ATENEO SCHOOL OF LAW
Tax II
REMEDIES UNDER THE TAX CODE 0F 1997
(As amended by the TRAIN Law)
TAX DELINQUENCY VS. TAX DEFICIENCY
A taxpayer is considered delinquent in the payment of his tax when (a) the self-assessed tax per return filed
by the taxpayer on the prescribed date was not paid or partially paid; or (b) the deficiency tax assessed by the BIR
became final and executory.
Deficiency means : (1) the amount by which the tax imposed by law, as determined by the commissioner or
his duly authorized representative exceeds the amount shown as the tax by the taxpayer on his return; or (2) if no
amount is shown as the tax by the taxpayer upon his return or no tax return was filed, then the amount by which the
tax was determined by the commissioner or his duly authorized representative exceeds the amount previously
assessed (or collected without assessment) as a deficiency.
Distinctions
A delinquent tax can immediately be collected administratively through the issuance of a warrant of
distraint and levy or by judicial action. A deficiency tax can likewise be collected through administrative and/or
judicial process except that it has to go through the process of filing of a protest, etc.
The filing of a civil action for the collection of the delinquent tax in the CTA or ordinary court is the proper
remedy. An action for the collection of a deficiency tax with the CTA or ordinary court requires that the assessment
become final and executory, otherwise the same may be dismissed for lack of jurisdiction.
CIR vs. Island Garment Manufacturing Corp GR No L-46644 September 11, 1987
“Being a valid request for reconsideration, the letter of 23 September 1969 suspended the running of the
period for the perfection of an appeal. As stated in Section 11 of Rep. Act No. 1125, the period for the
perfection of an appeal to the Court of Tax Appeals is thirty (30) days from receipt of an adverse decision
or ruling of the Commissioner of Internal Revenue, Collector of Customs or any provincial or city Board of
Assessment Appeals. In the instant case, the appealable decision is the letter of the petitioner dated 8
August 1969. The respondent corporation received this letter on 23 September 1969, and, on 9 October
1969, or after the lapse of sixteen (16) days, the corporation filed the written request for reconsideration,
also dated 23 September 1969. Since the time during which a motion for new trial or reconsideration has
been pending, is deducted from the period for perfecting an appeal, the period to appeal began to run again
on 18 February 1970, when the respondent corporation received a copy of the Final Notice Before Seizure,
dated 20 November 1969. From 18 February 1970 to 26 February 1970, when the respondent corporation
filed its petition for review with the Court of Tax Appeals, only eight (8) days had elapsed. Tacking these
eight (8) days to the sixteen (16) days previously used, only twenty four (24) days, out of the thirty (30)
days period, had been consumed. The appeal was, therefore, timely filed.”a
… … …
"An assessment fixes and determines the tax liability of a taxpayer. As soon as it is served, an obligation
arises on the part of the taxpayer concerned to pay the amount assessed and demanded. Hence, assessments
should not be based on mere presumptions no matter how reasonable or logical said presumptions may
be . . . ."cralaw virtua1aw library
In order to stand the test of judicial scrutiny, the assessment must be based on actual facts. The presumption
of correctness of assessment being a mere presumption cannot be made to rest on another
presumption . . . ."cralaw virtua
Request for reconsideration must be filed within the 30 day period to appeal, when the same is filed, the prescriptive
period tolls until a reply is made by the commissioner’s office. IN the case at hand, the response of the
commissioner’s office is the “final notice before seizure” which is deemed a denial. In this case the period between
the filing of the motion for reconsideration and the response of the commissioner is taken as against the entire 30
day period given to appeal to the CTA, in this case from the assessment of the commissioner, it is 16 days, then
when the commissioner responded by the issuance of final notice and the taxpayer filed the case with the CTA
within 8 days from the Final Notice, then only 24 days of the 30 days elapsed, thereby within the 30 day period.
(Please note that under the 1987 provisions of the NIRC these things have changed in terms of procedure.
The requirement that an assessment is based on fact and not on presumptions is still a valid position at present, the
tax is strictly construed against the entity enforcing the same and any exaction taken must be based on facts and not
presumptions.
1aw library
ASSESSMENT PROCESS (RR 12-99) (Sec. 228 NIRC)
(RR18-2013 amending RR12-99)
(RR 7-2018 amending RR 18-2013)
After the filing of the return of the taxpayer together with the payment of taxes. It is the duty of the
government to ascertain the correctness of the returns filed and if there exists any deficiency or fraud in the said
returns. The process by the government is as follows:
1. Issuance of a valid Letter of Authority, Letter Notice, Tax Verification Notice
a. Medicard Philippines inc. Vs CIR GR 222743 April 5, 2017
Medicard was issued a Letter Notice for discrepancy for its income tax and VAT, a PAN and
FAN followed. The case went to the CTA with medicard claming that no LOA was ever
issued. The court ruled that the LOA is the only document which can start an assessment
process by the BIR and an LN cannot replace an LOA, which is what is provided in the tax
code.
b. CIR vs Sony Phil 635 SCRA 234
BIR issued an LOA against Sony Philippines “for 1997 and other unverified years”, this was
later raised in the CTA and the courts.
“A Letter of Authority should cover a taxable period not exceeding one taxable year. The
practice of issuing L/As covering audit of "unverified prior years is hereby prohibited. If the
audit of a taxpayer shall include more than one taxable period, the other periods or years shall
be specifically indicated in the L/A.”
2. Examination of Books, paper and records Sec.5 (B) and
Amendment of returns for 3 years 6 (A) NIRC
Subpoena powers Sec. 5(C) NIRC
2.5 Notice of Discrepancy RR 22-2020
Replaced Notice of Informal Conference Sec. 3.1.1 Rev. Regs. No. 12-99
On matter that taxpayers and BIR agree payment may be made using the “Agreement
Form”. On other matter not in agreement, the process continues.
RR 18-2013 removes the informal conference requirement. RR 7-2018 returns the Notice of
informal conference requirement.
3. Issuance of the Preliminary Assessment Notice (PAN)
Taxpayer is given 15 days to contest, otherwise he is considered in default, this is done
by a “REPLY” within 15 days. The REPLY is not mandatory and does not fully tackle
the issues contained in the PAN.
Exceptions to the use of PAN Sec. 228 NIRC
CIR vs. Metro Star Superama inc. GR 185371 Dec. 8, 2010
Taxpayer denied receiving a 15 day notice letter (PAN) and claimed it was a denial of
due process. Courts required that the PAN is a mandatory document in the due process
requirement of an assessment. IN this case, the BIR failed to prove that it sent a PAN to the
taxpayer, which must be proven by evidence.
East airways
VIP data systems
A brown inc. (15 days mandatory for due process)
4. Issuance of the Formal Assessment Notice (FAN) and letter of demand
Requirements: Sec. 3.1.4 RR 12-99
State the facts, laws, rules and regulations which the assessment is based otherwise it is
void.
Sent by registered mail or by personal delivery, if using the latter, the same should be
acknowledged in the duplicate copy with the following information: 1) name, 2) signature, 3)
designation and authority, 4) date of receipt.
PNZ Marketing vs. Com. CTA Case No. 5726 Dec. 14, 2001
An assessment must be based on fact and law as required by section 228 of the NIRC. “
For it is believed that it is only through a detailed appraisal of its basis that a taxpayer may be able
to dispute the imposition or agree with it.” “The demand letter, as thus worded contains the reason
why a deficiency income tax assessment was issued against the Petitioner. …”
Artex dev Co vs. NLRC 187 SCRA 611 (opportunity to be heard)
This is a labor case wherein the Petitioner claimed he was denied due process because he
was not given the opportunity to be heard. It was however shown that he was notified of the case
and the schedules but he failed to appear in the proceeding. The court ruled that he was given due
process but he refused to act on the same.
CIR vs. Pacific Bayview Prop CTA EB No 1677 Oct 8, 2018
The case involves the issue of the BIR issuing a Final Assessment Notice on the
Fourteenth day after the Preliminary assessment notice was given to the taxpayer, thus the
taxpayer was denied due process because he was not given the 15 day period to reply to the PAN,
as provided by law. The CTA ruled that the 15 day period is mandatory on the BIR to provide the
taxpayer the opportunity to reply to the PAN and the assessment process.
CIR vs. Derek Arthur P. Ramsey CTA EB No. 1413 (Jun 22, 2017)
Taxpayer claims that he received a formal letter of demand without receiving an
assessment notice from the BIR. The BIR never presented any proof of the service of the
assessment notice with the FLD. The BIR never showed any proof of service, nor of any
acknowledgement of the taxpayer nor was there any date shown in the claimed assessment notice.
The rules required that the final assessment be issued to the taxpayer with a letter of demand.
Since the BIR failed to show any final assessment notice (FAN) there was no assessment issued in
the case.
Protest by taxpayer of the FAN within thirty days otherwise the same becomes final and
executory wherein the taxpayer can no longer contest the assessment.
Penta Technology, Inc. vs CIR CTA case no. 9258, 9 March 2019 what happens when an
assessment is void ab initio.
The taxpayer received a Tax Verification Notice from the BIR which generated an
assessment of deficiency taxes. It was also noted that there was a reassignment of the examiner
without the issuance of a new Letter of Authority. This matter and the matter of the assessment
being issued through a TVN and not an LOA was questioned in the CTA.
As reiterated by the cases and the CTA, the only basis for an assessment is a Letter of
Authority because that is what is provided in the NIRC, there is no TVN, LN or whatever other
investigation document provided in the tax code, other than the LOA, as such the assessment
issued was invalid and the FDDA was reversed.
IT is also mandatory that for each reassignment of the examiners assigned to a case, a
new LOA is to be issued to the new examiner, failure to do the same would lead to the
presumption that there was no valid LOA issued.
COLLECTION PROCESS
The issuance of the Final Assessment Notice legally creates a tax liability of the taxpayer which is being
demanded in the accompanying letter of demand. The stages are as follows:
5. Filing of an administrative protest by the taxpayer against the assessment
a. Done within thirty days from receipt otherwise the assessment becomes final.
b. Must specify the following:
i. Complete name and address of taxpayer
ii. Nature of the request of whether it is for reconsideration or reinvestigation
1. If reconsideration – question of appreciation of the law
2. If reinvestigation – newly discovered evidence which is to be presented.
iii. Taxable period covered
iv. Assessment number
v. Date of receipt of assessment number or demand letter
1. Itemized statement of findings which are agreed upon which should be paid
immediately.
vi. Itemized schedule of the adjustments to which the taxpayer does not agree to.
vii. Statement of facts and law to support the protest.
c. Distinction between a request for reconsideration and request for reinvestigation
i. RR No. 12-85 Section 6
ii. CIR vs. Philippine Global Communication G.R. No. 167146 October 31, 2006
1. Sec. 269 (c) NIRC
2. Sec. 224
The filing of protest letters requesting for a “reconsideration” does not toll the
prescriptive period because there are no longer any new evidences to be presented, it
is only a reconsideration of a filed protest.
6. Submission of documentary evidence within sixty days of filing of protest.
7. Upon the submission of documentary evidence or memorandum, the commissioner is given the
180 days to act upon the protest.
- There are issues as to when the 180 day period begins to start.
If there is no additional documents filed. If the memo is filed before the lapse of
60 days or after the lapse of 60 days.
Oceanic Wireless Network vs. Comm CTA Case 61111, Nov. 3, 2004
The taxpayer filed a protest with the BIR asking for reinvestigation, it however
did not file any other supporting documents to support its position. The taxpayer then
filed a case with the CTA on the basis of inaction. The question is whether the 60 day
period to file supporting documents should be added to the 180 days to determine when
the case can be filed with the CTA. In this case, since there was no subsequent documents
filed, the 180 days started to run on the date of the filing of the protest with the CIR. On
the 180 day after the filing of the protest, the taxpayer can file with the CTA. In this case,
the taxpayer filed an action with the CTA beyond the 30 days after the expiration of the
180 days, on the belief that there was still the added 60 days to submit documents, which
the taxpayer did not. Thus filed out of time.
8. Issuance of a revised assessment (possibility)
i. Collector vs. Batangas Transportation Co. 102 Phil 822
b. Cancellation of the entire assessment.
c. Revision of the Assessment in parts.
d. Denial of the protest.
9. Denial of the Protest
If the protest of the taxpayer is denied in whole or in part the same shall contain the
following
i. State the facts, the applicable law, rules and regulations, jurisprudence on which such
decision is based; otherwise, the decision shall be void.
ii. That the same is the final decision of the commisioner. (Sec. 3.1.6 RR 12-99)
10. Within 30 days from the denial of the Protest, the taxpayer is given 30 days to appeal to the Court
of Tax Appeals (RA 9282 Expanded jurisdiction of the CTA).
When does the CTA have jurisdiction?
Lascona land Co vs.CIR GR 171251 March 5, 2012
Choice is between filing after the 180 day period or wait for the decision of the
commissioner.
RCBC vs. CIR GR 168498 apr 24,2007
Taxpayer received an assessment, decided to file due to inaction of the
commissioner within the 180 day period, but filed the action beyond the 30 day window.
Effect was that the CTA lost jurisdiction over the case.
Section 3, Rule 4 and Section 3(a), Rule 8 of the Revised Rules of the Court of Tax
Appeals
