1.

CIR VS HANTEX
Facts:
BIR alleged Hantex misdeclared its imported resins.
BIR used as basis a photocopy of the Consumption Entry (Customs) and Profit and Loss Statements
(SEC).
The CTA and CA denied both since the photocopy was not the best evidence. BIR did not use the
tax return which is indispensable in tax assessments rather BIR relied on hearsay information of the
informants.

ISSUE:
W/N the use of tax returns is indispensable in the computation of the assessments to be made by
the CIR. ( not indispensable, CIR may rely on other information but it must be supported by the best
evidence obtainale.)
Held:
Section 16 of the NIRC of 1977, as amended, provides that the CIR has the power to make
assessments and prescribe additional requirements for tax administration and enforcement.
Among such powers are those provided in paragraph (b) thereof:
(b) Failure to submit required returns, statements, reports and other documents. When a report
required by law as a basis for the assessment of any national internal revenue tax shall not be
forthcoming within the time fixed by law or regulation or when there is reason to believe that any
such report is false, incomplete or erroneous, the Commissioner shall assess the proper tax on the
best evidence obtainable.
In case a person fails to file a required return or other document at the time prescribed by law,
or willfully or otherwise files a false or fraudulent return or other document, the Commissioner shall
make or amend the return from his own knowledge and from such information as he can obtain
through testimony or otherwise, which shall be prima facie correct and sufficient for all legal
purposes.
This provision applies when the CIR undertakes to perform her administrative duty of assessing the
proper tax against a taxpayer, to make a return in case of a taxpayers failure to file one, or to amend
a return already filed in the BIR.
The best evidence envisioned in Section 16 includes the corporate and accounting records of the
taxpayer who is the subject of the assessment process, the accounting records of other taxpayers
engaged in the same line of business, including their gross profit and net profit sales.
Such evidence also includes data, record, paper, document or any evidence gathered by internal
revenue officers from other taxpayers who had personal transactions or from whom the subject
taxpayer received any income; and record, data, document and information secured from

government offices or agencies, such as the SEC, the Central Bank of the Philippines, the Bureau of
Customs, and the Tariff and Customs Commission.
The law allows the BIR access to all relevant or material records and data in the person of the
taxpayer. It places no limit or condition on the type or form of the medium by which the record
subject to the order of the BIR is kept. The purpose of the law is to enable the BIR to get at the
taxpayers records in whatever form they may be kept. The standard is not the form of the record but
where it might shed light on the accuracy of the taxpayers return.
In Campbell, Jr. v. Guetersloh, the United States (U.S.) Court of Appeals (5th Circuit) declared that it
is the duty of the Commissioner of Internal Revenue to investigate any circumstance which led him
to believe that the taxpayer had taxable income larger than reported. Necessarily, this inquiry would
have to be outside of the books because they supported the return as filed.
Citing its ruling in Kenney v. Commissioner, the U.S. appellate court declared that where the records
of the taxpayer are manifestly inaccurate and incomplete, the Commissioner may look to other
sources of information to establish income made by the taxpayer during the years in question.
We agree with the contention of the petitioner that the best evidence obtainable may consist of
hearsay evidence. Moreover, the general rule is that administrative agencies such as the BIR are not
bound by the technical rules of evidence. It can accept documents which cannot be admitted in a
judicial proceeding where the Rules of Court are strictly observed. It can choose to give weight or
disregard such evidence, depending on its trustworthiness.
However, the best evidence obtainable under Section 16 of the 1977 NIRC, as amended, does not
include mere photocopies of records/documents.
Mere photocopies of the Consumption Entries have no probative weight if offered as proof of the
contents thereof. The reason for this is that such copies are mere scraps of paper and are of no
probative value as basis for any deficiency income or business taxes against a taxpayer.
The rule is that in the absence of the accounting records of a taxpayer, his tax liability may be
determined by estimation.
The petitioner is not required to compute such tax liabilities with mathematical exactness.
Approximation in the calculation of the taxes due is justified. To hold otherwise would be tantamount
to holding that skillful concealment is an invincible barrier to proof. However, the rule does not apply
where the estimation is arrived at arbitrarily and capriciously.[79]
As a general rule, tax assessments by tax examiners are presumed correct and made in good faith.
All presumptions are in favor of the correctness of a tax assessment. It is to be presumed, however,
that such assessment was based on sufficient evidence.
However, the prima facie correctness of a tax assessment DOES NOT apply upon proof that an
assessment is utterly without foundation, meaning it is arbitrary and capricious. Where the BIR has
come out with a naked assessment, i.e., without any foundation character, the determination of the
tax due is without rational basis
. In such a situation, the U.S. Court of Appeals ruled that the determination of the Commissioner
contained in a deficiency notice disappears. Hence, the determination by the CTA must rest on all
the evidence introduced and its ultimate determination must find support in credible evidence.

In the case, The original copies of the Consumption Entries were of prime importance to the BIR.
This is so because such entries are under oath and are presumed to be true and correct under
penalty of falsification or perjury. Admissions in the said entries of the importers documents are
admissions against interest and presumptively correct.
In fine, the petitioner acted arbitrarily and capriciously in relying on and giving weight to the machine
copies of the Consumption Entries in fixing the tax deficiency assessments against the respondent.

3. CIR VS CA, ATLAS and ATLAS VS CA

Facts:
The CIR caused the service of an assessment notice and demand for payment
of deficiency ad valorem percentage and fixed taxes against ATLAS.
ATLAS protested the assessment but the same was denied.
ATLAS elevated the case to the SC where one of the issues raised was the assessed
contractors tax. It claimed that the leasing out of its personal properties was a mere isolated
transaction, hence, should not be subjected to contractors tax.
ISSUE:
W/N the assessment against ATLAS for contractors tax was validly made by the CIR.
Held:
The challenged assessment against ACMDC for contractor's tax must be upheld.

It cannot validly claim that the leasing out of its personal properties was merely an isolated
transaction. Its book of accounts shows that several distinct payments were made for the use of its
personal properties such as its plane, motor boat and dump truck.

The series of transactions engaged in by ACMDC for the lease of its aforesaid properties
could also be deduced from the fact that for the tax years 1975 and 1976 there were profits earned
and reported therefor.
The allegation of ACMDC that it did not realize any profit from the leasing out of its said
personal properties, since its income therefrom covered only the costs of operation such as salaries
and fuel, is not supported by any documentary or substantial evidence. We are not, therefore,
convinced by such disavowal.
Assessments are prima facie presumed correct and made in good faith. Contrary to the theory of
ACMDC, it is the taxpayer and not the Bureau of Internal Revenue who has the duty of proving
otherwise. It is an elementary rule that in the absence of proof of any irregularities in the
performance of official duties, an assessment will not be disturbed. All presumptions are in favor of
tax assessments. Verily, failure to present proof of error in the assessment will justify judicial
affirmance of said assessment.

5. CABRERA vs PROVINCIAL TREASURER OF TAYABAS, CATIGBAC

Facts:
The provincial treasurer of Tayabas issued a notice for the sale at public auction of numerous
real properties forfeited for tax delinquency "on December 15, 1940 at 9 a. m. and every day
thereafter, at the same place and hour until all the properties shall have been sold to the highest
bidder."
The sale in favor of the appellant (CATIGBAC) of the land involved was executed on May 12, 1941
Thereafter, BASILIA CABRERA( plaintiff) the file a case attacking the validity of the tax sale ON THE
GROUNDS THAT
-

She was not notified thereof; and

She had become the registered owner of the land although the land had
remained IN THE ASSESSMENT BOOK under the name of NEMESIO.

The court a quo ruled IN FAVOR of the PLAINTIFF.

Issue:
W/N the auction sale was valid.
Held.
This sale is invalid.
Under the law (Commonwealth Act No. 470, section 35), the provincial treasurer is enjoined to set
forth in the notice, among other particulars, the date of the tax sale.
This mandatory requirement was not satisfied in the present case, because the announcement that
the sale would take place on December 15, 1940 and every day thereafter, is the same as general
and indefinite as a notice for the sale "within this or next year" or "some time within the month of
December."
In order to enable a taxpayer to protect his rights, he should at least be apprised of the exact date of
the proceeding by which he is to lose his property.

6. VELAYO vs ORDOVEZA, ET AL.

Facts:
Respondents owned the subject parcel of land.
The City treasurer of Manila sold at public auction to the Petitioner (VELAYO) said land after
the publication of the corresponding notice. The reason for the sale---- there were unpaid real estate
taxes thereon.
When one of the respondents tried to the real property tax thereon, the clerk of said city
treasurer advised him of the sale.
The respondents sent a letter to the city treasurer stating that they had not received any
previous notice or read in the newspaper of the public auction; and it appears that the description in
the deed of sale is different from the description appearing in the TCT of the subject land.
Petitioner tried to register the property under his name by filing the appropriate action w/c
was opposed by the respondents.
The court a quo favored the respondents.
ISSUE:
Was the City Treasurer, the proper officer who has the authority to distain/levy and cause the
notice of sale of the subject property?
HELD:
Under the law (Republic Act No. 409), the city assessor and collector is the officer charged
with the function of distraining personal property for the collection of delinquent real estate taxes. It is
he who shall "advertise the real estate of the delinquent for sale."
the officer charged by law with the duty of giving notice of the contemplated sale of properties for tax
delinquency and of executing the corresponding deed of sale is the City Assessor and Collector, not
the City Treasurer.
In the case at bar, the notice of sale at public auction was given, and the sale was made, by the city
treasurer, who, likewise, executed the certificate of sale and, later on, the deed of sale, although he
had no authority therefor.
Accordingly, said notice, sale, certificate and deed are insufficient to divest the Ordovezas of their
title to the property in question.

7. CASTRO VS CIR
Facts:
The Sec. of Finance created a committee to review and examine the assessment of war
profit tax issued against petitioner.
After the investigation, the committee submitted a report recommending the collection of her
war profits tax due.
To enforce collection, CIR caused to be advertised the sale at public auction of the real
properties of the petitioner to satisfy the war profits tax assessed against her.
Due to lack of bidders, the properties were forfeited to the Government in accordance with
the NIRC.
When the case was elevated to the SC, she raised the issue that the sale and forfeiture to
the government (Due to lack of bidders) of the properties of her w/c were levied CONSTITUTES a
FULL DISCHARGE of her tax liabilities.
ISSUE:
Does the forfeiture of levied properties tantamount to the full discharge of the total amount of
tax liabilities?
HELD:
The Court did not agree.
The forfeiture of the property to the National Government CANNOT operate as full
discharge/satisfaction of the tax claims even beyond the value of the property forfeited.
THE SATISFACTION is only to the extent of the value of the property forfeited not the full
amount of the tax liabilities.

8. CIR VS PASCOR
Facts:
CIR filed a criminal complaint against the respondents before the DOJ alleging evasion of
taxes.
Private respondents filed a request for reconsideration and reinvestigation.
The CIR denied on the ground that no formal assessment has been issued.
The matter was elevated to the CTA where CIR moved to dismiss.
The CTA denied CIRs motion and held that the criminal complaint for tax evasion was
already an assessment.
The CA affirmed.
When the issue reached the SC, respondents contended that the filing of a criminal
complaint MUST be PRECEDED by an assessment, in other words, there must be an assessment
first before a criminal action could be filed.
ISSUE:
Whether or not an assessment is necessary before criminal charges for tax evasion may be
instituted.
Held:
This is incorrect.
because Section 222 of the NIRC specifically states that in cases where a false or fraudulent return
is submitted or in cases of failure to file a return such as this case, proceedings in court may be
commenced without an assessment.
Furthermore, Section 205 of the same Code clearly mandates that the civil and criminal aspects of
the case may be pursued simultaneously.
In Ungab v. Cusi, petitioner therein sought the dismissal of the criminal Complaints for being
premature, since his protest to the CTA had not yet been resolved. The Court held that such protests
could not stop or suspend the criminal action which was independent of the resolution of the protest
in the CTA. This was because the CIR had, in such tax evasion cases, discretion on whether to
issue an assessment or to file a criminal case against the taxpayer or to do both.
Section 222 states that an assessment is not necessary before a criminal charge can be filed. This is
the general rule. Private respondents failed to show that they are entitled to an exception. Moreover,
the criminal charge need only be supported by a prima facie showing of failure to file a required
return. This fact need not be proven by an assessment.

The issuance of an assessment must be distinguished from the filing of a complaint.

Before an assessment is issued,
a. there is, by practice, a pre-assessment notice sent to the taxpayer.
b. The taxpayer is then given a chance to submit position papers and documents to prove
that the assessment is unwarranted.
c. If the commissioner is unsatisfied, an assessment signed by him or her is then sent to
the taxpayer informing the latter specifically and clearly that an assessment has been
made against him or her.
In contrast, the criminal charge need not go through all these.
1. The criminal charge is filed directly with the DOJ.
2. Thereafter, the taxpayer is notified that a criminal case had been filed against him, not
that the commissioner has issued an assessment.
It must be stressed that a criminal complaint is instituted not to demand payment, but to penalize
the taxpayer for violation of the Tax Code.

Judicial Action
9. Ungab vs Cusi. GR No. L-41919-24 May 30, 1980. 97 SCRA 877
Because of his failure to report his income from sale of banana saplings for calendar year 1973, BIR
found sufficient proof to file 6 information for tax evasion against Ungab.
He filed motion to quash the informations claiming that its filing is premature since the Commissioner
of Internal Revenue has not yet resolved his protests against the assessment of the Revenue District
Officer; and that he was denied recourse to the Court of Tax Appeals.

Issue: Is petitioner's protest against assessment Revenue District Officer stop his prosecution for tax
evasion?
Ruling: No. What is involved here is not the collection of taxes but a criminal prosecution for
violations of the National Internal Revenue Code which is within the cognizance of courts of first
instance. An assessment of a deficiency is not necessary to a criminal prosecution for willful attempt
to defeat and evade the income tax. A crime is complete when the violator has knowingly and willfuly
filed a fraudulent return with intent to evade and defeat the tax.

10. Arches vs Bellosilo.G.R. No. L-23534. May 16, 1967. 20 SCRA 32

Facts:Arches file income tax return in 1954. Within five years, deficiency income tax and residence
tax assessments were issued against him.
As said assessment was not contested, BIR Revenue Regional Director without approval of CIR filed
suit before municipal court to recover the deficiency income tax.
Arches moved to dismiss it on ground of prescription and since complaint was not approved by
Revenue Commissoner(CIR) as required by Tax Code so the court has no jurisdiction.
Municipal court denied said motion. It was affirmed by the CFI.

Issue: Does the lower court has jurisdiction over the case?
Ruling: Yes. The municipal court had jurisdiction over the parties and over the subject matter, the
amount demanded being less than P5,000.00. 1 The suit below instituted by the Republic, based on
an uncontested assessment, was one merely for the recovery of a sum of money where the amount
demanded constitutes the jurisdictional test.
As for the need to have the CIR approval to institute court actions, Finance Secretary issued
Memorandum Order No. V-634 delegating to Regional Director the function to enforce revenue laws
such as approval of court actions to be filed. --> not anymore controlling!!!

11. CIR vs Hizon.GR No. 130430, December 13, 1999.320 SCRA 574
Facts:Hizon was issued by BIR in 1986 with deficiency income tax assessment for year 1981-82. He
did not contest it and he was served warrants of distraint and levy but properties was not attached.
BIR Region 4 filed a complained in RTC Pampanga in 1992 to collect tax deficiencyo of respondent
Hizon.
Complaint was signed and verified by BIR Regional Director.
Hizon moved to dismiss case on two grounds:1)complaint filed not upon authority of CIR and 2)
prescription. RTC granted the motion

Issue: Could BIR Regional Director file tax collection cases without approval of CIR?
Ruling: No. RA 8424 (Tax Code) authorizes CIR to delegate powers vested in him under the Code
like power to compromise or abate under 204 (A) and (B) of this Code, any tax deficiency, power to
issue rulings of first impression or to reverse, revoke or modify any existing ruling of the Bureau. one
of the exceptions relates to the Commissioner's power to approve the filing of tax collection cases.

Compromises
12. Pampanga Sugar Development vs Court of Industrial Relations. G.R. No. 112650. May 29,
1997.114 SCRA 725
---> I think this is wrong case talaga. Better read the compromise part

Tax Lien
13. Republic vs Enriquez. G.R. No. L-78391. October 21, 1988.166 SCRA 608
Facts:CIR issued warrant of distraint in 1985 on the 2 barges of Maritime Company due to its failure
to pay its deficiency taxes.
However, Enriquez, respondent sheriff, levied the said barges to satisfy Maritime's debt to Genstar
Container after it lost in a civil case.
CIR filed its affidavit of adverse claim but the barges were still sold to a public auction.
Petitioner filed before CA petition for prohibition praying that respondent from selling the barges in
public auction. CA dismissed the petition.

Issue:Is the goverment tax lien on the said property superior to a private claim based an a court
judgment?
OR is a goverment tax lien preferred over a private claim over a property?

Ruling: Yes. It is settled that the claim of the government predicated on a tax lien is superior to the
claim of a private litigant predicated on a judgment. The tax lien attaches not only from the service of
the warrant of distraint of personal property but from the time the tax became due and payable.
Besides, the distraint on the subject properties of Maritime Company of the Philippines as well as the
notice of their seizure were made by petitioner, through the Commissioner of Internal Revenue, long
before the writ of execution was issued by the Regional Trial Court of Manila, Branch 31. There is no
question then that at the time the writ of execution was issued, the two (2) barges were no longer
properties of the Maritime Company of the Philippines but by the government.

14. Republic vs Peralta. G.R. No. L-56568. May 20, 1987.150 SCRA 37
Facts: Quality Tobacco was involved in insolvency proceedings before respondent Judge Peralta.

The following claims of creditors were filed namely: 1) separation pay from two labor unions and 2)
tobacco inspection fees from BIR and 3) customs duties and taxes from Customs.
The said trial court ruled that the claums of unions were preferred over that of the taxes due to the
government. It relied on the Section 110, Labor Code stating that in case of liquidation of employer's
business, his workers shall enjoy first preferences as regards to wages over taxes and customs due
to the government.

Issue: Is labor wages preferred over taxes due to the government in case of liquidation of an
employer's business?

Ruling:No. Said provision of Labor Code should be read in relation to Article 110, 2241, 2242 and
2243 of the Civil Code.
It should be emphasized in this connection that "duties, taxes and fees due [on specific movable
property of the insolvent] to the State or any subdivision thereof" (Article 2241 [1]) and "taxes due
upon the [insolvents] land or building (2242 [1])" stand first in preference in respect of the particular
movable or immovable property to which the tax liens have attached. Article 2243 is quite explicit:"
Taxes mentioned in number 1, Article 2241 and number 1, Article 2242 shall first be satisfied."

Prescriptive Periods

15. Mambulao Lumber Co vs Republic. G.R. No. L-37061. September 5, 1984.132 SCRA 1
Facts: Bureau of Forestry in Camarines Norte through a letter dated January 15, 1949 assessed
petitioner Mambulao Lumber of deficiency forest charges.
Case was contested till it goes with Secretary of Agriculture which then referred case to CIR.
CIR then through a letter dated August 29, 1958, demanded the company to pay forest charges for
the year 1949. It failed to pay the tax.
This led CIR to file tax collection case in August 25, 1961 before CFI Manila.
CFI ordered the company to pay the tax. It was upheld by CA. Hence this appeal by petitioner
alleging the judicial action to collect the tax had prescribed.

Issue: Is the judicial action for collection of said tax prescribed?

Ruling: No. Under the Tax Code, complaint for collection of taxes must be filed within five
years counted from the date of assessment or else it would prescribed. In the case at bar, the
commencement of the five-year period should be counted from August 29, 1958, the date of the
letter of demand of CIR to petitioner Mambulao Lumber Company and not the demand of Bureau of
Forestry. It is this demand or assessment that is appealable to the Court of Tax Appeals. The
complaint for collection was filed in the Court of First Instance of Manila on August 25, 1961, very
much within the five-year period prescribed by the Tax Code.

16. Republic vs Araneta. GR No. L-14142, May 30, 1961 .2 SCRA 144
Facts: CIR assessed defendants Araneta Co. and Manila Surety of 2% on gross receipts for their
business as common carriers tax in March 15, 1948 for taxable year 1946-48 plus surcharge.
They request to pay tax liability for six equal monthly installments beginning April 15, 1949. It was
granted by CIR under that they execute a bond where in case of their failure to pay, the tax
obligations remain in full force and effect.
They did not pay the said tax so CIR sued them before CFI Manila for the bond they executed and
they failed to comply in Feb, 22, 1957. Defendants invoke prescription (tax assessed in 1948+5
years under old Tax Code=1953 period so they argued).

Issue: Could appellant Araneta invoke prescription under the Tax Code?

Ruling: No. They cannot invoke prescription under the provisions of section 331 of the National
Internal Revenue Code, because the appellee is suing on the bond executed and filed by them and
the appellant-surety. The action to enforce the obligation on the bond executed on 18 March 1949,
having been filed in court by the appellee on 22 February 1957, was within the prescriptive period of
ten years (under the Civil Code).
NOTE: Court said that this is now a civil case not a tax case that they are filing so the 10
year prescriptive period, not the 5 year period under the Tax Code. Cause of action is not the failure
to pay tax but failure to comply with the bond they executed.
Checked Dimaampao. According to him. Prescriptive period is 5 years-with assessment. 10 yearsno assessment plus intent of taxpayer to evade tax.

17. G.R. No. L-22492

September 5, 1967

BASILAN ESTATES, INC., vs. CIR

FACTS:
Basilan Estates is a Phil. Corporation engaged in the coconut industry. On March 24, 1954 it filed
and paid its income tax returns for 1953.
On February 26, 1959, assessment was made by CIR against Basilan Estates, Inc., a deficiency
income tax 25% surtax on unreasonably accumulated profits as of 1953.
Basilan Estates, Inc. filed before the Court of Tax Appeals a petition for review of the Commissioner's
assessment, alleging prescription of the period for assessment and collection.
Court of Tax Appeals affirmed the deficiency assessment in toto.
Petitioner claims that it never received notice of such assessment or if it did, it received the notice
beyond the five-year prescriptive period
ISSUE:
Has the Commissioner's right to collect deficiency income tax prescribed?
HELD:
No. Even granting that notice had been received by the petitioner late, as alleged, under Section 331
of the Tax Code requiring five years within which to assess deficiency taxes, the assessment is
deemed made when notice to this effect is released, mailed or sent by the Collector to the taxpayer
and it is not required that the notice be received by the taxpayer within the aforementioned five-year
period.
In the case, the notice of assessment shows the assessment to have been made on February 26,
1959, well within the five-year period. On the right side of the notice is also stamped "Feb. 26, 1959"
denoting the date of release, according to Bureau of Internal Revenue practice. Subsequently, the
Chief of the Investigation Division indorsed on March 18, 1959 the case to the Chief of the Law
Division. There it was alleged that notice was already sent to petitioner on February 26, 1959. These
circumstances pointing to official performance of duty must necessarily prevail over petitioner's
contrary interpretation.

18. G.R. No. L-21551

September 30, 1969

FERNANDEZ HERMANOS, INC., vs. CIR

The taxpayer, Fernandez Hermanos, Inc., is a domestic corporation organized for the principal
purpose of engaging in business as an "investment company".
The Commissioner of Internal Revenue assessed against the taxpayer alleged deficiency income
taxes from 1950 to 1954. Said assessments were the result of alleged discrepancies found upon the
examination and verification of the taxpayer's income tax returns for the said years
The Tax Court modified the assessments reducing the deficiency income taxes.
The taxpayer contends that the Commissioner's action to recover its tax liability should be deemed
to have prescribed for failure on the part of the Commissioner to file a complaint for collection
against it in an appropriate civil action.
ISSUE:
Whether or not the government's right to collect the deficiency income taxes in question has already
prescribed.
HELD:
This Court has consistently held that "a judicial action for the collection of a tax is begun by the filing
of a complaint with the proper court of first instance, or where the assessment is appealed to the
Court of Tax Appeals, by filing an answer to the taxpayer's petition for review wherein payment of
the tax is prayed for." 17 This is but logical for where the taxpayer avails of the right to appeal the tax
assessment to the Court of Tax Appeals, the said Court is vested with the authority to pronounce
judgment as to the taxpayer's liability to the exclusion of any other court.
In the present case, regardless of whether the assessments were made on February 24 and 27,
1956, as claimed by the Commissioner, or on December 27, 1955 as claimed by the taxpayer, the
government's right to collect the taxes due has clearly not prescribed, as the taxpayer's appeal or
petition for review was filed with the Tax Court on May 4, 1960, with the Commissioner filing on May
20, 1960 his Answer with a prayer for payment of the taxes due, long before the expiration of the
five-year period to effect collection by judicial action counted from the date of assessment.

19. G.R. No. L-29485 November 21, 1980

COMMISSIONER OF INTERNAL REVENUE, vs. AYALA SECURITIES CORPORATION
FACTS:
SC earlier affirmed the decision of CTA and held that the assessment made on February 21, 1961 by
petitioner against respondent corporation (and received by the latter on March 22, 1961 for its fiscal
year ending September 30, 1955 fell under the five-year prescriptive period provided in section 331
of the National Internal Revenue Code and that the assessment had, therefore, been made after the
expiration of the said five-year prescriptive period and was of no binding force and effect .
Commissioner of Internal Revenue filed a motion for reconsideration
Petitioner cites the Court of Tax Appeals' ruling in the earlier case of United Equipment & Supply
Company vs. Commissioner of Internal Revenue In said case, the tax court squarely ruled that the
provisions of sections 331 and 332 of the National Internal Revenue Code for prescriptive periods of
five 5 and ten (10) years after the filing of the return do not apply to the tax on the taxpayer's
unreasonably accumulated surplus under section 25 of the Tax Code since no return is required to
be filed by law or by regulation on such unduly ac cumulated surplus on earnings.
ISSUE: WON the right to assess and collect the assessment in question had prescribed after five
years?
HELD: NO.
Limitations upon the right of the government to assess and collect taxes will not be presumed in the
absence of clear legislation to the contrary and that where the government has not by express
statutory provision provided a limitation upon its right to assess unpaid taxes, such right is
imprescriptible.
There is no such time limit on the right of the Commissioner of Internal Revenue to assess the 25%
tax on unreasonably accumulated surplus provided in section 25 of the Tax Code, since there is no
express statutory provision limiting such right or providing for its prescription. The underlying
purpose of the additional tax in question on a corporation's improperly accumulated profits or
surplus is as set forth in the text of section 25 of the Tax Code itself 1 to avoid the situation
where a corporation unduly retains its surplus instead of declaring and paving dividends to its
shareholders or members who would then have to pay the income tax due on such dividends
received by them. The record amply shows that respondent corporation is a mere holding
company of its shareholders through its mother company, a registered co-partnership then set
up by the individual shareholders belonging to the same family and that the prima
facie evidence and presumption set up by the Tax Code, therefore applied without having been
adequately rebutted by the respondent corporation.

22. G.R. No. L-20569 August 23, 1974

JOSE B. AZNAR vs. CTA
FACTS:
The late Matias H. Aznar who died on May 18, 1958, predecessor in interest of herein petitioner,
during his lifetime as a resident of Cebu City, filed his income tax returns on the cash and
disbursement basis.
Commissioner of Internal Revenue having his doubts on the veracity of the reported income of one
obviously wealthy ascertained the taxpayer's true income. Upon investigation CIR assessed tax
delinquency against Matias on November 28, 1952.
Petitioner assailed the assessment. Petitioner's contention is that the provision of law applicable to
this case is the period of five years limitation upon assessment and collection from the filing of the
returns provided for in See. 331 of the National Internal Revenue Code. He argues that since the
1946 income tax return could be presumed filed before March 1, 1947 and the notice of final and last
assessment was received by the taxpayer on March 2, 1955, a period of about 8 years had elapsed
and the five year period provided by law (Sec. 331 of the National Internal Revenue Code) had
already expired.
Petitioner argues that Sec. 332 of the NIRC does not apply because the taxpayer did not file false
and fraudulent returns with intent to evade tax, while respondent Commissioner of Internal Revenue
insists contrariwise.
ISSUE: Whether or not the right of the Commissioner of Internal Revenue to assess deficiency
income taxes of the late Matias H. Aznar for the years 1946, 1947, and 1948 had already prescribed
at the time the assessment was made on November 28, 1952.
HELD: NO.
The proper and reasonable interpretation of Sec. 332 of NIRC should be that in the three different
cases of (1) false return, (2) fraudulent return with intent to evade tax, (3) failure to file a return, the
tax may be assessed, or a proceeding in court for the collection of such tax may be begun without
assessment, at any time within ten years after the discovery of the (1) falsity, (2) fraud, (3) omission.
While false return merely implies deviation from the truth, whether intentional or not, fraudulent
return implies intentional or deceitful entry with intent to evade the taxes due.
The ordinary period of prescription of 5 years within which to assess tax liabilities under Sec. 331 of
the NIRC should be applicable to normal circumstances, but whenever the government is placed at
a disadvantage so as to prevent its lawful agents from proper assessment of tax liabilities due to
false returns, fraudulent return intended to evade payment of tax or failure to file returns, the period
of ten years provided for in Sec. 332 (a) NIRC, from the time of the discovery of the falsity, fraud or
omission even seems to be inadequate and should be the one enforced.
There being undoubtedly false tax returns in this case, We affirm the conclusion of the respondent
Court of Tax Appeals that Sec. 332 (a) of the NIRC should apply and that the period of ten years
within which to assess petitioner's tax liability had not expired at the time said assessment was
made.

23. G.R. No. 162852

December 16, 2004

PHILIPPINE JOURNALISTS, INC., vs. COMMISSIONER OF INTERNAL REVENUE,

FACTS:
Petitioner filed an Annual Income Tax Return on Dec. 31, 1994 and paid the income tax thereon.
On August 10, 1995 petitioners books of account and other accounting records for internal revenue
taxes for the period January 1, 1994 to December 31, 1994 was examined. From the examination,
the petitioner was told that there were deficiency taxes.
Petitioners Comptroller, Lorenza Tolentino, executed a "Waiver of the Statute of Limitation Under the
National Internal Revenue Code (NIRC)".5 The document "waive[d] the running of the prescriptive
period provided by Sections 223 and 224 and other relevant provisions of the NIRC and consent[ed]
to the assessment and collection of taxes which may be found due after the examination at any time
after the lapse of the period of limitations fixed by said Sections 223 and 224 and other relevant
provisions of the NIRC, until the completion of the investigation". 6
On December 9, 1998 issued a final assessment of deficiency tax.
Petitioner filed a Petition for Review12 with the Court of Tax Appeals (CTA) Petitioner complains that
the assessment, having been made beyond the 3-year prescriptive period, is null and void;
CTA - The waiver executed by the petitioner on September 22, 1997 was suffering from legal
infirmities, rendering the same invalid and ineffective, and the assessment was time-barred.
CA Reversed. Respondent Phil. Journalists is ordered [to] pay its assessed tax liability.
ISSUE: WON the right to assess has prescribed?
HELD: To check if the right has prescribed the validity of the waiver must first be examined.
The waiver of the statute of limitations under NIRC is not a waiver of the right to invoke the defense
of prescription as erroneously held by the Court of Appeals. The waiver does not mean that the
taxpayer relinquishes the right to invoke prescription unequivocally particularly where the language
of the document is equivocal. The law on prescription, being a remedial measure, should be liberally
construed in order to afford such protection.
Waiver of Statute of Limitations, signed by petitioners comptroller on September 22, 1997 is not
valid and binding because:
1. It did not specify a definite agreed date between the BIR and petitioner, within which the
former may assess and collect revenue taxes. Thus, petitioners waiver became unlimited in
time, violating Section 222(b) of the NIRC.
2. it was signed only by a revenue district officer, not the Commissioner.
3. The date of acceptance which makes it difficult to fix with certainty if the waiver was
actually agreed before the expiration of the three-year prescriptive period.
4. the records show that petitioner was not furnished a copy of the waiver.

The waiver document is incomplete and defective and thus the three-year prescriptive period was
not tolled or extended and continued to run until April 17, 1998. Consequently, the
Assessment/Demand No. 33-1-000757-94 issued on December 9, 1998 was invalid because it was
issued beyond the three (3) year period.

24. G.R. No. L-41919-24 May 30, 1980

QUIRICO P. UNGAB, vs. HON. VICENTE N. CUSI, JR.,

In July, 1974, BIR Examiner Ben Garcia examined the income tax returns filed by the herein
petitioner, Quirico P. Ungab, for the calendar year ending December 31, 1973. He discovered
that the petitioner failed to report his income derived from sales of banana saplings.
BIR Examiner Ben Garcia was fully convinced that the petitioner had filed a fraudulent income
tax return so that he submitted a "Fraud Referral Report," to the Tax Fraud Unit of the Bureau of
Internal Revenue.
After examining the records of the case, the Special Investigation Division of the Bureau of
Internal Revenue found sufficient proof that the herein petitioner is guilty of tax evasion
Six (6) informations against the petitioner was filed.
On September 16, 1975, the petitioner filed a motion to quash on the ground that the
information filed was premature since the Commissioner of Internal Revenue has not yet
resolved his protests against the assessment of the Revenue District Officer.
Trial court denied the motion.
ISSUE: WON a petition for reconsideration of an assessment may affect the suspension of the
prescriptive period of the instant case.
HELD: NO.
It has been ruled that a petition for reconsideration of an assessment may affect the suspension
of the prescriptive period for the collection of taxes, but not the prescriptive period of a criminal
action for violation of law. 16 Obviously, the protest of the petitioner against the assessment of
the District Revenue Officer cannot stop his prosecution for violation of the National Internal
Revenue Code. Accordingly, the respondent Judge did not abuse his discretion in denying the
motion to quash filed by the petitioner.