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FIRST DIVISION

CS GARMENT, INC.,* G.R. No. 182399

Petitioner,
Present:

SERENO, CJ,
LEONARDO-DE CASTRO,
-versus- BERSAMIN,
VILLARAMA, JR., and
REYES,JJ

COMMISSIONER OF INTERNAL Promulgated:

REVENUE,
Respondent. MAR 1 2 201Jt
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----- )(

DECISION

SERENO, CJ:

Before the Court is a Rule 45 petition for review on certiorari,

1 2
assailing the respective Decision and Resolution of the Court of Ta)(
Appeals (CTA) en bane in EB Case No. 287. These judgments in tum
3 4
affirmed the Decision and the Resolution of the CTA Second Division,

• The case title indicated in the petition filed with this Court was followed. According to petitioner, its
corporate name under its Articles of Incorporation is "CS Garment, Inc." and not "CS Garments, Inc.," as
previously referred to in the proceedings before the Court of Tax Appeals. See Petition for Review at I, f.n.
1 (filed on 23 May 2008), rolla at 10.
1
CS Garments, Inc. v. Commissioner of Internal Revenue, EB Case No. 287 (CTA en bane, 14 January
2008), slip op., rolla at 40-62 (hereinafter CTA en bane Decision).
2
CS Garments, Inc. v. Commissioner of Internal Revenue, EB Case No. 287 (CTA en bane, 2 April 2008),
slip op., rolla at 37-39 (hereinafter CTA en bane Resolution). Both the Decision and the Resolution of the
CTA en bane were penned by CTA Associate Justice Caesar A. Casanova and concurred in by Justices
Emesto D. Acosta, Juanito C. Castafteda, Jr., Lovell R. Bautista, Erlinda P. Uy, and Olga Palanca-Enriquez.
3
CS Garments, Inc. v. Commissioner of Internal Revenue, CTA Case No. 6520 (CTA 2nd Div., 4 January
2007), slip op., rolla at 63-94 (hereinafter CTA 2"d Div. Decision).
4
CS Garments, Inc. v. Commissioner of Internal Revenue, CTA Case No. 6520 (CTA 2"d Div., 25 May
2007), slip op., rolla at 95-97 (hereinafter CTA Sec.2nd Div. Resolution). Both the Decision and the
Resolution of the CTA Second Division were penned by CTA Associate Justice Juan ito C. Castafteda, Jr.
and concurred in by Justices Erlinda P. Uy and Olga Palanca-Enriquez.
Decision 1 G.R. No. 182399

which ordered the cancellation of certain items in the 1998 tax assessments
against petitioner CS Garment, Inc. (CS Garment or petitioner).
Accordingly, petitioner was directed to pay the Bureau of Internal Revenue
(BIR) the remaining portion of the tax assessments. This portion was
comprised of the outstanding deficiency value-added tax (VAT) on CS
Garment’s undeclared local sales and on the incidental sale of a motor
vehicle; deficiency documentary stamp tax (DST) on a lease agreement; and
deficiency income tax as a result of the disallowed expenses and undeclared
local sales. However, while the present case was pending before this Court,
CS Garment filed a Manifestation and Motion stating that the latter had
availed itself of the government’s tax amnesty program under Republic Act
No. (R.A.) 9480, or the 2007 Tax Amnesty Law.

FACTS

We reproduce the narration of facts culled by the CTA en banc5 as

follows:

Petitioner [CS Garment] is a domestic corporation duly organized

and existing under and by virtue of the laws of the Philippines with
principal office at Road A, Cavite Ecozone, Rosario, Cavite. On the other
hand, respondent is the duly appointed Commissioner of Internal Revenue
of the Philippines authorized under law to perform the duties of said
office, including, inter alia, the power to assess taxpayers for [alleged]
deficiency internal revenue tax liabilities and to act upon administrative
protests or requests for reconsideration/reinvestigation of such
assessments.

Petitioner is registered with the Philippine Economic Zone

Authority (PEZA) under Certificate of Registration No. 89-064, duly
approved on December 18, 1989. As such, it is engaged in the business of
manufacturing garments for sale abroad.

On November 24, 1999, petitioner [CS Garment] received from

respondent [CIR] Letter of Authority No. 00012641 dated November 10,
1999, authorizing the examination of petitioner’s books of accounts and
other accounting records for all internal revenue taxes covering the period
January 1, 1998 to December 31, 1998.

On October 23, 2001, petitioner received five (5) formal demand

letters with accompanying Assessment Notices from respondent, through
the Office of the Revenue Director of Revenue Region No. 9, San Pablo
City, requiring it to pay the alleged deficiency VAT, Income, DST and
withholding tax assessments for taxable year 1998 in the aggregate
amount of ₱2,046,580.10 broken down as follows:

5
CTA en banc Decision, supra note 1, at 2-5, rollo at 41-44.
 Deficiency VAT
Basic tax due ₱ 314,194.00
Add: Surcharge 157,097.00
Interest 188,516.00
Total Amount Payable ₱ 659,807.00
Deficiency Income Tax (at Normal Rate of 34%)
Basic tax due ₱ 78,639.00
Add: Surcharge 39,320.00
Interest 43,251.00
Total Amount Payable ₱ 161,210.00
Deficiency Income Tax (at Special Rate of 5%)
Basic tax due ₱ 742,574.10
Add: Surcharge -
Interest 408,416.00
Compromise Penalty 25,000.00
Total Amount Payable ₱ 1,175,990.10

Deficiency DST
Basic tax due ₱ 806.00
Add: Surcharge 403.00
Interest 484.00
Total Amount Payable ₱ 1,693.00
Deficiency EWT
Basic tax due ₱ 22,800.00
Add: Surcharge 11,400.00
Interest 13,680.00
Total Amount Payable ₱ 47,880.00
GRAND TOTAL ₱ 2,046,580.10

On November 20, 2001, or within the 30-day period prescribed

under Section 228 of the Tax Code, as amended, petitioner filed a formal
written protest with the respondent assailing the above assessments.

On January 11, 2002, or within the sixty-day period after the filing
of the protest, petitioner submitted to the Assessment Division of Revenue
Region No. 9, San Pablo City, additional documents in support of its
protest.

Respondent failed to act with finality on the protest filed by

petitioner within the period of one hundred eighty (180) days from
January 11, 2002 or until July 10, 2002. Hence, petitioner appealed before
[the CTA] via a Petition for Review filed on August 6, 2002 or within
thirty (30) days from the last day of the aforesaid 180-day period.

The case was raffled to the Second Division of [the CTA] for
decision. After trial on the merits, the Second Division rendered the
Assailed Decision on January 4, 2007 upon which the Second Division
cancelled respondent’s assessment against CS Garments for deficiency
expanded withholding taxes for CY 1998 amounting to ₱47,880.00, and
partially cancelled the deficiency DST assessment amounting to
₱1,963.00. However, the Second Division upheld the validity of the
 deficiency income tax assessments by subjecting the disallowed expenses
in the amount of ₱14,851,478.83 and a portion of the undeclared local
sales ₱1,541,936.60 (amounting to ₱l,500,000.00) to income tax at the
special rate of 5%. The remainder of undeclared local sales of
₱1,541,936.06 (amounting to ₱41,936.60) was subjected to income tax at
the rate of 34%. The Second Division found that total tax liability of CS
Garments amounted to ₱2,029,570.12, plus 20% delinquency interest
pursuant to Section 249(C)(3), and computed the same as follows:

Income Tax
Deficiency Tax VAT DST at 5% at 34% TOTAL
Basic Tax Due ₱ 314,194.00 ₱ 145.00 ₱ 817,573.94 ₱ 1,789.44
25% Surcharge 78,548.50 36.25 204,393.49 447.36
20% Interest 188,516.00 102.02 422,898.52 925.6
₱ 581,258.50 ₱ 283.27 ₱ 1,444,865.95 ₱ 3,162.40 ₱ 2,029,570.12

On January 29, 2007, CS Garments filed its “Motion for Partial

Reconsideration” of the said decision. On May 25, 2007, in a resolution,
the Second Division denied CS Garments’ motion for lack of merit.
(Citations omitted)

Petitioner appealed the case to the CTA en banc and alleged the
following: (1) the Formal Assessment Notices (FAN) issued by the
Commissioner of Internal Revenue (CIR) did not comply with the
requirements of the law; (2) the income generated by CS Garment from its
participation in the Cavite Export Processing Zone’s trade fairs and from its
sales to employees were not subject to 10% VAT; (3) the sale of the
company vehicle to its general manager was not subject to 10% VAT; (4) it
had no undeclared local sales in the amount of ₱1,541,936.60; and (5) Rule
XX, Section 2 of the PEZA Rules and Regulations allowed deductions from
the expenses it had incurred in connection with advertising and
representation; clinic and office supplies; commissions and professional
fees; transportation, freight and handling, and export fees; and licenses and
other taxes.

The CTA en banc affirmed the Decision and Resolution of the CTA
Second Division. As regards the first issue, the banc ruled that the CIR had
duly apprised CS Garment of the factual and legal bases for assessing the
latter’s liability for deficiency income tax, as shown in the attached Schedule
of Discrepancies provided to petitioner; and in the subsequent reference of
the CIR to Rule XX, Section 2 of the Rules and Regulations of R.A. 7916.
With respect to the second issue, the CTA pronounced that the income
generated by CS Garment from the trade fairs was subject to internal
revenue taxes, as those transactions were considered “domestic sales” under
R.A. 7916, otherwise known as the Special Economic Zone Act. With
respect to the third issue, the CTA en banc declared that the sale of the
motor vehicle by CS Garment to the latter’s general manager in the amount
of ₱1.6 million was subject to VAT, since the sale was considered an
incidental transaction within the meaning of Section 105 of the NIRC. On
the fourth issue, the CTA found that CS Garment had failed to declare the
latter’s total local sales in the amount of ₱1,541,936.60 in its 1998 income
tax return. The tax court then calculated the income tax liability of petitioner
by subjecting ₱1.5 million of that liability to the preferential income tax rate
of 5%. This amount represented the extent of the authority of CS Garment,
as a PEZA-registered enterprise, to sell in the local market. The normal
income tax rate of 34% was then charged for the excess amount of
₱41,936.60. Finally, as regards the fifth issue, the CTA ruled that Section 2,
Rule XX of the PEZA Rules – which enumerates the specific deductions for
ECOZONE Export Enterprises – does not mention certain claims of
petitioner as allowable deductions.

Aggrieved, CS Garment filed the present Petition for Review assailing

the Decision of the CTA en banc. However, on 26 September 2008, while
the instant case was pending before this Court, petitioner filed a
Manifestation and Motion stating that it had availed itself of the
government’s tax amnesty program under the 2007 Tax Amnesty Law. It
thus prays that we take note of its availment of the tax amnesty and confirm
that it is entitled to all the immunities and privileges under the law. It has
submitted to this Court the following documents, which have allegedly been
filed with Equitable PCI Bank–Cavite EPZA Branch, a supposed authorized
agent-bank of the BIR:6

1. Notice of Availment of Tax Amnesty under R.A. 9480

2. Statement of Assets, Liabilities, and Net worth (SALN)

3. Tax Amnesty Return (BIR Form No. 2116)

4. Tax Amnesty Payment Form (Acceptance of Payment Form or

BIR Form No. 0617)

5. Equitable PCI Bank’s BIR Payment Form indicating that CS

Garment deposited the amount of ₱250,000 to the account of
the Bureau of Treasury–BIR

On 26 January 2009, the Office of the Solicitor General (OSG) filed

its Comment objecting to the Manifestation and Motion of CS Garment.7

6
Annexes A to E of CS Garment’s Manifestation and Motion dated 25 September 2008, rollo at 171-175.
7
Comment (on Petitioner’s Manifestation and Motion dated September 25, 2008) of the OSG (filed on 26
January 2009), rollo at 212-220.
The OSG asserts that the filing of an application for tax amnesty does not by
itself entitle petitioner to the benefits of the law, as the BIR must still assess
whether petitioner was eligible for these benefits and whether all the
conditions for the availment of tax amnesty had been satisfied. Next, the
OSG claims that the BIR is given a one-year period to contest the
correctness of the SALN filed by CS Garment, thus making petitioner’s
motion premature. Finally, the OSG contends that pursuant to BIR Revenue
Memorandum Circular No. (RMC) 19-2008, petitioner is disqualified from
enjoying the benefits of the Tax Amnesty Law, since a judgment was
already rendered in favor of the BIR prior to the tax amnesty availment. The
OSG points out that CS Garment submitted its application for tax amnesty
only on 6 March 2008, which was almost two months after the CTA en banc
issued its 14 January 2008 Decision and more than one year after the CTA
Second Division issued its 4 January 2007 Decision.

On 8 February 2010, the Court required both parties to prepare and

file their respective memoranda within 30 days from notice.8 After this
Court granted the motions for extension filed by the parties, the OSG
eventually filed its Memorandum on 18 May 2010, and CS Garment on 7
June 2010. It is worthy to note that in its Memorandum, the OSG did not
raise any argument with respect to petitioner’s availment of the tax amnesty
program. Neither did the OSG deny the authenticity of the documents
submitted by CS Garments or mention that a case had been filed against the
latter for availing itself of the tax amnesty program, taking into account the
considerable lapse of time from the moment petitioner filed its Tax Amnesty
Return and Statement of Assets, Liabilities, and Net Worth in 2008.

On 17 July 2013, the parties were ordered9 to “move in the

premises”10 by informing the Court of the status of the tax amnesty
availment of petitioner CS Garment, including any supervening event that
may be of help to the Court in its immediate disposition of the present case.
Furthermore, the parties were directed to indicate inter alia (a) whether CS
Garment had complied with the requirements of the 2007 Tax Amnesty
Law, taking note of the aforementioned documents submitted; (b) whether a
case had been initiated against petitioner, with respect to its availment of the
tax amnesty program; and (c) whether respondent CIR was still interested in
pursuing the case. Petitioner eventually filed its Compliance11 on 27 August
2013, and the OSG on 29 November 2013.12

8
Order dated 8 February 2010, rollo at 229-230.
9
Order dated 17 July 2013, rollo at 321-323.
10
To clarify, an order to “move in the premises,” which is a term of art employed in this Court, simply
means that the parties are obliged to inform the Court of pertinent developments that may help in the
immediate disposition of the case. See Oliveras v. Lopez, G.R. No. L-29727, 14 December 1988,
168 SCRA 431.
11
Rollo at 324-352.
12
Id. at 366-374.
 According to the OSG,13 CS Garment had already complied with all
documentary requirements of the 2007 Tax Amnesty Law. It also stated that
the BIR Litigation Division had not initiated any case against petitioner
relative to the latter’s tax amnesty application. However, the OSG reiterated
that the CIR was still interested in pursuing the case.

ISSUE

The threshold question before this Court is whether or not CS

Garment is already immune from paying the deficiency taxes stated in the
1998 tax assessments of the CIR, as modified by the CTA.

DISCUSSION

Tax amnesty refers to the articulation of the absolute waiver by a

sovereign of its right to collect taxes and power to impose penalties on
persons or entities guilty of violating a tax law.14 Tax amnesty aims to grant
a general reprieve to tax evaders who wish to come clean by giving them an
opportunity to straighten out their records.15 In 2007, Congress enacted R.A.
9480, which granted a tax amnesty covering “all national internal revenue
taxes for the taxable year 2005 and prior years, with or without assessments
duly issued therefor, that have remained unpaid as of December 31, 2005.”16
These national internal revenue taxes include (a) income tax; (b) VAT; (c)
estate tax; (d) excise tax; (e) donor’s tax; (f) documentary stamp tax; (g)
capital gains tax; and (h) other percentage taxes.17 Pursuant to Section 6 of
the 2007 Tax Amnesty Law, those who availed themselves of the benefits of
the law became “immune from the payment of taxes, as well as additions
thereto, and the appurtenant civil, criminal or administrative penalties under
the National Internal Revenue Code of 1997, as amended, arising from the
failure to pay any and all internal revenue taxes for taxable year 2005 and
prior years.”

Amnesty taxpayers may immediately enjoy

the privileges and immunities under the
2007 Tax Amnesty Law, as soon as they
fulfill the suspensive conditions imposed
therein

A careful scrutiny of the 2007 Tax Amnesty Law would tell us that
the law contains two types of conditions – one suspensive, the other

13
Compliance (filed on 29 November 2013) at 2, rollo at 367.
14
Metropolitan Bank and Trust Co. v. Commissioner of Internal Revenue, G.R. No. 178797, 4 August
2009, 595 SCRA 234; and Philippine Banking Corporation (Now: Global Business Bank, Inc.) v.
Commissioner of Internal Revenue, G.R. No. 170574, 30 January 2009, 577 SCRA 366.
15
Id.
16
R.A. 9480, Sec. 1.
17
BIR Revenue Memorandum Circular (RMC) No. 19-2008, 22 February 2008.
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.

The imposition of a suspensive condition under the 2007 Tax

Amnesty Law is evident from the following provisions of the law:

2007 Tax Amnesty Law – Republic Act No. 9480

SECTION 2. Availment of the Amnesty. — Any person, natural

or juridical, who wishes to avail himself of the tax amnesty authorized
and granted under this Act shall file with the Bureau of Internal Revenue
(BIR) a notice and Tax Amnesty Return accompanied by a Statement
of Assets, Liabilities and Networth (SALN) as of December 31, 2005, in
such form as may be prescribed in the implementing rules and regulations
(IRR) of this Act, and pay the applicable amnesty tax within six months
from the effectivity of the IRR.

SECTION 4. Presumption of Correctness of the SALN. — The

SALN as of December 31, 2005 shall be considered as true and correct
except where the amount of declared networth is understated to the
extent of thirty percent (30%) or more as may be established in
proceedings initiated by, or at the instance of, parties other than the
BIR or its agents: Provided, That such proceedings must be initiated
within one year following the date of the filing of the tax amnesty return
and the SALN. Findings of or admission in congressional hearings, other
administrative agencies of government, and/or courts shall be admissible
to prove a thirty percent (30%) under-declaration.

SECTION 6. Immunities and Privileges. — Those who availed

themselves of the tax amnesty under Section 5 hereof, and have fully
complied with all its conditions shall be entitled to the following
immunities and privileges:

(a) The taxpayer shall be immune from the payment of

taxes, as well as additions thereto, and the appurtenant
civil, criminal or administrative penalties under the
National Internal Revenue Code of 1997, as amended,
arising from the failure to pay any and all internal revenue
taxes for taxable year 2005 and prior years.

(b) The taxpayer’s Tax Amnesty Return and the SALN as

of December 31, 2005 shall not be admissible as
evidence in all proceedings that pertain to taxable year
2005 and prior years, insofar as such proceedings relate to
internal revenue taxes, before judicial, quasi-judicial or
administrative bodies in which he is a defendant or
respondent, and except for the purpose of ascertaining the
networth beginning January 1, 2006, the same shall not be
 examined, inquired or looked into by any person or
government office. However, the taxpayer may use this
as a defense, whenever appropriate, in cases brought
against him.

(c) The books of accounts and other records of the

taxpayer for the years covered by the tax amnesty
availed of shall not be examined: Provided, That the
Commissioner of Internal Revenue may authorize in
writing the examination of the said books of accounts and
other records to verify the validity or correctness of a claim
for any tax refund, tax credit (other than refund or credit of
taxes withheld on wages), tax incentives, and/or
exemptions under existing laws.

All these immunities and privileges shall not apply where the
person failed to file a SALN and the Tax Amnesty Return, or 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.

SECTION 7. When and Where to File and Pay. — The filing of

the Tax Amnesty Return and the payment of the amnesty tax for those
availing themselves of the tax amnesty shall be made within six months
starting from the effectivity of the IRR. It shall be filed at the office of the
Revenue District Officer which has jurisdiction over the legal residence or
principal place of business of the filer. The Revenue District Officer
shall issue an acceptance of payment form authorizing an authorized
agent bank, or in the absence thereof, the collection agent or
municipal treasurer concerned, to accept the amnesty tax payment.

Department of Finance Order No. 29-07: Rules and Regulations to

Implement R.A. 9480

SECTION 6. Method of Availment of Tax Amnesty. —

xxxx

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 Agent 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 of 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 R.A. 9480. (Emphases supplied)

In availing themselves of the benefits of the tax amnesty program,

taxpayers must first accomplish the following forms and prepare them for
submission: (1) Notice of Availment of Tax Amnesty Form; (2) Tax
Amnesty Return Form (BIR Form No. 2116); (3) Statement of Assets,
Liabilities and Net worth (SALN) as of December 31, 2005; and (4) Tax
Amnesty Payment Form (Acceptance of Payment Form or BIR Form No.
0617).18

The taxpayers must then compute the amnesty tax due in accordance
with the rates provided in Section 5 of the law,19 using as tax base their net
worth as of 31 December 2005 as declared in their SALNs. At their option,
the revenue district office (RDO) of the BIR may assist them in
accomplishing the forms and computing the taxable base and the amnesty
tax due.20 The RDO, however, is disallowed from looking into, questioning
or examining the veracity of the entries contained in the Tax Amnesty
Return, SALN, and other documents they have submitted.21 Using the Tax
Amnesty Payment Form, the taxpayers must make a complete payment of
the computed amount to an authorized agent bank, a collection agent, or a
duly authorized treasurer of the city or municipality.22

Thereafter, the taxpayers must file with the RDO or an authorized

agent bank the (1) Notice of Availment of Tax Amnesty Form; (2) Tax
Amnesty Return Form (BIR Form No. 2116); (3) SALN; and (4) Tax
Amnesty Payment Form.23 The RDO shall only receive these documents
after complete payment is made, as shown in the Tax Amnesty Payment
Form.24 It must be noted that the completion of these requirements “shall be
deemed full compliance with the provisions of R.A. 9480.”25 In our
considered view, this rule means that amnesty taxpayers may immediately
enjoy the privileges and immunities under the 2007 Tax Amnesty Law as
soon as the aforementioned documents are duly received.

18
See R.A. 9480, Sec. 2; Department of Finance Department Order No. (DOF D.O.) 29-07, Rule II, Sec.
6(1) (Implementing Rules and Regulations of R.A. 9480); BIR RMC No. 19-2008, 22 February 2008; and
BIR RMC NO. 69-2007, 5 November 2007.
19
R.A. 9480, Sec. 5 provides: Grant of Tax Amnesty. — Except for the persons or cases covered in Section
8 hereof, any person, whether natural or juridical, may avail himself of the benefits of tax amnesty under
this Act, and pay the amnesty tax due thereon, based on his networth as of December 31, 2005 as
declared in the SALN as of said period, in accordance with the following schedule of amnesty tax rates
and minimum amnesty tax payments required: x x x x
20
DOF D.O. 29-07, Rule II, Sec. 6(2)(c); BIR RMC No. 19-2008, 22 February 2008.
21
DOF D.O. 29-07, Rule II, Sec. 6(2)(c). See R.A. 9480, Sec. 6.
22
DOF D.O. 29-07, Rule II, Sec. 6(3); R.A. 9480, Secs. 2 & 7; and BIR RMC NO. 69-2007, 5 November
2007.
23
See R.A. 9480, Sec. 2; DOF D.O. 29-07, Rule II, Sec. 6(1); BIR RMC No. 19-2008, 22 February 2008;
and BIR RMC NO. 69-2007, 5 November 2007.
24
DOF D.O. 29-07, Rule II, Sec. 6(3).
25
DOF D.O. 29-07, Rule II, Sec. 6(3); Philippine Banking Corporation v. Commissioner of Internal
Revenue, supra note 14. See R.A. 9480, Sec. 2 in relation to Sec. 6.
 The OSG has already confirmed26 to this Court that CS Garment has
complied with all of the documentary requirements of the law.
Consequently, and contrary to the assertion of the OSG, no further
assessment by the BIR is necessary. CS Garment is now entitled to invoke
the immunities and privileges under Section 6 of the law.

Similarly, we reject the contention of OSG that the BIR was given a
one-year period to contest the correctness of the SALN filed by CS Garment,
thus making petitioner’s motion premature. Neither the 2007 Tax Amnesty
Law nor Department of Finance (DOF) Order No. 29-07 (Tax Amnesty Law
IRR) imposes a waiting period of one year before the applicant can enjoy the
benefits of the Tax Amnesty Law. It can be surmised from the cited
provisions that the law intended the immediate enjoyment of the immunities
and privileges of tax amnesty upon fulfilment of the requirements. Further, a
reading of Sections 4 and 6 of the 2007 Tax Amnesty Law shows that
Congress has adopted a “no questions asked” policy, so long as all the
requirements of the law and the rules are satisfied. The one-year period
referred to in the law should thus be considered only as a prescriptive period
within which third parties, meaning “parties other than the BIR or its
agents,” can question the SALN – not as a waiting period during which the
BIR may contest the SALN and the taxpayer prevented from enjoying the
immunities and privileges under the law.

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.

Nevertheless, in this case we note that the OSG has already

indicated27 that the CIR had not filed a case relative to the tax amnesty

26
Compliance (filed on 29 November 2013) at 2, rollo at 367.
27
Compliance (filed on 29 November 2013) at 2, rollo at 367.
application of CS Garment, from the time the documents were filed in
March 2008. Neither did the OSG mention that a third party had initiated
proceedings challenging the declared amount of net worth of the amnesty
taxpayer within the one-year period.

Taxpayers with pending tax cases are still

qualified to avail themselves of the tax
amnesty program.

With respect to its last assertion, the OSG quotes the following
guidelines under BIR RMC 19-2008 to establish that CS Garment is
disqualified from availing itself of the tax amnesty program:28

A BASIC GUIDE ON THE TAX AMNESTY ACT OF 2007

The following is a basic guide for taxpayers who wish to avail of tax
amnesty pursuant of Republic Act No. 9480 (Tax Amnesty Act of 2007).

Who may avail of the amnesty?

xxxx

EXCEPT:

 Withholding agents with respect to their withholding tax liabilities

 Those with pending cases:

 Under the jurisdiction of the PCGG

 Involving violations of the Anti-Graft and Corrupt Practices
Act
 Involving violations of the Anti-Money Laundering Law
 For tax evasion and other criminal offenses under the NIRC
and/or the RPC

 Issues and cases which were ruled by any court (even without
finality) in favor of the BIR prior to amnesty availment of the
taxpayer. (e.g. Taxpayers who have failed to observe or follow
BOI and/or PEZA rules on entitlement to Income Tax Holiday
Incentives and other incentives)
 Cases involving issues ruled with finality by the Supreme Court
prior to the effectivity of R.A. 9480 (e.g. DST on Special Savings
Account)
 Taxes passed-on and collected from customers for remittance to
the BIR
 Delinquent Accounts/Accounts Receivable considered as assets of
the BIR/Government, including self-assessed tax (Emphasis
supplied)

28
BIR RMC 19-2008, 22 February 2008.
 To resolve the matter, we refer to the basic text of the Tax Amnesty
Law and its implementing rules and regulations, viz:

Republic Act No. 9480

SECTION 8. Exceptions. — The tax amnesty provided in Section

5 hereof shall not extend to the following persons or cases existing as of
the effectivity of this Act:

xxxx

(f) Tax cases subject of final and executory judgment by

the courts.

DOF Order No. 29-07: Rules and Regulations to Implement R.A. 9480

SECTION 5. Exceptions. — The tax amnesty shall not extend to

the following persons or cases existing as of the effectivity of R.A. 9480:

xxxx

7. Tax cases subject of final and executory judgment by

the courts. (Emphases supplied)

We cull from the aforementioned provisions that neither the law nor
the implementing rules state that a court ruling that has not attained finality
would preclude the availment of the benefits of the Tax Amnesty Law. Both
R.A. 9480 and DOF Order No. 29-07 are quite precise in declaring that
“[t]ax cases subject of final and executory judgment by the courts” are the
ones excepted from the benefits of the law. In fact, we have already pointed
out the erroneous interpretation of the law in Philippine Banking
Corporation (Now: Global Business Bank, Inc.) v. Commissioner of Internal
Revenue, viz:

The BIR’s inclusion of “issues and cases which were ruled by

any court (even without finality) in favor of the BIR prior to amnesty
availment of the taxpayer” as one of the exceptions in RMC 19-2008 is
misplaced. RA 9480 is specifically clear that the exceptions to the tax
amnesty program include "tax cases subject of final and executory
judgment by the courts." The present case has not become final and
executory when Metrobank availed of the tax amnesty program.29
(Emphasis supplied)

While tax amnesty, similar to a tax exemption, must be

construed strictly against the taxpayer and liberally in favor of the taxing

29
Supra note 14.
authority,30 it is also a well-settled doctrine31 that the rule-making power of
administrative agencies cannot be extended to amend or expand statutory
requirements or to embrace matters not originally encompassed by the law.
Administrative regulations should always be in accord with the provisions of
the statute they seek to carry into effect, and any resulting inconsistency
shall be resolved in favor of the basic law. We thus definitively declare that
the exception “[i]ssues and cases which were ruled by any court (even
without finality) in favor of the BIR prior to amnesty availment of the
taxpayer” under BIR RMC 19-2008 is invalid, as the exception goes beyond
the scope of the provisions of the 2007 Tax Amnesty Law.32

Considering the completion of the aforementioned requirements, we

find that petitioner has successfully availed itself of the tax amnesty benefits
granted under the Tax Amnesty Law. Therefore, we no longer see any need
to further discuss the issue of the deficiency tax assessments. CS Garment is
now deemed to have been absolved of its obligations and is already immune
from the payment of taxes – including the assessed deficiency in the
payment of VAT, DST, and income tax as affirmed by the CTA en banc – as
well as of the additions thereto (e.g., interests and surcharges). Furthermore,
the tax amnesty benefits include immunity from “the appurtenant civil,
criminal, or administrative penalties under the NIRC of 1997, as amended,
arising from the failure to pay any and all internal revenue taxes for taxable
year 2005 and prior years.”33

WHEREFORE, the instant Petition for Review is GRANTED. The

14 January 2008 Decision and 2 April 2008 Resolution of the Court of Tax
Appeals en banc in CTA EB Case No. 287 is hereby SET ASIDE, and the
remaining assessments for deficiency taxes for taxable year 1998 are hereby
CANCELLED solely in the light of the availment by CS Garment, Inc. of
the tax amnesty program under Republic Act No. 9480.

30
Metropolitan Bank and Trust Co. v. Commissioner of Internal Revenue, G.R. No. 178797, 4 August
2009, 595 SCRA 234 (citing Philippine Banking Corporation, supra note 14).
31
People v. Maceren, G.R. No. L-32166, 18 October 1977, 79 SCRA 450 (citing Calalang v. Williams, 70
Phil. 726 [1940]; People v. Rosenthal, 68 Phil. 328 [1939]; U.S. v. Tupasi Molina, 29 Phil. 119 [1914];
Santos v. Estenzo, 109 Phil. 419 [1960]; Teoxon v. Members of the Board of Administrators, G.R. No. L-
25619, 30 June 1970, 33 SCRA 585; Manuel v. General Auditing Office, G.R. No. L-28952, 29 December
1971, 42 SCRA 660; Deluao v. Casteel, G.R. No. L-21906, 29 August 1969, 29 SCRA 350; University of
Santo Tomas v. Board of Tax Appeals, 93 Phil. 376 [1953]; El Colector de Rentas Internas v. Villaflor, 69
Phil. 319 [1940]; Wise & Co. v. Meer, 78 Phil. 655 [1947]; and Del Mar v. Phil. Veterans Administration,
G.R. No. L-27299, 27 June 1973, 51 SCRA 340); Land Bank of the Philippines v. Court of Appeals, G.R.
Nos. 118712 and 118745, 05 July 1996, 258 SCRA 404 (citing Shell Philippines, Inc. v. Central Bank of
the Philippines, 162 SCRA 628 [1988]; Philippine Petroleum Corporation v. Municipality of Pililla, 198
SCRA 82 [1991]; and Tayug Rural Bank v. Central Bank, 146 SCRA 120 [1986]).
32
In Philippine Banking Corporation (supra note 14), we ruled that the BIR was “misplaced” in including
in RMC 19-2008 as one of the exceptions those “issues and cases which were ruled by any court (even
without finality) in favor of the BIR prior to amnesty availment of the taxpayer.” Since in that case the
bank availed itself of the tax amnesty program before the judgment against it had become “final and
executory,” we resolved to set aside the CTA Decision; see also Metropolitan Bank and Trust Co. v.
Commissioner of Internal Revenue, G.R. No. 178797, 4 August 2009, 595 SCRA 234.
33
R.A. 9480, Sec. 6(a).
Decision 15 G.R. No. 182399

SO ORDERED.

MARIA LOURDES P. A. SERENO

Chief Justice, Chairperson

WE CONCUR:

tU
TERESITA J. LEONARDO-DE CASTRO
Associate Justice

Associate Justice

Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, I certify that

the conclusions in the above Decision had been reached in consultation
before the case was assigned to the writer of the opinion of the Court's
Division.

MARIA LOURDES P. A. SERENO

Chief Justice