EXTENDED ASSESSMENT

CIR v. Systems Technology Institute (STI), GR No. 220835, July 26, 2017

Facts:

On May 30, 2006, STI's Amiel C. Sangalang signed a Waiver of the Defense of
Prescription Under the NIRC, with the proviso that the assessment and collection of taxes
(Income tax, VAT, and EWT) of fiscal year 2003 shall come "no later than December 31,
2006." This was accepted by BIR. On December 12, 2006, another waiver was executed
extending the period to assess and collect the assessed taxes to March 31, 2007, which was
again accepted by BIR, and the third waiver extending further the period the period to June 30,
2007.

On June 28, 2007, STI received a Formal Assessment Notice from the CIR, assessing
STI for deficiency income tax, VAT and EWT for fiscal year 2003, in the aggregate amount of
₱161,835,737.98. Thus, STI filed for reconsideration/ reinvestigation. Subsequently, STI
received from the CIR the Final Decision on Disputed Assessment (FDDA) dated August 17,
2009 finding STI liable for deficiency income tax, VAT and EWT in the lesser amount of
₱124,257,764.20.

STI appealed the said FDDA to CTA by filing a petition for review. CTA ruled in favor
of STI denying the assessment of CIR on the ground of prescription. It likewise found that said
waivers are defective for failing to strictly comply with the requirements provided by RMO No.
20-90 and RDAO No. 05-01. Consequently, the assessments were never extended, and the
subject assessment by the CIR was issued beyond the 3-year prescriptive period provided by law.
CIR filed a motion for reconsideration but it was denied. Hence, this petition.

Issue:

Whether or not prescription had set in against the assessments for deficiency taxes
considering the CIR’s contention that the waivers executed are valid, and that STI is estopped to
invoke prescription because of their active participation in the reinvestigation that resulted in
reduced assessment.

Ruling:

Yes, prescription had set in.

Section 222(b) of NIRC provides that “If before the expiration of the time prescribed in
Section 203 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
agreement made before the expiration of the period previously agreed upon.”

To implement the said provision, BIR issued RMO 20-90 and RDAO 05-01, outlining the
procedures for a valid waiver, which requirements are mandatory and must be strictly complied,
to wit:

1. The waiver must be in the proper form prescribed by RMO 20- 90. The phrase "but not after
__________ 19 _",which indicates the expiry date of the period agreed upon to assess/collect the
tax after the regular three-year period of prescription, should be filled up.
 2. The waiver must be signed by the taxpayer himself or his duly authorized representative. In the
case of a corporation, the waiver must be signed by any of its responsible officials. In case the
authority is delegated by the taxpayer to a representative, such delegation should be in writing
and duly notarized.

3. The waiver should be duly notarized.

4. The CIR or the revenue official authorized by him must sign the waiver indicating that the BIR
has accepted and agreed to the waiver. The date of such acceptance by the BIR should be
indicated. However, before signing the waiver, the CIR or the revenue official authorized by him
must make sure that the waiver is in the prescribed form, duly notarized, and executed by the
taxpayer or his duly authorized representative.

5. Both the date of execution by the taxpayer and date of acceptance by the Bureau should be
before the expiration of the period of prescription or before the lapse of the period agreed upon
in case a subsequent agreement is executed.

6. The waiver must be executed in three copies, the original copy to be attached to the docket of
the case, the second copy for the taxpayer and the third copy for the Office accepting the waiver.
The fact of receipt by the taxpayer of his/her file copy must be indicated in the original copy to
show that the taxpayer was notified of the acceptance of the BIR and the perfection of the
agreement.

Here, testing the requirements, at the time the first waiver dated May 30, 2006 which took
effect on June 2, 2006, the CIR’s period to assess said taxes for 2003 has already prescribed
(requirement no. 5); STI's Amiel C. Sangalang has no notarized written authority (requirement
no. 2); and the waivers in this case did not specify the kind of tax and the amount of tax due.
(doctrine laid down in CIR v. Standard Chartered Bank 1) Considering the said defects, the
waivers executed did not extend the periods for the CIR to assess or collect the alleged
deficiency taxes.

ADDITIONAL NOTES:

Facts No. 2

CIR contends that STI is estopped from invoking the defense of prescription. Like in the
case of RCBC v. CIR, 672 Phil. 514 (2011), where the Court considered the taxpayer's partial
payment of the revised assessment as an implied admission of the validity of the waivers.

Issue No. 2

Whether or not STI is estopped from invoking the defense of prescription.

Ruling No. 2

No, STI is not estopped.

In RCBC v. CIR, The Court explained that RCBC's partial payment of the revised
assessments effectively belied its insistence that the waivers are invalid and the assessments were
issued beyond the prescriptive period.

1
It is established that a waiver of the statute of limitations is a bilateral agreement between the taxpayer
and the BIR to extend the period to assess or collect deficiency taxes on a certain date. Logically, there
can be no agreement if the kind and amount of the taxes to be assessed or collected were not indicated.
Hence, specific information in the waiver is necessary for its validity.
 Here, the estoppel upheld in the said case arose from the taxpayer's act of payment and
not on the reduction in the amount of the assessed taxes. As no such payment was made by
STI, mere reduction of the amount of the assessment because of a request for reinvestigation
should not bar it from raising the defense of prescription.
III. Final Assessment Notice/ Demand Letter (5. EFFECT)

CIR v. Liquigaz Philippines Corporation, G.R. No. 215534, April 18, 2016
(Liquigaz Phils. Corporation v. CIR, G.R. NO. 215557, April 18, 2016)

Summary:

Liquigaz asserts that CIR’s assessment for WTC, EWT and FBT deficiency, should have
been invalidated because the FDDA did not provide for the facts on which the assessment was
based. It argues that it was deprived of due process because in not stating the factual basis of the
assessment. On the other hand, the CIR avers that the said tax assessments should be upheld
because the FDDA must be taken together with the PAN and FAN, where details of the
assessments were attached. Hence, the CIR counters that Liquigaz was fully apprised of not only
the laws, but also the facts on which the assessment was based, which were likewise evidenced
by the fact that it was able to file a protest on the assessment. Further, the CIR avers that even if
the FDDA would be declared void, it should not result in the automatic abatement of tax liability
especially because RR No. 12-99 merely states that a void decision of the CIR or his
representative shall not be considered as a decision on the assessment.

Facts:

Liquigaz received a LOA dated July 4, 2006 issued by the CIR authorizing the
investigation of all internal revenue taxes for taxable year 2005. It likewise received an undated
letter purporting to be a Notice of Informal Conference (NIC) with detailed computation of
supposed tax liability, and Preliminary Assessment Notice (PAN) with attached detailed
discrepancies for the year ending December 31, 2005. Upon investigation, Liquigaz was initially
assessed with discrepancy withholding tax liabilities (EWT, WTC, FBT) in the amount of
P23,931,708.72.

Thereafter, on June 25, 2008, it received a Formal Letter of Demand (FLD)/Formal

Assessment Notice (FAN), together with its attached details of discrepancies, for the calendar
year ending December 31, 2005. The total deficiency withholding tax liabilities, inclusive of
interest, under the FLD was P24,332,347.20. Liquigaz filed its protest against the FLD/FAN and
subsequently submitted its supporting documents, then on July 1, 2010, it received a copy of the
FDDA covering the tax audit under LOA for the calendar year ending December 31, 2005.
Under said FDDA, CIR still found Liquigaz liable for deficiency withholding tax liabilities,
inclusive of interest, in the aggregate amount of P22,380,025.19. Thus, Liquigaz filed a petition
for review before the CTA assailing the validity of FDDA.

Subsequently, CTA partially granted the petition cancelling the EWT and FBT
assessments but affirmed with modification the WTC assessment. It ruled that the portion of the
FDDA relating to the EWT and the FBT assessment was void pursuant to Section 228 of NIRC
of 1997, as implemented by RR No. 12-99. The CTA Division noted that unlike the PAN and
the FLD/FAN, the FDDA did not provide the details thereof, hence, Liquigaz had no way of
knowing what items were considered by the CIR in arriving at the deficiency assessments. This
was especially true because the FDDA reflected a different amount from what was stated in the
FLD/FAN. The CTA Division explained that though the legal bases for the EWT and FBT
assessment were stated in the FDDA, the taxpayer was not notified of the factual bases thereof,
as required in Section 228 of the NIRC. With regard the WTC, it found and modified the said
assessment as it uses a different tax rate. (From 32% to 25.40%) Aggrieved, both parties filed
their respective petitions before the CTA en banc. However, it affirmed the decision of CTA
division with regard the EWT and FBT and emphasized the need for stating the factual bases as
the FDDA reflected different amounts than that contained in the FLD/FAN, but it reversed the
modification of WTC and sustained the WTC assessment as it found that the assessments in
FDA and FDDA are the same. Both parties filed their motions for reconsideration but was
denied. Hence, these consolidated petitions.

Issue:

Whether or not the void FDDA has the effect of VOID tax assessment.

Ruling:

No, the void FDDA does not necessarily renders the tax assessment void.

In St. Stephen's Association v. Collector of Internal Revenue, the Court has long
recognized that a "decision"- differs from an "assessment," to wit: Where a taxpayer questions
an assessment and asks the Collector to reconsider or cancel the same because he (the taxpayer)
believes he is not liable therefor, the assessment becomes a "disputed assessment" that the
Collector must decide, and the taxpayer can appeal to the Court of Tax Appeals only upon
receipt of the decision of the Collector on the disputed assessment, in accordance with paragraph
(1) of section 7, Republic Act No. 1125, conferring appellate jurisdiction upon the Court of Tax
Appeals to review "decisions of the Collector of Internal Revenue in cases involving disputed
assessment...

Here, an assessment becomes a “disputed assessment” after a taxpayer has filed its
protest to the assessment in the administrative level. Thereafter, the CIR either issues a
decision on the disputed assessment or fails to act on it and is, therefore, considered denied.
The taxpayer may then appeal the decision on the disputed assessment or the inaction of the CIR.
As such, the FDDA is not the only means that the final tax liability of a taxpayer is fixed, which
may then be appealed by the taxpayer. Under the law, inaction on the part of the CIR may
likewise result in the finality of a taxpayer's tax liability as it is deemed a denial of the protest
filed by the latter, which may also be appealed before the CTA. Clearly, a decision of the CIR
on a disputed assessment differs from the assessment itself. Hence, the invalidity of one does
not necessarily result to the invalidity of the other—unless the law or regulations otherwise
provide.

Also, Section 228 of the NIRC provides that an assessment shall be void if the taxpayer is
not informed in writing of the law and the facts on which it is based. It is, however, silent with
regard to a decision on a disputed assessment by the CIR which fails to state the law and
facts on which it is based. This void is filled by RR No. 12-99 where it is stated that failure of
the FDDA to reflect the facts and law on which it is based will make the decision void. It,
however, does not extend to the nullification of the entire assessment.

ADDITIONAL ISSUE:

Whether or not the FDDA is void considering Liquigaz’s contention that it merely
contained a table of supposed tax liability, considering further the CIR’s contention that the
FDDA still complied with the requirements of the law as it was issued in connection with the
PAN and FLD/FAN, which had an attachment of the details of discrepancies.

ADDITIONAL RULING:

Yes, said FDDA is void.

 Under Section 228 of the NIRC, a taxpayer shall be informed in writing of the law and
the facts on which the assessment is made, otherwise, the assessment shall be void. In
implementing Section 228 of the NIRC, RR No. 12-99 reiterates the requirement that a taxpayer
must be informed in writing of the law and the facts on which his tax liability was based.

3.1.6 of RR No. 12-99 provides that “Administrative Decision on a Disputed Assessment.

— The decision of the Commissioner or his duly authorized representative shall (a) state
the facts, the applicable law, rules and regulations, or jurisprudence on which such
decision is based, otherwise, the decision shall be void (see illustration in ANNEX C hereof),
in which case, the same shall not be considered a decision on a disputed assessment; and (b) that
the same is his final decision.”

Here, it is undisputed that the FDDA merely showed Liquigaz' tax liabilities without any
details on the specific transactions which gave rise to its supposed tax deficiencies. While it
provided for the legal bases of the assessment, it fell short of informing Liquigaz of the factual
bases thereof. Thus, the FDDA as regards the EWT and FBT tax deficiency did not comply with
the requirement in Section 3.1.6 of RR No. 12-99, as amended, for failure to inform Liquigaz of
the factual basis thereof.

CASE REMANDED.
EFFECT OF FAILURE TO FILE PROTEST AND/OR APPEAL TO THE CTA

MISNET, Inc. v. CIR, G.R. No. 210604, June 03, 2019

Facts:

On March 28, 2011, petitioner received an Amended Assessment Notice reflecting an

amended deficiency EWT after reinvestigation. On the same date, petitioner received a Final
Decision on Disputed Assessment (FDDA) stating that after reinvestigation, there was still due
from petitioner the amount of P14,564,323.34, representing deficiency taxes.

On April 8, 2011, petitioner filed a letter-reply to the Amended Assessment Notice and
FDDA, which was received by the CIR on April 11, 2011. On May 9, 2011, the CIR sent a letter
to petitioner which states in part that petitioner's letter-reply dated April 8, 2011 produced no
legal effect since it availed of the improper remedy. It should have appealed the final
decision of the CIR to the Court of Tax Appeals within thirty (30) days from the date of
receipt of the said Decision (FDDA), otherwise, the assessment became final, executory and
demandable. Then, petitioner filed a Petition for Relief from Judgment arguing that it was not
able to file its proper appeal of the FDDA due to its mistake and excusable negligence as it was
not assisted by counsel. On June 29, 2011, petitioner received a Preliminary Collection Letter
dated June 22, 2011, which is deemed a denial of petitioner's Petition for Relief.

On July 26, 2011, petitioner filed a Petition for Review before the CTA. However, CIR
moved for its dismissal for lack of jurisdiction considering that the FDDA (decision) already
become final and executory after the lapse of the statutory period to file an appeal. The CTA then
granted the said motion and dismissed the petition. Petitioner then filed a motion for
reconsideration but it was denied. Hence, this petition.

Issue:

Whether or not the CTA En Banc correctly dismissed petitioner's Petition for Review on
the ground of lack of jurisdiction.

Ruling:

No, the CTA en banc erred in dismissing the petition.

Section 228 of the 1997 NIRC which provides for the remedies of a taxpayer in case of
an adverse final decision by the CIR on Disputed Assessment, thus, “If the protest is denied in
whole or in part, or is not acted upon within one hundred eighty (180) days from submission of
documents, the taxpayer adversely affected by the decision or inaction may appeal to the
Court of Tax Appeals within (30) days from receipt of the said decision, or from the lapse of
the one hundred eighty (180)-day period; otherwise, the decision shall become final, executory
and demandable.”
While it is true that the perfection of an appeal within the statutory period is a
jurisdictional requirement and failure to do so renders the questioned decision or decree final and
executory and no longer subject to review. In the instant case, petitioner allegedly failed to
observe the 30-day period within which to appeal the final decision of the CIR to the CTA. As
records would show, petitioner admittedly received the FDDA on March 28, 2011. Reckoned
from this date of receipt, it has until April27, 2011, within which to appeal with the CTA.
However, petitioner filed its appeal (Petition for Review) only on July 26, 2011 or after the lapse
of ninety-three (93) days from its receipt of the FDDA. It appears that petitioner's filing of an
appeal with the CTA was beyond the statutory period to appeal.
 However, in Trans International v. CA, 348 Phil. 830, 838 (1998), the Court held that
“For a party to seek exception for its failure to comply strictly with the statutory requirements for
perfecting its appeal, strong compelling reasons such as serving the ends of justice and
preventing a grave miscarriage thereof must be shown, in order to warrant the Court's suspension
of the rules. Indeed, the Court is confronted with the need to balance stringent application of
technical rules vis-a-vis strong policy considerations of substantial significance to relax said
rules based on equity and justice.”

Here, petitioner averred that after receiving the Amendment Assessment Notice and
FDDA of the CIR on March 28, 2011, it filed, without the assistance of a counsel, a letter
protesting it on April 11, 2011, or within the statutory period within which to appeal. Apparently,
petitioner was merely relying on the statement in the said Amended Assessment Notice, which
reads:

“IF YOU DISAGREE WITH THIS ASSESSMENT, FILE YOUR PROTEST IN

WRITING INDICATING YOUR REASONS WITH THE COMMISSIONER OF INTERNAL
REVENUE, BIR DILIMAN, QUEZON CITY OR THE REGIONAL DIRECTOR WITHIN 30
DAYS FROM RECEIPT HEREOF:”

Thus, petitioner opted to file the protest with the Regional Director. On May 12, 2011,
petitioner received a letter informing it that its filing of a letter of protest was an improper
remedy.

Petitioner was correct when it protested with the Regional Director the deficiency EWT
as per the Amended Assessment Notice sent by the BIR. However, instead of resolving the
protest, the Regional Director informed the petitioner that it was an improper remedy. A ruling
totally inconsistent with the statement reflected in the Amended Assessment Notice, which states
that protest must be filed with the CIR or the Regional Director within 30 days from receipt
thereof. Apparently, the Regional Director has hastily presumed that petitioner was already
protesting the FDDA, which incidentally was received by petitioner on the same date as that of
the Amended Assessment Notice.

With petitioner's pending protest with the Regional Director on the amended EWT,
then technically speaking, there was yet no final decision that was issued by the CIR that is
appealable to the CTA. It is still incumbent for the Regional Director to act upon the protest on
the amended EWT- whether to grant or to deny it. Only when the CIR settled (deny/grant) the
protest on the deficiency EWT could there be a final decision on petitioner's liabilities. And only
when there is a final decision of the CIR, would the prescriptive period to appeal with the CTA
begin to run.

Hence, petitioner's belated filing of an appeal with the CTA is not without strong,
compelling reason. We could say that petitioner was merely exhausting all administrative
remedies available before seeking recourse to the judicial courts. While the rule is that a
taxpayer has 30 days to appeal to the CTA from the final decision of the CIR, the said rule
could not be applied if the Assessment Notice itself clearly states that the taxpayer must file
a protest with the CIR or the Regional Director within 30 days from receipt of the
Assessment Notice. Under the circumstances obtaining in this case, we opted not to apply
the statutory period within which to appeal with the CTA considering that no final decision
yet was issued by the CIR on petitioner's protest. The subsequent appeal taken by petitioner is
from the inaction of the CIR on its protest.

CASE REMANDED to the CTA.

ABATEMENT – Definition (Section 204(b))

People v. Sandiganbayan, G.R. No. 152532. August 16, 2005

Facts:

Pursuant to LOA dated January 2, 1986 and Memorandum of Authority dated March 3,
1986, an investigation was conducted by BIR examiners on the ad valorem and specific tax
liabilities of San Miguel Corp. (SMC) covering the period from January 1, 1985 to March 31,
1986. The result of the investigation showed that SMC has a deficiency on specific and ad
valorem taxes totaling ₱342,616,217.88. On this basis, BIR sent a letter demanding SMC to pay
the said deficiency taxes. SMC then protested the said assessment in a letter, which was
subsequently denied by accused Commissioner Bienvenido Tan, Jr., but the original assessment
of ₱342,616,217.88 was reduced to ₱302,051,048.93 due to the crediting of the taxpayer’s
excess ad valorem tax deposit of ₱21,805,409.10 with a reiteration of the payment of the x x x
assessed specific and ad valorem tax as reduced.

On October 27, 1987, herein accused referred the matter to Jaime M. Maza, Assistant
BIR Commissioner, Legal Service Division and thereafter different BIR officials also reviewed
the case of SMC and rendered varying legal opinions on the issue. Nevertheless, majority
concurred to the recommendation that the offer of SMC for ₱10,000,000.00 in compromise
settlement be accepted. The recommendation was approved by accused Bienvenido Tan; and
accordingly, in a letter dated December 20, 1988, SMC was informed that its offer to
compromise was accepted. With this, accused was convicted before the Sandiganbayan for
violation of Sec. 3(e) of RA 3019 (Anti-Graft and Corrupt Practices Act) finding that the
compromise agreement has been entered into illegally. Accused filed his motion for
reconsideration arguing among others that the Court erred in not holding that the abatement of
SMC’s ad valorem tax was proper on the ground that there exists a reasonable doubt as to the
correctness of said assessment, as the assessment in October 1987 is not yet final and executory.
This was objected by the prosecution, however, Sandiganbayan granted the motion for
reconsideration, thereby acquitting the accused, finding merits to the arguments posited by the
accused. Hence, this petition.

Issue:

Whether or not the Sandiganbayan is correct in acquitting the accused when it ruled that
the abatement of SMC’s ad valorem taxes is proper.

Ruling:

Yes, the Sandiganbayan is correct.

Several Jurisprudence states: Abatement is the "diminution or decrease in the amount of

tax imposed;" it refers to "the act of eliminating or nullifying; x x x of lessening or moderating x
x x." To abate is "to nullify or reduce in value or amount"; while to cancel is "to obliterate, cross
out, or invalidate"; and "to strike out; x x x delete; x x x erase; x x x make void or invalid; x x x
annul; x x x destroy; x x x revoke or recall."

Here, although referred to in the pleadings as a compromise, the matter at hand is actually
an abatement or a cancellation. The BIR may therefore abate or cancel the whole or any unpaid
portion of a tax liability, inclusive of increments, if its assessment is excessive or erroneous; or if
the administration costs involved do not justify the collection of the amount due. No mutual
concessions need be made, because an excessive or erroneous tax is not compromised; it is
abated or canceled. Only correct taxes should be paid. Besides, as we have discussed earlier,
there was no finality in the assessment that could be settled.

Moreover, petitioner did not prove the alleged bad faith attributed to private respondent,
who simply relied upon his subordinates. Mere assertion will not suffice. Even reference to the
approval by the Evaluation Board was misleading, for such approval was inexistent at the time
and was merely a product of RA 8424 2 as amended. Actual, not presumed, fraud should be the
bench mark of liability.

2
Section 204 (B) Abate or cancel a tax liability, when:

(1) The tax or any portion thereof appears to be unjustly or excessively assessed; or

(2) The administration and collection costs involved do not justify the collection of the amount due.

All criminal violations may be compromised except: (a) those already filed in court, or (b) those involving fraud.
Tax Refunds and Credits/ Scope of claims for refund/ Requisites/
Conditions for grant

CIR v. Univation Motor Philippines, Inc. (formerly NISSAN MOTOR

PHILIPPINES, INC.), G.R. No. 231581, April 10, 2019

Facts:

On July 8, 2011, Univation Motor Philippines, Inc. (respondent) filed its amended
Annual Income Tax Return (ITR) for 2010 showing a total gross income of ₱117,084,174.00
and an overpayment of income taxes amounting to ₱26,103,898.52. Respondent opted to claim
its overpayment of income tax through the issuance of a tax credit certificate. On March 12,
2012, respondent filed its administrative claim with the BIR explaining that the overpayment of
₱26,103,898.52 consists of prior year's excess credits in the amount of ₱15,576,837.00 less
Minimum Corporate Income Tax amounting to ₱2,341,683.48 and creditable withholding taxes
accumulated during the four quarters of 2010 in the amount of ₱12,868,745.00. Respondent
filed its Application for Tax Credit in the amount of ₱12,868,745.00. Since the BIR has not
yet acted upon respondent's administrative claim, petitioner filed a Petition for Review
with the CTA on April 12, 2013.

In its Answer, petitioner CIR raised the following special and affirmative defenses: (a)
respondent's claim for refund is tainted with procedural infirmity due to petitioner's failure to
submit complete documents in support of its administrative claim for refund; (b) petitioner
miserably failed to exhaust administrative remedies before elevating the case to this Court; and
(c) claims for refund are construed strictly against the taxpayer and in favor of the government.

While respondent formally offered testimonial and documentary evidence, the petitioner
manifested that they will not present evidence. CTA then favored Univation and ordered the
CIR to issue a tax credit certificate in the amount of P12,729,617.90. The case was elevated to
CTA en banc but it only affirmed the CTA division’s ruling. Motion for reconsideration was
likewise denied, hence, this petition.

Issue No. 1:

Whether or not CTA has prematurely assumed jurisdiction on respondent's judicial claim
for tax refund or credit without waiting for the decision of petitioner, considering the
respondent’s contention that if it waited for the CIR's decision on its claim for refund, it would
have suffered irreparable damage as it would have been barred from seeking judicial recourse.

Ruling No. 1:

Sections 204 and 229 of the National Internal Revenue Code (NIRC) provide for the
refund of erroneously or illegally collected taxes. Section 204 applies to administrative claims
for refund, while Section 229 to judicial claims for refund. Thus:

SEC. 204. Authority of the Commissioner to Compromise, Abate and Refund or Credit
Taxes. — The Commissioner may —
xxxx

(c) Credit or refund taxes erroneously or illegally received or penalties imposed without
authority, refund the value of internal revenue stamps when they are returned in good condition
by the purchaser, and, in his discretion, redeem or change unused stamps that have been rendered
unfit for use and refund their value upon proof of destruction. No credit or refund of taxes or
penalties shall be allowed unless the taxpayer files in writing with the Commissioner a
claim for credit or refund within two (2) years after the payment of the tax or penalty:
Provided, however, That a return filed showing an overpayment shall be considered as a written
claim for credit or refund.11

Section 229 of the 1997 NIRC provides:

Sec. 229. Recovery of Tax Erroneously or Illegally Collected. — No suit or proceeding

shall be maintained in any court for the recovery of any national internal revenue tax hereafter
alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed to
have been collected without authority, of any sum alleged to have been excessively or in any
manner wrongfully collected without authority, or of any sum alleged to have been excessively
or in any manner wrongfully collected, until a claim for refund or credit has been duly filed with
the Commissioner; but such suit or proceeding may be maintained, whether or not such tax,
penalty, or sum has been paid under protest or duress.

In any case, no such suit or proceeding shall be filed after the expiration of two (2)
years from the date of payment of the tax or penalty regardless of any supervening cause
that may arise after payment. Provided, however, That the Commissioner may, even without a
written claim therefor, refund or credit any tax, where on the face of the return upon which
payment was made, such payment appears clearly to have been erroneously paid.

Here, the' two-year period to file a claim for refund is reckoned from April 15, 2011, the
date respondent filed its Final Adjustment Return. Since respondent filed its administrative claim
on March 12, 2012 and its judicial claim on April 12, 2013, therefore, both of respondent's
administrative and judicial claim for refund were filed on time or within the two-year
prescriptive period provided by law. Under the circumstances, if respondent awaited for the
commissioner to act on its administrative claim (before resort to the Court), chances are, the two-
year prescriptive period will lapse effectively resulting to the loss of respondent's right to seek
judicial recourse and worse, its right to recover the taxes it erroneously paid to the government.
Hence, respondent's immediate resort to the Court is justified.

As regards the doctrine of exhaustion of administrative remedies, the law only requires that an
administrative claim be priorly filed. That is, to give the BIR at the administrative level an
opportunity to act on said claim. In other words, for as long as the administrative claim and the
judicial claim were filed within the two-year prescriptive period, then there was exhaustion of
the administrative remedies.

At any rate, Section 7(2) of NIRC provides that the CTA may exercise jurisdiction over
inaction by the Commissioner of Internal Revenue in cases involving disputed assessments,
refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other
matters arising under the National Internal Revenue Code or other laws administered by the
Bureau of Internal Revenue, where the National Internal Revenue Code provides a specific
period of action, in which case the inaction shall be deemed a denial

This means that while the Commissioner has the right to hear a refund claim first, if he or
she fails to act on it, it will be treated as a denial of the refund, and the CTA is the only entity
that may review this ruling. Respondent need not wait for the Commissioner to act on its
administrative claim for refund.

Additional Notes:
 Petitioner CIR argued that failure of the respondent to submit the required complete
documents as required by Revenue Memorandum Order No. 53-98 and Revenue Regulations No.
2-2006 rendered the petition with the CTA dismissible on the ground of lack of jurisdiction. It
reasoned out that when a taxpayer prematurely filed a judicial claim with the CTA, the latter has
no jurisdiction over the appeal.

Issue No. 2:

Whether or not the CTA en banc erred in granting respondent's claim for refund despite
its failure to substantiate its claim by sufficient documentary proof.

Ruling No. 2:

No, the CRA did not err.

Here, it was the inaction of petitioner CIR which prompted respondent to seek judicial
recourse with the CTA. Petitioner CIR did not send any written notice to respondent
informing it that the documents it submitted were incomplete or at least require
respondent to submit additional documents. As a matter of fact, petitioner CIR did not even
render a Decision denying respondent's administrative claim on the ground that it had failed to
submit all the required documents. Considering that the administrative claim was never acted
upon, there was no decision for the CTA to review on appeal per se. However, this does not
preclude the CTA from considering evidence that was not presented in the administrative claim
with the BIR.

Issue No. 3:

Whether or not the respondent was able to prove by preponderance of evidence its
entitlement to the issuance of a Tax Credit certificate.

Ruling No. 3:

Yes.

Jurisprudence laid down the basic requirements in order for a taxpayer to claim tax credit
or refund of creditable withholding tax, thus: (1) The claim must be filed with the CIR within
the two-year period from the date of payment of the tax, as prescribed under Section 229 of
the NIRC of 1997; (2) The fact of withholding is established by a copy of a statement duly
issued by the payor to the payee showing the amount paid and the amount of tax withheld;
and (3) It must be shown on the return of the recipient that the income received was
declared as part of the gross income. The second and third requirements are found under
Section 2.58.3(B) of Revenue Regulation No. 2-98,32 as amended, which reads:

Section 2.58.3. Claim for tax credit or refund. — (B) Claims for tax credit or
refund of any creditable income tax which was deducted and withheld on income
payment shall be given due course only when it is shown that the income payments has
been declared as part of the gross income and the fact of withholding is established by a
copy of the withholding tax statement duly issued by the payor to the payee showing the
amount paid and the amount of tax withheld therefrom.

Here, respondent was able to establish through the documentary evidence it submitted
compliance with the second and third requisites. As correctly evaluated by the CTA 1st division:
 To prove its compliance with the second requisite, petitioner [now
respondent] presented Schedule/Summary of Creditable Taxes Withheld for the
year 2010 and the related Certificates of Creditable Taxes Withheld at Source
(BIR form No. 2307) duly issued to it by various withholding agents for the year
2010, reflecting creditable withholding taxes in the total amount of
₱12,868,745.87.

Anent the third requisite, the court was able to trace the income payments related to the
substantiated CWT of ₱12,868,745.87 (save for the amount of ₱139,127.97 CWT) to petitioner's
General Ledger (GL) for CY 2010, 2009, 2008 and 2006 and noted that the same were reported
in petitioner's Annual ITRs for the years 2010, 2009, 2008 and 2006. The CTA En Banc
likewise correctly appreciated the explanation of the independent CPA (ICPA). As concluded by
the CTA En Banc, the delay in collection of certain income payments of respondent caused the
timing difference between the actual reporting of the income by respondent and the actual
withholding of the corresponding creditable income tax by respondent's customers.