4. CIR vs.

Phil Global 506 SCRA 427 (prescriptn) Oct 2006

Facts:
Respondent corporation filed its Annual ITR on April 15, 1991. On April 14 1994,
respondent issued a PAN to respondent.

On April 22, 1994, Respondent received a FAN to which respondent replied with
formal protest letters sent on the month of May 1994.

On October 16, 2002, more than 8 years after assessment was presumably
issued, respondent received a final decision of respondent's protest.

Respondent invokes prescription in its petition for review with the CTA which the
latter granted. Respondent in the petition before the SC argues that
respondent's protest letters were actually requests for reinvestigation and has
therefore tolled the prescription period for collection.

Issue: Whether the right of the CIR to collect taxes has prescribed?

Held: Yes. According to Section 269 of the NIRC, If BIR issues an assessment within
the 3 year period, the law provides another 3 years after the assessment for the
collection of tax due. the 3-year period for collection begins to run on the date
the assessment notice had been released, mailed or sent by the BIR.

However, under sec. 224, the prescriptive period for collection may be tolled if
the taxpayer requests for a reinvestigation which is granted by the
Commissioner.

In the case at bar, The assessment was presumably issued on 14 April 1994 and
the BIR had until 13 April 1997 to collect. However, CIR did collect from the
taxpayer during the aforesaid period.
The May 1994 letters of protest from the respondent were merely request for
reconsideration and not requests for reinvestigation because respondent
consistently refused to submit new evidence and cooperate with any
reinvestigation. Therefore, CIR right to collect has prescribed

Other notes:
1. Difference between request for reconsideration and request for re-
investigation
Request for reconsideration Re-investigation
Does not need new or additional evidence Needs additional
evidence
Does not toll prescriptive period for collection of tolls the prescriptive
taxes period

NOTES

TAXATION; PRESCRIPTION; THE LAW INCREASED THE PRESCRIPTIVE PERIOD TO

ASSESS OR TO BEGIN A COURT PROCEEDING FOR THE COLLECTION WITHOUT AN
ASSESSMENT TO TEN YEARS WHEN A FALSE OR FRAUDULENT RETURN WAS
FILED WITH THE INTENT OF EVADING THE TAX OR WHEN NO RETURN WAS FILED
AT ALL.—The law prescribed a period of three years from the date the return was
actually filed or from the last date prescribed by law for the filing of such return,
whichever came later, within which the BIR may assess a national internal
revenue tax. However, the law increased the prescriptive period to assess or to
begin a court proceeding for the collection without an assessment to ten years
when a false or fraudulent return was filed with the intent of evading the tax or
when no return was filed at all. In such cases, the ten-year period began to run
only from the date of discovery by the BIR of the falsity, fraud or omission.
SAME; SAME; 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.—If the BIR issued this assessment within the threeyear 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.

SAME; SAME; THE PROVISIONS ON PRESCRIPTION IN THE ASSESSMENT AND

COLLECTION OF NATIONAL INTERNAL REVENUE TAXES BECAME LAW UPON THE
RECOMMENDATION OF THE TAX COMMISSIONER OF THE PHILIPPINES.—The
provisions on prescription in the assessment and collection of national internal
revenue taxes became law upon the recommendation of the tax commissioner of
the Philippines. The report submitted by the tax commission clearly states that
these provisions on prescription should be enacted to benefit and protect
taxpayers.

SAME; STATUTE OF LIMITATIONS; THE STATUTE OF LIMITATIONS ON THE

COLLECTION OF TAXES SHOULD BENEFIT BOTH THE GOVERNMENT AND THE
TAXPAYERS.—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
the delay in the assessment and collection of taxes inflicts upon taxpayers.
In Collector of Internal Revenue v. Suyoc Consolidated Mining Company, 104 Phil.
819 (1958), Justice Montemayor, in his dissenting opinion, identified the potential
loss to the taxpayer if the assessment and collection of taxes are not promptly
made.
SAME; SAME; THE STATUTE OF LIMITATIONS OF ACTIONS FOR THE COLLECTION
OF TAXES IS JUSTIFIED BY THE NEED TO PROTECT LAW-ABIDING CITIZENS FROM
POSSIBLE HARASSMENT.—In Republic of the Philippines v. Ablaza, 108 Phil. 1105
(1960), this Court emphatically explained that the statute of limitations of actions
for the collection of taxes is justified by the need to protect law-abiding citizens
from possible harassment.

SAME; SAME; THOUGH THE STATUTE OF LIMITATIONS FOR THE COLLECTION OF

TAXES BENEFITS BOTH THE GOVERNMENT AND THE TAXPAYER, IT PRINCIPALLY
INTENDS TO AFFORD PROTECTION TO THE TAXPAYER AGAINST UNREASONABLE
INVESTIGATION.—In the recent case Bank of the Philippine Islands v.
Commissioner of Internal Revenue, 473 SCRA 205 (2005), this Court, in confirming
these earlier rulings, pronounced that: Though the statute of limitations on
assessment and collection of national internal revenue taxes benefits both the
Government and the taxpayer, it principally intends to afford protection to the
taxpayer against unreasonable investigation. The indefinite extension of the
period for assessment is unreasonable because it deprives the said taxpayer of
the assurance that he will no longer be subjected to further investigation for
taxes after the expiration of a reasonable period of time.

SAME; SAME; PRESCRIPTION; THE LAW ON PRESCRIPTION SHOULD BE

LIBERALLY CONSTRUED IN ORDER TO PROTECT TAXPAYERS AND THAT, AS A
COROLLARY, THE EXCEPTIONS TO THE LAW ON PRESCRIPTION SHOULD BE
STRICTLY CONSTRUED.—In Commissioner of Internal Revenue v. B.F. Goodrich,
303 SCRA 546 (1999), this Court affirmed that the law on prescription should be
liberally construed in order to protect taxpayers and that, as a corollary, the
exceptions to the law on prescription should be strictly construed.

SAME; SAME; SAME; SECTION 271 OF THE 1997 TAX CODE PROVIDES 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 WAIVER.—The Tax Code of 1977, as
amended, provides 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 271 thereof which
reads: Section 224. Suspension of running of statute.—The running of the statute
of limitation provided in Sections 268 and 269 on the making of assessments 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 x x x.

SAME; SAME; SAME; REVENUE REGULATIONS NO. 12-85, THE PROCEDURE

GOVERNING ADMINISTRATIVE PROTESTS OF ASSESSMENT OF THE BUREAU OF
INTERNAL REVENUE, DEFINES TWO TYPES OF PROTEST, THE REQUEST FOR
RECONSIDERATION AND THE REQUEST FOR REINVESTIGATION.—Revenue
Regulations No. 12-85, the Procedure Governing Administrative Protests of
Assessment of the Bureau of Internal Revenue, issued on 27 November 1985,
defines the two types of protest, the request for reconsideration and the request
for reinvestigation, and distinguishes one from the other in this manner: x x x

SAME; SAME; SAME; THE MAIN DIFFERENCE BETWEEN THE TWO TYPES OF
PROTESTS LIES IN THE RECORDS OR EVIDENCE TO BE EXAMINED BY INTERNAL
REVENUE OFFICERS, WHETHER THERE ARE EXISTING RECORDS OR NEWLY
DISCOVERED OR ADDITIONAL EVIDENCE; A REQUEST FOR REINVESTIGATION,
AND NOT A REQUEST FOR RECONSIDERATION, INTERRUPTS THE RUNNING OF
THE STATUTE OF LIMITATIONS ON THE COLLECTION OF THE ASSESSED TAX.—
The main difference between these two types of protests lies in the records or
evidence to be examined by internal revenue officers, whether these are
existing records or newly discovered or additional evidence. A re-evaluation of
existing records which results from a request for reconsideration does not toll the
running of the prescription period for the collection of an assessed tax. Section
271 distinctly limits the suspension of the running of the statute of limitations to
instances when reinvestigation is requested by a taxpayer and is granted by the
CIR. The Court provided a clear-cut rationale in the case of Bank of the Philippine
Islands v. Commissioner of Internal Revenue, 473 SCRA 205 (2005), explaining
why a request for reinvestigation, and not a request for reconsideration,
interrupts the running of the statute of limitations on the collection of the
assessed tax.

SAME; SAME; SAME; THE COURT WEIGHED THE CONSIDERABLE TIME SPENT BY
THE BIR TO ACTUALLY CONDUCT THE REINVESTIGATIONS REQUESTED BY THE
TAXPAYER IN DECIDING THAT THE PRESCRIPTION PERIOD WAS SUSPENDED
DURING THIS TIME.—In Collector of Internal Revenue v. Suyoc Consolidated
Mining Company, 104 Phil. 819 (1958), the Court weighed the considerable time
spent by the BIR to actually conduct the reinvestigations requested by the
taxpayer in deciding that the prescription period was suspended during this time.

SAME; SAME; SAME; WHERE A TAXPAYER DEMANDS A REINVESTIGATION, THE

TIME EMPLOYED IN REINVESTIGATING SHOULD BE DEDUCTED FROM THE TOTAL
PERIOD OF LIMITATION.—The Court reiterated the ruling in Republic v. Lopez, 7
SCRA 566 (1963), in the case of Commissioner of Internal Revenue v. Sison, 7
SCRA 884 (1963), “that where a taxpayer demands a reinvestigation, the time
employed in reinvestigating should be deducted from the total period of
limitation.” Finally, in Republic v. Arcache, 10 SCRA 337 (1964), the Court
enumerated the reasons why the taxpayer is barred from invoking the defense of
prescription, one of which was that, “In the first place, it appears obvious that the
delay in the collection of his 1946 tax liability was due to his own repeated
requests for reinvestigation and similarly repeated requests for extension of time
to pay.”
Same; Same; Same; It bears repetition that a request for reconsideration, unlike a
request for reinvestigation, cannot suspend the statute of limitations on the
collection of the assessed tax; If the taxpayer does file the protest on a patently
erroneous assessment, the statute of limitations would automatically be
suspended and the tax thereon may be collected long after it was assessed.—The
distinction between a request for reconsideration and a request for
reinvestigation is significant. It bears repetition that a request for reconsideration,
unlike a request for reinvestigation, cannot suspend the statute of limitations on
the collection of an assessed tax. If both types of protest can effectively interrupt
the running of the statute of limitations, an erroneous assessment may never
prescribe. If the taxpayer fails to file a protest, then the erroneous assessment
would become final and unappealable. On the other hand, if the taxpayer does
file the protest on a patently erroneous assessment, the statute of limitations
would automatically be suspended and the tax thereon may be collected long
after it was assessed. Meanwhile the interest on the deficiencies and the
surcharges continue to accumulate. And for an unrestricted number of years, the
taxpayers remain uncertain and are burdened with the costs of preserving their
books and records. This is the predicament that the law on the statute of
limitations seeks to prevent.
SAME; SAME; SAME; THE COURT, IN SUSTAINING FOR THE FIRST TIME THE
SUSPENSION OF THE RUNNING OF THE STATUTE OF LIMITATIONS IN CASES
WHERE THE TAXPAYER REQUESTED FOR A REINVESTIGATION, GAVE THIS
JUSTIFICATION THAT THE TAXPAYER’S REPEATED REQUESTS OR POSITIVE ACTS
THE GOVERNMENT HAS BEEN, FOR GOOD REASONS, PERSUADED TO POSTPONE
COLLECTION TO MAKE HIM FEEL THAT THE DEMAND WAS NOT UNREASONABLE
OR THAT NO HARASSMENT OR INJUSTICE IS MEANT BY THE GOVERNMENT.—
The Court, in sustaining for the first time the suspension of the running of the
statute of limitations in cases where the taxpayer requested for a reinvestigation,
gave this justification: A taxpayer may be prevented from setting up the defense
of prescription even if he has not previously waived it in writing as when by his
repeated requests or positive acts the Government has been, for good reasons,
persuaded to postpone collection to make him feel that the demand was not
unreasonable or that no harassment or injustice is meant by the Government.

SAME; SAME; SAME; GIVEN THAT BOTH PARTIES WERE AT A DEADLOCK, THE
NEXT LOGICAL STEP WOULD HAVE BEEN FOR THE BIR TO ISSUE A DECISION
DENYING RESPONDENT’S PROTEST AND TO INITIATE PROCEEDINGS FOR THE
COLLECTION OF THE ASSESSED TAX AND, THUS ALLOW THE RESPONDENT,
SHOULD IT SO CHOOSE, TO CONTEST THE ASSESSMENT BEFORE THE COURT OF
TAX APPEALS.—
This rationale is not applicable to the present case where the respondent did
nothing to prevent the BIR from collecting the tax. It did not present to the BIR
any new evidence for its re-evaluation. At the earliest opportunity, respondent
insisted that the assessment was invalid and made clear to the BIR its refusal to
produce documents that the BIR requested. On the other hand, the BIR also
communicated to the respondent its unwavering stance that its assessment is
correct. Given that both parties were at a deadlock, the next logical step would
have been for the BIR to issue a Decision denying the respondent’s protest and
to initiate proceedings for the collection of the assessed tax and, thus, allow the
respondent, should it so choose, to contest the assessment before the CTA.
Postponing the collection for eight long years could not possibly make the
taxpayer feel that the demand was not unreasonable or that no harassment or
injustice is meant by the Government.

There was no legal, or even a moral, obligation preventing the CIR from collecting
the assessed tax. In a similar case, Cordero v. Gonda, the Court did not suspend
the running of the prescription period where the acts of the taxpayer did not
prevent the government from collecting the tax.
SAME; SAME; SAME; THE THREE-YEAR STATUTE OF LIMITATIONS ON THE
COLLECTION OF AN ASSESSED TAX PROVIDED UNDER SECTION 269 (C) OF THE
TAX CODE OF 1997, A LAW ENACTED TO PROTECT THE INTERESTS OF THE
TAXPAYER, MUST BE GIVEN EFFECT.—The three-year statute of limitations on the
collection of an assessed tax provided under Section 269(c) of the Tax Code of
1977, a law enacted to protect the interests of the taxpayer, must be given effect.
In providing for exceptions to such rule in Section 271, the law strictly limits the
suspension of the running of the prescription period to, among other instances,
protests wherein the taxpayer requests for a reinvestigation. In this case, where
the taxpayer merely filed two protest letters requesting for a reconsideration, and
where the BIR could not have conducted a reinvestigation because no new or
additional evidence was submitted, the running of statute of limitations cannot be
interrupted. The tax which is the subject of the Decision issued by the CIR on 8
October 2002 affirming the Formal Assessment issued on 14 April 1994 can no
longer be the subject of any proceeding for its collection. Consequently, the right
of the government to collect the alleged deficiency tax is barred by prescription.

FULL TEXT

FIRST DIVISION

[G.R. No. 167146. October 31, 2006.]

COMMISSIONER OF INTERNAL REVENUE, petitioner,vs.PHILIPPINE

GLOBAL COMMUNICATION, INC., respondent.

DECISION

CHICO-NAZARIO, J p:

This is a Petition for Review on Certiorari, under Rule 45 of the Rules of

Court, seeking to set aside the en banc Decision of the Court of Tax Appeals
(CTA) in CTA EB No. 37 dated 22 February 2005, 1 ordering the petitioner to
withdraw and cancel Assessment Notice No. 000688-80-7333 issued against
respondent Philippine Global Communication, Inc. for its 1990 income tax
deficiency. The CTA, in its assailed en banc Decision, affirmed the Decision of
the First Division of the CTA dated 9 June 2004 2 and its Resolution dated 22
September 2004 in C.T.A. Case No. 6568.
Respondent, a corporation engaged in telecommunications, filed its
Annual Income Tax Return for taxable year 1990 on 15 April 1991. On 13 April
1992, the Commissioner of Internal Revenue (CIR) issued Letter of Authority
No. 0002307, authorizing the appropriate Bureau of Internal Revenue (BIR)
officials to examine the books of account and other accounting records of
respondent, in connection with the investigation of respondent's 1990 income
tax liability. On 22 April 1992, the BIR sent a letter to respondent requesting
the latter to present for examination certain records and documents, but
respondent failed to present any document. On 21 April 1994, respondent
received a Preliminary Assessment Notice dated 13 April 1994 for deficiency
income tax in the amount of P118,271,672.00, inclusive of surcharge, interest,
and compromise penalty, arising from deductions that were disallowed for
failure to pay the withholding tax and interest expenses that were likewise
disallowed. On the following day, 22 April 1994, respondent received a Formal
Assessment Notice with Assessment Notice No. 000688-80-7333, dated 14
April 1994, for deficiency income tax in the total amount of P118,271,672.00. 3
On 6 May 1994, respondent, through its counsel Ponce Enrile Cayetano
Reyes and Manalastas Law Offices, filed a formal protest letter against
Assessment Notice No. 000688-80-7333. Respondent filed another protest
letter on 23 May 1994, through another counsel Siguion Reyna Montecillo &
Ongsiako Law Offices. In both letters, respondent requested for the
cancellation of the tax assessment, which they alleged was invalid for lack of
factual and legal basis. 4
On 16 October 2002, more than eight years after the assessment was
presumably issued, the Ponce Enrile Cayetano Reyes and Manalastas Law
Offices received from the CIR a Final Decision dated 8 October 2002 denying
the respondent's protest against Assessment Notice No. 000688-80-7333, and
affirming the said assessment in toto. 5
On 15 November 2002, respondent filed a Petition for Review with the
CTA. After due notice and hearing, the CTA rendered a Decision in favor of
respondent on 9 June 2004. 6 The CTA ruled on the primary issue of
prescription and found it unnecessary to decide the issues on the validity and
propriety of the assessment. It decided that the protest letters filed by the
respondent cannot constitute a request for reinvestigation, hence, they cannot
toll the running of the prescriptive period to collect the assessed deficiency
income tax. 7 Thus, since more than three years had lapsed from the time
Assessment Notice No. 000688-80-7333 was issued in 1994, the CIR's right to
collect the same has prescribed in conformity with Section 269 of the National
Internal Revenue Code of 1977 8 (Tax Code of 1977). The dispositive portion of
this decision reads: cCDAHE
WHEREFORE, premises considered, judgment is hereby
rendered in favor of the petitioner. Accordingly, respondent's Final
Decision dated October 8, 2002 is hereby REVERSED and SET ASIDE
and respondent is hereby ORDERED to WITHDRAW and CANCEL
Assessment Notice No. 000688-80-7333 issued against the
petitioner for its 1990 income tax deficiency because respondent's
right to collect the same has prescribed. 9
The CIR moved for reconsideration of the aforesaid Decision but was
denied by the CTA in a Resolution dated 22 September 2004. 10 Thereafter,
the CIR filed a Petition for Review with the CTA en banc,questioning the
aforesaid Decision and Resolution. In its en banc Decision, the CTA affirmed
the Decision and Resolution in CTA Case No. 6568. The dispositive part reads:
WHEREFORE, premises considered, the Petition for Review is
hereby DISMISSED for lack of merit. Accordingly, the assailed
Decision and Resolution in CTA Case No. 6568 are hereby
AFFIRMED in toto. 11
Hence, this Petition for Review on Certiorari raising the following
grounds:
THE COURT OF TAX APPEALS, SITTING EN BANC, COMMITTED
REVERSIBLE ERROR IN AFFIRMING THE ASSAILED DECISION AND
RESOLUTION IN CTA CASE NO. 6568 DECLARING THAT THE RIGHT
OF THE GOVERNMENT TO COLLECT THE DEFICIENCY INCOME TAX
FROM RESPONDENT FOR THE YEAR 1990 HAS PRESCRIBED
A. THE PRESCRIPTIVE PERIOD WAS INTERUPTED WHEN
RESPONDENT FILED TWO LETTERS OF PROTEST
DISPUTING IN DETAIL THE DEFICIENCY ASSESSMENT IN
QUESTION AND REQUESTING THE CANCELLATION OF
SAID ASSESSMENT. THE TWO LETTERS OF PROTEST
ARE, BY NATURE, REQUESTS FOR REINVESTIGATION OF
THE DISPUTED ASSESSMENT.
B. THE REQUESTS FOR REINVESTIGATION OF
RESPONDENT WERE GRANTED BY THE BUREAU OF
INTERNAL REVENUE. 12
This Court finds no merit in this Petition.
The main issue in this case is whether or not CIR's right to collect
respondent's alleged deficiency income tax is barred by prescription under
Section 269(c) of the Tax Code of 1977, which reads:
Section 269. Exceptions as to the period of limitation of
assessment and collection of taxes.— ...
xxx xxx xxx
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.
The law prescribed a period of three years from the date the return was
actually filed or from the last date prescribed by law for the filing of such
return, whichever came later, within which the BIR may assess a national
internal revenue tax. 13 However, the law increased the prescriptive period to
assess or to begin a court proceeding for the collection without an assessment
to ten years when a false or fraudulent return was filed with the intent of
evading the tax or when no return was filed at all. 14 In such cases, the ten-
year period began to run only from the date of discovery by the BIR of the
falsity, fraud or omission.
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. 15 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. 16
The assessment, in this case, was presumably issued on 14 April 1994
since the respondent did not dispute the CIR's claim. Therefore, the BIR had
until 13 April 1997. However, as there was no Warrant of Distraint and/or Levy
served on the respondents nor any judicial proceedings initiated by the BIR,
the earliest attempt of the BIR to collect the tax due based on this assessment
was when it filed its Answer in CTA Case No. 6568 on 9 January 2003, which
was several years beyond the three-year prescriptive period. Thus, the CIR is
now prescribed from collecting the assessed tax.
The provisions on prescription in the assessment and collection of
national internal revenue taxes became law upon the recommendation of the
tax commissioner of the Philippines. The report submitted by the tax
commission clearly states that these provisions on prescription should be
enacted to benefit and protect taxpayers:
Under the former law, the right of the Government to collect
the tax does not prescribe. However, in fairness to the taxpayer,
the Government should be estopped from collecting the tax where
it failed to make the necessary investigation and assessment within
5 years after the filing of the return and where it failed to collect
the tax within 5 years from the date of assessment thereof. Just as
the government is interested in the stability of its collections, so
also are the taxpayers entitled to an assurance that they will not be
subjected to further investigation for tax purposes after the
expiration of a reasonable period of time. (Vol. II, Report of the Tax
Commission of the Philippines, pp. 321-322). 17
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 the delay in the assessment and collection of taxes inflicts upon
taxpayers. In Collector of Internal Revenue v. Suyoc Consolidated Mining
Company, 18 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 ....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. SIcEHD
In Republic of the Philippines v. Ablaza, 19 this Court emphatically
explained that the statute of limitations of actions for the collection of taxes is
justified by the need to protect law-abiding citizens from possible harassment:
The law prescribing a limitation of actions for the collection
of the income tax is beneficial both to the Government and to its
citizens; to the Government because tax officers would be obliged
to act promptly in the making of assessment, and to citizens
because after the lapse of the period of prescription citizens would
have a feeling of security against unscrupulous tax agents who will
always find an excuse to inspect the books of taxpayers, not to
determine the latter's real liability, but to take advantage of every
opportunity to molest, peaceful, law-abiding citizens. Without such
legal defense taxpayers would furthermore be under obligation to
always keep their books and keep them open for inspection subject
to harassment by unscrupulous tax agents. The law on prescription
being a remedial measure should be interpreted in a way conducive
to bringing about the beneficient purpose of affording protection to
the taxpayer within the contemplation of the Commission which
recommended the approval of the law.
And again in the recent case Bank of the Philippine Islands v. Commissioner of
Internal Revenue, 20 this Court, in confirming these earlier rulings, pronounced
that:
Though the statute of limitations on assessment and
collection of national internal revenue taxes benefits both the
Government and the taxpayer, it principally intends to afford
protection to the taxpayer against unreasonable investigation. The
indefinite extension of the period for assessment is unreasonable
because it deprives the said taxpayer of the assurance that he will
no longer be subjected to further investigation for taxes after the
expiration of a reasonable period of time.
Thus, in Commissioner of Internal Revenue v. B.F. Goodrich, 21 this Court
affirmed that the law on prescription should be liberally construed in order to
protect taxpayers and that, as a corollary, the exceptions to the law on
prescription should be strictly construed.
The Tax Code of 1977, as amended, provides 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 271 thereof which reads:
Section 224. Suspension of running of statute.— The running
of the statute of limitation provided in Sections 268 and 269 on the
making of assessments 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 ....(Emphasis supplied.)
Among the exceptions provided by the aforecited section, and invoked
by the CIR as a ground for this petition, is the instance when the taxpayer
requests for a reinvestigation which is granted by the Commissioner. However,
this exception does not apply to this case since the respondent never
requested for a reinvestigation. More importantly, the CIR could not have
conducted a reinvestigation where, as admitted by the CIR in its Petition, the
respondent refused to submit any new evidence.
Revenue Regulations No. 12-85, the Procedure Governing
Administrative Protests of Assessment of the Bureau of Internal Revenue,
issued on 27 November 1985, defines the two types of protest, the request for
reconsideration and the request for reinvestigation, and distinguishes one
from the other in this manner:
Section 6. Protest. — The taxpayer may protest
administratively an assessment by filing a written request for
reconsideration or reinvestigation specifying the following
particulars:
xxx xxx xxx
For the purpose of 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. DACTSH
(b) Request for reinvestigation — refers to a plea for re-
evaluation of an assessment on the basis of newly-discovered
evidence or additional evidence that a taxpayer intends to
present in the investigation. It may also involve a question of
fact or law or both.
The main difference between these two types of protests lies in the
records or evidence to be examined by internal revenue officers, whether
these are existing records or newly discovered or additional evidence. A re-
evaluation of existing records which results from a request for reconsideration
does not toll the running of the prescription period for the collection of an
assessed tax. Section 271 distinctly limits the suspension of the running of the
statute of limitations to instances when reinvestigation is requested by a
taxpayer and is granted by the CIR. The Court provided a clear-cut rationale in
the case of Bank of the Philippine Islands v. Commissioner of Internal
Revenue 22 explaining why a request for reinvestigation, and not a request for
reconsideration, interrupts the running of the statute of limitations on the
collection of the assessed tax:
Undoubtedly, a reinvestigation, which entails the reception
and evaluation of additional evidence, will take more time than a
reconsideration of a tax assessment, which will be limited to the
evidence already at hand; this justifies why the former can suspend
the running of the statute of limitations on collection of the
assessed tax, while the latter cannot.
In the present case, the separate letters of protest dated 6 May 1994
and 23 May 1994 are requests for reconsideration. The CIR's allegation that
there was a request for reinvestigation is inconceivable since respondent
consistently and categorically refused to submit new evidence and cooperate
in any reinvestigation proceedings. This much was admitted in the Decision
dated 8 October 2002 issued by then CIR Guillermo Payarno, Jr.
In the said conference-hearing, Revenue Officer Alameda
basically testified that Philcom, despite repeated demands, failed to
submit documentary evidences in support of its claimed deductible
expenses. Hence, except for the item of interest expense which was
disallowed for being not ordinary and necessary, the rest of the
claimed expenses were disallowed for non-withholding. In the same
token, Revenue Officer Escober testified that upon his assignment
to conduct the re-investigation, he immediately requested the
taxpayer to present various accounting records for the year 1990, in
addition to other documents in relation to the disallowed items (p.
171).This was followed by other requests for submission of
documents (pp. 199 &217) but these were not heeded by the
taxpayer. Essentially, he stated that Philcom did not cooperate in
his reinvestigation of the case.
In response to the testimonies of the Revenue Officers,
Philcom thru Atty. Consunji, emphasized that it was denied due
process because of the issuance of the Pre-Assessment Notice and
the Assessment Notice on successive dates. ...Counsel for the
taxpayer even questioned the propriety of the conference-hearing
inasmuch as the only question to resolved (sic) is the legality of the
issuance of the assessment. On the disallowed items, Philcom thru
counsel manifested that it has no intention to present documents
and/or evidences allegedly because of the pending legal question
on the validity of the assessment. 23
Prior to the issuance of Revenue Regulations No. 12-85, which
distinguishes a request for reconsideration and a request for reinvestigation,
there have been cases wherein these two terms were used interchangeably.
But upon closer examination, these cases all involved a reinvestigation that
was requested by the taxpayer and granted by the BIR.
In Collector of Internal Revenue v. Suyoc Consolidated Mining
Company, 24 the Court weighed the considerable time spent by the BIR to
actually conduct the reinvestigations requested by the taxpayer in deciding
that the prescription period was suspended during this time.
Because of such requests, several reinvestigations were
made and a hearing was even held by the Conference Staff
organized in the collection office to consider claims of such nature
which, as the record shows, lasted for several months. After
inducing petitioner to delay collection as he in fact did, it is most
unfair for respondent to now take advantage of such desistance to
elude his deficiency income tax liability to the prejudice of the
Government invoking the technical ground of prescription.
Although the Court used the term "requests for reconsideration" in
reference to the letters sent by the taxpayer in the case of Querol v. Collector
of Internal Revenue, 25 it took into account the reinvestigation conducted
soon after these letters were received and the revised assessment that
resulted from the reinvestigations. cIADTC
It is true that the Collector revised the original assessment on
February 9, 1955; and appellant avers that this revision was invalid
in that it was not made within the five-year prescriptive period
provided by law (Collector vs. Pineda,112 Phil. 321).But that fact is
that the revised assessment was merely a result of petitioner
Querol's requests for reconsideration of the original assessment,
contained in his letters of December 14, 1951 and May 25, 1953.
The records of the Bureau of Internal Revenue show that after
receiving the letters, the Bureau conducted a reinvestigation of
petitioner's tax liabilities, and, in fact, sent a tax examiner to San
Fernando, La Union, for that purpose; that because of the
examiner's report, the Bureau revised the original assessment, ....In
other words, the reconsideration was granted in part, and the
original assessment was altered. Consequently, the period between
the petition for reconsideration and the revised assessment should
be subtracted from the total prescriptive period (Republic vs.
Ablaza,108 Phil 1105).
The Court, in Republic v. Lopez, 26 even gave a detailed accounting of
the time the BIR spent for each reinvestigation in order to deduct it from the
five-year period set at that time in the statute of limitations:
It is now a settled ruled in our jurisdiction that the five-year
prescriptive period fixed by Section 332(c) of the Internal
Revenue Code within which the Government may sue to collect an
assessed tax is to be computed from the last revised assessment
resulting from a reinvestigation asked for by the taxpayer and (2)
that where a taxpayer demands a reinvestigation, the time
employed in reinvestigating should be deducted from the total
period of limitation.
xxx xxx xxx
The first reinvestigation was granted, and a reduced
assessment issued on 29 May 1954, from which date the
Government had five years for bringing an action to collect.
The second reinvestigation was asked on 16 January 1956,
and lasted until it was decided on 22 April 1960, or a period of 4
years, 3 months, and 6 days, during which the limitation period was
interrupted.
The Court reiterated the ruling in Republic v. Lopez in the case
of Commissioner of Internal Revenue v. Sison, 27 "that where a taxpayer
demands a reinvestigation, the time employed in reinvestigating should be
deducted from the total period of limitation." Finally, in Republic v.
Arcache, 28 the Court enumerated the reasons why the taxpayer is barred
from invoking the defense of prescription, one of which was that, "In the first
place, it appears obvious that the delay in the collection of his 1946 tax liability
was due to his own repeated requests for reinvestigation and similarly
repeated requests for extension of time to pay."
In this case, the BIR admitted that there was no new or additional
evidence presented. Considering that the BIR issued its Preliminary
Assessment Notice on 13 April 1994 and its Formal Assessment Notice on 14
April 1994, just one day before the three-year prescription period for issuing
the assessment expired on 15 April 1994, it had ample time to make a factually
and legally well-founded assessment. Added to the fact that the Final Decision
that the CIR issued on 8 October 2002 merely affirmed its earlier findings,
whatever examination that the BIR may have conducted cannot possibly
outlast the entire three-year prescriptive period provided by law to collect the
assessed tax, not to mention the eight years it actually took the BIR to decide
the respondent's protest. The factual and legal issues involved in the
assessment are relatively simple, that is, whether certain income tax
deductions should be disallowed, mostly for failure to pay withholding taxes.
Thus, there is no reason to suspend the running of the statute of limitations in
this case. aSITDC
The distinction between a request for reconsideration and a request for
reinvestigation is significant. It bears repetition that a request for
reconsideration, unlike a request for reinvestigation, cannot suspend the
statute of limitations on the collection of an assessed tax. If both types of
protest can effectively interrupt the running of the statute of limitations, an
erroneous assessment may never prescribe. If the taxpayer fails to file a
protest, then the erroneous assessment would become final and
unappealable. 29 On the other hand, if the taxpayer does file the protest on a
patently erroneous assessment, the statute of limitations would automatically
be suspended and the tax thereon may be collected long after it was assessed.
Meanwhile the interest on the deficiencies and the surcharges continue to
accumulate. And for an unrestricted number of years, the taxpayers remain
uncertain and are burdened with the costs of preserving their books and
records. This is the predicament that the law on the statute of limitations
seeks to prevent.
The Court, in sustaining for the first time the suspension of the running
of the statute of limitations in cases where the taxpayer requested for a
reinvestigation, gave this justification:
A taxpayer may be prevented from setting up the defense of
prescription even if he has not previously waived it in writing as
when by his repeated requests or positive acts the Government has
been, for good reasons, persuaded to postpone collection to make
him feel that the demand was not unreasonable or that no
harassment or injustice is meant by the Government.
xxx xxx xxx
This case has no precedent in this jurisdiction for it is the first
time that such has risen, but there are several precedents that may
be invoked in American jurisprudence. As Mr. Justice Cardozo has
said: "The applicable principle is fundamental and
unquestioned. 'He who prevents a thing from being done may not
avail himself of the nonperformance which he himself occasioned,
for the law says to him in effect "this is your own act, and
therefore you are not damnified."' (R.H. Stearns Co. v. U.S.,78 L.
ed.,647).(Emphasis supplied.) 30
This rationale is not applicable to the present case where the
respondent did nothing to prevent the BIR from collecting the tax. It did not
present to the BIR any new evidence for its re-evaluation. At the earliest
opportunity, respondent insisted that the assessment was invalid and made
clear to the BIR its refusal to produce documents that the BIR requested. On
the other hand, the BIR also communicated to the respondent its unwavering
stance that its assessment is correct. Given that both parties were at a
deadlock, the next logical step would have been for the BIR to issue a Decision
denying the respondent's protest and to initiate proceedings for the collection
of the assessed tax and, thus, allow the respondent, should it so choose, to
contest the assessment before the CTA. Postponing the collection for eight
long years could not possibly make the taxpayer feel that the demand was not
unreasonable or that no harassment or injustice is meant by the Government.
There was no legal, or even a moral, obligation preventing the CIR from
collecting the assessed tax. In a similar case, Cordero v. Gonda, 31 the Court
did not suspend the running of the prescription period where the acts of the
taxpayer did not prevent the government from collecting the tax.
The government also urges that partial payment is
"acknowledgement of the tax obligation",hence a "waiver on the
defense of prescription." But partial payment would not prevent
the government from suing the taxpayer. Because, by such act of
payment, the government is not thereby "persuaded to postpone
collection to make him feel that the demand was not unreasonable
or that no harassment or injustice is meant." Which, as stated
in Collector v. Suyoc Consolidated Mining Co., et al., L-11527,
November 25, 1958, is the underlying reason behind the rule that
prescriptive period is arrested by the taxpayer's request for
reexamination or reinvestigation — even if "he has not previously
waived it [prescription] in writing."
The Court reminds us, in the case of Commissioner of Internal Revenue
v. Algue, Inc., 32 of the need to balance the conflicting interests of the
government and the taxpayers.
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 interest
of the authorities and the taxpayers so that the real purpose of
taxation, which is the promotion of common good, may be
achieved.
Thus, the three-year statute of limitations on the collection of an
assessed tax provided under Section 269(c) of the Tax Code of 1977, a law
enacted to protect the interests of the taxpayer, must be given effect. In
providing for exceptions to such rule in Section 271, the law strictly limits the
suspension of the running of the prescription period to, among other
instances, protests wherein the taxpayer requests for a reinvestigation. In this
case, where the taxpayer merely filed two protest letters requesting for a
reconsideration, and where the BIR could not have conducted a
reinvestigation because no new or additional evidence was submitted, the
running of statute of limitations cannot be interrupted. The tax which is the
subject of the Decision issued by the CIR on 8 October 2002 affirming the
Formal Assessment issued on 14 April 1994 can no longer be the subject of any
proceeding for its collection. Consequently, the right of the government to
collect the alleged deficiency tax is barred by prescription. ECTHIA
IN VIEW OF THE FOREGOING, the instant Petition is DENIED. The
assailed en banc Decision of the CTA in CTA EB No. 37 dated 22 February 2005,
cancelling Assessment Notice No. 000688-80-7333 issued against Philippine
Global Communication, Inc. for its 1990 income tax deficiency for the reason
that it is barred by prescription, is hereby AFFIRMED. No costs.
SO ORDERED.
Panganiban, C.J.,Ynares-Santiago, Austria-Martinez and Callejo,
Sr.,JJ., concur.

Footnotes
1.Penned by Associate Justice Juanito C. Castañeda, Jr. with Presiding
Justice Ernesto D. Acosta, Associate Justice Erlinda P. Uy, Associate Justice
Lovell R. Baustista, Associate Justice Olga Palanca-Enriquez and Associate
Justice Caesar A. Casanova, concurring. Rollo,pp. 29-36.
2.Id.at 37-45.
3.Id.at 37-38.
4.Id.at 38.
5.Id.at 38.
6.Id.at 37-45.
7.Id.at 44.
8.The CTA inadvertently referred to this provision as Section 223, which is
the section where this provision falls under the present tax code, the
National Internal Revenue Code of 1997. However, in the Tax Code of
1977, as amended, which was the law applicable to this case, this
provision was under Section 269, which reads:
Section 269. Exceptions as to the period of limitation of assessment
and collection of taxes.— ...
xxx xxx xxx
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.
9.Rollo,p. 45.
10.Id.at 47-53.
11.Id.at 35.
12.Id.at 15.
13.Section 268. 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.
14.Section 269. Exceptions as to period of limitations of assessment and
collection of taxes.— (a) In the case of a false or fraudulent return with
intent to evade 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 ....
15.Section 269. Exceptions as to the period of limitation of assessment
and collection of taxes.— ...
xxx xxx xxx
(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.
16.Bank of the Philippine Islands v. Commissioner of Internal Revenue,G.R.
No. 139736, 17 October 2005, 473 SCRA 205, 223.
17.Republic of the Philippines v. Ablaza,108 Phil. 1105, 1107-1108 (1960).
18.104 Phil. 819, 833-834 (1958).
19.108 Phil. 1105, 1108 (1960).
20.G.R. No. 139736, 17 October 2005, 473 SCRA 205, 225.
21.363 Phil. 169, 178 (1999).
22.G.R. No. 139736, 17 October 2005, 473 SCRA 205, 230-231.
23.Rollo,p. 104
24.104 Phil. 819, 822-823 (1958).
25.116 Phil. 615, 618-619 (1962).
26.117 Phil. 575, 578 (1963).
27.117 Phil. 892, 895 (1963).
28.119 Phil. 604, 610 (1964).
29.Revenue Regulations No. 12-85 provides that:
Section 7. When to File Protest — A protest must be filed within thirty
(30) days from receipt of the assessment.
Section 9. Finality of Assessments — If a taxpayer who receives an
assessment from the Bureau of Internal Revenue fails to file a protest
within the period prescribed in Section 7 of these regulations, the said
assessment shall become final and unappealable and the taxpayer is
thereby precluded from disputing the assessment.
30.Collector of Internal Revenue v. Suyoc Consolidated Mining
Company,104 Phil. 819, 823 (1958).
31.124 Phil. 927, 932 (1966).
32.G.R. No. L-18896, 17 February 1988, 158 SCRA 9, 11.
||| (Commissioner of Internal Revenue v. Philippine Global Communication, Inc.,
G.R. No. 167146, [October 31, 2006], 536 PHIL 1131-1150)