Commissioner of Internal Revenue, Petitioner, vs. Isabela Cultural Corporation, Respondent

THIRD DIVISION
[G.R. No. 135210. July 11, 2001.]

COMMISSIONER OF INTERNAL REVENUE, petitioner, vs.
ISABELA CULTURAL CORPORATION, respondent.
The Solicitor General for petitioner.
Bengson Narciso Cudala Jimenez Gonzales & Liwanag for private respondent.
SYNOPSIS
Respondent was assessed an income tax deficiency by the Bureau of Internal Revenue
(BIR) in the reduced amount of P325,869.44. It moved for reconsideration and filed a
letter attaching certain documents in support of its protest. The BIR sent a Final Notice
Before Seizure to respondent demanding payment of the subject assessment within 10
days from receipt thereof and that failure on respondent's part would constrain the BIR to
collect through summary remedies. The notice, however, did not contain a categorical
statement that the BIR has denied respondent's motion for reconsideration. Respondent,
nonetheless, filed a petition for review with the Court of Tax Appeals alleging that the
final notice of seizure was petitioner's final decision. The tax court dismissed the same.
On appeal, the Court of Appeals ruled that the final notice before seizure had effectively
denied petitioner's request for reconsideration of the assessment. Hence, this recourse by
the BIR.
TIEHSA
A final demand from the BIR reiterating the immediate payment of a tax deficiency
previously made, is tantamount to a denial of the taxpayer's request for reconsideration.
Such letter amounts to a final decision on a disputed assessment and is thus appealable to
the Court of Tax Appeals. The petition was denied and the assailed decision of the Court
of Appeals was affirmed.
SYLLABUS
TAXATION; NATIONAL INTERNAL REVENUE CODE; TAX DEFICIENCY
ASSESSMENT; FINAL DEMAND LETTER FROM BUREAU OF INTERNAL,
REVENUE (BIR) REITERATING IMMEDIATE PAYMENT, TANTAMOUNT TO
DENIAL OF REQUEST FOR RECONSIDERATION; CASE AT BAR. A final
demand letter from the Bureau of Internal Revenue, reiterating to the taxpayer the
immediate payment of a tax deficiency assessment previously made, is tantamount to a

denial of the taxpayer's request for reconsideration. Such letter amounts to a final
decision on a disputed assessment and is thus appealable to the Court of Tax Appeals
(CTA). Indisputably, respondent received an assessment letter dated February 9, 1990,
stating that it had delinquent taxes due; and it subsequently filed its motion for
reconsideration on March 23, 1990. In support of its request for reconsideration, it sent to
the CIR additional documents on April 18, 1990. The next communication respondent
received was already the Final Notice Before Seizure dated November 10, 1994. In the
light of the above facts, the Final Notice Before Seizure cannot but be considered as the
commissioner's decision disposing of the request for reconsideration filed by respondent,
who received no other response to its request. Not only was the Notice the only response
received; its content and tenor supported the theory that it was the CIR's final act
regarding the request for reconsideration. The very title expressly indicated that it was a
final notice prior to seizure of property. The letter itself clearly stated that respondent was
being given "this LAST OPPORTUNITY" to pay; otherwise, its properties would be
subjected to distraint and levy. How then could it have been made to believe that its
request for reconsideration was still pending determination, despite the actual threat of
seizure of its properties? Furthermore, Section 228 of the National Internal Revenue
Code states that a delinquent taxpayer may nevertheless directly appeal a disputed
assessment, if its request for reconsideration remains unacted upon 180 days after
submission thereof. In this case, the said period of 180 days had already lapsed when
respondent filed its request for reconsideration on March 23, 1990, without any action on
the part of the CIR. Lastly, jurisprudence dictates that a final demand letter for payment
of delinquent taxes may be considered a decision on a disputed or protested assessment.
ACHEaI
DECISION
PANGANIBAN, J :
p
A final demand letter from the Bureau of Internal Revenue, reiterating to the taxpayer the
immediate payment of a tax deficiency assessment previously made, is tantamount to a
denial of the taxpayer's request for reconsideration. Such letter amounts to a final
decision on a disputed assessment and is thus appealable to the Court of Tax Appeals
(CTA).
The Case
Before this Court is a Petition for Review on Certiorari 1 pursuant to Rule 45 of the Rules
of Court, seeking to set aside the August 19, 1998 Decision 2 of the Court of Appeals 3
(CA) in CA-GR SP No. 46383 and ultimately to affirm the dismissal of CTA Case No.
5211. The dispositive portion of the assailed Decision reads as follows:
"WHEREFORE, the assailed decision is REVERSED and SET ASIDE.
Accordingly, judgment is hereby rendered REMANDING the case to the CTA
for proper disposition." 4
The Facts
The facts are undisputed. The Court of Appeals quoted the summary of the CTA as
follows:
"As succinctly summarized by the Court of Tax appeals (CTA for brevity), the
antecedent facts are as follows:
'In an investigation conducted on the 1986 books of account of
[respondent, petitioner] had the preliminary [finding] that [respondent]
incurred a total income tax deficiency of P9,985,392.15, inclusive of
increments. Upon protest by [respondent's] counsel, the said preliminary
assessment was reduced to the amount of P325,869.44, a breakdown of
which follows:
Deficiency Income TaxP321,022.68
Deficiency Expanded4,846.76
Withholding Tax
TotalP325,869.44
=========
(pp. 187-189, BIR records)'
On February 23, 1990, [respondent] received from [petitioner] an assessment

letter, dated February 9, 1990, demanding payment of the amounts of
P333,196.86 and P4,897.79 as deficiency income tax and expanded withholding
tax inclusive of surcharge and interest, respectively, for the taxable period from
January 1, 1986 to December 31, 1986. (pp. 204 and 205, BIR rec.)
In a letter, dated March 22, 1990, filed with the [petitioner's] office on March
23, 1990 (pp. 296-311, BIR rec.), [respondent] requested . . . a reconsideration
of the subject assessment.
Supplemental to its protest was a letter, dated April 2, 1990, filed with the
[petitioner's] office on April 18, 1990 (pp. 224 & 225, BIR rec.), to which . . .
were attached certain documents supportive of its protest, as well as a Waiver of

Statute of Limitation, dated April 17, 1990, where it was indicated that
[petitioner] would only have until April 5, 1991 within which to asses and
collect the taxes that may be found due from [respondent] after the reinvestigation.
On February 9, 1995, [respondent] received from [petitioner] a Final Notice
Before Seizure, dated December 22, 1994 (p. 340, BIR rec.). In said letter,
[petitioner] demanded payment of the subject assessment within ten (10) days
from receipt thereof. Otherwise, failure on its part would constrain [petitioner]
to collect the subject assessment through summary remedies.
[Respondent] considered said final notice of seizure as [petitioner's] final
decision. Hence, the instant petition for review filed with this Court on March 9,
1995.
The CTA having rendered judgment dismissing the petition, [respondent] filed
the instant petition anchored on the argument that [petitioner's] issuance of the
Final Notice Before Seizure constitutes [its] decision on [respondent's] request
for reinvestigation, which the [respondent] may appeal to the CTA." 5
Ruling of the Court of Appeals

In its Decision, the Court of Appeals reversed the Court of Tax Appeals. The CA
considered the final notice sent by petitioner as the latter's decision, which was
appealable to the CTA. The appellate court reasoned that the final Notice before seizure
had effectively denied petitioner's request for a reconsideration of the commissioner's
assessment. The CA relied on the long-settled tax jurisprudence that a demand letter
reiterating payment of delinquent taxes amounted to a decision on a disputed assessment.
ITCHSa
Hence, this recourse. 6

Issues
In his Memorandum, 7 petitioner presents for this Court's consideration a solitary issue:
"Whether or not the Final Notice Before Seizure dated February 9, 1995 signed
by Acting Chief Revenue Collection Officer Milagros Acevedo against ICC
constitutes the final decision of the CIR appealable to the CTA." 8
The Court's Ruling

The Petition is not meritorious.
Sole Issue: The Nature of the Final Notice Before Seizure
The Final Notice Before Seizure sent by the Bureau of Internal Revenue (BIR) to
respondent reads as follows:
"On Feb. 9, 1990, [this] Office sent you a letter requesting you to settle the
above-captioned assessment. To date, however, despite the lapse of a
considerable length of time, we have not been honored with a reply from you.
In this connection, we are giving you this LAST OPPORTUNITY to settle the
adverted assessment within ten (10) days after receipt hereof. Should you again
fail, and refuse to pay, this Office will be constrained to enforce its collection by
summary remedies of Warrant of Levy of Road Property, Distraint of Personal
Property or Warrant of Garnishment, and/or simultaneous court action.
Please give this matter your preferential attention.
Very truly yours,
ISIDRO B. TECSON, JR.
Revenue District Officer
By:
(Signed)
MILAGROS M. ACEVEDO
Actg. Chief Revenue Collection Officer" 9
Petitioner maintains that this Final Notice was a mere reiteration of the delinquent
taxpayer's obligation to pay the taxes due. It was supposedly a mere demand that should
not have been mistaken for a decision on a protested assessment. Such decision, the
commissioner contends, must unequivocably indicate that it is the resolution of the
taxpayer's request for reconsideration and must likewise state the reason therefor.
Respondent, on the other hand, points out that the Final Notice Before Seizure should be
considered as a denial of its request for reconsideration of the disputed assessment. The
Notice should be deemed as petitioner's last act, since failure to comply with it would
lead to the distraint and levy of respondent's properties, as indicated therein.
We agree with respondent. In the normal course, the revenue district officer sends the
taxpayer a notice of delinquent taxes, indicating the period covered, the amount due
including interest, and the reason for the delinquency. If the taxpayer disagrees with or
wishes to protest the assessment, it sends a letter to the BIR indicating its protest, stating
the reasons therefor, and submitting such proof as may be necessary. That letter is
considered as the taxpayer's request for reconsideration of the delinquent assessment.
After the request is filed and received by the BIR, the assessment becomes a disputed
assessment on which it must render a decision. That decision is appealable to the Court of
Tax Appeals for review.
Prior to the decision on a disputed assessment, there may still be exchanges between the
commissioner of internal revenue (CIR) and the taxpayer. The former may ask
clarificatory questions or require the latter to submit additional evidence. However, the
CIR's position regarding the disputed assessment must be indicated in the final decision.
It is this decision that is properly appealable to the CTA for review.
Indisputably, respondent received an assessment letter dated February 9, 1990, stating
that it had delinquent taxes due; and it subsequently filed its motion for reconsideration
on March 23, 1990. In support of its request for reconsideration, it sent to the CIR
additional documents on April 18, 1990. The next communication respondent received
was already the Final Notice Before Seizure dated November 10, 1994.
In the light of the above facts, the Final Notice Before Seizure cannot but be considered
as the commissioner's decision disposing of the request for reconsideration filed by
respondent, who received no other response to its request. Not only was the Notice the
only response received; its content and tenor supported the theory that it was the CIR's
final act regarding the request for reconsideration. The very title expressly indicated that
it was a final notice prior to seizure of property. The letter itself clearly stated that
respondent was being given "this LAST OPPORTUNITY" to pay; otherwise, its
properties would be subjected to distraint and levy. How then could it have been made to
believe that its request for reconsideration was still pending determination, despite the
actual threat of seizure of its properties?
Furthermore, Section 228 of the National Internal Revenue Code states that a delinquent
taxpayer may nevertheless directly appeal a disputed assessment, if its request for
reconsideration remains unacted upon 180 days after submission thereof. We quote:
"SECTION 228.Protesting an Assessment. . . .
Within a period to be prescribed by implementing rules and regulations, the
taxpayer shall be required to respond to said notice. If the taxpayer fails to
respond, the Commissioner or his duly authorized representative shall issue an
assessment based on his findings.
Such assessment may be protested administratively by filing a request for
reconsideration or reinvestigation within thirty (30) days from receipt of the
assessment in such form and manner as may be prescribed by implementing
rules and regulations. Within sixty (60) days from filing of the protest, all
relevant supporting documents shall have become final.
If the protest is denied in whole or in part, or is not acted upon within one
hundred eighty (180) days from submission of documents, the taxpayer
adversely affected by the decision or inaction may appeal to the Court of Tax
Appeals within (30) days from receipt of the said decision, or from the lapse of
the one hundred eighty (180)-day period; otherwise the decision shall become
final, executory and demandable." 10
In this case, the said period of 180 days had already lapsed when respondent filed its
request for reconsideration on March 23, 1990, without any action on the part of the CIR.
Lastly, jurisprudence dictates that a final demand letter for payment of delinquent taxes
may be considered a decision on a disputed or protested assessment. In Commissioner of
Internal Revenue v. Ayala Securities Corporation, this Court held:
"The letter of February 18, 1963 (Exh. G), in the view of the Court, is
tantamount to a denial of the reconsideration or [respondent corporation's] . . .
protest o[f] the assessment made by the petitioner, considering that the said
letter [was] in itself a reiteration of the demand by the Bureau of Internal
Revenue for the settlement of the assessment already made, and for the
immediate payment of the sum of P758,687.04 in spite of the vehement protest
of the respondent corporation on April 21, 1961. This certainly is a clear
indication of the firm stand of petitioner against the reconsideration of the
disputed assessment, in view of the continued refusal of the respondent
corporation to execute the waiver of the period of limitation upon the
assessment in question.
This being so, the said letter amount[ed] to a decision on a disputed or protested
assessment and, there, the court a quo did not err in taking cognizance of this
case." 11
Similarly, in Surigao Electric Co., Inc. vs. Court of Tax Appeals 12 and again in CIR v.
Union Shipping Corp., 13 we ruled:
". . . The letter of demand dated April 29, 1963 unquestionably constitutes the
final action taken by the commissioner on the petitioner's several requests for
reconsideration and recomputation. In this letter the commissioner not only in
effect demanded that the petitioner pay the amount of P11,533.53 but also gave
warning that in the event it failed to pay, the said commissioner would be
constrained to enforce the collection thereof by means of the remedies provided
by law. The tenor of the letter, specifically the statement regarding the resort to
legal remedies, unmistakably indicate[d] the final nature of the determination
made by the commissioner of the petitioner's deficiency franchise tax liability."
As in CIR v. Union Shipping, 14 petitioner failed to rule on the Motion for

Reconsideration filed by private respondent, but simply continued to demand payment of
the latter's alleged tax delinquency. Thus, the Court reiterated the dictum that the BIR
should always indicate to the taxpayer in clear and unequivocal language what constitutes
final action on a disputed assessment. The object of this policy is to avoid repeated
requests for reconsideration by the taxpayer, thereby delaying the finality of the
assessment and, consequently, the collection of the taxes due. Furthermore, the taxpayer
would not be groping in the dark, speculating as to which communication or action of the
BIR may be the decision appealable to the tax court. 15
In the instant case, the second notice received by private respondent verily indicated its
nature that it was final. Unequivocably, therefore, it was tantamount to a rejection of
the request for reconsideration.
Commissioner v. Algue 16 is not in point here. In that case, the Warrant of Distraint and
Levy, issued to the taxpayer without any categorical ruling on its request for
reconsideration, was not deemed equivalent to a denial of the request. Because such
request could not in fact be found in its records, the BIR cannot be presumed to have
taken it into consideration. The request was considered only when the taxpayer gave a
copy of it, duly stamp-received by the BIR. Hence, the Warrant was deemed premature.
HDIaST
In the present case, petitioner does not deny receipt of private respondent's protest letter.
As a matter of fact, it categorically relates the following in its "Statement of Relevant
Facts": 17
"3.On March 23, 1990, respondent ICC wrote the CIR requesting for a
reconsideration of the assessment on the ground that there was an error
committed in the computation of interest and that there were expenses which
were disallowed (Ibid., pp. 296-311).
"4.On April 2, 1990, respondent ICC sent the CIR additional documents in
support of its protest/reconsideration. The letter was received by the BIR on
April 18, 1990. Respondent ICC further executed a Waiver of Statute of
Limitation (dated April 17, 1990) whereby it consented to the BIR to assess and
collect any taxes that may be discovered in the process of reinvestigation, until
April 3, 1991 (Ibid., pp. 296-311). A copy of the waiver is hereto attached as
Annex C.
Having admitted as a fact private respondent's request for reconsideration, petitioner must
have passed upon it prior to the issuance of the Final Notice Before Seizure.
WHEREFORE, the Petition is hereby DENIED and the assailed Decision AFFIRMED.
SO ORDERED.
TSCIEa
Melo, Vitug and Sandoval-Gutierrez, JJ ., concur.

Gonzaga-Reyes, J ., is on leave.
(Commissioner of Internal Revenue v. Isabela Cultural Corp., G.R. No. 135210, [July
11, 2001], 413 PHIL 376-386)
|||
SECOND DIVISION
[G.R. No. 66160. May 21, 1990.]
UNION SHIPPING CORPORATION and THE COURT OF TAX
APPEALS, respondents.
Artemio M. Lobrin for private respondent.
DECISION
PARAS, J :
p
This is a petition for review on certiorari of the December 9, 1983 decision * of the Court
of Tax Appeals in CTA Case No. 2989 reversing the Commissioner of Internal Revenue.
In a letter dated December 27, 1974 (Exhibit "A"), herein petitioner Commissioner of
Internal Revenue assessed against Yee Fong Hong, Ltd. and/or herein private respondent
Union Shipping Corporation, the total sum of P583,155.22 as deficiency income taxes
due for the years 1971 and 1972. Said letter was received on January 4, 1975, and in a
letter dated January 10, 1975 (Exhibit "B"), received by petitioner on January 13, 1975,
private respondent protested the assessment.
LLjur
Petitioner, without ruling on the protest, issued a Warrant of Distraint and Levy (Exhibit
"C"), which was served on private respondent's counsel, Clemente Celso, on November
25, 1976.
In a letter dated November 27, 1976 (Exhibit "D"), received by petitioner on November
29, 1976 (Exhibit "D-1"), private respondent reiterated its request for reinvestigation of
the assessment and for the reconsideration of the summary collection thru the Warrant of
Distraint and Levy.
Petitioner, again, without acting on the request for reinvestigation and reconsideration of
the Warrant of Distraint and Levy, filed a collection suit before Branch XXI of the then
Court of First Instance of Manila and docketed as Civil Case No. 120459 against private
respondent. Summons (Exhibit "E") in the said collection case was issued to private
respondent on December 28, 1978.
On January 10, 1979, private respondent filed with respondent court its Petition for
Review of the petitioner's assessment of its deficiency income taxes in a letter dated
December 27, 1974, docketed therein as CTA Case No. 2989 (Rollo, pp. 44-49), wherein
it prays that after hearing, judgment be rendered holding that it is not liable for the
payment of the income tax herein involved, or which may be due from foreign shipowner
Yee Fong Hong, Ltd.; to which petitioner filed his answer on March 29, 1979 (Rollo, pp.
50-53).
Respondent Tax Court, in a decision dated December 9, 1983, ruled in favor of private
respondent
"WHEREFORE, the decision of the Commissioner of Internal Revenue
appealed from, assessing against and demanding from petitioner the payment of
deficiency income tax, inclusive of 50% surcharge, interest and compromise
penalties, in the amounts of P73,958.76 and P583,155.22 for the years 1971 and
1972, respectively, is reversed."
Hence, the instant petition.

The Second Division of this Court, after the filing of the required pleadings, in a
resolution dated January 28, 1985, resolved to give due course to the petition, and
directed petitioner therein, to file his brief (Rollo, p. 145). In compliance, petitioner filed
his brief on May 10, 1985 (Rollo, p. 151). Respondents, on the other hand, filed their
brief on June 6, 1985 (Rollo, p. 156).
The main issues in this case are: (a) on the procedural aspect, whether or not the Court of
Tax Appeals has jurisdiction over thus case and (b) on the merits, whether or not Union
Shipping Corporation acting as a mere "husbanding agent" of Yee Fong Hong Ltd. is
liable for payment of taxes on the gross receipts or earnings of the latter.
LLjur
The main thrust of this petition is that the issuance of a warrant of distraint and levy is
proof of the finality of an assessment because it is the most drastic action of all media of
enforcing the collection of tax, and is tantamount to an outright denial of a motion for
reconsideration of an assessment. Among others, petitioner contends that the warrant of
distraint and levy was issued after respondent corporation filed a request for
reconsideration of subject assessment, thus constituting petitioner's final decision in the
disputed assessments (Brief for petitioner, pp. 9 and 12).
Petitioner argues therefore that the period to appeal to the Court of Tax Appeals
commenced to run from receipt of said warrant on November 25, 1976, so that on
January 10, 1979 when respondent corporation sought redress from the Tax Court,
petitioner's decision has long become final and executory.
On this issue, this Court had already laid down the dictum that the Commissioner should
always indicate to the taxpayer in clear and unequivocal language what constitutes his
final determination of the disputed assessment.
Specifically, this Court ruled:
". . . we deem it appropriate to state that the Commissioner of Internal Revenue
should always indicate to the taxpayer in clear and unequivocal language
whenever his action on an assessment questioned by a taxpayer constitutes his
final determination on the disputed assessment, as contemplated by sections 7
and 11 of Republic Act 1125, as amended. On the basis of this statement
indubitably showing that the Commissioner's communicated action is his final
decision on the contested assessment, the aggrieved taxpayer would then be able
to take recourse to the tax court at the opportune time. Without needless
difficulty, the taxpayer would be able to determine when his right to appeal to
the tax court accrues. This rule of conduct would also obviate all desire and
opportunity on the part of the taxpayer to continually delay the finality of the
assessment - and, consequently, the collection of the amount demanded as taxes
- by repeated requests for recomputation and reconsideration. On the part of the
Commissioner, this would encourage his office to conduct a careful and
thorough study of every questioned assessment and render a correct and definite
decision thereon in the first instance. This would also deter the Commissioner
from unfairly making the taxpayer grope in the dark and speculate as to which
action constitutes the decision appealable to the tax court. Of greater import,
this rule of conduct would meet a pressing need for fair play, regularity, and
orderliness in administrative action." (Surigao Electric Co., Inc. v. C.T.A., 57
SCRA 523, 528, [1974]).
There appears to be no dispute that petitioner did not rule on private respondent's motion
for reconsideration but contrary to the above ruling of this Court, left private respondent
in the dark as to which action of the Commissioner is the decision appealable to the Court
of Tax Appeals. Had he categorically stated that he denies private respondent's motion
for reconsideration and that his action constitutes his final determination on the disputed
assessment, private respondent without needless difficulty would have been able to
determine when his right to appeal accrues and the resulting confusion would have been
avoided.
Much later, this Court reiterated the above-mentioned dictum in a ruling applicable on all
fours to the issue in the case at bar, that the reviewable decision of the Bureau of Internal
Revenue is that contained in the letter of its Commissioner, that such constitutes the final
decision on the matter which may be appealed to the Court of Tax Appeals and not the
warrants of distraint (Advertising Associates, Inc. v. Court of Appeals, 133 SCRA 769
[1984] italics supplied). It was likewise stressed that the procedure enunciated is
demanded by the pressing need for fair play, regularity and orderliness in administrative
action.
LexLib
Under the circumstances, the Commissioner of Internal Revenue, not having clearly
signified his final action on the disputed assessment, legally the period to appeal has not
commenced to run. Thus, it was only when private respondent received the summons on
the civil suit for collection of deficiency income on December 28, 1978 that the period to
appeal commenced to run.
The request for reinvestigation and reconsideration was in effect considered denied by
petitioner when the latter filed a civil suit for collection of deficiency income. So that on
January 10, 1979 when private respondent filed the appeal with the Court of Tax
Appeals, it consumed a total of only thirteen (13) days well within the thirty day period to
appeal pursuant to Section 11 of R.A. 1125.
On the merits, it was found fully substantiated by the Court of Tax Appeals that,
respondent corporation is the husbanding agent of the vessel Yee Fong Hong, Ltd. as
follows:
"Coming to the second issue, petitioner contended and was substantiated by
satisfactory uncontradicted testimonies of Clemente Celso, Certified Public
Accountant, and Rodolfo C. Cabalquinto, President and General Manager, of
petitioner that it is actually and legally the husbanding agent of the vessel of
Yee Fong Hong, Ltd. as (1) it neither performed nor transacted any shipping
business, for and in representation, of Yee Fong Hong, Ltd. or its vessels or
otherwise negotiated or procured cargo to be loaded in the vessels of Yee Fong
Hong, Ltd. (p. 21, t.s.n., July 16, 1980); (2) it never solicited or procured cargo
or freight in the Philippines or elsewhere for loading in said vessels of Yee Fong
Hong, Ltd. (pp. 21 & 38, ibid.); (3) it had not collected any freight income or
receipts for the said Yee Fong Hong Ltd. (pp. 22 & 38, ibid.; pp. 46 & 48, t.s.n.,
Nov. 14, 1980.); (4) it never had possession or control, actual or constructive,
over the funds representing payment by Philippine shippers for cargo loaded on
said vessels (pp. 21 & 38, ibid; p. 48, ibid); petitioner never remitted to Yee
Fong Hong, Ltd. any sum of money representing freight incomes of Yee Fong
Hong, Ltd. (p. 21, ibid.; p. 48, ibid); and (5) that the freight payments made for
cargo loaded in the Philippines for foreign destination were actually paid
directly by the shippers to the said Yee Fong Hong, Ltd. upon arrival of the
goods in the foreign ports." (Rollo, pp. 58-59).
On the same issue, the Commissioner of Internal Revenue Misael P. Vera, on query of
respondent's counsel, opined that respondent corporation being merely a husbanding
agent is not liable for the payment of the income taxes due from the foreign ship owners
loading cargoes in the Philippines (Rollo, p. 63; Exhibit "I", Rollo, pp. 64-66).
cdll
Neither can private respondent be liable for withholding tax under Section 53 of the
Internal Revenue Code since it is not in possession, custody or control of the funds
received by and remitted to Yee Fong Hong, Ltd., a non-resident taxpayer. As correctly
ruled by the Court of Tax Appeals, "if an individual or corporation like the petitioner in
this case, is not in the actual possession, custody, or control of the funds, it can neither be
physically nor legally liable or obligated to pay the so-called withholding tax on income
claimed by Yee Fong Hong, Ltd." (Rollo, p. 67).
Finally, it must be stated that factual findings of the Court of Tax Appeals are binding on
this Court (Industrial Textiles Manufacturing Company of the Phil., Inc. (ITEMCOP) v.
Commissioner of Internal Revenue, et al. (136 SCRA 549 [1985]). It is well-settled that
in passing upon petitions for review of the decisions of the Court of Tax Appeals, this
Court is generally confined to questions of law. The findings of fact of said Court are not
to be disturbed unless clearly shown to be unsupported by substantial evidence
(Commissioner of Internal Revenue v. Manila Machinery & Supply Company, 135 SCRA
8 [1985]).
A careful scrutiny of the records reveals no cogent reason to disturb the findings of the
Court of Tax Appeals.
PREMISES CONSIDERED, the instant petition is hereby DISMISSED and the assailed
decision of the Court of Tax Appeals is hereby AFFIRMED.
SO ORDERED.
Melencio-Herrera , Padilla, Sarmiento and Regalado, JJ., concur.
(Commissioner of Internal Revenue v. Union Shipping Corp., G.R. No. 66160, [May 21,
1990], 264 PHIL 132-140)
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SECOND DIVISION
[G.R. No. 59758. December 26, 1984.]
ADVERTISING ASSOCIATES, INC., petitioner, vs. COURT OF
APPEALS and COMMISSIONER OF INTERNAL REVENUE,
respondents.
Bito, Misa & Lozada Law Office for petitioner.
The Solicitor General for respondents.
SYLLABUS
1. TAXATION; TAX CODE; INDEPENDENT CONTRACTOR AND BUSINESS
AGENT DEFINED. Section 191 defines an independent contractor as including all
persons whose activity consists essentially of the sale of all kinds of services for a fee.
Section 194(v) of the Tax Code defines a business agent as including persons who
conduct advertising agencies.
2. ID.; ID.; COMMISSIONER'S LETTER IS THE REVIEWABLE DECISION NOT
THE WARRANTS OF DISTRAINT; CASE AT BAR. The reviewable decision is
that contained in Commissioner Plana's letter of May 23, 1979 and not the warrants of
distraint which were served upon the taxpayer on April 18 and May 25, 1978. No amount
of quibbling or sophistry can blink the fact that said letter embodies the Commissioner s
final decision within the meaning of section 7 of Republic Act No. 1125. The
Commissioner said so. He even directed the taxpayer to appeal it to the Tax Court. That
was the same situation in St. Stephen's Association and St. Stephen's Chinese Girl's
School vs. Collector of Internal Revenue, 104 Phil. 314, 317-318. The directive is in
consonance with the Supreme Court's dictum that the Commissioner should always
indicate to the taxpayer in clear and unequivocal language what constitutes his final
determination of the disputed assessment. That procedure is demanded by the pressing
need for fair play, regularity and orderliness in administrative action (Surigao Electric
Co., Inc. vs. Court of Tax Appeals, L-25289, June 28, 1974, 57 SCRA 523).
3. ID.; ID.; DEFICIENCY ASSESSMENTS; TAXPAYER IN CASE AT BAR
CONSIDERED A BUSINESS AGENT AND AN INDEPENDENT CONTRACTOR;
25% SURCHARGE ELIMINATED DUE TO THE CONTROVERSIAL NATURE OF
THE ASSESSMENTS. The Commissioner required Advertising Associates to pay
P297,927.06 and P84,773.10 as contractor's tax for 1967-1971 and 1972, respectively,
including 25% surcharge (the latter amount includes interest) on its income from
billboards and neon signs. The basis of the assessment is the fact that the taxpayer's
articles of incorporation provide that its primary purpose is to engage in general
advertising business. Its income tax returns indicate that its business was advertising.
Advertising Associates contested that assessments since it considers itself a media
company, like a newspaper or a radio broadcasting company. but not an advertising
agency in spite of the purpose stated in its articles of incorporation. It argues that its act
of leasing its neon signs and billboards does not make it a business agent or an
independent contractor. It stresses that it is a mere lessor of neon signs and billboards and
does not perform advertising services. But the undeniable fact is that neon signs and
billboards are primarily designed for advertising. The petitioner is a business agent and
an independent contractor as contemplated in Sections 191 and 194(v). However, in view
of the prior rulings that the taxpayer is not a business agent nor an independent contractor
and in view of the controversial nature of the deficiency assessments, the 25% surcharge
should be eliminated (C. M. Hoskins & Co., Inc. vs. Commissioner of Internal Revenue,
L-28383, June 22, 1976, 71 SCRA 511.519; Imus Electric Co., Inc. vs. Commissioner of
Internal Revenue 125 Phil. 1084).
4. ID.; COLLECTION OF TAX PRESCRIBES WITH FIVE YEARS AFTER THE
ASSESSMENT; CASE AT BAR. Section 332 of the 1939 Tax Code, now Section
319 of the 1977 Tax Code, Presidential Decree No. 1158, effective on June 3, 1977,
provides that the tax may be collected by distraint or levy or by a judicial proceeding
begun "within five years after the assessment of the tax." The taxpayer received on June
18, 1973 and March 5, 1974 the deficiency assessments herein. The warrants of distraint
were served upon it on April 18 and May 25, 1978 or within five years after the
assessment of the tax. The warrants were issued to interrupt the five-year prescriptive
period. Its enforcement was not implemented because of the pending protests of the
taxpayer and its requests for withdrawal of the warrants which were eventually resolved
in Commissioner Plana's letter of May 23, 1979.
DECISION
AQUINO, J :
p
This case is about the liability of Advertising Associates, Inc. for P382,700.16 as 3%
contractor's percentage tax on its rental income from the lease of neon signs and
billboards imposed by section 191 of the Tax Code (as amended by Republic Acts Nos.
1612 and 6110) on business agents and independent contractors. Parenthetically, it may
be noted that Presidential Decree No. 69, effective November 24, 1972, added paragraph
17 to section 191 by taxing lessors of personal property.
llcd
Section 191 defines an independent contractor as including all persons whose activity
consists essentially of the sale of all kinds of services for a fee. Section 194(v) of the Tax
Code defines a business agent as including persons who conduct advertising agencies.
It should be noted that in Advertising Associates, Inc. vs. Collector of Internal Revenue,
97 Phil. 636, the taxpayer was held liable as a manufacturer for the 30% sales tax on its
sales of neon-tube signs under section 185(k) of the Tax Code as amended. It paid
P11,986.18 as sales tax for the 4th quarter of 1948 to 1951.
This Court rejected the taxpayer's contention that it was only a contractor of neon-tube
signs and that it should pay only the 3% contractor's tax under section 191 of the Tax
Code.
In the instant case, Advertising Associates alleged that it sold in 1949 its advertising
agency business to Philippine Advertising Counsellors, that its business is limited to the
making, construction and installation of billboards and electric signs and making and
printing of posters, signs, handbills, etc. (101) tsn). It contends that it is a media
company, not an advertising company.
It paid sales taxes for selling billboards, electric signs, calendars, posters, etc., realty
dealer's tax for leasing billboards and electric signs and 3% contractor's tax for repairing
electric signs.
LLjur
The billboards and electric signs manufactured by it are either sold or leased. As already
stated, the Commissioner of Internal Revenue subjected to 3% contractor's tax its rental
income from billboards and electric signs (p. 10, Appellant's brief).
The Commissioner required Advertising Associates to pay P297,927.06 and P84,773.10
as contractor's tax for 1967-1971 and 1972, respectively, including 25% surcharge (the
latter amount includes interest) on its income from billboards and neon signs.
The basis of the assessment is the fact that the taxpayer's articles of incorporation provide
that its primary purpose is to engage in general advertising business. Its income tax
returns indicate that its business was advertising (Exh. 14 and 15, etc.).
It is supposed "to conduct a general advertising business, both as principal and agent,
including the preparation and arrangements of advertising devices and novelties; to erect,
construct, purchase, lease or otherwise acquire fences, billboards, signboards, buildings
and other structures suitable for advertising purposes; to carry on the business of printers,
publishers, binders, and decorators in connection with advertising business and to make
and carry out contracts of every kind and character that may be necessary or conducive to
the accomplishment of any of the purposes of the company; to engage in and carry on a
general advertising business by the circulation and distribution and the display of cards,
signs, posters, dodgers, handbills, programs, banners and flags to be placed in and on
railroad cars, street cars, steam boats, cabs, hacks, omnibuses, stages and any and all
kinds of conveyances used for passengers or for any other purposes; to display moveable
or changeable signs, cards, pictures, designs, mottoes, etc., operated by clockwork,
electricity or any other power; to use, place and display the same in depots, hotels, halls,
and other public places, to advertise in the air by airplanes, steamers, skywriting and
other similar or dissimilar operation." (Exh. 14-A, pp. 48-49, BIR Records, Vol. I).
Advertising Associates contested the assessments in its letters of June 25, 1973 (for the
1967-71 deficiency taxes) and March 7, 1974 (for the 1972 deficiency). The
Commissioner reiterated the assessments in his letters of July 12 and September 16, 1974
(p. 3, Rollo).
The taxpayer requested the cancellation of the assessments in its letters of September 13
and November 21, 1974 (p. 3, Rollo). Inexplicably, for about four years there was no
movement in the case. Then, on March 31, 1978, the Commissioner resorted to the
summary remedy of issuing two warrants of distraint, directing the collection
enforcement division to levy on the taxpayer's personal properties as would be sufficient
to satisfy the deficiency taxes (pp. 4, 29 and 30, Rollo). The warrants were served upon
the taxpayer on April 18 and May 25, 1978.
More than a year later, Acting Commissioner Efren I. Plana wrote a letter dated May 23,
1979 in answer to the requests of the taxpayer for the cancellation of the assessments and
the withdrawal of the warrants of distraint (Annex C of Petition, pp. 31-32, Rollo).
LLpr
He justified the assessments by stating that the rental income of Advertising Associates
from billboards and neon signs constituted fees or compensation for its advertising
services. He requested the taxpayer to pay the deficiency taxes within ten days from
receipt of the demand; otherwise, the Bureau would enforce the warrants of distraint. He
closed his demand letter with this paragraph:
"This constitutes our final decision on the matter. If you are not agreeable, you
may appeal to the Court of Tax Appeals within 30 days from receipt of this
letter."
Advertising Associates received that letter on June 18, 1979. Nineteen days later or on
July 7, it filed its petition for review. In its resolution of August 28, 1979, the Tax Court
enjoined the enforcement of the warrants of distraint.
The Tax Court did not resolve the case on the merits. It ruled that the warrants of distraint
were the Commissioner's appealable decisions. Since Advertising Associates appealed
from the decision of May 23, 1979, the petition for review was filed out of time. It was
dismissed. The taxpayer appealed to this Court.
We hold that the petition for review was filed on time. The reviewable decision is that
contained in Commissioner Plana's letter of May 23, 1979 and not the warrants of
distraint.
No amount of quibbling or sophistry can blink the fact that said letter, as its tenor shows,
embodies the Commissioner's final decision within the meaning of section 7 of Republic
Act No. 1125. The Commissioner said so. He even directed the taxpayer to appeal it to
the Tax Court. That was the same situation in St. Stephen's Association and St. Stephen's
Chinese Girl's School vs. Collector of Internal Revenue, 104 Phil. 314, 317-318.
The directive is in consonance with this Court's dictum that the Commissioner should
always indicate to the taxpayer in clear and unequivocal language what constitutes his
final determination of the disputed assessment. That procedure is demanded by the
pressing need for fair play, regularity and orderliness in administrative action (Surigao
Electric Co., Inc. vs. Court of Tax Appeals, L-25289, June 28, 1974, 57 SCRA 523).
On the merits of the case, the petitioner relies on the Collector's rulings dated September
12, 1960 and June 20, 1967 that it is neither an independent contractor nor a business
agent (Exh. G and H).
As already stated, it considers itself a media company, like a newspaper or a radio
broadcasting company, but not an advertising agency in spite of the purpose stated in its
articles of incorporation. It argues that its act of leasing its neon signs and billboards does
not make it a business agent or an independent contractor. It stresses that it is a mere
lessor of neon signs and billboards and does not perform advertising services.
But the undeniable fact is that neon signs and billboards are primarily designed for
advertising. We hold that the petitioner is a business agent and an independent contractor
as contemplated in sections 191 and 194(v).
However, in view of the prior rulings that the taxpayer is not a business agent nor an
independent contractor and in view of the controversial nature of the deficiency
assessments, the 25% surcharge should be eliminated (C. M. Hoskins & Co., Inc. vs.
Commissioner of Internal Revenue, L-28383, June 22, 1976, 71 SCRA 511, 519; Imus
Electric Co., Inc. vs. Commissioner of Internal Revenue, 125 Phil. 1084).
LexLib
Petitioner's last contention is that the collection of the tax had already prescribed. Section
332 of the 1939 Tax Code, now section 319 of the 1977 Tax Code, Presidential Decree
No. 1158, effective on June 3, 1977, provides that the tax may be collected by distraint or
levy or by a judicial proceeding begun "within five years after the assessment of the tax".
The taxpayer received on June 18, 1973 and March 5, 1974 the deficiency assessments
herein. The warrants of distraint were served upon it on April 18 and May 25, 1978 or
within five years after the assessment of the tax. Obviously, the warrants were issued to
interrupt the five-year prescriptive period. Its enforcement was not implemented because
of the pending protests of the taxpayer and its requests for withdrawal of the warrants
which were eventually resolved in Commissioner Plana's letter of May 23, 1979.
It should be noted that the Commissioner did not institute any judicial proceeding to
collect the tax. He relied on the warrants of distraint to interrupt the running of the statute
of limitations. He gave the taxpayer ample opportunity to contest the assessments but at
the same time safeguarded the Government's interest by means of the warrants of
distraint.
WHEREFORE, the judgment of the Tax Court is reversed and set aside. The
Commissioner's deficiency assessments are modified by requiring the petitioner to pay
the tax proper and eliminating the 25% surcharge, interest and penalty. In case of
nonpayment, the warrants of distrant should be implemented. The preliminary injunction
issued by the Tax Court on August 28, 1979 restraining the enforcement of said warrants
is lifted. No costs.
SO ORDERED.
Makasiar, Concepcion, Jr., Abad Santos, Escolin and Cuevas, JJ ., concur.
(Advertising Associates, Inc. v. Court of Appeals, G.R. No. 59758, [December 26,
1984], 218 PHIL 730-737)
|||
SECOND DIVISION
[G.R. No. 185371. December 8, 2010.]
METRO STAR SUPERAMA, INC., respondent.
DECISION
MENDOZA, J :
p
This petition for review on certiorari under Rule 45 of the Rules of Court filed by the
petitioner Commissioner of Internal Revenue (CIR) seeks to reverse and set aside the 1]
September 16, 2008 Decision 1 of the Court of Tax Appeals En Banc (CTA-En Banc), in
C.T.A. EB No. 306 and 2] its November 18, 2008 Resolution 2 denying petitioner's
motion for reconsideration.
The CTA-En Banc affirmed in toto the decision of its Second Division (CTA-Second
Division) in CTA Case No. 7169 reversing the February 8, 2005 Decision of the CIR
which assessed respondent Metro Star Superama, Inc. (Metro Star) of deficiency valueadded tax and withholding tax for the taxable year 1999.
Based on a Joint Stipulation of Facts and Issues 3 of the parties, the CTA Second
Division summarized the factual and procedural antecedents of the case, the pertinent
portions of which read:
Petitioner is a domestic corporation duly organized and existing by virtue of the
laws of the Republic of the Philippines, . . . .
On January 26, 2001, the Regional Director of Revenue Region No. 10, Legazpi
City, issued Letter of Authority No. 00006561 for Revenue Officer Daisy G.
Justiniana to examine petitioner's books of accounts and other accounting
records for income tax and other internal revenue taxes for the taxable year
1999. Said Letter of Authority was revalidated on August 10, 2001 by Regional
Director Leonardo Sacamos.
For petitioner's failure to comply with several requests for the presentation of
records and Subpoena Duces Tecum, [the] OIC of BIR Legal Division issued an
Indorsement dated September 26, 2001 informing Revenue District Officer of
Revenue Region No. 67, Legazpi City to proceed with the investigation based
on the best evidence obtainable preparatory to the issuance of assessment
notice.
On November 8, 2001, Revenue District Officer Socorro O. Ramos-Lafuente

issued a Preliminary 15-day Letter, which petitioner received on November 9,
2001. The said letter stated that a post audit review was held and it was
ascertained that there was deficiency value-added and withholding taxes due
from petitioner in the amount of P 292,874.16.
On April 11, 2002, petitioner received a Formal Letter of Demand dated April
3, 2002 from Revenue District No. 67, Legazpi City, assessing petitioner the
amount of Two Hundred Ninety Two Thousand Eight Hundred Seventy Four
Pesos and Sixteen Centavos (P292,874.16.) for deficiency value-added and
withholding taxes for the taxable year 1999, computed as follows:
ASSESSMENT NOTICE NO. 067-99-003-579-072
VALUE ADDED TAX
Gross Sales P1,697,718.90
Output Tax P154,338.08
Less: Input Tax
VAT Payable P154,338.08
Add: 25% Surcharge P38,584.54
20% Interest 79,746.49
Compromise Penalty
Late Payment P16,000.00
Failure to File VAT returns 2,400.00 18,400.00 136,731.01

TOTAL P291,069.09
WITHHOLDING TAX
Compensation 2,772.91
Expanded 110,103.92
Total Tax Due P112,876.83

Less: Tax Withheld 111,848.27
Deficiency Withholding Tax P1,028.56
Add: 20% Interest p.a. 576.51
Compromise Penalty 200.00
TOTAL P1,805.07
*Expanded Withholding Tax

Film Rental P1,949,334.25 x 5% 97,466.71
Audit Fee 10,000.25 x 10% 1,000.00
Rental Expense 193,261.20 x 5% 9,663.00
Security Service 41,272.73 x 1% 412.73
Service Contractor 156,142.01 x 1% 1,561.42
Total P110,103.92
SUMMARIES OF DEFICIENCIES
VALUE ADDED TAX P291,069.09
WITHHOLDING TAX 1,805.07
TOTAL P292,874.16
==========
Subsequently, Revenue District Office No. 67 sent a copy of the Final Notice of
Seizure dated May 12, 2003, which petitioner received on May 15, 2003, giving
the latter last opportunity to settle its deficiency tax liabilities within ten (10)
[days] from receipt thereof, otherwise respondent BIR shall be constrained to
serve and execute the Warrants of Distraint and/or Levy and Garnishment to
enforce collection.
AHCcET
On February 6, 2004, petitioner received from Revenue District Office No. 67 a

Warrant of Distraint and/or Levy No. 67-0029-23 dated May 12, 2003
demanding payment of deficiency value-added tax and withholding tax payment
in the amount of P292,874.16.
On July 30, 2004, petitioner filed with the Office of respondent Commissioner a
Motion for Reconsideration pursuant to Section 3.1.5 of Revenue Regulations
No. 12-99.
On February 8, 2005, respondent Commissioner, through its authorized
representative, Revenue Regional Director of Revenue Region 10, Legaspi City,
issued a Decision denying petitioner's Motion for Reconsideration. Petitioner,
through counsel received said Decision on February 18, 2005.
xxx xxx xxx.
Denying that it received a Preliminary Assessment Notice (PAN) and claiming that it was
not accorded due process, Metro Star filed a petition for review 4 with the CTA. The
parties then stipulated on the following issues to be decided by the tax court:
1. Whether the respondent complied with the due process requirement as
provided under the National Internal Revenue Code and Revenue
Regulations No. 12-99 with regard to the issuance of a deficiency tax
assessment;
1.1 Whether petitioner is liable for the respective amounts of
P291,069.09 and P1,805.07 as deficiency VAT and withholding
tax for the year 1999;
1.2 Whether the assessment has become final and executory and
demandable for failure of petitioner to protest the same within 30
days from its receipt thereof on April 11, 2002, pursuant to
Section 228 of the National Internal Revenue Code;
2. Whether the deficiency assessments issued by the respondent are void for
failure to state the law and/or facts upon which they are based.
2.2 Whether petitioner was informed of the law and facts on which the
assessment is made in compliance with Section 228 of the
National Internal Revenue Code;
3. Whether or not petitioner, as owner/operator of a movie/cinema house, is

subject to VAT on sales of services under Section 108(A) of the
National Internal Revenue Code;
4. Whether or not the assessment is based on the best evidence obtainable
pursuant to Section 6(b) of the National Internal Revenue Code.
AEcIaH
The CTA-Second Division found merit in the petition of Metro Star and, on March 21,
2007, rendered a decision, the decretal portion of which reads:
WHEREFORE, premises considered, the Petition for Review is hereby
GRANTED. Accordingly, the assailed Decision dated February 8, 2005 is
hereby REVERSED and SET ASIDE and respondent is ORDERED TO
DESIST from collecting the subject taxes against petitioner.
The CTA-Second Division opined that "[w]hile there [is] a disputable presumption that a
mailed letter [is] deemed received by the addressee in the ordinary course of mail, a
direct denial of the receipt of mail shifts the burden upon the party favored by the
presumption to prove that the mailed letter was indeed received by the addressee." 5 It
also found that there was no clear showing that Metro Star actually received the alleged
PAN, dated January 16, 2002. It, accordingly, ruled that the Formal Letter of Demand
dated April 3, 2002, as well as the Warrant of Distraint and/or Levy dated May 12, 2003
were void, as Metro Star was denied due process. 6
The CIR sought reconsideration 7 of the decision of the CTA-Second Division, but the
motion was denied in the latter's July 24, 2007 Resolution. 8
Aggrieved, the CIR filed a petition for review 9 with the CTA-En Banc, but the petition
was dismissed after a determination that no new matters were raised. The CTA-En Banc
disposed:
WHEREFORE, the instant Petition for Review is hereby DENIED DUE
COURSE and DISMISSED for lack of merit. Accordingly, the March 21, 2007
Decision and July 27, 2007 Resolution of the CTA Second Division in CTA
Case No. 7169 entitled, "Metro Star Superama, Inc., petitioner vs.
Commissioner of Internal Revenue, respondent" are hereby AFFIRMED in toto.
SO ORDERED.
The motion for reconsideration 10 filed by the CIR was likewise denied by the CTA-En
Banc in its November 18, 2008 Resolution. 11
The CIR, insisting that Metro Star received the PAN, dated January 16, 2002, and that
due process was served nonetheless because the latter received the Final Assessment
Notice (FAN), comes now before this Court with the sole issue of whether or not Metro
Star was denied due process.
The general rule is that the Court will not lightly set aside the conclusions reached by the
CTA which, by the very nature of its functions, has accordingly developed an exclusive
expertise on the resolution unless there has been an abuse or improvident exercise of
authority. 12 In Barcelon, Roxas Securities, Inc. (now known as UBP Securities, Inc.) v.
Commissioner of Internal Revenue, 13 the Court wrote:
ScCIaA
Jurisprudence has consistently shown that this Court accords the findings of fact
by the CTA with the highest respect. In Sea-Land Service Inc. v. Court of
Appeals [G.R. No. 122605, 30 April 2001, 357 SCRA 441, 445-446], this Court
recognizes that the Court of Tax Appeals, which by the very nature of its
function is dedicated exclusively to the consideration of tax problems, has
necessarily developed an expertise on the subject, and its conclusions will not
be overturned unless there has been an abuse or improvident exercise of
authority. Such 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, this Court must presume that the CTA rendered a decision which is
valid in every respect.
On the matter of service of a tax assessment, a further perusal of our ruling in Barcelon is
instructive, viz.:
Jurisprudence is replete with cases holding that if the taxpayer denies ever
having received an assessment from the BIR, it is incumbent upon the
latter to prove by competent evidence that such notice was indeed received
by the addressee. The onus probandi was shifted to respondent to prove by
contrary evidence that the Petitioner received the assessment in the due
course of mail. The Supreme Court has consistently held that while a mailed
letter is deemed received by the addressee in the course of mail, this is merely a
disputable presumption subject to controversion and a direct denial thereof
shifts the burden to the party favored by the presumption to prove that the
mailed letter was indeed received by the addressee (Republic vs. Court of
Appeals, 149 SCRA 351). Thus as held by the Supreme Court in Gonzalo P.
Nava vs. Commissioner of Internal Revenue, 13 SCRA 104, January 30, 1965:
"The facts to be proved to raise this presumption are (a) that the
letter was properly addressed with postage prepaid, and (b) that it
was mailed. Once these facts are proved, the presumption is that the
letter was received by the addressee as soon as it could have been
transmitted to him in the ordinary course of the mail. But if one of the
said facts fails to appear, the presumption does not lie. (VI, Moran,
Comments on the Rules of Court, 1963 ed, 56-57 citing Enriquez vs.
Sunlife Assurance of Canada, 41 Phil. 269)."
. . . . What is essential to prove the fact of mailing is the registry receipt

issued by the Bureau of Posts or the Registry return card which would have
been signed by the Petitioner or its authorized representative. And if said
documents cannot be located, Respondent at the very least, should have
submitted to the Court a certification issued by the Bureau of Posts and
any other pertinent document which is executed with the intervention of
the Bureau of Posts. This 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 fact of mailing. Thus:
"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." (Nava vs. CIR, 13 SCRA 104, January 30, 1965).
IEHaSc
xxx xxx xxx.

The failure of the respondent to prove receipt of the assessment by the Petitioner
leads to the conclusion that no assessment was issued. Consequently, the
government's right to issue an assessment for the said period has already
prescribed. (Industrial Textile Manufacturing Co. of the Phils., Inc. vs. CIR,
CTA Case 4885, August 22, 1996). (Emphases supplied.)
The Court agrees with the CTA that the CIR failed to discharge its duty and present any
evidence to show that Metro Star indeed received the PAN dated January 16, 2002. It
could have simply presented the registry receipt or the certification from the postmaster
that it mailed the PAN, but failed. Neither did it offer any explanation on why it failed to
comply with the requirement of service of the PAN. It merely accepted the letter of Metro
Star's chairman dated April 29, 2002, that stated that he had received the FAN dated April
3, 2002, but not the PAN; that he was willing to pay the tax as computed by the CIR; and
that he just wanted to clarify some matters with the hope of lessening its tax liability.
This now leads to the question: Is the failure to strictly comply with notice requirements
prescribed under Section 228 of the National Internal Revenue Code of 1997 and
Revenue Regulations (R.R.) No. 12-99 tantamount to a denial of due process?
Specifically, are the requirements of due process satisfied if only the FAN stating the
computation of tax liabilities and a demand to pay within the prescribed period was sent
to the taxpayer?
The answer to these questions require an examination of Section 228 of the Tax Code
which reads:
SEC. 228. Protesting of Assessment. When the Commissioner or his duly
authorized representative finds that proper taxes should be assessed, he
shall first notify the taxpayer of his findings: provided, however, that a
preassessment notice shall not be required in the following cases:
(a) When the finding for any deficiency tax is the result of mathematical error in
the computation of the tax as appearing on the face of the return; or
(b) When a discrepancy has been determined between the tax withheld and the
amount actually remitted by the withholding agent; or
(c) When a taxpayer who opted to claim a refund or tax credit of excess
creditable withholding tax for a taxable period was determined to have carried
over and automatically applied the same amount claimed against the estimated
tax liabilities for the taxable quarter or quarters of the succeeding taxable year;
or
(d) When the excise tax due on exciseable articles has not been paid; or
(e) When the article locally purchased or imported by an exempt person, such
as, but not limited to, vehicles, capital equipment, machineries and spare parts,
has been sold, traded or transferred to non-exempt persons.
The taxpayers shall be informed in writing of the law and the facts on
which the assessment is made; otherwise, the assessment shall be void.
rules and regulations. Within sixty (60) days from filing of the protest, all
relevant supporting documents shall have been submitted; otherwise, the
assessment shall become final.
ETHIDa
adversely affected by the decision or inaction may appeal to the Court of Tax
Appeals within thirty (30) days from receipt of the said decision, or from the
lapse of one hundred eighty (180)-day period; otherwise, the decision shall
become final, executory and demandable. (Emphasis supplied).
Indeed, Section 228 of the Tax Code clearly requires that the taxpayer must first be
informed that he is liable for deficiency taxes through the sending of a PAN. He must be
informed of the facts and the law upon which the assessment is made. The 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. 14
This is confirmed under the provisions R.R. No. 12-99 of the BIR which pertinently
provide:
SECTION 3. Due Process Requirement in the Issuance of a Deficiency Tax
Assessment.
3.1 Mode of procedures in the issuance of a deficiency tax assessment:
3.1.1 Notice for informal conference. The Revenue Officer who audited the
taxpayer's records shall, among others, state in his report whether or not the
taxpayer agrees with his findings that the taxpayer is liable for deficiency tax or
taxes. If the taxpayer is not amenable, based on the said Officer's submitted
report of investigation, the taxpayer shall be informed, in writing, by the
Revenue District Office or by the Special Investigation Division, as the case
may be (in the case Revenue Regional Offices) or by the Chief of Division
concerned (in the case of the BIR National Office) of the discrepancy or
discrepancies in the taxpayer's payment of his internal revenue taxes, for the
purpose of "Informal Conference," in order to afford the taxpayer with an
opportunity to present his side of the case. If the taxpayer fails to respond within
fifteen (15) days from date of receipt of the notice for informal conference, he
shall be considered in default, in which case, the Revenue District Officer or the
Chief of the Special Investigation Division of the Revenue Regional Office, or
the Chief of Division in the National Office, as the case may be, shall endorse
the case with the least possible delay to the Assessment Division of the Revenue
Regional Office or to the Commissioner or his duly authorized representative,
as the case may be, for appropriate review and issuance of a deficiency tax
assessment, if warranted.
HESCcA
3.1.2 Preliminary Assessment Notice (PAN). If after review and evaluation

by the Assessment Division or by the Commissioner or his duly authorized
representative, as the case may be, it is determined that there exists sufficient
basis to assess the taxpayer for any deficiency tax or taxes, the said Office shall
issue to the taxpayer, at least by registered mail, a Preliminary Assessment
Notice (PAN) for the proposed assessment, showing in detail, the facts and the
law, rules and regulations, or jurisprudence on which the proposed assessment is
based (see illustration in ANNEX A hereof). If the taxpayer fails to respond

within fifteen (15) days from date of receipt of the PAN, he shall be considered
in default, in which case, a formal letter of demand and assessment notice shall
be caused to be issued by the said Office, calling for payment of the taxpayer's
deficiency tax liability, inclusive of the applicable penalties.
3.1.3 Exceptions to Prior Notice of the Assessment. The notice for informal
conference and the preliminary assessment notice shall not be required in any of
the following cases, in which case, issuance of the formal assessment notice for
the payment of the taxpayer's deficiency tax liability shall be sufficient:
(i) When the finding for any deficiency tax is the result of mathematical
error in the computation of the tax appearing on the face of the
tax return filed by the taxpayer; or
(ii) When a discrepancy has been determined between the tax withheld
and the amount actually remitted by the withholding agent; or
(iii) When a taxpayer who opted to claim a refund or tax credit of excess
creditable withholding tax for a taxable period was determined to
have carried over and automatically applied the same amount
claimed against the estimated tax liabilities for the taxable
quarter or quarters of the succeeding taxable year; or
(iv) When the excise tax due on excisable articles has not been paid; or
(v) When an article locally purchased or imported by an exempt person,
such as, but not limited to, vehicles, capital equipment,
machineries and spare parts, has been sold, traded or transferred
to non-exempt persons.
3.1.4 Formal Letter of Demand and Assessment Notice. The formal letter of
demand and assessment notice shall be issued by the Commissioner or his duly
authorized representative. The letter of demand calling for payment of the
taxpayer's deficiency tax or taxes shall state the facts, the law, rules and
regulations, or jurisprudence on which the assessment is based, otherwise, the
formal letter of demand and assessment notice shall be void (see illustration in
ANNEX B hereof).
IaSCTE
The same shall be sent to the taxpayer only by registered mail or by personal
delivery.
If sent by personal delivery, the taxpayer or his duly authorized representative
shall acknowledge receipt thereof in the duplicate copy of the letter of demand,
showing the following: (a) His name; (b) signature; (c) designation and
authority to act for and in behalf of the taxpayer, if acknowledged received by a

person other than the taxpayer himself; and (d) date of receipt thereof.
xxx xxx xxx.
From the provision quoted above, it is clear that the sending of a PAN to taxpayer to
inform him of the assessment made 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. The use of the word "shall" in subsection 3.1.2
describes the mandatory nature of the service of a PAN. The persuasiveness of the right
to due process reaches both substantial and procedural rights and the failure of the CIR to
strictly comply with the requirements laid down by law and its own rules is a denial of
Metro Star's right to due process. 15 Thus, for its failure to send the PAN stating the facts
and the law on which the assessment was made as required by Section 228 of R.A. No.
8424, the assessment made by the CIR is void.
The case of CIR v. Menguito 16 cited by the CIR in support of its argument that only the
non-service of the FAN is fatal to the validity of an assessment, cannot apply to this case
because the issue therein was the non-compliance with the provisions of R.R. No. 12-85
which sought to interpret Section 229 of the old tax law. RA No. 8424 has already
amended the provision of Section 229 on protesting an assessment. The old requirement
of merely notifying the taxpayer of the CIR's findings was changed in 1998 to informing
the taxpayer of not only the law, but also of the facts on which an assessment would be
made. Otherwise, the assessment itself would be invalid. 17 The regulation then, on the
other hand, simply provided that a notice be sent to the respondent in the form prescribed,
and that no consequence would ensue for failure to comply with that form.
The Court need not belabor to discuss the matter of Metro Star's failure to file its protest,
for it is well-settled that a void assessment bears no fruit. 18
It is an elementary rule enshrined in the 1987 Constitution that no person shall be
deprived of property without due process of law. 19 In balancing the scales between the
power of the State to tax and its inherent right to prosecute perceived transgressors of the
law on one side, and the constitutional rights of a citizen to due process of law and the
equal protection of the laws on the other, the scales must tilt in favor of the individual, for
a citizen's right is amply protected by the Bill of Rights under the Constitution. Thus,
while "taxes are the lifeblood of the government," the power to tax has its limits, in spite
of all its plenitude. Hence in Commissioner of Internal Revenue v. Algue, Inc., 20 it was
said
HEcaIC
Taxes are the lifeblood of the government and so should be collected without
unnecessary hindrance. On the other hand, such collection should be made in
accordance with law as any arbitrariness will negate the very reason for
government itself. It is therefore necessary to reconcile the apparently
conflicting interests of the authorities and the taxpayers so that the real purpose
of taxation, which is the promotion of the common good, may be achieved.
xxx xxx xxx
It is said that taxes are what we pay for civilized society. Without taxes, the
government would be paralyzed for the lack of the motive power to activate and
operate it. Hence, despite the natural reluctance to surrender part of one's hardearned income to taxing authorities, every person who is able to must contribute
his share in the running of the government. The government for its part is
expected to respond in the form of tangible and intangible benefits intended to
improve the lives of the people and enhance their moral and material values.
This symbiotic relationship is the rationale of taxation and should dispel the
erroneous notion that it is an arbitrary method of exaction by those in the seat of
power.
But even as we concede the inevitability and indispensability of taxation, it
is a requirement in all democratic regimes that it be exercised reasonably
and in accordance with the prescribed procedure. If it is not, then the
taxpayer has a right to complain and the courts will then come to his succor. For
all the awesome power of the tax collector, he may still be stopped in his tracks
if the taxpayer can demonstrate . . . that the law has not been observed. 21
(Emphasis supplied).
WHEREFORE, the petition is DENIED.

SO ORDERED.
Carpio, Nachura, Peralta and Abad, JJ., concur.
(Commissioner of Internal Revenue v. Metro Star Superama, Inc., G.R. No. 185371,
[December 8, 2010], 652 PHIL 172-188)
|||
THIRD DIVISION
[G.R. No. 171251. March 5, 2012.]
LASCONA LAND CO., INC., petitioner, vs. COMMISSIONER OF
INTERNAL REVENUE, respondent.
DECISION
PERALTA, J :
p
Before this Court is a Petition for Review on Certiorari under Rule 45 of the Rules of
Court seeking the reversal of the Decision 1 dated October 25, 2005 and Resolution 2
dated January 20, 2006 of the Court of Appeals (CA) in CA-G.R. SP No. 58061 which
set aside the Decision 3 dated January 4, 2000 and Resolution 4 dated March 3, 2000 of
the Court of Tax Appeals (CTA) in C.T.A. Case No. 5777 and declared Assessment
Notice No. 0000047-93-407 dated March 27, 1998 to be final, executory and
demandable.
AHacIS
The facts, as culled from the records, are as follows:

On March 27, 1998, the Commissioner of Internal Revenue (CIR) issued Assessment
Notice No. 0000047-93-407 5 against Lascona Land Co., Inc. (Lascona) informing the
latter of its alleged deficiency income tax for the year 1993 in the amount of
P753,266.56.
Consequently, on April 20, 1998, Lascona filed a letter protest, but was denied by
Norberto R. Odulio, Officer-in-Charge (OIC), Regional Director, Bureau of Internal
Revenue, Revenue Region No. 8, Makati City, in his Letter 6 dated March 3, 1999, which
reads, thus:
xxx xxx xxx
Subject:
LASCONA
LAND
1993 Deficiency Income Tax
CO.,
INC.
Madam,
Anent the 1993 tax case of subject taxpayer, please be informed that while we
agree with the arguments advanced in your letter protest, we regret, however,
that we cannot give due course to your request to cancel or set aside the
assessment notice issued to your client for the reason that the case was not
elevated to the Court of Tax Appeals as mandated by the provisions of the last
paragraph of Section 228 of the Tax Code. By virtue thereof, the said
assessment notice has become final, executory and demandable.
In view of the foregoing, please advise your client to pay its 1993 deficiency
income tax liability in the amount of P753,266.56.
xxx xxx xxx (Emphasis ours)
On April 12, 1999, Lascona appealed the decision before the CTA and was docketed as
C.T.A. Case No. 5777. Lascona alleged that the Regional Director erred in ruling that the
failure to appeal to the CTA within thirty (30) days from the lapse of the 180-day period
rendered the assessment final and executory.
The CIR, however, maintained that Lascona's failure to timely file an appeal with the
CTA after the lapse of the 180-day reglementary period provided under Section 228 of
the National Internal Revenue Code (NIRC) resulted to the finality of the assessment.
On January 4, 2000, the CTA, in its Decision, 7 nullified the subject assessment. It held
that in cases of inaction by the CIR on the protested assessment, Section 228 of the NIRC
provided two options for the taxpayer: (1) appeal to the CTA within thirty (30) days from
the lapse of the one hundred eighty (180)-day period, or (2) wait until the Commissioner
decides on his protest before he elevates the case.
cDTaSH
The CIR moved for reconsideration. It argued that in declaring the subject assessment as
final, executory and demandable, it did so pursuant to Section 3 (3.1.5) of Revenue
Regulations No. 12-99 dated September 6, 1999 which reads, thus:
If the Commissioner or his duly authorized representative fails to act on the
taxpayer's protest within one hundred eighty (180) days from date of
submission, by the taxpayer, of the required documents in support of his protest,
the taxpayer may appeal to the Court of Tax Appeals within thirty (30) days
from the lapse of the said 180-day period; otherwise, the assessment shall
become final, executory and demandable.
On March 3, 2000, the CTA denied the CIR's motion for reconsideration for lack of
merit. 8 The CTA held that Revenue Regulations No. 12-99 must conform to Section 228
of the NIRC. It pointed out that the former spoke of an assessment becoming final,
executory and demandable by reason of the inaction by the Commissioner, while the
latter referred to decisions becoming final, executory and demandable should the
taxpayer adversely affected by the decision fail to appeal before the CTA within the
prescribed period. Finally, it emphasized that in cases of discrepancy, Section 228 of the
NIRC must prevail over the revenue regulations.
Dissatisfied, the CIR filed an appeal before the CA. 9

In the disputed Decision dated October 25, 2005, the Court of Appeals granted the CIR's
petition and set aside the Decision dated January 4, 2000 of the CTA and its Resolution
dated March 3, 2000. It further declared that the subject Assessment Notice No. 000004793-407 dated March 27, 1998 as final, executory and demandable.
Lascona moved for reconsideration, but was denied for lack of merit.
Thus, the instant petition, raising the following issues:
I
THE HONORABLE COURT HAS, IN THE REVISED RULES OF COURT
OF TAX APPEALS WHICH IT RECENTLY PROMULGATED, RULED
THAT AN APPEAL FROM THE INACTION OF RESPONDENT
COMMISSIONER IS NOT MANDATORY.
TASCDI
II
THE COURT OF APPEALS SERIOUSLY ERRED WHEN IT HELD THAT
THE ASSESSMENT HAS BECOME FINAL AND DEMANDABLE
BECAUSE, ALLEGEDLY, THE WORD "DECISION" IN THE LAST
PARAGRAPH OF SECTION 228 CANNOT BE STRICTLY CONSTRUED
AS REFERRING ONLY TO THE DECISION PER SE OF THE
COMMISSIONER,
BUT
SHOULD
ALSO
BE
CONSIDERED
SYNONYMOUS WITH AN ASSESSMENT WHICH HAS BEEN
PROTESTED, BUT THE PROTEST ON WHICH HAS NOT BEEN ACTED
UPON BY THE COMMISSIONER. 10
In a nutshell, the core issue to be resolved is: Whether the subject assessment has become
final, executory and demandable due to the failure of petitioner to file an appeal before
the CTA within thirty (30) days from the lapse of the One Hundred Eighty (180)-day
period pursuant to Section 228 of the NIRC.
Petitioner Lascona, invoking Section 3, 11 Rule 4 of the Revised Rules of the Court of
Tax Appeals, maintains that in case of inaction by the CIR on the protested assessment, it
has the option to either: (1) appeal to the CTA within 30 days from the lapse of the 180day period; or (2) await the final decision of the Commissioner on the disputed
assessment even beyond the 180-day period in which case, the taxpayer may appeal
such final decision within 30 days from the receipt of the said decision. Corollarily,
petitioner posits that when the Commissioner failed to act on its protest within the 180day period, it had the option to await for the final decision of the Commissioner on the
protest, which it did.
The petition is meritorious.

Section 228 of the NIRC is instructional as to the remedies of a taxpayer in case of the
inaction of the Commissioner on the protested assessment, to wit:
SEC. 228.Protesting of Assessment. . . .
xxx xxx xxx
rules and regulations.
Within sixty (60) days from filing of the protest, all relevant supporting
documents shall have been submitted; otherwise, the assessment shall become
final.
AcEIHC
adversely affected by the decision or inaction may appeal to the Court of
Tax Appeals within (30) days from receipt of the said decision, or from the
lapse of the one hundred eighty (180)-day period; otherwise the decision
shall become final, executory and demandable. (Emphasis supplied).
Respondent, however, insists that in case of the inaction by the Commissioner on the
protested assessment within the 180-day reglementary period, petitioner should have
appealed the inaction to the CTA. Respondent maintains that due to Lascona's failure to
file an appeal with the CTA after the lapse of the 180-day period, the assessment became
final and executory.
We do not agree.
In RCBC v. CIR, 12 the Court has held that in case the Commissioner failed to act on the
disputed assessment within the 180-day period from date of submission of documents, a
taxpayer can either: (1) file a petition for review with the Court of Tax Appeals within 30
days after the expiration of the 180-day period; or (2) await the final decision of the
Commissioner on the disputed assessments and appeal such final decision to the Court of
Tax Appeals within 30 days after receipt of a copy of such decision. 13
This is consistent with Section 3 A (2), Rule 4 of the Revised Rules of the Court of Tax
Appeals, 14 to wit:
SEC. 3.Cases within the jurisdiction of the Court in Divisions. The Court in
Divisions shall exercise:
(a)Exclusive original or appellate jurisdiction to review by appeal the following:
(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;
DHESca
(2)Inaction by 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, where the National Internal Revenue Code
or other applicable law provides a specific period for action: Provided,
that in case of disputed assessments, the inaction of the
Commissioner of Internal Revenue within the one hundred eighty
day-period under Section 228 of the National Internal revenue Code
shall be deemed a denial for purposes of allowing the taxpayer to
appeal his case to the Court and does not necessarily constitute a
formal decision of the Commissioner of Internal Revenue on the tax
case; Provided, further, that should the taxpayer opt to await the
final decision of the Commissioner of Internal Revenue on the
disputed assessments beyond the one hundred eighty day-period
abovementioned, the taxpayer may appeal such final decision to the
Court under Section 3(a), Rule 8 of these Rules; and Provided, still
further, that in the case of claims for refund of taxes erroneously or
illegally collected, the taxpayer must file a petition for review with the
Court prior to the expiration of the two-year period under Section 229 of
the National Internal Revenue Code; (Emphasis ours)
In arguing that the assessment became final and executory by the sole reason that
petitioner failed to appeal the inaction of the Commissioner within 30 days after the 180day reglementary period, respondent, in effect, limited the remedy of Lascona, as a
taxpayer, under Section 228 of the NIRC to just one, that is to appeal the inaction of
the Commissioner on its protested assessment after the lapse of the 180-day period. This
is incorrect.
As early as the case of CIR v. Villa, 15 it was already established that the word
"decisions" in paragraph 1, Section 7 of Republic Act No. 1125, quoted above, has been
interpreted to mean the decisions of the Commissioner of Internal Revenue on the protest
of the taxpayer against the assessments. Definitely, said word does not signify the
assessment itself. We quote what this Court said aptly in a previous case:
In the first place, we believe the respondent court erred in holding that the
assessment in question is the respondent Collector's decision or ruling
appealable to it, and that consequently, the period of thirty days prescribed by
section 11 of Republic Act No. 1125 within which petitioner should have
appealed to the respondent court must be counted from its receipt of said
assessment. Where a taxpayer questions an assessment and asks the
Collector to reconsider or cancel the same because he (the taxpayer)
believes he is not liable therefor, the assessment becomes a "disputed
assessment" that the Collector must decide, and the taxpayer can appeal to
the Court of Tax Appeals only upon receipt of the decision of the Collector
on the disputed assessment, . . . 16
Therefore, as in Section 228, when the law provided for the remedy to appeal the inaction
of the CIR, it did not intend to limit it to a single remedy of filing of an appeal after the
lapse of the 180-day prescribed period. Precisely, when a taxpayer protested an
assessment, he naturally expects the CIR to decide either positively or negatively. A
taxpayer cannot be prejudiced if he chooses to wait for the final decision of the CIR on
the protested assessment. More so, because the law and jurisprudence have always
contemplated a scenario where the CIR will decide on the protested assessment.
TaDIHc
It must be emphasized, however, that in case of the inaction of the CIR on the protested
assessment, while we reiterate the taxpayer has two options, either: (1) file a petition
for review with the CTA within 30 days after the expiration of the 180-day period; or (2)
await the final decision of the Commissioner on the disputed assessment and appeal such
final decision to the CTA within 30 days after the receipt of a copy of such decision,
these options are mutually exclusive and resort to one bars the application of the
other.
Accordingly, considering that Lascona opted to await the final decision of the
Commissioner on the protested assessment, it then has the right to appeal such final
decision to the Court by filing a petition for review within thirty days after receipt of a
copy of such decision or ruling, even after the expiration of the 180-day period fixed by
law for the Commissioner of Internal Revenue to act on the disputed assessments. 17
Thus, Lascona, when it filed an appeal on April 12, 1999 before the CTA, after its receipt
of the Letter 18 dated March 3, 1999 on March 12, 1999, the appeal was timely made as
it was filed within 30 days after receipt of the copy of the decision.
Finally, the CIR should be reminded that taxpayers cannot be left in quandary by its
inaction on the protested assessment. It is imperative that the taxpayers are informed of
its action in order that the taxpayer should then at least be able to take recourse to the tax
court at the opportune time. As correctly pointed out by the tax court:
. . . to adopt the interpretation of the respondent will not only sanction
inefficiency, but will likewise condone the Bureau's inaction. This is especially
true in the instant case when despite the fact that respondent found petitioner's
arguments to be in order, the assessment will become final, executory and
demandable for petitioner's failure to appeal before us within the thirty (30) day
period. 19
Taxes are the lifeblood of the government and so should be collected without
unnecessary hindrance. On the other hand, such collection should be made in accordance
with law as any arbitrariness will negate the very reason for government itself. It is
therefore necessary to reconcile the apparently conflicting interests of the authorities and
the taxpayers so that the real purpose of taxation, which is the promotion of the common
good, may be achieved. 20 Thus, even as we concede the inevitability and
indispensability of taxation, it is a requirement in all democratic regimes that it be
exercised reasonably and in accordance with the prescribed procedure. 21
WHEREFORE, the petition is GRANTED. The Decision dated October 25, 2005 and
the Resolution dated January 20, 2006 of the Court of Appeals in CA-G.R. SP No. 58061
are REVERSED and SET ASIDE. Accordingly, the Decision dated January 4, 2000 of
the Court of Tax Appeals in C.T.A. Case No. 5777 and its Resolution dated March 3,
2000 are REINSTATED.
aEcDTC
SO ORDERED.
Velasco, Jr., Abad, Villarama, Jr.* and Mendoza, JJ., concur.
(Lascona Land Co., Inc. v. Commissioner of Internal Revenue, G.R. No. 171251,
[March 5, 2012], 683 PHIL 430-442)
|||

Commissioner of Internal Revenue, Petitioner, vs. Isabela Cultural Corporation, Respondent

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THIRD DIVISION

[G.R. No. 135210. July 11, 2001.]

immediate payment of a tax deficiency assessment previously made, is tantamount to a

On February 23, 1990, [respondent] received from [petitioner] an assessment

were attached certain documents supportive of its protest, as well as a Waiver of

Ruling of the Court of Appeals

Hence, this recourse. 6

The Court's Ruling

As in CIR v. Union Shipping, 14 petitioner failed to rule on the Motion for

Melo, Vitug and Sandoval-Gutierrez, JJ ., concur.

Hence, the instant petition.

On November 8, 2001, Revenue District Officer Socorro O. Ramos-Lafuente

Total Tax Due P112,876.83

*Expanded Withholding Tax

On February 6, 2004, petitioner received from Revenue District Office No. 67 a

3. Whether or not petitioner, as owner/operator of a movie/cinema house, is

. . . . What is essential to prove the fact of mailing is the registry receipt

xxx xxx xxx.

3.1.2 Preliminary Assessment Notice (PAN). If after review and evaluation

based (see illustration in ANNEX A hereof). If the taxpayer fails to respond

authority to act for and in behalf of the taxpayer, if acknowledged received by a

WHEREFORE, the petition is DENIED.

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

Dissatisfied, the CIR filed an appeal before the CA. 9

The petition is meritorious.

(2)Inaction by the Commissioner of Internal Revenue in cases involving

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