G.R. No.

139736 | October 17, 2005 Case flow:

BIR issued Tax Assessment against BPI for
BANK OF THE PHILIPPINE ISLANDS, Petitioner, deficiency DST; BPI filed a protest letter
vs. against BIR. BIR denied.
COMMISSIONER OF INTERNAL REVENUE,
Respondent CTA: BIR’s right to collection deficiency
DST had not yet prescribed
Prescriptive Period of Assessment | General Rule (Sec. CA: Sustained CTA’s decision.
203) SC: Granted the Petition for Review on
(Rationale & Interpretation) Certiorari by BPI. BIR’s right to collect has
already prescribed.

FACTS

Petitioner BPI is a commercial banking corporation organized and existing under the laws of the
Philippines. On two separate occasions, particularly on 06 June 1985 and 14 June 1985, it sold United
States (US) $500,000.00 to the Central Bank of the Philippines (Central Bank), for the total sales amount of
US$1,000,000.00.

On 10 October 1989, the Bureau of Internal Revenue (BIR) issued Assessment No. FAS-5-85-89-
002054, finding petitioner BPI liable for deficiency Documentary Stamp Tax (DST) on its afore-mentioned
sales of foreign bills of exchange to the Central Bank. Petitioner BPI, in a letter, protested against the
Assessment, requesting for reconsideration. Petitioner BPI did not receive any immediate reply to its
protest letter. On 15 October 1992, the BIR issued a Warrant of Distraint and/or Levy against petitioner
BPI for the assessed deficiency DST for taxable year 1985, in the amount of ₱27,720.00 (excluding the
compromise penalty of ₱300.00).

Upon receipt of the letter from BIR denying BPI’s request, the latter filed a Petition for Review with
the CTA.

CTA: (1st Issue) It decided that the statute of limitations for respondent BIR Commissioner to collect
on Assessment No. FAS-5-85-89-002054 had not yet prescribed; (2nd Issue) Nonetheless, it still ordered the
cancellation of the said Assessment because the sales of foreign currency by petitioner BPI to the Central
Bank in taxable year 1985 were tax-exempt.

CA: (1st Issue) It sustained the finding of the CTA that the running of the prescriptive period for
collection on Assessment No. FAS-5-85-89-002054 was suspended when herein petitioner BPI filed a
protest on 17 November 1989. (2nd Issue) Reversed the CTA on the second issue and basically adopted the
position of the respondent BIR Commissioner that the sales of foreign currency by petitioner BPI to the
Central Bank in taxable year 1985 were subject to DST.

ISSUE

Whether or not the right of respondent BIR Commissioner to collect from petitioner BPI the
alleged deficiency DST had prescribed
RATIONALE

The efforts of respondent Commissioner to collect on Assessment No. FAS-5-85-89-002054 were

already barred by prescription.

The period for the BIR to assess and collect an internal revenue tax is limited to three years by
Section 203 of the Tax Code of 1977, as amended, xxx 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 xxx

SEC. 224. Suspension of running of statute. – The running of the statute of limitation provided in
Section[s] 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 xxx when the taxpayer requests for
a reinvestigation which is granted by the Commissioner xxx.

Existing jurisprudence establishes that distraint and levy proceedings are validly begun or
commenced by the issuance of the Warrant and service thereof on the taxpayer. It must be served upon the
taxpayer in order to suspend the running of the prescriptive period for collection of an assessed tax.

**While Assessment No. FAS-5-85-89-002054 and its corresponding Assessment Notice were both
dated 10 October 1989 and were received by petitioner BPI on 20 October 1989, there was no showing as
to when the said Assessment and Assessment Notice were released, mailed or sent by the BIR . Still, it can
be granted that the latest date the BIR could have released, mailed or sent the Assessment and Assessment
Notice to petitioner BPI was on the same date they were received by the latter, on 20 October 1989.
Counting the three-year prescriptive period, for a total of 1,095 days, from 20 October 1989, then the BIR
only had until 19 October 1992 within which to collect the assessed deficiency DST**

Statute of limitations on assessment and collection of taxes shall be construed and applied
liberally in favor of the taxpayer

The law on prescription being a remedial measure should be interpreted in a way conducive to
bringing about the beneficent purpose of affording protection to the taxpayer within the contemplation of
the Commission which recommend the approval of the law. To give effect to the legislative intent, these
provisions on the statute of limitations on assessment and collection of taxes shall be construed and applied
liberally in favor of the taxpayer and strictly against the Government.

Waiver of the Statute of Limitations; Elements

The waiver of the statute of limitations, whether on assessment or collection, should not be construed
as a waiver of the right to invoke the defense of prescription but, rather, an agreement between the taxpayer
and the BIR to extend the period to a date certain, within which the latter could still assess or collect taxes
due. The waiver does not mean that the taxpayer relinquishes the right to invoke prescription
unequivocally.

Paragraphs (b) and (d) of Section 223 of the Tax Code of 1977, as amended requires that the waiver
must be: (1) in writing; (2) agreed to by both the Commissioner and the taxpayer; (3) before the expiration
of the ordinary prescriptive periods for assessment and collection; and (4) for a definite period beyond the
ordinary prescriptive periods for assessment and collection.

This Court had consistently ruled in a number of cases that a request for reconsideration or
reinvestigation by the taxpayer, without a valid waiver of the prescriptive periods for the assessment and
collection of tax, as required by the Tax Code and implementing rules, will not suspend the running thereof.

Exception to the absence of waiver

The Tax Code of 1977, as amended, also recognizes instances when the running of the statute of
limitations on the assessment and collection of national internal revenue taxes could be suspended, even in
the absence of a waiver, under Section 224 thereof, xxx the running of the statute of limitations on
assessment and collection of taxes is considered suspended "when the taxpayer requests for a
reinvestigation which is granted by the Commissioner xxx

Distinction between reconsideration and reinvestigation (Revenue Regulations (RR) No. 12-85 by
the Sec. of Finance)

For the purpose of the protest herein –

(a) Request for reconsideration. – refers to a plea for a re-evaluation of an assessment on the basis of
existing records without need of additional evidence. It may involve both a question of fact or of law or
both.

(b) Request for reinvestigation. – refers to a plea for re-evaluation of an assessment on the basis of
newly-discovered or additional evidence that a taxpayer intends to present in the reinvestigation. It may
also involve a question of fact or law or both.

It bears to emphasize that under Section 224 of the Tax Code of 1977, as amended, the running of
the prescriptive period for collection of taxes can only be suspended by a request for reinvestigation, not a
request for reconsideration.

**The protest letter of petitioner BPI, dated 16 November 1989 and filed with the BIR the next day,
on 17 November 1989, did not specifically request for either a reconsideration or reinvestigation. The BIR
itself referred to the protest of petitioner BPI as a request for reconsideration**

The act of requesting a reinvestigation alone does not suspend the period. The request should first be
granted, in order to effect suspension. (Collector vs. Suyoc)

To reiterate, Section 224 of the Tax Code of 1977, as amended, identifies specific circumstances
when the statute of limitations on assessment and collection may be interrupted or suspended, among which
is a request for reinvestigation that is granted by the BIR Commissioner. The act of filing a request for
reinvestigation alone does not suspend the period; such request must be granted. The grant need not be
express, but may be implied from the acts of the BIR Commissioner or authorized BIR officials in response
to the request for reinvestigation

**As already heretofore determined by this Court, the protest filed by petitioner BPI was a request
for reconsideration, which merely required a review of existing evidence and the legal basis for the
assessment. Respondent BIR Commissioner did not require, neither did petitioner BPI offer, additional
evidence on the matter.**
SUMMARY

The statute of limitations on collection may only be interrupted or suspended by a valid waiver
executed in accordance with paragraph (d) of Section 223 of the Tax Code of 1977, as amended, and the
existence of the circumstances enumerated in Section 224 of the same Code, which include a request for
reinvestigation granted by the BIR Commissioner.

Even when the request for reconsideration or reinvestigation is not accompanied by a valid waiver or
there is no request for reinvestigation that had been granted by the BIR Commissioner, the taxpayer may
still be held in estoppel and be prevented from setting up the defense of prescription of the statute of
limitations on collection when, by his own repeated requests or positive acts, the Government had been,
for good reasons, persuaded to postpone collection to make the taxpayer feel that the demand is not
unreasonable or that no harassment or injustice is meant by the Government, as laid down by this Court in
the Suyoc case.

RULING

Applying the given rules to the present Petition, this Court finds that –

(a) The statute of limitations for collection of the deficiency DST in Assessment No. FAS-5-85-89-
002054, issued against petitioner BPI, had already expired; and

(b) None of the conditions and requirements for exception from the statute of limitations on collection
exists herein: Petitioner BPI did not execute any waiver of the prescriptive period on collection as mandated
by paragraph (d) of Section 223 of the Tax Code of 1977, as amended; the protest filed by petitioner BPI was
a request for reconsideration, not a request for reinvestigation that was granted by respondent BIR
Commissioner which could have suspended the prescriptive period for collection under Section 224 of the
Tax Code of 1977, as amended; and, petitioner BPI, other than filing a request for reconsideration of
Assessment No. FAS-5-85-89-002054, did not make repeated requests or performed positive acts that could
have persuaded the respondent BIR Commissioner to delay collection, and that would have prevented or
estopped petitioner BPI from setting up the defense of prescription against collection of the tax assessed, as
required in the Suyoc case.

This is a simple case wherein respondent BIR Commissioner and other BIR officials failed to act promptly in
resolving and denying the request for reconsideration filed by petitioner BPI and in enforcing collection on
the assessment. They presented no reason or explanation as to why it took them almost eight years to address
the protest of petitioner BPI. The statute on limitations imposed by the Tax Code precisely intends to protect
the taxpayer from such prolonged and unreasonable assessment and investigation by the BIR.

Considering that the right of the respondent BIR Commissioner to collect from petitioner BPI the deficiency
DST in Assessment No. FAS-5-85-89-002054 had already prescribed, then, there is no more need for this
Court to make a determination on the validity and correctness of the said Assessment for the latter would
only be unenforceable.
Wherefore, based on the foregoing, the instant Petition is GRANTED. The Decision of the Court of Appeals
in CA-G.R. SP No. 51271, dated 11 August 1999, which reinstated Assessment No. FAS-5-85-89-002054
requiring petitioner BPI to pay the amount of ₱28,020.00 as deficiency documentary stamp tax for the taxable
year 1985, inclusive of the compromise penalty, is REVERSED and SET ASIDE. Assessment No. FAS-5-
85-89-002054 is hereby ordered CANCELED.

SUACO and SUYOC RULING

The Wyeth Suaco case cannot be in conflict with the Suyoc case because there are substantial
differences in the factual backgrounds of the two cases.

The Suyoc case refers to a situation where there were repeated requests or positive acts performed by
the taxpayer that convinced the BIR to delay collection of the assessed tax. This Court pronounced therein
that the repeated requests or positive acts of the taxpayer prevented or estopped it from setting up the defense
of prescription against the Government when the latter attempted to collect the assessed tax.

In the Wyeth Suaco case, taxpayer Wyeth Suaco filed a request for reinvestigation, which was apparently
granted by the BIR and, consequently, the prescriptive period was indeed suspended as provided under
Section 224 of the Tax Code of 1977, as amended.