CIR vs ENRON

In 1997,Enron Subic Power Corporation received apre-assessment notice from the Bureau of Internal Revenue (BIR). Enron allegedly had a tax deficiency of P2.8 million for the year 1996. Enron filed a protest. In 1999, Enron received a final assessment notice (FAN) from the BIR for the same amount of tax deficiency.Enron however assailed the FAN because according to Enron the FAN is not compliant with Section 228 of the National Internal Revenue Code (NIRC) which provides that the legal and factual bases of the assessment must be contained in the FAN. The FAN issued to Enron only contained thecomputationof itsallegedtax liability.The Commissioner of Internal Revenue (CIR) admitted that the FAN did not contain the legal and factual bases of the assessment however, the CIR insisted that the same has been substantially complied with already because during the pre-assessment stage, the representative of Enron has been advised of the said factual and legal bases of the assessment.ISSUE:Whether or not there is a valid final assessment notice issued to Enron.HELD:No. The wording of Section 228 of the NIRC provides:The taxpayer shall be informed in writing of the law and the facts on which the assessment is made; otherwise the assessment shall be void.The word shall is mandatory. The law requires that the legal and factual bases of the assessment be stated in the formal letter of demand and assessment notice. It cannot be substituted by other notices or advisories issued or delivered to the taxpayer during the preliminary stage.

CIR v. FIRST EXPRESS PAWNSHOPG.R. Nos. 172054-46, 16 June 2009

Facts: In this case, respondent a pawnshop company received the tax assessment on 3 January 2002. On 1 February 2002, respondent submitted its protest and attached the GIS and Balance Sheet as of 31 December 1998. Since petitioner did not act on the protest during the 180-day period,respondent filed a petition before the CTA on 28 August 2002 and contended that petitioner did not consider the supporting documents on the interest expenses and donations which resulted in the deficiency income tax. Within 60 days from the filing of protest or until 2 April 2002, respondent should submit relevant supporting documents. Respondent, having submitted the supporting documents together with its protest, did not present additional documents anymore.In a letter dated 12 March 2002, petitioner requested respondent to present proof of payment of DST on subscription. In a letter-reply, respondent stated that it could not produce any proof of DST payment because it was not required to pay DST under the law considering that the deposit on subscription was an advance made by its stockholders for future subscription, and no stock certificates were issued.Since respondent has not allegedly submitted any relevant supporting documents, petitioner now claims that the assessment has become final, executory and demandable, hence, unappealable.

Issue: WON assessment has become finalHELD: NO. The assessment did not become final and unappealable. It cannot be said that respondent failed to submit relevant supporting documents that would render the assessment final because when respondent submitted its protest, respondent attached the GIS and Balance Sheet. Further, petitioner cannot insist on the submission of proof of DST payment because such document does not exist as respondent claims that it is not liable to pay, and has not paid, the DST on the deposit on subscription. After respondent submitted its letter-reply stating that it could not comply with the presentation of the proof of DST payment, no reply was received from petitioner.The term relevant supporting documents should be understood as those documents necessary to support the legal basis in disputing a tax assessment as determined by the taxpayer. The BIR can only inform the taxpayer to submit additional documents. The BIR cannot demand what type of supporting documents should be submitted. Otherwise, a taxpayer will be at the mercy of the BIR, which may require the production of documents that a taxpayer cannot submit. Respondent has complied with the requisites in disputing an assessment pursuant to Section 228 of the Tax Code.Section 228 states that if the protest is not acted upon within 180 days from submission of documents, the taxpayer adversely affected by the inaction may appeal to the CTA within 30 days from the lapse of the 180-day period. Respondent, having submitted its supporting documents on the same day the protest was filed, had until 31 July 2002 to wait for petitioners reply to its protest. On 28 August 2002 or within 30 days after the lapse of the 180-day period counted from the filing of the protest as the supporting documents were simultaneously filed, respondent filed a petition before the CTA.

Adamson, et al. v. Court of Appeals

FACTS:Case involves a petition for review on certiorari filed by petitioners LUCAS G. ADAMSON, THERESE JUNE D. ADAMSON, and SARA S. DE LOS REYES (private respondents), in their respective capacities as president, treasurer and secretary of Adamson Management Corporation (AMC) against then CIR Liwayway Vinzons-Chato (COMMISSIONER).

OnJune 20, 1990, Lucas Adamson andAMCsold 131,897 common shares of stock in Adamson and Adamson, Inc. (AAI) toAPACHolding Limited (APAC). The shares were valued atP7,789,995.00.OnJune 22, 1990,P159,363.21 was paid as capital gains tax for the transaction.OnOctober 12, 1990,AMCsold toAPACPhilippines, Inc. another 229,870 common shares of stock inAAIforP17,718,360.00.AMC paid the capital gains tax ofP352,242.96.OnOctober 15, 1993, the Commissioner issued a Notice of Taxpayer to AMC, Lucas G. Adamson, Therese June D. Adamson and Sara S. de los Reyes, informing them of deficiencies on their payment of capital gains tax and Value Added Tax (VAT).

A deficiency tax assessment was issued against Petitioners relating to their payment of capital gains tax and VAT on their sale of shares of stock and parcels of land. Subsequent to the preliminary conference, the CIR filed with the Department of Justice her Affidavit of Complaint against Petitioners. The Court of Appeals ultimately ruled that, in a criminal prosecution for tax evasion, assessment of tax deficiency is not required because the offense of tax evasion is complete or consummated when the offender has knowingly and willfully filed a fraudulent return with intent to evade the tax.

ISSUES:(1) Dis the CIR issue an assessment?(2) Must a criminal prosecution for tax evasion be preceded by a deficiency tax assessment?(3) Does the CTA have jurisdiction on the case?

HELD:(1) NO. The recommendation letter of the Commissioner cannot be considered a formal assessment as (a) it was not addressed to the taxpayers; (b) there was no demand made on the taxpayers to pay the tax liability, nor a period for payment set therein; (c) the letter was never mailed or sent to the taxpayers by the Commissioner. It was only an affidavit of the computation of the alleged liabilities and thus merely served as prima facie basis for filing criminal informations.

(2) YES. When fraudulent tax returns are involved as in the cases at bar, a proceeding in court after the collection of such tax may be begun without assessment considering that upon investigation of the examiners of the BIR, there was a preliminary finding of gross discrepancy in the computation of the capital gains taxes due from the transactions. The Tax Code is clear that the remedies may proceed simultaneously.

(3) NO. While the laws governing the CTA have expanded the jurisdiction of the Court, they did not change the jurisdiction of the CTA to entertain an appeal only from a final decision of the Commissioner, or in cases of inaction within the prescribed period. Since in the cases at bar, the Commissioner has not issued an assessment of the tax liability of the Petitioners, the CTA has no jurisdiction.

CIR vs. KUDOS METAL CORPORATION

FACTS:Kudos Metal Corporation filed its Income Tax Return (ITR) on April 1999 for taxable year 1998. However, pursuant to Letter of Authority, the BIR issued three notices of Presentation of Records to Kudos but Kudos did not comply with the said notice. The BIR then issued subpoena duces tecum, thus the review and audit of the record ensued.However, on December 2001, Pasco, the accountant of Kudos executed an affidavit of Waiver of Prescription duly notarized and was received by BIR and accepted the same by Assistant Commissioner Salazar. Pasco executed second waiver on February 2003 following the process undergone by the first waiver she executed.The BIR later issued a Preliminary Notice of Assessment followed by Formal Demand letter to Kudos asking them to settle their tax liabilities for the year 2008 covering the following:Income Tax9,693,897.85VAT13,962,460.90EWT1,712,336.76Withholding Compensation Tax247,353.24Penalties8,000.00TOTAL25,624,048.76

On appeal, the Court of Tax Appeal en banc affirmed the decision of the CTA Second Division ruling that the governments right to assess taxes has already prescribed. BIR appealed then appealed to the Supreme Court.

ISSUE:Whether or not the right of the government to assess taxes has already prescribed despite the waivers executed by the accountant of Kudos.

HELD:Supreme Court affirmed the decision of the CTA en banc stating that Section 222 of tax code provide that the period to assess and collect taxes may only be extended upon written agreement between the CIR and the taxpayer following the procedures laid down on RMO 20.90 and RDAO 05-01 such as:1. Waiver must in official form and the expiration period must be stated.1. Waiver must be notarized and must be signed by the duly authorized representative in case of representation.1. The revenue officer must sign the waiver indicating that the BIR has accepted and agreed to the waiver.1. Both the date of execution by the taxpayer and the acceptance by the revenue officer should be before the expiration of the period agreed upon in case of subsequent waiver.1. The fact of receipt by the taxpayer of his file copy must be indicated din the original. In the above case, there is not written authorization given by the management of Kudos to Pasco to execute such waiver. The date of execution of the waiver was not indicated to show if it was executed before the lapsed of the agreed period in the first waiver. The fact of the acceptance of the file copy of the taxpayer was not indicated on the original. The second waiver was filed after the lapsed of the agreed period in the first waiver which was on December 2002. These shows that the waivers were incomplete and defective thus not in accordance with the procedures provided for. Thus, due to the defective waivers, the prescriptive period of 3-years was not extended and it remained 3 years in this case thus the governments right as already prescribed making the assessment in effective.FISHWEALTH CANNING CORPORATION v. CIR G.R. No.179343 January 21, 2010

FACTS:Petitioner was assessed for income tax, Value Added Tax and withholding tax. After Court of Tax Appeals issued a Final Decision on Disputed Assessment, Petitioner filed a Letter of Reconsideration with the CIR instead of appealing the same to the Court of Tax Appeals within 30 days. The CIR then issued a Preliminary Collection Letter which prompted the Petitioner to file its Petition with the Court of Tax Appeals. CIR argued that the Petition with the Court of Tax Appeals was filed out of time.ISSUE:Did the filing of a Reconsideration toll the running of the 30-day period to appeal to the Court of Tax Appeals?HELD:NO. A Motion for Reconsideration of the denial of the administrative protest does not toll the 30-day period to appeal to the Court of Tax Appeals.---------------FISHWEALTH CANNING CORPORATION v. CIR The CIR (respondent), by Letter of Authority datedMay 16, 2000,ordered the examination of the internal revenue taxes for the taxable year 1999 of Fishwealth Canning Corp. (petitioner).The investigation disclosed that petitioner was liable in the amount ofP2,395,826.88 representing income tax, value added tax (VAT), withholding tax deficiencies and other miscellaneous deficiencies.Petitioner eventually settled these obligations onAugust 30, 2000.The petition is bereft of merit.Section 228 of the 1997 Tax Code provides that an assessmentx x x may be protested administratively by filing a request for reconsideration or reinvestigation within thirty (30) days from receipt of the assessment in such form and manner as may be prescribed by implementing rules and regulations.Within sixty (60) days from filing of the protest, all relevant supporting documents shall have been submitted; otherwise, the assessment shall become final.If the protest is denied in whole or in part, or is not acted upon within one hundred eighty (180) days from submission of documents, the taxpayer adversely affected by the decision or inaction mayappeal to the Court of Tax Appeals within thirty (30) daysfrom receipt of the said decision, or from the lapse of the one hundred eighty (180)-day period; otherwise, the decision shall become final, executory and demandable.(underscoring supplied)In the case at bar, petitioners administrative protest was denied by Final Decision on Disputed Assessment datedAugust 2, 2005issued by respondent and whichpetitioner received onAugust 4, 2005.Under the above-quoted Section 228 of the 1997 Tax Code, petitioner had 30 days to appeal respondents denial of its protest to the CTA.Since petitioner received the denial of its administrative protest onAugust 4, 2005, it had untilSeptember 3, 2005to file a petition for review before the CTA Division.It filed one, however, onOctober 20, 2005, hence, it was filed out of time.For a motion for reconsideration of thedenial of the administrative protestdoes not toll the 30-day period to appeal to the CTA.On petitioners final contention that it has a meritorious case in view of the dismissal of the above-mentioned criminal case filed against it for violation of the 1997 Internal Revenue Code,the same fails.For the criminal complaint was instituted not to demand payment, but to penalize the taxpayer for violation of the Tax Code.------------------

CIR V PASCOR REALTYG.R 128315June 29, 1999

Facts:The CIR authorized certain BIR officers to examine thebooks ofaccounts and otheraccountingrecords of Pascor Realty and Development Corp. (PRDC) for 1986, 1987 and 1988. The examination resulted in recommendation for the issuance of an assessment of P7,498,434.65 and P3,015,236.35 for 1986 and 1987, respectively.On March 1, 1995, Commissioner filed a criminal complaint fortax evasionagainst PRDC, its president and treasurer before the DOJ. Private respondents filed immediately an urgent request for reconsideration on reinvestigation disputing the tax assessment and tax liability.On March 23, 1995, private respondents received a subpoena from the DOJ in connection with the criminal complaint. In a letter dated, May 17, 1995, the Commissioner denied private respondents request for reconsideration (reinvestigation on the ground that no formal assessment has been issued which the latterelevatedto the CTA on a petition for review. The Commissioners motion to dismiss on the ground of the CTAs lack of jurisdiction inasmuch as no formal assessment was issued against private respondent was denied by CTA and ordered the Commissioner to file an answer but did not instead filed a petition with the CA alleging grave abuse of discretion and lack of jurisdiction on the part of CTA for considering the affidavit/report of the revenue officers and the endorsement of said report as assessment which may be appealed to he CTA. The CA sustained the CTA decision and dismissed the petition.

Issues: 1. Whether or not the criminal complaint fortax evasioncan be construed as an assessment.2. Whether or not an assessment is necessary beforecriminal chargesfortax evasionmay be instituted.

Held:The filing of the criminal complaint with the DOJ cannot be construed as a formal assessment. Neither theTax Codenor the revenue regulations governing the protest assessments provide a specific definition or form of an assessment.An assessment must be sent to and received by the taxpayer, and mustdemandpayment of the taxes described therein within a specific period. The revenue officers affidavit merely contained a computation of respondentstax liability. It did not state ademandor period for payment. It was addressed to the Secretary of Justice not to the taxpayer. They joint affidavit was meant to support the criminal complaint fortax evasion; it was not meant to be a notice of tax due and ademandto private respondents for the payment thereof. The fact that the complaint was sent to the DOJ, and not to private respondent, shows that commissioner intended to file a criminal complaint fortax evasion, not to issue an assessment.An assessment is not necessary beforecriminal chargescan be filed. Acriminal chargeneed not only be supported by a prima facie showing of failure to file a required return. The CIR had, in suchtax evasioncases, discretion on whether to issue an assessment, or to file a criminal caseagainst the taxpayer, or to do both.