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V:/F'Ftmaj: Upreme Ourt
V:/F'Ftmaj: Upreme Ourt
. FIRST DIVISION
CAGUIOA, J.:
1
Rollo, pp. 3-44.
Decision 2 G.R. No. 258947
Other relief just and equitable under the premises are likewise
prayed for. 2
The CIR essentially challenges the June 7, 2021 3 and December 11,
2021 4 Resolutions in CTA Case No. 10291, which cancelled QLDI's
deficiency tax assessment for taxable year 2010 on the ground of prescription
and enjoined the CIR from collecting the assessed deficiency taxes against
QLDI.
The Facts
On December 12, 2014, the CIR sent out the Formal Assessment Notice
(FAN) or Formal Letter ofDemand9 (FLD) with Details of Discrepancies to
QLDI. 10 Despite receipt of the F AN/FLD, QLDI failed to file a protest within
the 30-day period provided by law. Subsequently, as there was no disputed
assessment to speak of, as no protest was filed, the CIR issued a Final Decision
on Disputed Assessmentll (FDDA), which QLDI received on March 3, 2015.
2
Id. at 39-40; emphasis in the original.
Id. at 50-58. Signed by Associate Justices Juanito C. Castaf:ieda, Jr. and Jean Marie A. Bacorro-Villena.
4 Id. at 59-73. Signed by Associate Justices Juanita C. Castafieda, Jr., Jean Marie A. Bacorro-Villena and
Lanee S. Cui-David.
Id. at 86.
6
Id. at 12, 87-91.
7
Id. at 12: See also id. at 104-105, where QLDl alleged that it received the PAN on December 11, 2014.
Id. at 105.
9 Attached to the Petition as Annex "F," Formal Letter of Demand with Details of Discrepancies dated
December 11, 2014, id. at 92-96.
10
Id. at 57.
11 Attached to the Petition as Annex "G," Final Decision on Disputed Assessment dated February 11,201
id. at 97.
Decision 3 G.R. No. 258947
QLDI filed with the CIR a request for reconsideration dated March 30,
2015, which was denied by the CIR in the Decision dated February 4, 2020. 12
Consequently, the CIR ordered QLDI to pay the deficiency taxes and the
compromise penalty for taxable year 2010.
On June 30, 2020, QLDI filed a Petition for Review 13 before the CTA
Division, challenging the CIR's February 4, 2020 Decision. Particularly,
QLDI questioned the validity of the assessment against it, and the prescription
of the CIR's right to collect taxes.
In the assailed Resolution dated June 7, 2021, the CTA Division held
that the period within which the CIR may collect deficiency taxes had already
lapsed. Accordingly, the CTA Division cancelled the assessment for
deficiency taxes against QLDI for taxable year 2010.
SO ORDERED. 16
The CTA Division ruled that when an assessment is timely issued, the .
CIR has five years to collect the assessed tax, reckoned from the date the
assessment notice had been released, mailed, or sent by the Bureau of Internal
Revenue (BIR) to the taxpayer. Thus, in this case, the CIR had five years from
December 12, 2014, or until December 12, 2019, to collect the deficiency
12 Id. at 98.
13
Id. at 98-138.
14
Id. at 13.
15
Id. at 50.
16 Id. at 58; emphasis and underscoring in the original.
Decision 4 G.R. No. 258947
taxes. However, the CIR issued the BIR letters for the collection of taxes on
various dates in 2020, which were all beyond December 12, 2019.
Accordingly, the CTA Division ruled that the government's demand for
payment of deficiency taxes was already barred by prescription.
The CIR filed a Motion for Reconsideration, which the CTA Division
denied in its assailed Resolution dated December 11, 2021. The CTA Division
enjoined the CIR from collecting from QLDI the deficiency taxes either by
distraint or levy. It likewise held that its jurisdiction over "other matters"
arising under the National Internal Revenue Code of 1997 17 (NIRC) includes
the issue as to whether the CIR's right to collect taxes has already prescribed.
The dispositive portion of the Resolution reads:
SO ORDERED. 18
The Issue
The core of the issue is whether the CIR' s right to collect taxes had
already prescribed.
After a careful study of the allegations and the records of this case, the
Court resolves to dismiss the Petition and uphold the Resolutions dated June
7, 2021 and December 11, 2021 issued by the CTA Division.
At the outset, it bears noting that the CIR directly filed a petition for
certiorari and prohibition with the Court, alleging that the twin Resolutions
issued by the CTA Division are interlocutory orders that cannot be appealed
before the CTA En Banc.
In CIR v. Court of Tax Appeals, 19 the Court held that the CTA En Banc
has jurisdiction over a final judgment or order but not over an interlocutory
order issued by the CTA Division. In reaching this conclusion, the Court
explained the concept ofa final judgment or order and distinguished it from
an interlocutory order, as follows:
xxxx
19
G.R. Nos. 203054-55, July 29, 2015, 764 SCRA 212.
20
Id. at 222; italics in the original, citations omitted.
Decision 6 G.R. No. 258947
CIR's proper remedy on the adverse Resolutions of the CTA Division was to
file an appeal by way of a petition for review with the CTA En Banc. Thus,
the CIR's filing of the instant Petition before this Court assailing the twin
Resolutions issued by the CTA Division is erroneous.
On the merits of the case, the CIR attributes grave abuse of discretion
to the CTA Division when it assumed jurisdiction over QLDI's Petition for
Review. The CIR claims that QLDI's failure to file a valid protest to the
FAN/FLD rendered the assessment against it already final, executory, and
demandable. As such, the assessments are not subject to judicial scrutiny, as
it is already beyond the CTA Division's jurisdiction.
21 Rondina v. Court ofAppeals, G.R. No. 172212, July 9, 2009, 592 SCRA 346, 355; citation omitted.
22 ANACTCREAT!NGTHECOURTOFTAXAPPEALS, June 16, 1954.
23 AN ACT EXPANDING THE JURISDICTION OF THE COURT OF TAX APPEALS (CTA), ELEVATING ITS RANK
TO THE LEVEL OF A COLLEGIATE COURT WITH SPECIAL JURISDICTION AND ENLARGING ITS MEMBERSHIP,
AMENDING FOR THE PURPOSE CERTAIN SECTIONS OF REPUBLIC ACT NO. 1125, AS AMENDED,
OTHERWISE KNOWN AS THE LAW CREATING THE COURT OF TAX APPEALS, AND FOR OTHER PURPOSES,
March 30, 2004.
Decision 7 G.R. No. 258947
To be sure, the fact that an assessment has become final for failure of
the taxpayer to file a protest within the time allowed only means that the
validity or correctness of the assessment may no longer be questioned on
appeal. However, the validity of the assessment itself is a separate and distinct
issue from the issue of whether the right of the CIR to collect the validly
assessed tax has prescribed. This issue of prescription, being a matter provided
for by the NIRC, is well within the jurisdiction of the CTA to decide. 26
Regarding the period to collect taxes, the CTA Division held that when
an assessment is timely issued, the CIR has five years within which to collect
the assessed tax. Considering that the collection letters were issued beyond
five years, the CIR's right to collect from QLDI the assessed deficiency taxes
had already prescribed.
the three (3)-year period shall be counted from the day the return was filed.
For 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.
In CIR v. United Salvage and Towage (Phils.), Inc., 27 the Court held
that in cases of assessments issued within the three-year ordinary period, the
CIR has another three years within which to collect taxes, thus:
Applying the foregoing ruling, the Court holds that the CTA Division
erred when it applied the five-year period to collect taxes. The five-year period
for collection of taxes only applies to assessments issued within the
extraordinary period of 10 years in cases of false or fraudulent return or failure
to file a return. Indeed, Section 222 of the NIRC, as amended, provides:
xxxx
(c) Any internal revenue tax which has been assessed within the
period oflimitation as prescribed in paragraph (a) hereof may be collected
by distraint or levy or by a proceeding in court within five (5) years
following the assessment of the tax. (Emphasis supplied)
Here, given that the subject assessment was issued within the three-year
ordinary prescriptive period to assess, the CIR had another three years to
initiate the collection of taxes by distraint or levy or court proceeding.
Accordingly, since the FAN/FLD was mailed on December 12, 2014,29 the
CIR had another three years reckoned from said date, or until December 12,
27
G.R. No.197515,July2,2014, 729SCRA 113.
28 Id. at 133; emphasis supplied, citations omitted and italics in the original.
29 Rollo, p. 57.
Decision 9 G.R. No. 258947
At this juncture, the Court ought to reiterate that while taxes are the
lifeblood of the nation, the Court cannot allow tax authorities indefinite and
infinite periods to assess and collect alleged unpaid taxes. Certainly, it is an
injustice to leave taxpayers in perpetual uncertainty whether they will be made
liable for deficiency or delinquent taxes. 34 The Court has elaborated on the
significance of adopting a statute of limitations on tax assessment and
collection in this wise:
30
Id.
31 Id. at 27.
32 Bank of the Philippine Islands v. Commissioner of Internal Revenue, G.R. No. 139736, October 17,
2005, 473 SCRA 205,224.
33 Commissioner of Internal Revenue v. Pilipinas Shell Petroleum Corporation, G.R. Nos. 197945 &
204119-20, July 9, 2018, 871 SCRA 183,222.
34 Id. at 225.
Decision 10 G.R. No. 258947
The Court also rejects the CIR's argument that the CTA Division acted
without jurisdiction when it was enjoined to collect taxes against QLDI. For
the CIR, the CTA Division has no power to issue writs of injunction and
prohibition, but may only suspend the collection oftaxes. 36
xxxx
Pursuant to the foregoing, the CTA may enjoin the collection of taxes
if such collection will jeopardize the interest of the government or the
35 Commissioner of Internal Revenue v. The Stanley Works Sales (Phils.), Incorporated, G.R. No. 187589,
December 3, 2014, 743 SCRA 642, 654-655, citing Republic of the Phils. v. Ablaza, 108 Phil. I 105,
1108 (1960).
36
Rollo, pp. 27-28.
37 Section 218 of the NIRC, as amended, reads:
SEC. 218. Injunction not Available to Restrain Collection ofTax. - No court shall
have the authority to grant an injunction to restrain the collection of any national internal
revenue tax, fee or charge imposed by this Code.
Decision 11 G.R. No. 258947
taxpayer. In this regard, the Court ruled that the CTA has ample authority to
issue injunctive writs to restrain the collection of tax, 38 especially in cases
where prescription has set in. 39
To recall, the December 11, 2021 CTA Resolution enjoined the CIR
from collecting the deficiency taxes against QLDI until further orders from
the CTA Division. The Court finds that the CTA Division's act of enjoining
the CIR from collecting deficiency taxes had sufficient basis, as it was
centered on the finding that the CIR's right to collect the assessed deficiency
taxes had already lapsed. Moreover, QLDI posted a surety bond, which the
CTA Division approved.
SO ORDERED.
WE CONCUR:
AL ~ G. GESMUNDO
~ h i e f Justice
Chairperson
38 Pacquiao v. Court of Tax Appeals, First Division, G.R. No. 213394, April 6, 2016, 789 SCRA 19, 43,
39 See id. at 43. See also Collector of Internal Rev. v. Reyes and Court of Tax Appeals, 100 Phil. 822, 831
(1957).
40 RULES OF COURT, Rule 58, Sec. 3.
41 In Cayabyab v. Dimson, G.R. No. 223862, July 10, 2017, 830 SCRA 520,528, the Court enumerated
the requisites for an applicant to be entitled to the injunctive writ: (a) there exists a clear and unmistakable
right to be protected; (b) the right is directly threatened by an act sought to be enjoined; (c) the invasion
of the right is material and substantial; and (d) there is an urgent and paramount necessity for the writ to
prevent serious and irreparable damage.
Decision 12 G.R. No. 258947
HEN ;AMuft~AN ·
Associate Justice
ARB. DIMAAMP AO
Associate Justice
CERTIFICATION
G.GESMUNDO