a Letter addressed to petitioner, requesting for a
reconsideration of the approved amount as compromise settlement, and offering to pay the amount of
P1,600,000.00 as full and final settlement of the subject assessment. The same counsel for CBC issued a
Letter on March 8, 1995 reiterating its request for reconsideration and offering to increase its full and final
settlement in the amount P3,200,000.00.

On March 28, 1995, petitioner approved the Application for Compromise Settlement of CBC dated March 30,
1994, provided that CBC pay the amount of P8,607,517.00 within fifteen (15) days from receipt thereof.

Later, on May 4, 1995, the counsel for CBC issued another Letter addressed to petitioner, requesting for a
final reconsideration, and reiterating its offer of compromise in the amount of P3,200,000.00.

Petitioner, however, disapproved the Application for Compromise Settlement of CBC dated March 30, 1994.
The counsel of CBC, on July 27, 1995, issued a Letter addressed to petitioner requesting for reconsideration
and offering to pay the increased amount of P4,303,758.50.

Meanwhile, on October 4, 1996, the Securities and Exchange Commission approved the Articles of Merger
between respondent BPI and CBC, with BPI as the surviving corporation.

Afterwards, on May 26, 2011, petitioner issued a Notice of Denial addressed to respondent, requesting for
the payment of CBC's deficiency Income Tax for taxable year 1986, within fifteen (15) days from receipt
thereof, and on July 28, 2011, petitioner issued another Letter addressed to respondent, denying the offer of
compromise penalty, and requesting for the payment of the amount of P19,202,589.97, plus all increments
incident to delinquency, pursuant to Sections 248 (A) (3) and 249 (C) (3) of the 1997 NIRC, as amended.

Consequently, on September 21, 2011, petitioner issued a Warrant of Distraint and/or Levy against
respondent BPI which prompted the latter to file a Petition for Review with the CTA on October 7, 2011.

In a Decision4 dated February 12, 2014, the CTA Special Third Division granted the petition for review, thus:

WHEREFORE, the Petition for Review is hereby GRANTED. Accordingly, the Warrant of Distraint and/or Levy
dated September 21, 2011 is hereby CANCELLED and SET ASIDE.

SO ORDERED.5

According to the CTA Special Third Division, BPI can validly assail the Warrant of Distraint and/or Levy, as
its appellate jurisdiction is not limited to cases which involve decisions of the Commissioner of Internal
Revenue on matters relating to assessments or refunds. The Court further ruled that the Assessment
Notices, being issued only on May 6, 1991, were already issued beyond the three-year period to assess,
counting from April 15, 1987, when CBC filed its Annual Income Tax Returns for the taxable year 1986. The
same Court also held that the Waivers of Statute of Limitations executed on July 12, 1990 and November 8,
1990 were not in accordance with the proper form of a valid waiver pursuant to RMO No. 20-90, thus, the
waivers failed to extend the period given to petitioner to assess.
After the denial of petitioner's motion for reconsideration, a petition for review was filed with the CTA En
Banc, in which the latter Court denied the said petition, thus:

WHEREFORE, premises considered, the instant Petition for Review is hereby DENIED. Accordingly, the
Decision and the Resolution, dated February 12, 2014 and April 25, 2014, respectively, are hereby
AFFIRMED.

SO ORDERED.6

Hence, the present petition after the CTA En Banc denied petitioner's motion for reconsideration.

Petitioner raises the following grounds for the allowance of the present petition:

THE CTA EN BANC ERRED IN AFFIRMING THE CTA SPECIAL THIRD DIVISION'S EXERCISE OF JURISDICTION
OVER THE INSTANT CONTROVERSY.

THE CTA EN BANC ERRED IN AFFIRMING THE ANNULMENT OF THE WARRANT OF DISTRAINT AND/OR LEVY
AGAINST RESPONDENT GIVEN PETITIONER'S CLEAR RIGHT TO THE SAME.7

Petitioner argues that the CTA did not acquire jurisdiction over the case for respondent's failure to contest
the assessments made against it by the Bureau of Internal Revenue (BIR) within the period prescribed by
law. Petitioner also contends that by the principle of estoppel, respondent is not allowed to raise the defense
of prescription against the efforts of the government to collect the tax assessed against it.

In its Comment8 dated August 22, 2016, respondent claims that the assessment notice issued against it, is
not yet final and executory and that the CTA has jurisdiction over the case. It further asserts that the right
of petitioner to assess deficiency income tax for the taxable year 1986 had already prescribed pursuant to
the Tax Code of 1977 and that the right of petitioner to collect the alleged deficiency income tax for the
taxable year 1986 had already prescribed. Respondent also insists that it is not liable for the alleged
deficiency income tax and increments for the taxable year 1986.

The petition lacks merit.

First of all, the CTA did not err in its ruling that it has jurisdiction over cases asking for the cancellation and
withdrawal of a warrant of distraint and/or levy as provided under Section 7 of Republic Act (R.A.) No. 9282,
thus:

Sec. 7 Jurisdiction. – The CTA shall exercise:

a. Exclusive appellate jurisdiction to review by appeal, as herein provided:

1. xxx

2. Inaction by the Commissioner of the Internal Revenue in cases involving disputed

assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation
thereto, or other matter arising under the National Internal Revenue Code or other
laws administered by the Bureau of Internal Revenue, where the National Internal
Revenue Code provides a specific period of action, in which case the inaction shall be
deemed a denial;

xxxx

Anent the other grounds relied upon by petitioner, such are factual in nature. It is doctrinal that the Court
will not lightly set aside the conclusions reached by the CTA which, by the very nature of its function of
being dedicated exclusively to the resolution of tax problems, has developed an expertise on the subject,
unless there has been an abuse or improvident exercise of authority.9 We thus accord the findings of fact by
the CTA with the highest respect. These findings of facts can only be disturbed on appeal if they are not
supported by substantial evidence or there is a showing of gross error or abuse on the part of the CTA. In
the absence of any clear and convincing proof to the contrary, this Court must presume that the CTA
rendered a decision which is valid in every respect.10 Nevertheless, the factual findings of the CTA are
supported by substantial evidence.

An assessment becomes final and unappealable if within thirty (30) days from receipt of the assessment, the
taxpayer fails to file his or her protest requesting for reconsideration or reinvestigation as provided in
Section 229 of the NIRC, thus:

SECTION 229. Protesting of assessment. – When the Commissioner of Internal Revenue or his duly
authorized representative finds that proper taxes should be assessed, he shall first notify the taxpayer of his
findings within a period to be prescribed by implementing regulations, the taxpayer shall be required to
respond to said notice. If the taxpayer fails to respond, the Commissioner shall issue an assessment based
on his findings.

Such assessment may be protested administratively by filing a request for reconsideration or

reinvestigation in such form and manner as may be prescribed by implementing regulations
within thirty (30) days from receipt of the assessment; otherwise, the assessment shall become
final and unappealable.

If the protest is denied in whole and in part, the individual, association or corporation adversely
affected by the decision on the protest may appeal to the Court of Tax Appeals within thirty (30)
days from receipt of the said decision; otherwise, the decision shall become final, executory and
demandable.11

Petitioner insists that respondent failed to elevate the tax assessment against it to the CTA within the
required period. Respondent, on the other hand, claims that it never received any final decision on the
disputed assessment from petitioner granting or denying the same, whether in whole or in part.

The CTA was correct in ruling that petitioner failed to prove that it sent a notice of assessment and that it
was received by respondent, thus:

The February 5, 1992 Decision of the CIR which she insists to be the reckoning point to protest, was not
proven to have been received by BPI when the latter denied its receipt. Thus, the assessment notice dated
May 6, 1991 should be deemed as the final decision of the CIR on the matter, in which BPI timely protested
on May 27, 1991. While a mailed letter is deemed received by the addressee in the ordinary course of mail,
this is still merely a disputable presumption subject to controversion, and a direct denial of the receipt
thereof shifts the burden upon the party favored by the presumption to prove that the mailed letter was
indeed received by the addressee. (Republic v. Court of Appeals, G.R. No. L-38540, April 30, 1987, 149
SCRA 351, 355.) In the instant case, BPI denies receiving the assessment notice, and the CIR was unable to
present substantial evidence that such notice was, indeed, mailed or sent before the BIR's right to assess
had prescribed and that said notice was received by BPI. As a matter of fact, there was an express
admission on the part of the CIR that there was no proof that indeed the alleged Final Assessment Notice
was ever sent to or received by BPI. As stated in the Transcript of stenographic Notes on the court hearing
dated October 29, 2012:

Q: And you anchor your argument based on this document (Letter dated February 5, 1992) that this is the
final decision of the BIR, is that correct?
A: Yes.

Q: When was this received by the petitioner City Trust Banking Corporation?
A: I think it was only mailed.

Q: What is your proof that it was mailed?

A: Because the BIR...(interrupted by Atty. Nidea)

Q: Do you have any proof that it was mailed?

A: No, I don't have any proof.
Q: So, you don't have any proof. So you don't have any proof that it was received by the petitioner?
A: I don't have any idea.

Q: You don't have any proof.

Moreover, as correctly pointed out in the assailed Resolution, whether or not the Letter dated February 5,
1992 constitutes as the Final Decision on the Disputed Assessment appealable under Section 229 of the
1977 Tax Code, or whether the same was validly served and duly received by BPI, are immaterial matters
which will not cure the nullity of the said Preliminary Assessment Notice and Assessment Notices, as they
were clearly made beyond the prescriptive period.12

In the case of Nava v. Commissioner of Internal Revenue,13 this Court stressed on the importance of proving
the release, mailing or sending of the notice.

While we have held that an assessment is made when sent within the prescribed period, even if received by
the taxpayer after its expiration (Coll. Of Int. Rev. vs. Bautista, L-12250 and L-12259, May 27, 1959), this
ruling makes it the more imperative that the release, mailing, or sending of the notice be clearly and
satisfactorily proved. Mere notations made without the taxpayer's intervention, notice, or control, without
adequate supporting evidence, cannot suffice; otherwise, the taxpayer would be at the mercy of the revenue
offices, without adequate protection or defense.

Thus, the failure of petitioner to prove the receipt of the assessment by respondent would necessarily lead
to the conclusion that no assessment was issued.

As to the contention of petitioner that through the principle of estoppel, respondent is not allowed to raise
the defense of prescription against the efforts of the government to collect the tax assessed against it, such
is misplaced. Its argument that respondent's belated assertions relative to the alleged defects and flaws in
the waivers it signed in favor of the government should not be given merit, is also amiss.

Petitioner cannot implore the doctrine of estoppel just to compensate its failure to follow the proper
procedure. As aptly ruled by the CTA:

It is well established that issues raised for the first time on appeal are barred by estoppel. However, in the
leading case of Commissioner of Internal Revenue v. Kudos Metal Corporation, the Supreme Court held that:

The doctrine of estoppel cannot be applied in this case as an exception to the statute of limitations on the
assessment of taxes considering that there is a detailed procedure for the proper execution of the waiver,
which the BIR must strictly follow. xxx As such, the doctrine of estoppel cannot give validity to an act that is
prohibited by law or one that is against public policy. xxx

Moreover, the BIR cannot hide behind the doctrine of estoppel to cover its failure to comply with RMO 20-90
and RDAO 05-01, which the BIR itself issued. xxx Having caused the defects in the waivers, the BIR must
bear the consequence. It cannot shift the blame to the taxpayer. To stress, a waiver of the statute of
limitations, being a derogation of the taxpayer's right to security against prolonged and unscrupulous
investigations, must be carefully and strictly construed.

Applying the said ruling in the case at bench, BPI is not estopped from raising the invalidity of the subject
Waivers as the BIR in this case caused the defects thereof. As such, the invalid Waivers did not operate to
toll or extend the period of prescription. 14

From the above disquisitions, it is clear that the right of petitioner to assess respondent has already
prescribed and respondent is not liable to pay the deficiency tax assessment. The period of collection has
also prescribed. As held by the CTA:

As to the period of collection, We uphold the ruling of the Division that such has already prescribed.
Regardless if We will reckon the period to collect from May 6, 1991, or the alleged Final Demand Letter on
February 5, 1992, counting the three-year period therein to collect in accordance with Section 223 (c) of the
1977 Tax Code, obviously, the mode of collection through the issuance of Warrant of Distraint and/or Levy
on October 05, 2011 was made beyond the prescriptive period.15

It must be remembered that [T]he law imposes a substantive, not merely a formal, requirement. To proceed
heedlessly with tax collection without first establishing a valid assessment is evidently violative of the
cardinal principle in administrative investigations: that taxpayers should be able to present their case and
adduce supporting evidence.16 Although taxes are the lifeblood of the government, their assessment and
collection "should be made in accordance with law as any arbitrariness will negate the very reason for
government itself."17

WHEREFORE, the Petition for Review on Certiorari dated June 16, 2016 of petitioner Commissioner of
Internal Revenue is DENIED for lack of merit. Consequently, the Decision dated September 16, 2015 and
the Resolution dated April 21, 2016 of the Court of Tax Appeals En Banc in CTA EB No. 1173 (CTA CASE No.
8350), are AFFIRMED.

SO ORDERED.