Taxation Tax Collection Prescriptive Period Reconsideration vs Reinvestigation

In April 1991, Philippine Global Communication, Inc. (PGCI) filed its annual income tax
return (ITR) for the taxable year 1990. A tax audit was subsequently conducted by the
Bureau of Internal Revenue(BIR) and eventually a final assessment notice (FAN) was timely
issued in April 1994. The FAN demanded PGCI to pay P118 million in deficiency taxes
inclusive of surcharge and interest. PGCI was able to file a protest within the reglementary
period. PGCI however refused to produce additional evidence. In October 2002, eight years
after the FAN was issued, the Commissioner of Internal Revenue(CIR) issued a final
decision denying the protest filed by PGCI. PGCI then filed a petition for review with the
Court of Tax Appeals (CTA). The CIR filed its answer in January 2003. The CTA ruled that
the CIR can no longer collect because it is already barred by prescription. The CIR argued
that the prescriptive period has been extended because PGCI asked for a reinvestigation.
ISSUE: Whether or not the CIR is barred by prescription.
HELD: Yes. Under the law, the CIR has 3 years from the issuance of the FAN to make its
collection. The FAN was issued in April 1994 and so the CIR has until April 1997 to make a
collection. Within that period, the CIR never issued a warrant of distraint/levy. Its earliest
collection effort was only when it filed an answer to the appeal filed by PGCI. CIRs answer
was filed in January 2003 which was way beyond the three year prescriptive period to
collect the assessed taxes.
The CIR cannot invoke that the protest filed by PGCI is in effect a request for
reinvestigation. Under the law, a request for reinvestigation shall toll the running of the
prescriptive period to collect. However in the case at bar, the protest filed by PGCI is not a
request for reinvestigation but rather it was a request for reconsideration. And in such case,
it did not suspend the prescriptive period. The protest is a request for reconsideration
because PGCI did not adduce additional evidence or documents. PGCI merely sought the
CIR to review the existing records on file.