D.

ANTI-INJUNCTION RULE

SEC. 218. Injunction not Available to Restrain Collection of Tax. - 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.
1. GENERAL RULE

Commissioner of Internal Revenue vs. Cebu Portland Cement Co.

G.R. No. L-29059, 15 December 1987

Facts: CTA decision ordered the petitioner CIR to refund to the Cebu Portland Cement Company, respondent, P 359,408.98 representing overpayments of ad valorem taxes on cement sold by it. Execution of judgement was opposed by the petitioner citing that private respondent had an outstanding sales tax liability to which the judgment debt had already been credited. In fact, there was still a P4 M plus balance they owed. The Court of Tax Appeals, in holding that the alleged sales tax liability of the private respondent was still being questioned and therefore could not be set-off against the refund, granted private respondent's motion. The private respondent questioned the assessed tax based on Article 186 of the Tax Code, contending that cement was adjudged a mineral and not a manufactured product; and thusly they were not liable for their alleged tax deficiency. Thereby, petitioner filed this petition for review. Issue: Whether or not assessment of taxes can be enforced even if there is a case contesting it.

Held: The argument that the assessment cannot as yet be enforced because it is still being contested loses sight of the urgency of the need to collect taxes as "the lifeblood of the government." If the payment of taxes could be postponed by simply questioning their validity, the machinery of the state would grind to a halt and all government functions would be paralyzed. That is the reason why, save for the exception in RA 1125 , the Tax Code provides that injunction is not available to restrain collection of tax. Thereby, we hold that the respondent Court of Tax Appeals erred in its order.
CHURCHILL v RAFFERTY
1915) Trent J

FACTS:

Plaintiffs put up a billboard on private land in Rizal Province "quite a distance from the road and strongly built". Some residents (German and British Consuls) find it offensive. Act # 2339 allows the defendent, the Collector of Internal Revenue, to collect taxes from such property and to remove it when it is offensive to sight. Court of first Instance prohibited the defendant to collect or remove the billboard.

ISSUE:

1.May the courts restrain by injunction the collection of taxes?

2.Is Act # 2339 unconstitutional because it deprives property without due process of law in allowing CIR to remove it if it is offensive?

RULE:

1.an injunction is an extraordinary remedy and not to be used if there is an adequate remedy provided by law; here there is an adequate remedy, therefore court may not do so.

2.unsightly advertisements which are offensive to the sight are not dissociated from the general welfare of the public, therefore can be regulated by police power, and act is constitutional.

RATIONALE:

1.Writ of injunction by the courts is an extraordinary preventive remedy. Ordinary (adequate) remedies are in the law itself. Sections 139 and 140 of the Act forbids the use of injunction and provides a remedy for any wrong. _Plaintiffs say that those sections are unconstitutional because by depriving taxpayers remedy, it also deprives them of property without due process of law and it diminishes the power of the courts_. Taxes, whether legal or illegal, cannot be restrained by the courts by injunction. There must be a further showing that there are special circumstances such as irreparable injury, multiplicity of suits or a cloud upon title to real estate will result. Practically, if the courts can do so then there will be an insane number of suits enjoining the collection of taxes by tax avoiders. The state will not function since taxes are not paid (and judges will become unpaid!). There is, of course, no law nor jurisprudence that says it is not allowed to sue after having paid the tax, and such is the usual course in bringing suits against illegal(?) taxes. Pay it under protest. As to the diminishment of power of the courts, the Philippine courts never had the power to restrain the collection of taxes by injunction. It is said par 2 sec 56 Act 136 confers original jurisdiction upon CFI to hear and determine all civil actions but civil actions at that time had a well-defined meaning. The legislature had already defined the only action previously and that is the payment of the tax under protest then suit. Civil actions like injunction suits are of a special extraordinary character. Section 139 also does not diminish power of the courts because the power is still there if there is no adequate remedy available but sec 140 gives an adequate remedy.

2.sec 100 of act 2339 gives power to the CIR to remove offensive billboards, signs, signboards after due invstigation. The question becomes is that a reasonable exercise of police power affecting the advertising industry? Police power is reasonable insofar as it properly considers public health, safety, comfort, etc. If nothing can justify a statute, it's void. State may interfere in public interest but not final. Court is final. Police power has been expanding. blahblahblah (consti1). The basic idea of civil polity in US is gov't should interfere with individual effort only to the extent necessary to preserve a healthy social and economic condition of society. State interferes with private property through, taxation, eminent domain and police power. Only under the last are the benefits derived from the maintenance of a healthy economic standard of society and aka damnum absque injuria. Once police power was reserved for common nuisances. Now industry is organized along lines which make it possible for large combinations of capital to profit at the expense of socio-economic progress of the nation by controlling prices and dictating to industrial workers wages and conditions of labor. It has increased the toll on life and affects public health, safety and morals, also general social and economic life of the nation, as such state must necessarily regulate industries. Various industries have regulated and even offensive noises and smells coming from those industries. Those noises and smells though ostensibly regulated for health reason are actually regulated for more aesthetic reasons. What is more aesthetic than sight which the ad industry is wooing us with. Ads cover landscapes etc. The success of billboards lie not upon the use of private property but on channels of travel used by the general public. Billboard that cannot be seen by people are useless. Billboards are legitimate, they are not garbage but can be offensive in certain circumstances. Other courts in US hold the view that police power cannot interfere with private property rights for purely aesthetic purposes. But this court is of the opinion that unsightly advertisements which are offensive to the sight are not dissociated from the general welfare of the public.

Collector v Reyes NO DIGEST

Collector v Avelino Ratio:

hile the law is that No court shall have authority to grant an injunction to restrain the collection of any national internal revenue tax, fee, or charge imposed by this code (Section 305 of the National Internal Revenue Code), and it is a ruling laid down in this jurisdiction that the authority to issue injunction is limited, as in other cases where equitable relief is sought, to those cases where there is no plain, adequate, and complete remedy at law , which will not be granted while the rights between the parties are undetermined, except in extraordinary cases where material and irreparable injury will be done, which cannot be compensated in damages (Churchill and Tait vs. Rafferty, 32 Phil., 580, 591, Sarasola vs. Trinidad, 40 Phil., 252), however, these authorities are not here controlling, for we are not here concerned with an injunction to restrain the collection of tax but with one to restrain the exercise of the right to collect it by distraint and levy. What is prohibited is the injunction against judicial collection which is not the case here, for what the court merely enjoined is the enforcement by distraint and levy which was found to be in violation of the law. In any event, even if it refers to a collection of by court action, we find the action of the court justified under section 11 of Republic Act No. 1125, which provides:
cralaw chanroblesvirtuallawlibrary

No appeal taken to the Court of Tax Appeals from the decision of the Collector of Internal Revenue or the Collector of Customs shall suspend the payment, levy, distraint, and/or sale of any property of the taxpayer for the satisfaction of his tax liability as provided by existing law: Provided, however, That when in the opinion of the Court the collection by the Bureau of Internal Revenue or the Commissioner of Customs may
chanroblesvirtuallawlibrary

jeopardize the interest of the Government and/or the taxpayer the Court at any stage of the proceeding may suspend the said collection and require the taxpayer either to deposit the amount claimed or to file a surety bond for not more than double the amount with the Court. It therefore appears from the above that when in the opinion of the court the collection of the tax by the Collector of Internal Revenue may jeopardize the interest of the taxpayer it may, at any stage of the proceeding, suspend the collection and require the taxpayer either to deposit the amount claimed or file a surety bond for not more than double the amount with the court. This section must be deemed to have modified section 305 of the National Internal Revenue Code in view of the repealing clause contained in said Act to the effect that Any law or part of law, or any executive order, rule or regulations or part thereof, inconsistent with the provisions of this Act is hereby repealed (section 21). It is true that the court did not require the taxpayer to deposit the amount claimed or to file a bond as required by law before granting the relief, but such action is justified considering that the court found the action of the Collector to be contrary to law. To require a bond under such a situation would indeed be illogical and improper. The following observations made by the Court of Tax Appeals are correct:
chanroblesvirtuallawlibrary

The facts and the questions of law involved in this incident are no different from those involved in the petition for injunction in the case of A. P. Reyes (C. T. A., Case No. 42). In both cases, the Collector of Internal Revenue employed summary methods of collection beyond the three year period of limitation fixed in the aforesaid section of the National Internal Revenue Code. It will be noted in our resolution granting the injunction

prayed for in the A. P. Reyes case that no bond was required of the Petitioner to guarantee the payment of the deficiency income tax demanded by the Respondent. We refrained from requiring of the Petitioner A. P. Reyes the filing of any bond as a condition precedent to the granting of the preliminary injunction on good grounds. Having held in said case as we are holding in the case at bar that the Collector of Internal Revenue cannot, after three years from the time the taxpayer has filed his income tax returns or from the time when he should have filed the same, make any summary collection of the deficiency income taxes demanded thru administrative methods and that the warrant of distraint and levy as well as the contemplated sale at public auction of the properties of the taxpayer are null and void being as they are in violation of section 51 (d) of the National Internal Revenue Code, it would seem illogical and inconsistent on our part on the other hand to require the filing of a bond as a condition precedent to the enjoining of such act or acts by the Collector of Internal Revenue which he have held to be illegal. Moreover, supposing that under those circumstances in the Reyes case as well as in the present one, the taxpayer for one reason or another fails or refuses to file the bond fixed by this Court? Are we to allow then the Collector of Internal Revenue after such failure on the part of the taxpayer to file the required bond, to go on with the summary collection of the assessment thru administrative methods which methods we have held to be in violation of the provisions of the National Internal Revenue Code? We believe and so hold that under section 11 of Republic Act No. 1125, we may in the sound use of our discretion suspend by injunction the collection of taxes by the Collector of Internal Revenue and at the same time not require the tax-payer to file a bond if the method employed by the Collector of Internal Revenue in the collection of the tax is not sanctioned by

law.
2. EXCEPTION Sec 11 RA 9282

"SEC. 11. Who May Appeal; Mode of Appeal; Effect of Appeal. - Any party adversely affected by a decision, ruling or inaction of the Commissioner of Internal Revenue, the Commissioner of Customs, the Secretary of Finance, the Secretary of Trade and Industry or the Secretary of Agriculture or the Central Board of Assessment Appeals or the Regional Trial Courts may file an appeal with the CTA within thirty (30) days after the receipt of such decision or ruling or after the expiration of the period fixed by law for action as referred to in Section 7(a)(2) herein. "Appeal shall be made by filing a petition for review under a procedure analogous to that provided for under Rule 42 of the 1997 Rules of Civil Procedure with the CTA within thirty (30) days from the receipt of the decision or ruling or in the case of inaction as herein provided, from the expiration of the period fixed by law to act thereon. A Division of the CTA shall hear the appeal: Provided, however, That with respect to decisions or rulings of the Central Board of Assessment Appeals and the Regional Trial Court in the exercise of its appellate jurisdiction appeal shall be made by filing a petition for review under a procedure analogous to that provided for under rule 43 of the 1997 Rules of Civil Procedure with the CTA, which shall hear the case en banc. "All other cases involving rulings, orders or decisions filed with the CTA as provided for in Section 7 shall be raffled to its Divisions. A party adversely affected by a ruling, order or decision of a Division of the CTA may file a motion for reconsideration of new trial before the same Division of the CTA within fifteens (15) days from notice thereof: Provide, however, That in criminal cases, the general rule applicable in regular Courts on matters of prosecution and appeal shall likewise apply. "No appeal taken to the CTA from the decision of the Commissioner

of Internal Revenue or the Commissioner of Customs or the Regional Trial Court, provincial, city or municipal treasurer or the Secretary of Finance, the Secretary of Trade and Industry and Secretary of Agriculture, as the case may be shall suspend the payment, levy, distraint, and/or sale of any property of the taxpayer for the satisfaction of his tax liability as provided by existing law: Provided, however, That when in the opinion of the Court the collection by the aforementioned government agencies may jeopardize the interest of the Government and/or the taxpayer the Court any stage of the proceeding may suspend the said collection and require the taxpayer either to deposit the amount claimed or to file a surety bond for not more than double the amount with the Court. "In criminal and collection cases covered respectively by Section 7(b) and (c) of this Act, the Government may directly file the said cases with the CTA covering amounts within its exclusive and original jurisdiction.

Revised Rules of CTA RULE 10SUSPENSION OF COLLECTION OF TAX SECTION 1. No suspension of collection of tax, except as herein prescribed. No appeal taken to the Court shall suspend the payment, levy, distraint, or sale of any property of the taxpayer for the satisfaction of his tax liability as provided under existing laws, except as hereinafter prescribed. (n) SEC. 2. Who may file. Where the collection of the amount of the taxpayers liability, sought by means of a demand for payment, by levy, distraint or sale of any property of the taxpayer, or by whatever means, as provided under existing laws, may jeopardized the interest of the Government or the taxpayer, an interested party may file a motion for the suspension of the collection of the tax liability. (RCTA, Rule 12, sec. 1a) SEC. 3. When to file. The motion for the suspension of the collection of the tax may be filed together with the petition for review

or with the answer, or in a separate motion filed by the interested party at any stage of the proceedings. (RCTA, Rule 12, sec. 2) SEC. 4. Contents and attachments of the motion. The motion for the suspension of the collection of the tax shall be verified and shall state clearly and distinctly the facts and the grounds relied upon in support of the motion. Affidavits and other documentary evidence in support thereof shall be attached thereto, which, if uncontroverted, would be admissible in evidence as proof of the facts alleged in the motion. (RCTA, Rule 12, sec. 3a) SEC. 5. Opposition. Unless a shorter period is fixed by the Court because of the urgency of the motion, the adverse party shall, within five days after receipt of a copy of the motion, file an opposition thereto, if any, which shall state clearly and distinctly the facts and the grounds relied upon in support of the opposition. (RCTA, Rule 12, sec. 4) SEC. 6. Hearing of the motion. The movant shall, upon receipt of the opposition, set the motion for hearing at the next available motion day, and the Court shall give preference to the motion over all other cases, except criminal cases. At the hearing, both parties shall submit their respective evidence. If warranted, the Court may grant the motion if the movant shall deposit with the Court an amount in cash equal to the value of the property or goods under dispute or filing with the Court of an acceptable surety bond in an amount not more than double the disputed amount or value. However, for the sake of expediency, the Court, motu proprio or upon motion of the parties, may consolidate the hearing of the motion for the suspension of the collection of the tax with the hearing on the merits of the case. (RCTA, Rule 12, sec. 5a) SEC. 7. Corporate surety bonds. In the selection and qualification of surety companies, the parties and the Court shall be guided by Supreme Court Circular A.M. No. 04-7-02-SC, dated July 20, 2004

E. NATURE AND EXTENT OF TAX LIEN

SEC. 219. Nature and Extent of Tax Lien. - If any person, corporation, partnership, joint-account (cuentas en participacion), association or insurance company liable to pay an internal revenue tax, neglects or refuses to pay the same after demand, the amount shall be a lien in favor of the Government of the Philippines from the time when the assessment was made by the Commissioner until paid, with interests, penalties, and costs that may accrue in addition thereto upon all property and rights to property belonging to the taxpayer: Provided, That this lien shall not be valid against any mortgagee purchaser or judgment creditor until notice of such lien shall be filed by the Commissioner in the office of the Register of Deeds of the province or city where the property of the taxpayer is situated or located. F. COMPROMISE AND ABATEMENT

SEC.

204. Authority of the Commissioner to Compromise, Abate and Refund or Credit Taxes. - The Commissioner may (A) Compromise the Payment of any Internal R Revenue Tax, when: (1) A reasonable doubt as to the validity of the claim against the taxpayer exists; or t (2) The financial position of the taxpayer demonstrates a clear inability to pay the assessed tax. The compromise settlement of any tax liability shall be subject to the following m minimum amounts: For cases of financial incapacity, a minimum compromise rate equivalent to ten percent (10%) of the basic assessed tax; and For other cases, a minimum compromise rate equivalent to forty percent (40%) of the basic assessed tax. Where the basic tax involved exceeds One million

pesos (P1,000.000) or where the settlement offered is less than the prescribed minimum rates, the compromise shall be subject to the approval of the Evaluation Board which shall be composed of the Commissioner and the four (4) Deputy Commissioners. (B) Abate or Cancel a Tax Liability, when: (1) The tax or any portion thereof appears to t 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. RR-30-2002 (Not accessible) -

Implements certain provisions of the Tax Code relative to the compromise settlement of internal revenue tax liabilitiess superseding RR Nos. 6-2000 and 7-2001

Security Bank v CIR:

elative to the second issue, SBC claims that based on the terms and conditions of the compromise agreement between it and then BIR Commissioner Tan, the whole DST assessment for 1983, including that on sales of securities, is deemed included thereunder. SBC further claims that the contemporaneous and subsequent acts of revenue officials in accepting its offer of payment, using the entire 1983 DST deficiency

assessment, clearly including the sales of securities with repurchase agreement for the year 1983 in the amount of P3,022,803,857.63 as the tax base, were indicative of the fact that the DST due on said sales of securities for the year 1983 has been duly settled pursuant to the said compromise agreement of August 15, 1988. Again, we disagree. There is nothing clearer from the plain reading of the first paragraph of the subject compromise agreement than the fact that the only subject matter thereof is the assessment relating to Non-negotiable Promissory Notes issued prior to October 15, 1984.[18] To emphasize the limited scope thereof, the same compromise agreement expressly reiterated, in its Section VI, the exclusions thereto as follows:
VI. EXCLUSIONS: Other issues raised in the tax assessments or which may be raised for open and assessed/pre-assessed years respectively, not involving documentary stamp tax on all types of promissory notes issued prior to Oct. 15, 1984 are not included in, nor

affected by this (Emphasis supplied).

compromise,[19]

The issue of DST assessment on sales of securities with repurchase agreement, which was the subject of the reassessment being questioned in this case, is definitely not within the scope of the compromise agreement, being limited as it is to DST on promissory notes issued prior to October 15, 1984. The DST assessed on the former arises from the act of selling securities (presently taxed under Section 176), while the DST assessed in the latter is on the act of issuing promissory notes (taxed under Section 180). It is evident from the separate provisions governing the two that the law treats these two instruments differently. This Court simply cannot agree with SBC that securities and promissory notes for purposes of the subject Compromise Agreement are one and the same thing. Besides, even assuming, in gratia argumenti, that promissory notes may be included under the generic term securities, securities cannot be included under the specific term promissory notes so as to be deemed within the scope of the same compromise agreement. To be sure, the term promissory note has a definite meaning under the negotiable instruments law, which does not include securities, and this definite meaning is what is deemed incorporated in the compromise agreement entered into by and between SBC and the BIR, unless a different definition is therein

expressly agreed upon, which is not the case.

Philippine National Oil Company vs Court of Appeals G.R. 109976 April 26, 2005

-TirsoSavellano informed the BIR that PNB had failed to withhold the 15% final tax on interest earnings and yields from the money placements of PNOC, which was violative of P.D. 1931 (which withdrew all tax exemptions of GOCCs)

-Acting on such information, the BIR requested PNOC to settle the aforementioned tax liability; PNOC offered to compromise the same by proposing that it be set-off against a claim by NAPOCOR for tax refund/credit (the amount of the tax refund was supposedly a receivable account of PNOC from NAPOCOR)

-The proposalwas found premature by the BIR as NAPOCORs claim was still under process, so PNOC amended its offer and offered to pay an amount representing 30% of the basic tax in accordance with E.O. 44;The same was accepted by BIR Commissioner Bienvenido Tan

-Meanwhile,Savellano was paid the informers reward (15% of the tax collected from PNOC and PNB); A month after receiving his last installment for the reward, Savellano wrote the BIR to demand payment of the balance of his reward, to which the BIR (through Comm. Tan) replied that Savellano was no longer owed by them as he had already received an amount equal to 15% of the compromise agreement proposed by PNOC; Savellano sought a reconsideration of the decision, questioning the legality of the compromise agreement between the BIR and PNOC

-While his Motion for Reconsideration was yet pending with the BIR, Savellano filed a Petition for Review with the CTA claiming Comm. Tan acted with grave abuse of discretion in entering into a compromise agreement with PNOC which immensely lessened his informers reward

-Ultimately, new BIR Commissioner Jose Ong, found meritorious Savellanos Motion for Reconsideration and ordered the PNB to pay the deficiency withholding tax on the interest earnings from PNOCs money placements

-The CTA later on likewise found the compromise agreement entered into between the BIR and PNOC as without any force and effect; They likewise ordered that upon payment by PNOC, Savellano was entitled to the balance of his informers reward

-The CA concurred with the CTA decision and affirmed the same, hence the case at bar

Issue/s:

1. Was the CTA declaration finding the compromise agreement between the BIR and PNOC valid? 2. Was the CTA finding that the deficiency withholding tax assessment against PNB was already final and unappealable and unenforceable valid? 3. Was the CTA order directing payment of additional informers reward for Savellano valid? Held: 1. Compromise agreement between PNOC and BIR is void for being contrary to law and public policy 2. The withholding tax assessment vs. PNB had become final and unappealable 3. Savellano is entitled to be paid the remainder of his informers reward

Ratio:

1. PNOC could not apply for a compromise under E.O. 44 because its tax liability was not a delinquent account or a disputed assessment. PNOCs tax liability could not be considered a delinquent account because it was not self-assessed as the BIR conducted an investigation after receiving information from Savellano. Nor is there a deficiency assessment present. Neither PNOC or PNB conducted self-assessment, and neither was there any tax assessment issued by the BIR vs them. PNOC and PNB were both silent about their tax liabilities until they were assessed thereon. (Try to make it more specific or particular by infusing your own understanding of E.O. 44. This is alien to me so I wont elaborate too much, foundation nalangito to make your work easier. Anghaba din ng Ratio, grabe. I think this might be the only or at least the main issue/premise where tax is heavily involved.) 2. The CTA and the CA declared as final and unappealable (and thus unenforceable) the assessment vs PNB since PNB failed to protest it within the 30-day prescribed period.

3. Savellano is entitled to additional informers award since the BIR had already collected the full amount of the tax assessment against PNB. (Sec. 316(1) of the 1977 NIRC) G. LIABILITY OF CORPORATE OFFICES AND STOCKHOLDERS Proton Pilipinas v Republic
PROTON PILIPINAS vs. REPUBLIC 504 S 528 (October 16, 2006)

FACTS: Proton sold 13 vehicles to Devmark Textile which were paid in tax credit certificates and also acquired other tax credit certificates of Devmark with a total of P 30 M. Proton used the tax credit certificates for payment of customs, duties and taxes to the Bureau of Customs. Later on, it was discovered that the tax credit certificates were found to be fake and spurious. The finance officials and officers of Devmark were sued for Anti-Graft before the Sandiganbayan.

Since the tax credit certificates were found to be fake and spurious, the Bureau filed a collection case against Proton before the RTC and pursued a criminal case for estafa against Devmark. In the collection case, Proton refused payment since the tax collection should be with the Sandiganbayan, being a civil aspect of the criminal case, and not with the RTC and that the collection case in the RTC is a prejudicial question.

HELD: The SC ruled that the tax collection case is separate and distinct from the Sandiganbayan case and is not a prejudicial question. It could proceed independently of each other. The government is not precluded from pursuing the collection of unpaid customs duties and taxes.

V. IMPOSITION OF SURCHARGE, INTEREST, and COMPROMISE PENALTY

SEC. 248. - Civil Penalties. (A) There shall be imposed, in addition to the tax required to be paid, a penalty equivalent to twenty-five percent (25%) of the amount due, in the following cases: f (1) Failure to file any return and pay the tax due thereon as required under the provisions of this Code or rules and regulations on the date prescribed; or (2) Unless otherwise authorized by the Commissioner, filing a return with an internal revenue officer other than those with whom the return is required to be filed; or (3) Failure to pay the deficiency tax within the time prescribed for its payment in the notice of assessment; or (4) Failure to pay the full or part of the amount of tax shown on any return required to be filed under the provisions of this Code or rules and regulations, or the full amount of tax due for which no return is required to be filed, on or before the date prescribed for its payment. (B) In case of willful neglect to file the return within the period prescribed by this Code or by rules and regulations, or in case a false or fraudulent return is willfully made, the penalty to be imposed shall be fifty percent (50%) of the tax or of the deficiency tax, in case, any payment has been made on the basis of such return before the discovery of the falsity or fraud: Provided, That a substantial underdeclaration of taxable sales, receipts or income, or a substantial overstatement of deductions, as

determined by the Commissioner pursuant to the rules and regulations to be promulgated by the Secretary of Finance, shall constitute prima facie evidence of a false or fraudulent return: Provided, further, That failure to report sales, receipts or income in an amount exceeding thirty percent (30%) of that declared per return, and a claim of deductions in an amount exceeding (30%) of actual deductions, shall render the taxpayer liable for substantial underdeclaration of sales, receipts or income or for overstatement of deductions, as mentioned herein.

SEC. 250. Failure to File Certain Information Returns. - In the case of each failure to file an information return, statement or list, or keep any record, or supply any information required by this Code or by the Commissioner on the date prescribed therefor, unless it is shown that such failure is due to reasonable cause and not to willful neglect, there shall, upon notice and demand by the Commisssioner, be paid by the person failing to file, keep or supply the same, One thousand pesos (1,000) for each failure: Provided, however, That the aggregate amount to be imposed for all such failures during a calendar year shall not exceed Twenty-five thousand pesos (P25,000). SEC. 251. Failure of a Withholding Agent to Collect and Remit Tax. Any person required to withhold, account for, and remit any tax imposed by this Code or who willfully fails to withhold such tax, or account for and remit such tax, or aids or abets in any manner to evade any such tax or the payment thereof, shall, in addition to other penalties provided for under this Chapter, be liable upon conviction to a penalty equal to the total amount of the tax not withheld, or not accounted for and remitted. SEC. 252. Failure of a Withholding Agent to refund Excess Withholding Tax. - Any employer/withholding agent who fails or refuses to refund excess withholding tax shall, in addition to the penalties provided in this Title, be liable to a penalty to the total amount of refunds which was not refunded to the employee resulting from any excess of the amount withheld over the tax actually due on their return. RR-12-99

SECTION 4. Civil Penalties.

4.1 Twenty-Five Percent (25%) Surcharge. There shall be imposed, in addition to the basic tax required to be paid, a penalty equivalent to twenty-five percent (25%) thereof, in any the following cases: 4.1.1 Failure to file any return and pay the tax due thereon as required under the provisions of this Code or rules and regulations on the date prescribed; or 4.1.2 Unless otherwise authorized by the Commissioner, filing a return with an internal revenue officer other than those with whom the return is required to be filed; or 4.1.3 Failure to pay the deficiency tax within the time prescribed for its payment in the notice of assessment; or 4.1.4 Failure to pay the full or part of the amount of tax shown on any return required to be filed under the provisions of this Code or rules and regulations, or the full amount of tax due for which no return is required to be filed, on or before the date prescribed for its payment. cdasia 4.2 Fifty Percent (50%) Surcharge:

4.2.1 In case of willful neglect to file the return within the period prescribed by the Code, or in case a false or fraudulent return is willfully made, the penalty to be imposed shall be fifty percent (50%) of the tax or of the deficiency tax, in case any payment has been made on the basis of such return before the discovery of the falsity or fraud: Provided, That a substantial underdeclaration of taxable sales, receipts or income, or a substantial overstatement of deductions, as determined by the Commissioner or his duly authorized representative, shall constitute prima facie evidence of a false or fraudulent return: Provided, further, That failure to report sales, receipts or income in an amount exceeding thirty percent (30%) of that declared per return, and a claim of deductions in an amount exceeding thirty percent (30%) of actual deductions, shall render the taxpayer liable for substantial underdeclaration of sales, receipts or income or for overstatement of deductions, as mentioned herein: Provided, further, that the term "willful neglect to file the return within the period prescribed by the Code" shall not apply in case the taxpayer, without notice from the Commissioner or his authorized representative, voluntarily files the said return, in which case, only 25% surcharge shall be imposed for late filing and late payment of the tax in lieu of the above 50% surcharge. Conversely, the 50% surcharge shall be imposed in case the taxpayer files the return only after prior notice in writing from the Commissioner or his duly authorized representative. 4.2.2 Section 6 (A) of the Code provides that any tax return filed by a

taxpayer "may be modified, changed or amended" by the taxpayer "within three (3) years from date of such filing" provided, however, that "no notice for audit or investigation of such return, statement or declaration has, in the meantime, been actually served upon the taxpayer." Thus, if upon investigation, it is determined that the taxpayer's originally filed tax return is false or fraudulent, such taxpayer shall remain liable to the 50% civil penalty regardless that the taxpayer has filed his amended tax return, if the said amended tax return, however, has been filed only after issuance of the Letter of Authority for the investigation of the taxpayer's tax return or such amendment has been made in the course of the said investigation. cda SECTION 5. Mode of Procedures in Computing for the Tax and/or Applicable Surcharge. Shown hereunder are illustrative cases for the computation and assessment of the tax, inclusive of surcharge (if applicable) and interest: 5.1 Late filing and late payment of the tax. Illustration: Income tax return for the calendar year 1998 was due for filing on April 15, 1999 but the taxpayer voluntarily filed his tax return, without notice from the BIR, only on June 30, 1999. The tax due per return amounts to P100,000. In this case, the taxpayer shall be liable for delinquency penalties consisting of 25% surcharge, plus 20% interest per annum, computed from due date of the tax until date of payment, computed as follows: Calendar Year 1998 Income tax due per return P100,000.00

Add: 25% surcharge for late filing and late payment (P100,000.00 times 25%) P25,000.00 20% int. p.a. from 4-15-99 to 6-30-99 (P100,000.00 times .0415524) P4,155.24 P29,155.24

Total amount due (excluding suggested compromise for late filing and late payment of the tax) ========= Only one 25% surcharge shall be imposed for late filing of the return and late payment of the tax. P129,155.24

5.2 The tax return is filed on time but filed through an internal revenue officer other than with whom the return is required to be filed. Illustration: The taxpayer's 1998 income tax return is required to be filed through the authorized agent bank under the jurisdiction of RDO East Makati. But, without prior authorization from the BIR, the taxpayer filed his tax return and paid the tax through the authorized agent bank under the jurisdiction of RDO Davao City. Tax due and paid per return is P100,000.00.

Calendar Year 1998 Income tax due per return Add: 25% surcharge Total amount due P125,000.00 Less: Amount paid Amount still due P25,000.00 ========= 5.3 Late filing and late payment due to taxpayer's willful neglect. Illustration: The taxpayer did not file his income tax return for the calendar year 1997 which was due for filing on April 15, 1998. He was notified by the BIR of his failure to file the tax return, for which reason, he filed his tax return and paid the tax, only after the said notice, on June 30, 1999. The tax due per return is P100,000.00. Calendar Year 1997 Income tax due per return P100,000.00 P100,000.00 P100,000.00

P25,000.00

Add: 50% surcharge for willful neglect to file the return and late payment of the tax (P100,000 times 50%) P50,000.00 20% int. p.a. fr. 4-15-98 to 6-30-99 (P100,000.00 times .2415524) P24,155.24 P74,155.24

Total amount due (excluding suggested compromise for late filing and late payment of the tax) ========= 5.4 Penalty or penalties for deficiency tax. As a rule, no surcharge is imposed on deficiency tax and on the basic tax. However, if the amount due inclusive of penalties is not paid on or before the due date stated on the demand letter, the corresponding surcharge shall be imposed. Illustration No. 1: Taxpayer filed on time his income tax return for calendar year 1997 and paid P100,000.00 on April 15, 1998. Upon preaudit of his return, it was disclosed that he erroneously computed the tax due. The correct amount of tax due is P120,000.00. The taxpayer is assessed for deficiency income tax in a letter of demand and assessment notice issued on June 30, 1999. LLpr Calendar Year 1997 Tax due per pre-audit P120,000.00 P174,155.24

Less: Amount assessed and paid per tax return filed P100,000.00 Deficiency income tax P20,000.00 Add: 20% int. p.a. from 4-15-98 to 6-30-99 (P20,000.00 times .2415524) P4,831.05 Amount still due P24,831.05 ========= Illustration No. 2: ABC CORPORATION filed its income tax return for calendar year 1997 and paid on time its income tax shown thereunder, amounting to P100,000. Said taxpayer was investigated. Upon verification of its accounting records, it was disclosed that its deduction, from gross income, of representation expenses in the amount of P200,000.00 did not meet all the statutory requisites for deductibility. The corporation was duly notified of the said discrepancy through a Preliminary Assessment Notice. Based on the 35% income tax rate on corporations applicable in the year 1997, the income tax due after investigation amounts to P170,000.00. After deduction of income tax paid per return filed, the basic deficiency income tax

amounts to P70,000, excluding penalties. Failing to protest on time against the preliminary assessment notice, a formal letter of demand and assessment notice was issued on May 31, 1999, requiring payment of the assessment not later than June 30, 1999. Calendar Year 1997 Income tax due per investigation Less: Income tax paid per return Deficiency income tax P70,000.00 Add: 20% int. p.a. fr. 4-15-98 to 6-30-99 (P70,000 times .2415524) P16,908.67 Total amount still due ========= Illustration No. 3: XYZ CORPORATION filed its income tax return for calendar year 1997 with a net taxable income of P500,000.00. At the applicable income tax rate of 35% for the year 1997, its income tax amounted to P175,000.00. However, upon investigation, it was disclosed that its income tax return was false or fraudulent because it did not report a taxable income amounting to another P500,000.00. On its net income of P1,000,000.00, per investigation, the income tax due is P350,000.00. Deducting its payment per return filed, the deficiency, excluding penalties, amounted to P175,000.00. It was duly informed of this finding through a Preliminary Assessment Notice. Failing to protest on time against the preliminary assessment notice, a formal letter of demand and assessment notice was issued on May 31, 1999 calling for payment of the deficiency income tax on or before June 30, 1999. llcd In this case, said corporation is liable for the civil penalties of 50% surcharge for having filed a false or fraudulent return, plus 20% interest per annum on the deficiency, computed as follows: Calendar Year 1997 Income tax due per investigation Less: Income tax paid per return P350,000.00 P175,000.00 P86,908.67 P170,000.00 P100,000.00

Deficiency income tax P175,000.00 Add: 50% surcharge for filing a fraudulent or false return (P175,000.00 times 50%) 20% int. p.a. fr. 4-15-98 to 6-30-99 (P175,000.00 times .2415524) P42,271.67 P129,771.67 P87,500.00

Total amount due P304,771.67 ========= 5.5 Late payment of a deficiency tax assessed. In general, the deficiency tax assessed shall be paid by the taxpayer within the time prescribed in the notice and demand, otherwise, such taxpayer shall be liable for the civil penalties incident to late payment. Illustration: Based on the above Illustration No. 3, Scenario 4, assuming that the calendar year 1997 deficiency income tax assessment against XYZ CORPORATION, in the amount of P304,771.67, is not paid by June 30, 1999, the deadline for payment of the assessment, and assuming further that this assessment has already become final and collectible. In this case, such corporation shall be considered late in payment of the said assessment. Assuming, further, that the corporation pays its tax assessment only by July 31, 1999, the civil penalties for late payment shall be computed as follows: Calendar Year 1997 Total deficiency income tax assessed on May 31, 1999 P304,771.67 Add: 25% surcharge for late payment (P304,771.67 times 25%) P76,192.92

20% interest p.a. from 7-1-99 to 7-31-99 (P304,771.67 times .0166667) P5,079.54 P81,272.46

Total amount due (excluding suggested compromise penalty for late payment) P386,044.13

========= 5.6 Computation of 20% interest per annum in case of partial or installment payment of a tax liability. Illustration No. 1: In case extended payment of the tax is duly authorized. DEF CORPORATION, due to financial incapacity, requested that it be allowed to pay its income tax liability per return for calendar year 1998, in the amount of P1,000,000.00, in four (4) monthly installments, starting April 15, 1999. Its request has been duly approved pursuant to Sec. 53 of the Tax Code. In this case, no 25% surcharge shall be imposed for late payment of the tax since its deadline for payment has been duly extended. However, 20% interest per annum for the extended payment shall be imposed, computed based on the diminishing balance of the "unpaid amount", pursuant to the provisions of Section 249 (D) of the Code. No 25% surcharge on extended payment shall be imposed provided, however, that the taxpayer's request for extension of the period within which to pay is made on or before the deadline prescribed for payment of the tax due. Conversely, if such request is made after the deadline prescribed for payment, the taxpayer shall already be treated late in payment, in which case, the 25% surcharge shall be imposed, even if payment of the delinquency be allowed in partial amortization. cdasia Example: Calendar Year 1998 Income tax due per return P1,000,000.00

Less: 1st installment of the tax on or before 4-15-99 P250,000.00 Balance as of 4-15-99 P750,000.00

Add: 20% int. p.a. from 4-15-99 to 5-15-99 (P750,000.00 times .0166667) Amount due on 5-15-99P762,500.03 Less: 2nd installment on 5-15-99 (P250,000.00 plus P12,500.03 interest) P262,500.03 P12,500.03

Balance as of 5-15-99

P500,000.00

Add: 20% int. p.a. from 5-15-99 to 6-15-99 (P500,000.00 times .0166667) Amount due on 6-15-99P508,333.35 Less: 3rd installment on 6-15-99 (P250,000.00 plus P8,333.35 interest) Balance as of 6-15-99 P250,000.00 P258,333.35 P8,333.35

Add: 20% int. p.a. from 6-15-99 to 7-15-99 (P250,000.00 times .0166667) 4th and final installment on 7-15-99 =========== Illustration No. 2: Computation of tax delinquency in case of partial payment of the tax due without prior BIR authorization for extended payment. Example: GHI CORPORATION did not file its final adjustment income tax return for the calendar year 1998 which was due on April 15, 1999. The BIR informed the corporation of its failure to file its said tax return and required that it file the same, inclusive of the 25% surcharge and 20% interest per annum penalties incident to the said omission. On May 15, 1999 it advised that its income tax due for the said year amounts to P1,000,000.00 but, however, due to its adverse financial condition at the moment, it will be unable to pay the entire amount, inclusive of the delinquency penalties. Hence, on May 15, 1999, it made a partial payment of P400,000.00. Assuming that the BIR demanded payment of the unpaid balance of its tax obligation payable by June 15, 1999, the unpaid balance of the corporation's delinquent income tax shall be computed as follows: Calendar Year 1998 Income tax due per return P1,000,000.00 P254,166.68 P4,166.68

Add: 25% surcharge for late filing and

late payment

P250,000.00

20% interest per annum from 4-15-99 to 5-15-99 (P1,000,000.00 times .0166667) P16,666.70 P266,666.70 P1,266,666.70 P400,000.00

Amount due as of 5-15-99

Less: Partial payment on 5-15-99 Balance as of 5-15-99

P866,666.70

Add: 20% interest per annum from 5-15-99 to 6-15-99 (P866,666.70 times .0166667) P14,444.47 Amount still due (exclusive of the suggested compromise penalty for late filing and late payment ========= If the said taxpayer fails to pay the amount of P811,111.17 by June 15, 1999, no further 25% surcharge for late payment of the tax shall be imposed. Instead, only the 20% interest per annum shall be imposed against the taxpayer against the taxpayer, computed from due date thereof (i.e., June 15, 1999) until paid. If said taxpayer pays the same on partial payment basis, the 20% interest per annum shall be computed on the diminishing balance thereof, pursuant to the procedures in the preceding Illustration No. 1, Section 6.6 hereof P811,111.17

Philippine Refining Co vCA 3. ID.; ID.; ID.; DEFICIENCY TAX ASSESSMENT; FAILURE TO PAY WITHIN 30 DAYS RENDERS TAXPAYER LIABLE FOR PAYMENT OF 25% SURCHARGE AND 20% INTEREST. As correctly pointed out by the Solicitor General, the deficiency tax assessment in this case, which was the subject of the demand letter of respondent Commissioner dated April 11, 1989, should have been paid within thirty (30) days from receipt thereof. By reason of petitioners default thereon, the delinquency penalties of 25% surcharge and interest of 20% accrued

from April 11, 1989. The fact that petitioner appealed the assessment to the CTA and that the same was modified does not relieve petitioner of the penalties incident to delinquency. The reduced amount of P237,381.25 is but a part of the original assessment of P1,892,584.00.

4. ID.; TAX LAWS IMPOSING PENALTIES FOR DELINQUENCIES, INTENDED TO HASTEN PAYMENT OF TAXES. Tax laws imposing penalties for delinquencies, so we have long held, are intended to hasten tax payments by punishing evasions or neglect of duty in respect thereof. If penalties could be condoned for flimsy reasons, the law imposing penalties for delinquencies would be rendered nugatory, and the maintenance of the Government and its multifarious activities will be adversely affected. 5. ID.; NATIONAL INTERNAL REVENUE CODE; COLLECTION OF PENALTY AND INTEREST IN CASE OF DELINQUENCY, MANDATORY. We have likewise explained that it is mandatory to collect penalty and interest at the stated rate in case of delinquency. The intention of the law is to discourage delay in the payment of taxes due the Government and, in this sense, the penalty and interest are not penal but compensatory for the concomitant use of the funds by the taxpayer beyond the date when he is supposed to have paid them to the Government. BPI v CIR none Tambunting Pawnshop v CIR