REPUBLIC OF THE PHILIPPINES

COURT OF TAX APPEALS

QUEZON CITY

ENBANC

COMMISSIONER OF INTERNAL CTA E B NO. 1750

REVENUE, (CTA Case No. 8710)
Petitioner,
Present:

DEL ROSARIO, P.J.,

CASTANEDA, JR.,
-versus- UY,
FABON-VICTORINO,
MINDARO-GRULLA,
RINGPIS-LIBAN, and
MANAHAN, JJ.

ISLAND QUARRY AND Promulgated:

AGGREGATES CORPORATION,
Respondent. APR 0 5' 2019
)(- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

DECISION

MANAHAN , J .:

This resolves the Petition for Review 1 filed by the

Commissioner of Internal Revenue (CIR) on December 27,
2017 pursuant to Section 3(b), Rule 8 of the Revised Rules of
the Court of Ta)( Appeals (RRCTA), as amended, 2 , which pray
for the reversal and se~ting aside of the June 19, 2017
Decision3 and November 20, 2017 Resolution4 promulgated by
the Third Division of the Court of Ta)( Appeals (CTA) in CTA
Case No. 8710, entitled "Island Quarry and Aggregates
Corporation. us. Commissioner .of Internal Revenue," and the
issuance of a new decision instead.

1 Rollo, CTA EB No. 1750, pp. 6-19 .

2 Rules of the Court of Tax Appeals- approved by the Supreme Court on November 22 ,
2005 (A.M. No. 05- 11-07-CTA); Amendments to the 2005 Rules of Court of the Court
of Tax Appeals - approved by the Supreme Court on September 16, 2008 (A .M. No .
05-11-07-CTA; and Additional Amendments to the 2005 Revised Rules of the Court of
Tax Appeals- approved by the Supreme Court on February 10, 2009 (A.M. No . 05-11 -
07-CTA).
3 Rollo, pp. 23-38 .
4 !d., pp. 39-41.~
DECISION
CTA EB No. 1750 (CTA Case No. 8710)
Page 2 of 25

The dispositive portions of the assailed Decision and

Resolution read:

Decisions dated June 19, 20 17:

"WHEREFORE, the Petition for Review filed by Island

Quarry and Aggregates Corporation is hereby GRANTED.
Accordingly, the tax deficiency assessments issued against
petitioner for Income Tax, Value-Added Tax, and Withholding
Tax in the aggregate amount of P48,462,807.59, for taxable
years 1995, 1996, and 1997 are hereby CANCELLED and
WITHDRAWN.

SO ORDERED."

Resolution6 dated November 20, 2017:

"WHEREFORE, respondent's Motion for

Reconsideration [Re: Decision promulgated on 19 June 201 7]
is hereby DENIED, for lack of merit.

SO ORDERED."

The Facts

As culled from the assailed decision, petitioner CIR is the

head of the Bureau of Internal Revenue (BIR) vested with the
authority to administer and enforce national internal revenue
laws. He holds office at the BIR National Building, Agham
Road, Diliman, Quezon City. 7

On the other hand, respondent Island Quarry and

Aggregates Corporation (IQAC) is a domestic corporation, with
principal address at Sitio Tagbac, Barangay San Jose, Antipolo
City. 8

On January 18, 2000, respondent IQAC received a Final

Assessment Notice (FAN) and Formal Letters of Demand (FLO),
finding it liable for deficiency income tax (IT), value-added tax
(VAT), withholding tax on compensation (WTC), and other
withholding taxes, including surcharges, interests and

s Supra, Note 3.
6 Supra, Note 4.
7 Rollo, Decision dated June 19, 2017, p. 24.
a Id. at p. 23.~
DECISION
CTA EB No. 1750 (CTA Case No. 871 0)
Page 3 of 25

penalties for taxable years 1995, 1996, and 1997, in the

aggregate amount of P48,462,807.64, broken down as follows:9

FAN NO. PERIOD TAX TYPE TOTAL AMOUNT

ST-WC-95-0 167-2000 1995 Withholding Tax p 3,600,180.17
on Compensation
ST-LP-95-0106-2000 1995 Penalties on Late 2,882,693.51
Remittance of
Withholding Tax
ST-INC-96-0 183-2000 1996 IT 10,968,493.90
ST-WT-96-0184-2000 1996 Withholding Tax 1,835,448.12
ST-VAT-96-0 185-2000 1996 VAT 15,934,885.30
ST-VAT-97-0112-2000 1997 VAT 11,395,702.17
ST-CP-97 -044-2000 1997 Penalties on Late 1,845,404.4 7
Remittance of
Withholding Tax
TOTAL p 48,462,807.64

Respondent protested the assessment for each taxable

year on February 17, 2000, with Supplement thereon filed on
April 17, 2000 together with documents in support of its
protest. 10

On September 29, 2000, respondent received from

petitioner a letter dated September 18, 2000 stating that a
reinvestigation of all its internal revenue tax liabilities for the
years 1995, 1996, and 1997 had been assigned to Revenue
Officers Marivic S.P. Andres, Evangeline M. Casipe, Enrique C.
Pinos, and Ma. Theresa A. Raagas.l 1

On November 6, 2001, respondent received a collection

letter dated October 25, 2001, demanding payment of all its
deficiency tax assessments for taxable years 1995, 1996, and
1997, within ten (1 0) days from notice.l2

On September 16,. 2002, petitioner issued a Warrant of

Distraint and/ or Levy (WDL) for the satisfaction of petitioner's
deficiency withholding taxes, inclusive of surcharges,
interests, and penalties for the year 1995, in the amount of
P3,600, !'80.17, which petitioner paid on October 16, 2002. 13

9 Rollo, Decision dated June 19, 2017, p. 24.

10 !d.
II Jd.
12 Jd. at p. 25.
l3Jd.~
 DECISION
CTA EB No. 1750 (CTA Case No. 871 0)
Page 4 of 25

On February 4, 2008, respondent filed a letter with the

Large Taxpayers Audit and Investigation Division (LTAID),
stating its intention to avail of the benefits under the tax
amnesty law. On even date, respondent paid the amount of
PSOO,OOO.OO as amnesty .tax and submitted to petitioner the
required documents as follows: (1) Notice of Availment of Tax
Amnesty; (2) Statement of assets, Liabilities and Networth
(SALN) as of December 31, 2005; (3) Tax Amnesty Return (BIR
Form No. 2116); (4) Tax Amnesty Payment Form/ Acceptance
of Payment Form (BIR Form No. 0617); and (5) BIR Tax
Payment Deposit Slip dated February 4, 2008. 14

Several years thereafter, or on March 7, 2013,

respondent received a letter dated February 21, 2013 from the
Large Taxpayers Collection Enforcement Division for
petitioner's immediate submission of documents for the
purpose of post evaluation of its Tax Amnesty Return under
Republic Act (RA) No. 9480. The same letter indicated that
non-compliance thereof shall be construed as lack of interest
to avail of the benefits under the Tax Amnesty Law and
petitioner shall be constrained to enforce the collection of the
, total assessment amounting to P48,462,807.59.15

On September 10, 2013, respondent received a Final

Notice Before Seizure (FNBS) dated September 2, 2013, for the
payment of the deficiency tax assessments referred to in the
letter of February 21, 2013, amounting to P48,462,807.59.16

On September 20, 2013, respondent filed a Petition for

Review (With Motion to Suspend Collection of Income, Value-
Added Tax, Withholding Taxes and Surcharges, Interests and
Penalties Subject of this Petition), assailing the validity of the
collection letter and the FNBS.I7

After the trial of the case, the Court in Division ruled

against the petitioner stating that the right of the petitioner to
collect the subject deficiency tax assessments for the years
1995, 1996, and 1997 had prescribed.IS

14 Rollo, Decision dated June 19,2017, p. 25.

15 Id.
16 Id. at pp. 25-26.
17 Id. at p. 26.
lR Id. at pp. 33-37. ~
DECISION
CTA EB No. 1750 (CTA Case No. 8710)
Page 5 of 25

Petitioner, not satisfied with the assailed decision, moved

for the reconsideration of said ruling which the Court in
Division subsequently denied for lack of merit. 19

Thus, petitioner filed the instant Petition for Review on

December 27, 2017 praying for the reversal and setting aside
of the said assailed decision and resolution.

On January 23, 2018, respondent was ordered by this

Court to file its comment on the said petition for review. 20

Respondent filed its Comment/ Opposition (To Petitioner's

Petitionfor Review dated 27 December 2017)2 1 on February 27,
2018 after this Court granted 22 its Motion for Extension of Time
to File Comment (To the Petition for Review dated 27 December
2017)2 3 .

On March 21, 20 18, this Court had given due cours~ to

the instant petition and ordered the parties to file their
respective Memoranda. 24

On May 2, 2018, petitioner filed his Memorandum 2 5 while

respondent filed its Memorandum26 on May 15, 2018 through
registered mail which was received by this Court on May 23,
2018 after its Motion for Extension of Time to File
Memorandum27 was granted 2 8. The submission by the parties
of their respective memoranda has render the case deemed
submitted for decision.29

The Issue

Whether or not petitioner's right to collect the alleged

deficiency tax assessments for taxable years 1995, 1996, and
1997 has already prescribed.

19 Supra, Note 4.
20 Rollo, Resolution dated January 23, 2018, pp. 46-47.
21 Id. at pp. 54-74.
22 Id., Minute Resolution dated February 19, 2018, p. 53.

23 Id. at pp. 48-52.

24 Id., Resolution dated March 21, 2018, pp. 84-85.

2s Id. at pp. 86-103.

26 Id. at pp. 109-159.
27 Id. at pp. 104-107.
28 Id., Minute Resolution dated May 4, 2018, p. 108.
29 Id., Resolution dated June 7, 2018, pp. 162-163. ~
DECISION
CTA EB No. 1750 (CTA Case No. 8710)
Page 6 of 25

Arguments of Petitioner3o

Petitioner CIR argues that his right to collect

respondent's deficiency tax assessments for taxable years
1995, 1996, and 1997 has not yet prescribed.

Petitioner also argues that the FNBS is admissible even if

not formally offered and that respondent is not entitled to avail
of the tax amnesty program under Republic Act (RA) No. 9480.

Arguments of Respondent31

Respondent, in its comment, argues that it is not liable

for the alleged deficiency taxes since petitioner's right of
collection is already barred by prescription.

Respondent further argues that it is not liable for such

deficiency taxes because it had already settled its deficiency
taxes for the taxable years 1995, 1996, and 1997, and that the
alleged deficiency taxes have already been covered under the
tax amnesty program of RA No. 9480 which respondent
availed of.

Ruling of the Court En Bane

The Court has jurisdiction

on the instant case

Although the issue on jurisdiction was already discussed

in the assailed decision, this Court shall emphasize further the
disquisition therein.

The jurisdiction of the CTA regarding internal revenue

taxes is provided under Section 7(a)( 1) of Republic Act (RA) No.
1125, as amended by RA Nos. 9282 and 9503, which provides:

"SEC. 7. Jurisdiction. -The CTA shall exercise:

(a) Exclusive appellate jurisdiction to review by appeal,

as herein provided:

30 Supra, Notes 1 and 2.

31 Supra, Note 21 and 24 . .,.---
DECISION
CTA EB No. 1750 (CTA Case No·. 8710)
Page 7 of 25

(1) Decisions of the Commissioner of Internal

Revenue m 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 or
other laws administered by the Bureau of
Internal Revenue;" (Emphasis supplied)

Similarly, Section 3(a)(l) of Rule 4 of the Revised Rules of

the Court of Tax Appeals states:

"SEC. 3. Cases within the jurisdiction of the Court m

Division. -The Court in Division shall exercise:

(a) Exclusive original over 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;" (Emphasis supplied)

The abovementioned provisions provide that it is not only

the respondent's decision on disputed assessments that is
appealable before this Court but also other matters ans1ng
under the NIRC or other laws administered by the BIR.

In Commissioner of Internal Revenue v. Hambrecht &

Quist Philippines, Inc., 3 2 which was also cited in the assailed
decision, the Supreme Court ruled:

"Anent the first issue, petitioner argues that the CTA

had no jurisdiction over the case since the CTA itself had
ruled that the assessment had become final and
unappealable. Citing Protector's Services, Inc. v. Court of
Appeals,!6 1 the CIR argued that, after the lapse of the 30-day
period to protest, respondent may no longer dispute the
correctness of the assessment and its appeal to the CTA
should be dismissed. The CIR took issue with the CTA's
pronouncement that it had jurisdiction to decide "other
matters" related to the tax assessment such as the issue on

32 G.R. No. 169225, November 17, 2010.~

DECISION
CTA EB No. 1750 (CTA Case No. 8710)
Page 8 of 25

the right to collect the same since the CIR maintains that
when the law says that the CTA has jurisdiction over "other
matters," it presupposes that the tax assessment has not
become final and unappealable.

We cannot countenance the CIR's assertion with

regard to this point. The jurisdiction of the CTA is governed
by Section 7 of Republic Act No. 1125, as amended, and the
term "other matters" referred to by the CIR in its argument
can be found in number (1) of the aforementioned provision,
to wit:

Section 7. Jurisdiction. - The Court of Tax Appeals

shall exercise exclusive appellate jurisdiction to review by
appeal, as herein provided -

1. Decisions of the Commissioner of Internal

Revenue in cases involving disputed
assessments, refunds of internal revenue
taxes, fees or other charges, penalties
imposed m relation thereto, or other
matters arising under the National
Internal Revenue Code or other law as part
of law administered by the Bureau of
Internal Revenue. (Emphasis supplied.)

Plainly, the assailed CTA En Bane Decision was correct

in declaring that there was nothing in the foregoing provision
upon which petitioner's theory with regard to the parameters
of the term "other matters" can be supported or even
deduced. What is rather clearly apparent, however, is that
the term "other matters" is limited only by the qualifying
phrase that follows it.

Thus, on the strength of such observation, we have

previously ruled that the appellate jurisdiction of the CTA is
not limited to cases which involve decisions of the CIR on
matters relating to assessments or refunds. The second part
of the provision covers other cases that arise out of the
National Internal Revenue Code (NIRC) or related laws
administered by the Bureau of Internal Revenue (BIR)."

In the instant case, the basis for respondent's filing of its

petition for review was petitioner's issuance of the FNBS. The
purpose of the issuance of said FNBS was for the enforcement
of collection on the alleged deficiency tax assessments still
pending against the respondent. Thus, it is classified under
Section 7(a)(1) of RA No: 1125, as amended, on "other matters
arising under the NIRC or other laws administered by the
BIR." The Court has therefore jurisdiction on the instant case.-
DECISION
CTA EB No. 1750 (CTA Case No. 871 0)
Page 9 of 25

Issue raised for the first time

on appeal is not allowed

Petitioner, in arguing that the alleged assessments were

not yet prescribed, had faulted the Court in Division for not
having considered the FNBS dated March 7, 2002 which
would prove ·that it initiated the collection of said deficiency
taxes as early as 2002.

However, upon scrutiny of petitioner's (then respondent)

Memorandum33 and Motion for Reconsideration3 4 (MR) for the
assailed decision, the issue of the alleged FNBS dated March
7, 2002 was never raised or even discussed in passing. Thus,
such is a newly-raised issue on appeal.

In Spouses Jesus Dycoco and Joela E. Dycoco v. The

Honorable Court of Appeals et al.35, the Supreme Court ruled
that such newly-raised issue is not allowed, to wit:

"There is no question that petitioner-spouses are

entitled under the law to receive just compensation for the
property taken from them and transferred to private
respondents by virtue of Presidential Decree No. 27. Due
process guarantees that taking of private property by the
State for public use should be with payment of just
compensation. Unfortunately, petitioner-spouses themselves
did not consider the issue of just compensation as
compelling enough because they did not raise it in the
complaint or in the position paper which they filed in the
Office of the Provincial Adjudicator. They only claimed just
compensation for the first time on appeal, that is, when they
filed their petition for review with the Court of Appeals. The
settled rule that issues not raised in the proceedings
below cannot be raised for the first time on appeal bursts
the bubble that is the alleged compelling nature of
petitioner-spouses' claim. Petitioner- spouses ask for due
process, but fairness and due process dictate that
evidence and issues not presented below cannot be taken
up for the first time on appeal." (Emphasis supplied)

In China Trust (Phils.) Commercial Bank v. Philip Tumer, 36

the Supreme Court ruled:

33 Docket, CTA Case No. 8710, Vol. 3, pp. 1091-1100.

34 Jd., Vol. 3, Motion for Reconsideration (Re: Decision promulgated on 19 June 20 17),
pp. 1147-1156.
35 G.R. No. 147257, July 31, 2013.
36 G.R. No. 191458, July 3, 2017 . .,..,-
DECISION
CTA EB No. 1750 (CTA Case No. 8710)
Page 10 of 25

Basic rules of· fair play, justice, and due process

require that arguments or issues not raised in the trial court
may not be raised for the first time on appeal.

In Philippine Ports Authority v. City of floilo:

As a rule, a party who deliberately adopts a

certain theory upon which the case is tried and
decided by the lower court will not be permitted to
change theory on appeal. Points of law, theories,
issues and arguments not brought to the attention of
the lower court need not be, and ordinarily will not
be, considered by a reviewing court, as these cannot
be raised for the first time at such late stage. Basic
considerations of due process underlie this rule. It
would be unfair to the adverse party who would have
no opportunity to present further evidence material
to the new theory, which it could have done had it
been aware of it at the time of the hearing before the
trial court. To permit petitioner in this case to
change its theory on appeal would thus be unfair to
respondent, and offend the basic rules of fair play,
justice and due process. (Citations omitted)

There is more reason for a reviewing court to refrain

from resolving motu proprio an issue that was not even
raised by a party. This Court has previously declared that:

"[C]ourts of justice have no jurisdiction or

power to decide a question not in issue" and that a
judgment going outside the issues and purporting to
adjudicate something upon which the parties were
not heard is not merely irregular, but extrajudicial
and invalid. (Citations omitted)

Hence, the alleged FNBS dated March 7, 2002 shall not

be considered in this decision.

Evidence not formally oJfered

has no probative value

Petitioner also posits that even if the alleged FNBS dated

March 7, 2002 is not formally offered, it should be admissible
because it is part of the BIR Records which became part of the
judicial records of this case. Petitioner is totally mistaken.

The records of the case particularly in petitioner's (then

respondent) Formal Offer of Evidence3 7 reveal that said FNBS
or even the BIR Records as a whole were not among those

37 Docket, CTA Case No. 8710, Vol. 3, pp. 1091-1100.~-

DECISION
CTA EB No. 1750 (CTA Case No. 8710)
Page 11 of 25

offered as his evidence but only the FNBS dated September 2,

2013.

In Republic of the Philippines v. Fe Roa Jimenez and

Ignacio B. Gimenez, 38 the Supreme Court ruled that evidence
not formally offered should be excluded in the determination of
the case or deemed as a waiver to submit it, to wit:

More importantly, the Rules specifically provides that

evidence must be formally offered to be considered by the
court. Evidence not offered is excluded in the determination
of the case. "Failure to make a formal offer within a
considerable period of time shall be deemed a waiver to
submit it."

Rule 132, Section 34 provides:

SEC. 34. Offer of evidence. - The court shall

consider no evidence which has not been formally
offered. The purpose for which the evidence is offered
must be specified.

The rule on formal offer of evidence is intertwined with

the constitutional guarantee of due process. Parties must be
given the opportunity to review the evidence submitted
against them and take the necessary actions to secure their
case. Hence, any document or object that was marked for
identification is not evidence unless it was "formally offered
and the opposing counsel [was] given an opportunity to
object to it or cross-examine the witness called upon to prove
or identify it."

This court explained further the reason for the rule:

The Rules of Court provides that "the court

shall consider no evidence which has not been
formally offered." A formal offer is necessary because
judges are mandated to rest their findings of facts
and their judgment only and strictly upon the
evidence offered by the parties at the trial. Its
function is to enable the trial judge to know the
purpose or purposes for which the proponent is
presenting the evidence. On the other hand, this
allows opposing parties to examine the evidence and
object to its admissibility. Moreover, it facilitates
review as the appellate court will not be required to
review documents not previously scrutinized by the
trial court. (Emphasis supplied, citations omitted)

To consider a party's evidence which was not formally offered

during trial would deprive the other party of due process.

3R G.R. No. 174673, January 11, 2016.~

DECISION
CTA EB No. 1750 (CTA Case No. 8710)
Page 12 of 25

Evidence not formally offered has no probative value and

must be excluded by the court.

Thus, the FNBS ·dated March 7, 2002 not having been

formally offered during the trial of the case should be excluded
in the proper disposition of this case for having no probative
value.

Petitioner's right to collect

the alleged deficiency tax
assessments for the years
1995, 1996, and 1997 has
already prescribed

Petitioner argues that his right to collect the alleged

deficiency tax assessments has not yet prescribed since from
the time the Collection Letter was received by the respondent
on November 6, 2001, said assessments became final,
executory, and demandable because respondent failed to
exercise its remedy of filing an MR or appealing the case to
this Court within thirty (30) days from receipt thereof.

Sections 203, 223, and 224 of the 1977 National Internal

Revenue Code (NIRC), as amended39, provide for the statute of
limitations (SOL) for assessment and collection of deficiency
taxes on regular as well as special cases, and the suspension
of such SOL, to wit:

Sec. 203. Period of limitation upon assessment and

collection. - Except as provided in the succeeding section,
internal revenue taxes shall be assessed within three
years after the last day prescribed by law for the filing of
the return, and no proceeding in court without assessment
for the collection of such taxes shall be begun after the
expiration of such period: Provided, That in a case where a
return is filed beyond the period prescribed by law, the
three-year period shall be counted from the day the return
was filed. For the purposes of this section, a return filed
before the last day prescribed by law for the filing thereof
shall be considered as filed on such last day.
XXX XXX XXX

Sec. 223. Exceptions as to period of limitation of

assessment and collection of taxes. - (a) In the case of a

39 As amended by Batas Pambansa Blg. 700, Presidential Decree No. 1994, and
Executive Order No. 273 series of 1987; The National Internal Revenue Code of the
Philippines ·Annotated, Jose· N Nolledo and Mercedita S Nolledo, 1993, 16th and
Revised Edition . ..,_.-
DECISION
CTA EB No. 1750 (CTA Case No. 8710)
Page 13 of 25

false or fraudulent return with intent to evade tax or of

failure to file a return, the tax may be assessed, or a
proceeding in court for the collection of such tax may be
begun without assessment, at any time within ten years after
the discovery of the falsity, fraud, or omission: Provided,
That in a fraud assessment which has become final and
executory, the fact of fraud shall be judicially taken
cognizance of in the civil or criminal action for the collection
thereof.
(b) If before the expiration of the time prescribed in
the preceding section for the assessment of the tax, both the
Commissioner and the taxpayer have agreed in writing to its
assessment after such time, the tax may be assessed within
the period agreed upon. The period so agreed upon may be
extended by subsequent written agreements made before the
expiration of the period previously agreed upon.
(c) Any internal revenue tax which has been
assessed within the period of limitation above-prescribed
may be collected by distraint or levy or by a proceeding in
court within three years following the assessment of the
tax.
(d) Any internal revenue tax which has been
assessed within the period agreed upon as provided in
paragraph (b) hereinabove may be collected by distraint or
levy or by a proceeding in court within the period agreed
upon in writing before the expiration of the three-year
period. The period so agreed upon may be extended by
subsequent written agreements made before the expiration of
the period previously agreed upon.
(e) Provided, however, That nothing in the
immediately preceding section and paragraph (a) hereof
shall be construed to authorize the examination and
investigation or inquiry into any tax returns filed in
accordance with the provisions of any tax amnesty law or
decree.

Sec. 224. Suspension of running of statute. - The

running of the statute of limitations provided in Section 203
and 223 on the making of assessment and the beginning of
distraint or levy or a proceeding in court for collection, in
respect of any deficiency, shall be suspended for the period
during which the Commissioner is prohibited from making
the assessment or beginning distraint or levy or a proceeding
in court and for sixty days thereafter; when the taxpayer
requests for a reinvestigation which is granted by the
Commissioner; when the taxpayer cannot be located in the
address given by him in the return filed upon which a tax is
being assessed or collected: Provided, That, if the taxpayer
informs the Commissioner of any change in address, the
running of the statute of limitations will not be suspended;,.......,.-
DECISION
CTA EB No. 1750 (CTA Case No. 871 0)
Page 14 of 25

when the warrant of distraint and levy is duly served upon

the taxpayer, his authorized representative, or a member of
his household with sufficient discretion, and no property
could be located; and when the taxpayer is out of the
Philippines.
(Emphasis supplied)

The above-mentioned prov1s1ons of the 1977 NIRC, as

amended, provide a SOL or prescription for assessment and
collection of internal revenue taxes on regular as well as
special cases.

Considering that the instant case had no allegation of

either false or fraudulent return with intent to evade tax or of
failure to file a return, the applicable prescriptive period for
assessment is three (3) years. Thus, petitioner had until 1999,
2000, and 2001 to assess the respondent for any deficiency
taxes for the taxable years 1995, 1996, and 1997, respectively.

The factual antecedents of the case reveal that the

FAN/ FLD for the alleged deficiency taxes was only issued on
January 18, 2000. Thus, such assessment was valid only for
deficiency taxes in taxable years 1996 and 1997 as the
assessment for taxable year 1995 had already prescribed in
the year 1999. Hence, the assessment for taxable year 1995
was null and void for having been issued beyond the
prescriptive period.

Case records also reveal that after respondent filed its

protest on February 17, 2000 with Supplement thereon filed
on April 17, 2000, petitioner issued a collection letter dated
October 25, 2001 which was received by the respondent on
November 6, 2001 without the latter filing a motion for
reconsideration or elevating the case on appeal.

In Oceanic Wireless Network, Inc. v. Commissioner of

Internal Revenue et al. 40 , the Supreme Court ruled that when
taxpayers receive a notice or a letter other than the Final
Decision on Disputed Assessment (FDDA) demanding payment
of the alleged tax deficiency assessment after the latter filed its
protest letter, the same is deemed a denial of such protest, to
wit:

40 G.R. NO. 148380, December 09, 2005. ~

DECISION
CTA EB No. 1750 (CTA Case No. 871 0)
Page 15 of 25

A demand letter for payment of delinquent taxes may

be considered a decision on a disputed or protested
assessment. The determination on whether or not a demand
letter is final is conditioned upon the language used or the
tenor of the letter being sent to the taxpayer.
XXX XXX XXX

The demand letter received by petitioner verily

signified a character of finality. Therefore, it was tantamount
to a rejection of the request for reconsideration. As correctly
held by the Court of Tax Appeals, "while the denial of the
protest was in the form of a demand letter, the notation in
the said letter making reference to the protest filed by
petitioner clearly shows the intention of the respondent to
make it as [his] final decision."

The protest was deemed denied by the issuance of said

collection letter and the available remedy of the respondent
was to elevate the case before this Court which it failed to do
so. Hence, the assessment for the alleged deficiency taxes for
the years 1996 and 1997 became final and executory.
Petitioner then can enforce the collection of said deficiency
taxes.

Now, the question is: when will the prescriptive period on

petitioner's right to collect start?

In Commissioner of Internal Revenue u. Philippine Global

Communication, Inc, 41 the Supreme Court ruled that the
prescriptive period of petitioner's right to collect any deficiency
taxes starts from the date the assessment is released, mailed
or sent by the BIR, to wit:

If the BIR issued this assessment within the three-year

period or the ten-year period, whichever was applicable, the
law provided another three years after the assessment for
the collection of the tax due thereon through the
administrative process of distraint and/ or levy or through
judicial proceedings. The three-year period for collection
of the assessed tax began to run on the date the
assessment notice had been released, mailed or sent by
the BIR.
XXX XXX XXX

In a number of cases, this Court has also clarified that

the statute of limitations on the collection of taxes should
benefit both the Government and the taxpayers. In these
cases, the Court further illustrated the harmful effects that

41 G. R. No. 167146, October 31, 2006. ~

DECISION
CTA EB No. 1750 (CTA Case No. 8710)
Page 16 of 25

the delay in the assessment and collection of taxes inflicts

upon taxpayers. In Collector of Internal Revenue v. Suyoc
Consolidated Mining Company, Justice Montemayor, in his
dissenting opinion, identified the potential loss to the
taxpayer if the assessment and collection of taxes are not
promptly made.

Prescription in the assessment and in the

collection of taxes is provided by the Legislature for
the benefit of both the Government and the taxpayer;
for the Government for the purpose of expediting the
collection of taxes, so that the agency charged with
the assessment and collection may not tarry too long
or indefinitely to the prejudice of the interests of the
Government, which needs taxes to run it; and for the
taxpayer so that within a reasonable time after filing
his return, he may know the amount of the
assessment he is required to pay, whether or not
such assessment is well founded and reasonable so
that he may either pay the amount of the assessment
or contest its validity in court x x x. It would surely
be prejudicial to the interest of the taxpayer for the
Government collecting agency to unduly delay the
assessment and the collection because by the time
the collecting agency finally gets around to making
the assessment or making the collection, the
taxpayer may then have lost his papers and books to
support his claim and contest that of the
Government, and what is more, the tax is in the
meantime accumulating interest which the taxpayer
eventually has to pay .
(Emphasis supplied)

Considering that the FAN and FLD were received by the

respondent on January18, 2000, petitioner had three (3) years
or until January 18, 2003 to collect the assessment for the
alleged deficiency taxes for the years 1996 and 1997 unless
there was a probable cause to suspend the SOL as specified
under Section 224 of the 1977 NIRC, as amended.

However, the factual antecedents of the case reveal

otherwise. Not one of the instances cited in Section 224 of the
1977 NIRC, as amended, was present in this case except for
the issuance of the WDL on September 16, 2002 covering the
deficiency withholding taxes for taxable year 1995 which were
subsequently settled on October 16, 2002 by respondent.

Absent any waiver of the SOL, the issuance of FNBS on

September 2, 2013 was already barred by prescription and
any effort to collect respondent's alleged deficiency taxes for~
DECISION
CTA EB No. 1750 (CTA Case No. 871 0)
Page 17 of 25

the year 1995, 1996, and 1997 after January 18, 2003 was
already null and void.

Respondent was not entitled

to the benefits under RA No.
9480

Petitioner insists that respondent did not qualify to avail

of the tax amnesty program under RA No. 9480 or the Tax
Amnesty Law (TAL) based on the following grounds: (1) that
the alleged tax assessments became final and executory prior
to its application for tax amnesty; (2) that it is not covered
because its withholding tax liability is excluded under Section
8(1) of the TAL; and (3) that respondent did not make a full
and complete payment of the required amnesty tax due.

On the other hand, respondent argues that the

submission and subsequent acceptance of Payment Form, the
Notice of Availment, the Statement of Assets, Liabilities and
Networth (SALN), and the Tax Amnesty Return submitted to
the RDO after complete payment were deemed full compliance
with the TAL.

The TAL was the law that granted a tax amnesty to

qualified taxpayers for all national internal revenue taxes for
taxable year 2005 and pnor years, with or without
assessments duly issued that have remained unpaid as of
December 31, 2005. The significant provisions pertaining to
the availment and grant of tax amnesty under the said law
were as follows:

"SECTION 1. Coverage. - There is hereby authorized

and granted a tax amnesty which shall cover all national
internal revenue taxes for the taxable year 2005 and prior
years, with or without assessments duly issued therefor, that
have remained unpaid as of December 31, 2005: Provided,
however, That the amnesty hereby authorized and granted
shall not cover persons or cases enumerated under Section 8
hereof.

SECTION 2. Availment of the Amnesty.- Any person,

natural or juridical, who wishes to avail himself of the tax
amnesty authorized and granted under this Act shall file with
the Bureau of Internal Revenue (BIR) a notice and Tax
Amnesty Return accompanied by a Statement of Assets,
Liabilities and Networth (SALN) as of December 31, 2005, in
such form as may be prescribed in the implementing rules----
DECISION
CTA EB No. 1750 (CTA Case No. 8710)
Page 18 of 25

and regulations (IRR) of this Act, and pay the applicable

amnesty tax within six months from the effectivity of the IRR.
XXX XXX XXX

SECTION 4. Presumption of Correctness of the SALN.-

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

SECTION 5. Grant of Tax AmnestJJ.- Except for the

persons or cases covered in Section 8 hereof, any person,
whether natural or juridical, may avail himself of the benefits
of taX amnesty under this Act, and pay the amnesty tax
due thereon, based on his networth as of December 31,
2005 as declared in the SALN as of said period xxx
XXX XXX XXX

SECTION 6. Immunities and Privileges. - Those who

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

(a) The taxpayer shall be immune from the

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

(b) The taxpayer's Tax Amnesty Returns and

the SALN as of December 31, 2005 shall not
be admissible as evidence in all proceedings
that pertain to taxable year 2005 and prior
years, insofar as such proceedings relate to
internal revenue taxes, before judicial,
quasi-judicial or administrative bodies in
which he is a defendant or respondent, and
except for the purpose of ascertaining the
networth beginning January 1, 2006, the
same shall not be examined, inquired or
looked into by any person or government
office. However, the taxpayer may use this
as a defense, whenever appropriate, in cases
brought against him. ~
DECISION
CTA EB No. 1750 (CTA Case No. 8710)
Page 19 of 25

(c) The books of accounts and other records of

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

All these immunities and privileges shall not apply

where the person failed to file a SALN and the Tax Amnesty
Return, or where the amount of networth as of December 31,
2005 is proven to be understated to the extent of thirty
percent (30%) or more, in accordance with the provisions of
Section 3 hereof.

SECTION 7. When and Where to File and Pa_q.- The

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

SECTION 8. Exceptions. -The tax amnesty provided in

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

1. Withholding agents with respect to their

withholding tax liabilities;

2. Those with pending cases falling under the

jurisdiction of the Presidential Commission
on Good Government;

3. Those with pending cases involving

unexplained or unlawfully acquired wealth
or under the Anti-Graft and Corrupt
Practices Act;

4. Those with pending cases filed in court

involving violation of the Anti-Money
Laundering Law;

5. Those with pending criminal cases for tax

evasion and other criminal offenses under
Chapter II of Title X of the National Internal
Revenue Code of 1997, as amended, and the...,.----
DECISION
CTA EB No. 1750 (CTA Case No. 8710)
Page 20 of 25

felonies of frauds, illegal exactions and

transactions, and malversation of public
funds and property under Chapters III and
IV of Title VII of the Revised Penal Code; and

6. Tax cases subject of final and executory

judgment by the courts."
(Emphasis supplied)

On August 15, 2007, the Department of Finance issued

Department Order No . 29-07 (DO No. 29-07) serving as the
Rules and Regulations (RR) to implement the TAL which was
disseminated by the petitioner under Revenue Memorandum
Circular (RMC) No. 55-2007.

The relevant provisions of DO No. 29-07 provide:

"SECTION 6. Method of Availment of Tax Amnesty.-

1. Forms/ Documents to be filed. - To avail of the

general tax amnesty, concerned taxpayers
shall file the following
documents j requirements:

a. Notice of Availment in such form as

may be prescribed by the BIR.

b. Statements of Assets, Liabilities and

Networth (SALN) as of December 31,
2005 in such form, as may be
prescribed by the BIR;

c. Tax Amnesty Return in such form as

may be prescribed by the BIR.

2. Place of Filing of Amnesty Tax Return. - The

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

a. Residents shall file with the Revenue

District Officer (RDO)/Large Taxpayer
District Office of the BIR which has
jurisdiction over the legal residence or
.principal place of business of the
taxpayer, as the case may be.

b. Non-residents shall file with the office

of the Commissioner of the BIR, or
with the RDO.

c. At the option of the taxpayer, the ROO

may assist the taxpayer in ~
DECISION
CTA EB No. 1750 (CTA Case No. 8710)
Page 21 of 25

accomplishing the forms and

computing the taxable base and the
amnesty tax payable, but may not
look into, question or examine the
veracity of the entries contained in the
Tax Amnesty Return, Statement of
Assets, Liabilities and Networth, or
such other documents submitted by
the taxpayer.

3. Payment of Amnesty Tax and Full Compliance.

- Upon filing of the Tax Amnesty Return in
accordance with Sec. 6 (2), the taxpayer shall
pay the amnesty tax to the authorized agent
bank or in the absence thereof, the Collection
Agent or duly authorized Treasurer of the city
or municipality in which such person has his
legal residence or principal place of business.

The ROO shall issue sufficient Acceptance of

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

The Acceptance of Payment Form, the Notice

of Availmen t, the SALN, and the Tax
Amnesty Return shall be submitted to the
ROO, which shall be received only after
complete payment. The completion of these
requirements shall be deemed full
compliance with the provisions of RA 9480.
(Underscoring supplied)

As discussed above, petitioner's allegation that the

alleged deficiency taxes for the years 1996 and 1997 became
final and executory prior to respondent's application for tax
amnesty is baseless since the exception under Section 8 of the
TAL pertains to tax cases subject of "final and executory
judgments by the courts." Furthermore, Section 1 of the TAL
on Coverage also provides that the same applies also to tax
deficiency with or without assessments issued by the
petitioner. Hence, respondent's alleged deficiency taxes for the
years 1996 and 1997 which became final and executory were
separate and independent and will not impair such application
for tax amnesty. ~
DECISION
CTA EB No. 1750 (CTA Case No. 871 0)
Page 22 of 25

Respondent, in proving its entitlement to the said tax

amnesty, submitted to petitioner the following documents: (1)
Notice of Availment of Tax Amnesty; (2) Statement of assets,
Liabilities and Networth (SALN) as of December 31, 2005; (3)
Tax Amnesty Return (BIR Form No. 2116); (4) Tax Amnesty
Payment Form/ Acceptance of Payment Form (BIR Form No.
0617); and (5) BIR Tax Payment Deposit Slip dated February
4, 2008. Hence, said documents apparently had complied with
the requisite documents under Section 6 of DOF DO No. 29-
07.

Further, the FAN included other internal revenue taxes

aside from withholding taxes. Under Section 8(1) of RA No.
9480, the exception applies only to "withholding agents with
respect to their withholding tax liabilities" and not to other
internal revenue taxes and considering that the alleged
deficiency taxes were lumped in a single assessment, the
inclusion of the withholding tax liabilities will not invalidate
the availment of said tax amnesty program by the respondent.

However, as to the payment of the correct amnesty tax

under Section 5 of RA No. 9480, petitioner may have a point in
his argument. A closer look at respondent's SALN as of
December 31, 2005 4 2 reveals that its declared networth
amounted to P620,972,167.79.

Section 5 of RA No. 9480 as implemented by Section 7(2)

of DO No. 29-07 provides for the required tax amnesty rate
that should be paid by the respondent, to wit:

SEC. 7. Tax Amnesty Rates. - In order to enjoy the

benefits of the tax amnesty program, the qualified
taxpayers are required to pay an amnesty tax equivalent
to five percent (5%) of their total declared networth as of
December 31, 2005, as declared in the SALN as of the
said period, or resulting increase in networth by amending
such previously filed statements for purposes of this tax
amnesty, thereby including still undeclared assets and/ or
liabilities, as the case may be, as of December 31, 2005, or
the absolute minimum amnesty payment, whichever is
higher, in accordance with the following schedule:

1. Individuals (whether resident

or nonresident citizens, 5% or P50,000,
including resident or whichever is
nonresident aliens), Estates higher

42 Docket, CTA Case No. 8710, Vol. 2, Exhibit "P-31", p. 621.~

DECISION
CTA EB No. 1750 (CTA Case No. 8710)
Page 23 of 25

and Trusts

2. Corporations

(a) With subscribed 5% or P500,000,

capital of above whichever is
P50 Million higher

(Emphasis supplied)

Taking into consideration respondent's declared networth

and the above-mentioned amnesty rate, the latter should have
paid the amount of P31 ,048,608.39 as the amnesty tax due,
which is the higher amount between the minimum amount
due of P500,000.00 and the 5°/o of P620,972,167.79 or
petitioner's total declared networth as of its December 31,
2005 SALN.

It is true that under Section 6 of DO No. 29-07, the

submission of the required documents and payment of the
amnesty tax shall be considered as deemed full compliance
with the provisions of the TAL.43

However, under Section 5 of the same law, in order for

the respondent to avail of the immunities and privileges under
the said law, it is required that it must pay the correct
amnesty tax based on the tax rate provided under Section
5(b)(l) of the law as implemented by Section 7(2)(a) of DO No.
29-07.

Thus, the full compliance stated in the last paragraph of

Section 6 of DO No. 29-07 is conditioned upon the payment of
the correct amnesty tax due under the TAL as implemented by
its IRR. Respondent failed on this aspect, hence, not fully
compliant with the requirements of RA No. 9480.

Commissioner of Internal Revenue us. Philippine-

In
Aluminum Wheels, Inc., 44 the Supreme Court ruled that a tax
amnesty is in the nature of a tax exemption, hence, must be
construed strictly against the taxpayer and liberally in favor of
the taxing authority, to wit:

A tax amnesty is a general pardon or intentional

overlooking by the State of its authority to impose penalties

43 Commissioner of Internal Revenue v. Covanta Energy Philippine Holdings, Inc., January

24, 2018; Commissioner of Internal Revenue v. Apo Cement Corporation, G.R. No.
193381, February 08, 2017.
44 G.R. No. 216161, August 9, 2017. , _ ,
 DECISION
CTA EB No. 1750 (CTA Case No. 8710)
Page 24 of 25

on persons otherwise guilty of evasion or violation of a

revenue or tax law. It partakes of an absolute forgiveness or
waiver by the government of its right to collect what is due it
and to give tax evaders who wish to relent a chance to start
with a clean slate. A tax amnesty, much like a tax
exemption, is never favored nor presumed in law. The
grant of a tax amnesty, similar to a tax exemption, must
be construed strictly against the taxpayer and liberally
in favor of the taxing authority. (Emphasis supplied)

Be that as it may, considering that petitioner's right to

collect the alleged deficiency tax assessment was already
barred by prescription since January 18, 2003, the non-
entitlement of respondent to the benefits of the tax amnesty
law is no longer relevant and material to the disposition of the
instant case by this Court.

WHEREFORE, premises considered, the instant Petition

for Review is hereby DENIED for lack of merit. Accordingly, the
assailed June 19, 2017 Decision 45 and November 20, 2017
Resolution4 6 are hereby AFFIRMED.

SO ORDERED.

~7-~
CATHERINE T. MANAHAN
Associate Justice

WE CONCUR:

Presiding Justice

~~c.a..:T-~ ~
JUANITO c. CASTANEDA, JR.
Associate Justice
E~P.UY
Associate Justice

45 Supra, Note 3.
46 Supra, Note 4.
DECISION
CTA EB No. 1750 (CTA Case No. 8710)
Page 25 of 25

Cukt; 1J f./l~M~ C~
CIELITO N. MINDARO-GRULLA
Associate Justice

~-~....a·'-
MA. BELEN M. RINGPIS-LIBAN
Associate Justice

CERTIFICATION

Pursuant to Article VIII, Section 13 of the Constitution, it

is hereby certified that the conclusions in the above Decision
were reached in consultation before the case was assigned to
the writer of the opinion of the Court.

Presiding Justice