Asian Transmission Corp. v. CIR (2022)

SECOND DIVISION
[G.R. No. 230861. February 14, 2022.]
ASIAN TRANSMISSION CORPORATION , petitioner, vs.

COMMISSIONER OF INTERNAL REVENUE, respondent.
RESOLUTION
INTING, J : p
This resolves the Motion for Reconsideration 1 of the Court Decision 2

dated September 19, 2018 denying Asian Transmission Corporation's (ATC)
Petition for Review on Certiorari 3 thereby affirming the Court of Tax Appeals
(CTA) En Banc Decision 4 dated August 9, 2016 in CTA EB No. 1289.
The Antecedents
The crux of the present controversy lies in the validity of eight Waivers
of the Defense of Prescription under the Statute of Limitations of the National
Internal Revenue Code 5 (Waivers) executed successively by ATC, through
Roderick M. Tan, ATC Vice President for Personnel and Legal Affairs. 6
Previously, on the strength of a Letter of Authority 7 (LOA) dated
August 9, 2004, the Bureau of Internal Revenue (BIR) commenced its audit
and investigation of ATC's books of account and other accounting records
pertaining to taxable year 2002, including those in connection with the
following documents filed by ATC: (a) Annual Information Return of Income
Taxes Withheld on Compensation and Final Withholding Taxes filed on
January 30, 2003; and (b) Annual Information Return of Creditable Income
Taxes Withheld (Expanded)/Income Payments Exempt from Withholding Tax
filed on March 3, 2003. 8
Based on these filing dates, the Commissioner of Internal Revenue's
(CIR) right to assess ATC for the relevant taxes was due to prescribe in the
first quarter of 2006. 9 However, the Waivers' execution extended until
December 31, 2018: (a) the BIR's investigation period; and (b) the CIR's
assessment period. 10 Consequently, this allowed the CIR to serve a Formal
Letter of Demand 11 (FLD) on July 15, 2008 assessing ATC for deficiency
withholding tax on compensation (WTC), expanded withholding tax (EWT),
and final withholding tax (FWT). 12 ISHaCD
In its administrative protest, 13 ATC raised only two main objections:

first, the BIR violated ATC's right to due process when it failed to indicate in
t h e Preliminary Assessment Notice 14 (PAN) and accompanying details of
discrepancies "the surrounding circumstances supporting the assessment
that will allow the taxpayer the opportunity to dispute the assessment"; 15
and second, the BIR's details of discrepancies in the FLD, which set out to
compute the deficiency WTC, EWT, and FWT are erroneous and must be
reconsidered. 16 The CIR denied ATC's protest, 17 and its subsequent request
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for reconsideration. 18
Subsequently, the ATC proceeded to file a judicial protest 19 before the

CTA where it introduced the following arguments: first, the LOA became
invalid due to lack of revalidation; 20 and second, the first, second, and third
Waivers were defective; thus, these did not validly extend the assessment
period. 21
The Rulings of the CTA
At first instance, the CTA Second Division (CTA Division) ruled in ATC's
favor and canceled the tax assessments on account of prescription. It found
that the subject Waivers were defective and, at the same time, that ATC was
not estopped from assailing the Waivers' validity. 22
However, on appeal at the CIR's instance, the CTA En Banc reinstated
the assessments and remanded the case to the CTA Division for further
proceedings to determine ATC's tax liability. 23
Aggrieved, ATC assailed the CTA En Banc ruling before the Court.
Our Main Decision
In the decision sought to be reconsidered, the Court affirmed the CTA
En Banc. 24 The Court recounted the defects found in the Waivers, viz.:
1. The notarization of the Waivers was not in accordance with the
2004 Rules on Notarial Practice;
2. Several Waivers clearly failed to indicate the date of acceptance
by the Bureau of Internal Revenue;
3. The Waivers were not signed by the proper revenue officer; and
4. The Waivers failed to specify the type of tax and the amount of
tax due. 25
Stated differently, both parties were at fault. On the one hand, the BIR
failed to observe the procedures in the execution of a valid waiver, as
prescribed by Revenue Delegation Authority Order No. (RDAO) 05-01.
However, ATC was also remiss in its responsibility of preparing the waiver
prior to submission to and filing before the BIR. 26
Further, the Court explained that ATC benefited from the Waivers. They
are estopped from assailing its validity. Thus, the CTA En Banc was correct
in applying the equitable principles of in pari delicto, unclean hands, and
estoppel. 27
Hence, ATC filed the present motion. 28
Motion for Reconsideration
ATC grounds the present motion on the following arguments: first, the
Court focused solely on the first defect which had been attributed to it and
failed to address the issues arising from the three other defects which had
been attributed to the BIR. Second, the principles of in pari delicto, unclean
hands, and estoppel do not apply with respect to the second, third, and
fourth defects. Third, all defects were attributable to the BIR, rendering them
fatal to the waivers' validity. A waiver is a bilateral agreement between the
BIR and the taxpayer. When the tax authorities failed to indicate properly
their acceptance of the waivers executed by ATC, no valid agreement arose
between the parties. 29 cDTACE
Our Ruling
The Court denies the Motion for Reconsideration.
ATC's proposition seeks to divest the CIR of its right to assess and
collect deficiency taxes on account of alleged defects caused by the BIR that
outnumber the one caused by ATC. It makes much out of the singular defect
that had been attributable to it and how this pales in comparison when
juxtaposed against the three defects attributable to the tax authorities.
The Court rejects this reasoning. If a waiver suffers from defects on
account of both parties, the waiver's validity in relation to the timeliness of
the CIR's subsequent issuance of a tax assessment is not determined by a
mere plurality of the defects committed between the BIR and the taxpayer.
I n Commissioner of Internal Revenue v. Next Mobile, Inc. 30 (Next
Mobile), which was relied upon in the Main Decision, the taxpayer's
representative who signed the waivers had no authority to execute the same
on behalf of the corporation (i.e., no notarized written authority). 31 On the
other hand, the responsible revenue officer: (a) failed to verify the taxpayer
representative's authority to execute the waivers; (b) accepted the
documents despite not having received any proof of the taxpayer
representative's authority; and (c) signed the waivers upon submission by
the taxpayer but failed to indicate clearly the date of acceptance. 32
More recently, in Commissioner of Internal Revenue v. Transitions
Optical Philippines, Inc., 33 the circumstances were similar to those under
consideration in Next Mobile. On the one hand, the taxpayer failed to attach
a corresponding notarized written authority to each of the waivers executed.
On the other, the responsible revenue officer also failed to signify properly
the BIR's receipt and acceptance of the waivers (i.e., no dates of
receipt/acceptance). 34
Verily, both parties in those cases contributed flaws to the waivers.
However, the Court upheld the waivers as effective because, although both
parties caused separate defects, the taxpayer contested the waivers' validity
only on appeal. 35
ONTRIBUTORY FAULT CAS ESTOPPEL
&
A more circumspect appreciation of the relevant jurisprudence reveals
that the taxpayer's contributory fault or negligence coupled with estoppel 36
will render effective an otherwise flawed waiver, regardless of the physical
number of mistakes attributable to a party.
In other words, while a waiver may have been deficient in formalities,
the taxpayer's belated action on questioning its validity tilts the scales in
favor of the tax authorities.
In the present case, the Court considers the following:
First, it is no longer disputed that the subject defects were the result of
both parties failure to observe diligence in performing what is incumbent
upon them, respectively, relative to the execution of a valid waiver,
particularly the requirements outlined in applicable BIR issuances. 37 That
the defects attributable to one party had been greater in number cannot
diminish the seriousness of the counter-party's fault or negligence.
Second, ATC issued eight successive Waivers over the course of four
years (2004-2008). 38 The Waivers had always been marred by defects and,
yet, ATC continued to correspond with the tax authorities and allowed them
to proceed with their investigation, as extended by the Waivers in question.
Third, when the CIR issued the FLD, ATC did not question the Waivers'
validity. It raised this argument for the first time in its appeal to the CTA,
after obtaining an unfavorable CIR decision on their administrative protest.
That ATC acquiesced to the BIR's extended investigation and failed to
assail the Waivers' validity at the earliest opportunity gives rise to estoppel.
Moreover, ATC's belated attempt to cast doubt over the Waivers' validity
could only be interpreted as a mere afterthought to resist possible tax
liability. 39
Verily, it has been held that the doctrine of estoppel, as a bar to the
statute of limitations protecting a taxpayer from prolonged investigations, 40
must be applied sparingly. 41 cCHITA
However, the number of successive Waivers executed by ATC is telling.

Certainly, no taxpayer may be allowed to execute haphazard waivers
deliberately, go through the motions that the waivers are effective, and lead
the tax authorities to believe that the assessment period has been extended,
only to deny the validity thereof when it becomes unfavorable to him.
Otherwise, it would create a dangerous situation — "open to abuse by
unscrupulous taxpayers who intend to escape their responsibility to pay
taxes by mere expedient of hiding behind technicalities." 42
WHEREFORE, the present Motion for Reconsideration is DENIED for
lack of merit.
The Court shall not entertain further pleadings or motions in the case.
Let entry of judgment be issued.
SO ORDERED.
Perlas-Bernabe, Hernando, Gaerlan and Dimaampao, JJ., concur.
Footnotes
1. Rollo, pp. 393-407.
2. Asian Transmission Corp. v. Commissioner of Internal Revenue, G.R. No. 230861,

September 19, 2018; penned by Associate Justice Lucas P. Bersamin (now a
retired Chief Justice), with Chief Justice Teresita J. Leonardo-de Castro and
Associate Justices Mariano C. Del Castillo, Francis H. Jardeleza, and Noel G.
Tijam, concurring.
3. Id. at 9-30.

4. Id. at 32-45; penned by Associate Justice Lovell R. Bautista, with Presiding
Justice Roman G. Del Rosario (with Concurring Opinion) and Associate
Justices Juanito C. Castañeda, Jr., Erlinda P. Uy, Caesar A. Casanova,
Esperanza R. Fabon-Victorino, Cielito N. Mindaro-Grulla, Amelia R. Cotangco-
Manalastas, and Ma. Belen M. Ringpis-Liban, concurring.
5. Id. at 83-90.
6. Id. at 33-34.
7. Id. at 79.
8. Id. at 33.
9. In general, the period to assess internal revenue taxes is limited to three years
after the last day prescribed by law for the filing of the return or the date of
actual filing of the return, whichever is later. See Section 203 of Presidential
Decree No. 1158 or the National Internal Revenue Code of 1997.
10. The Waiver of the Statute of Limitation under the National Internal Revenue
Code dated May 30, 2008 extended the assessment period to December 31,
2008, rollo, p. 90.
11. Id. at 91-92.
12. Id. at 34.
13. Id. at 98-103.
14. Id. at 80-82.
15. Id. at 100.
16. Id. at 100-103.
17. See Final Decision on Disputed Assessment dated April 14, 2009, id. at 110-
111; signed by OIC-ACIR Zenaida G. Garcia.
18. See Decision dated November 15, 2011, id. at 122-130; signed by
Commissioner of Internal Revenue Kim S. Jacinto-Henares.
19. See Petition for Review dated April 13, 2012, id. at 131-156.
20. Id. at 135-137.
21. Id. at 137-148.
22. See Decision dated November 28, 2014 of the Court of Tax Appeals (CTA) in
CTA Case No. 8476, id. at 229-261; penned by Associate Justice Caesar A.
Casanova, with Associate Justices Juanito C. Castañeda, Jr., and Amelia R.
Cotangco-Manalastas, concurring.
23. See Decision dated August 9, 2016 of the CTA, id. at 32-45.
24. Asian Transmission Corp. v. Commissioner of Internal Revenue, supra note 2.
25. Id.
26. Id.
27. Id.
28. Rollo, pp. 393-407.
29. Id. at 394-306. n
30. 774 Phil. 428 (2015).
31. Id. at 441.
32. Id. at 440.
33. 821 Phil. 664 (2017).
34. Id. at 675.
35. See Commissioner of Internal Revenue v. Next Mobile, Inc., supra note 30, and
Commissioner of Internal Revenue v. Transitions Optical Philippines, Inc.,
supra note 33.
36. Asian Transmission Corp. v. Commissioner of Internal Revenue, supra note 2.
37. Rollo, pp. 41-43.
38. Id. at 33-34.
39. See AFP General Insurance Corp. v. Commissioner of Internal Revenue, G.R. No.
222133, November 4, 2020.
40. La Flor Dela Isabela, Inc. v. Commissioner of Internal Revenue, G.R. No.
202105, April 28, 2021.
41. Commissioner of Internal Revenue v. Kudos Metal Corporation, 634 Phil. 314,
328-329 (2010).
42. Commissioner of Internal Revenue v. Next Mobile, Inc., supra note 30 at 445.
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SECOND DIVISION

[G.R. No. 230861. February 14, 2022.]

ASIAN TRANSMISSION CORPORATION , petitioner, vs.

This resolves the Motion for Reconsideration 1 of the Court Decision 2

In its administrative protest, 13 ATC raised only two main objections:

Subsequently, the ATC proceeded to ﬁle a judicial protest 19 before the

However, the number of successive Waivers executed by ATC is telling.

1. Rollo, pp. 393-407.

2. Asian Transmission Corp. v. Commissioner of Internal Revenue, G.R. No. 230861,

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11. Id. at 91-92.

12. Id. at 34.

13. Id. at 98-103.

14. Id. at 80-82.

15. Id. at 100.

16. Id. at 100-103.

20. Id. at 135-137.

21. Id. at 137-148.

24. Asian Transmission Corp. v. Commissioner of Internal Revenue, supra note 2.

29. Id. at 394-306. n

30. 774 Phil. 428 (2015).

31. Id. at 441.

32. Id. at 440.

33. 821 Phil. 664 (2017).

34. Id. at 675.

37. Rollo, pp. 41-43.

38. Id. at 33-34.

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