Taxation - 8 Tax Remedies Under NIRC

TAXATION Part EIGHT

TAX REMEDIES REMEDIES UNDER THE NATIONAL INTERNAL REVENUE CODE Assessment of Internal Revenue Taxes a. Definition / Nature / Effect / Basis Sec 4, NIRC Power of the Commissioner to Interpret Tax Laws and to Decide Tax Cases. - Power to interpret this Code & other tax laws is under exclusive & orig jurisdiction of Commissioner, subject to rvw by Sec of Finance. - Power to decide disputed assessments, refunds of internal revenue taxes, fees, other charges, penalties, other matters under this Code or laws or portions administered by BIR is vested in Commissioner, subject to exclusive appellate jurisdiction of CTA. Sec 5, NIRC Power of the Commissioner to Obtain Information, and to Summon, Examine, and Take Testimony of Persons. - In ascertaining correctness of return OR in making return when none was made OR determining liability of person for internal revenue tax OR collecting such liability OR evaluating tax compliance, Commissioner is authorized to A. examine book, paper, record, data w/c may be relevant / material B. obtain on regular basis fr (1) person other than the person whose tax liability is subject to audit / investigation or (2) office / officer of nat’l & local gov’t, gov’t agencies & instrumentalities, incl BSP & GOCCs, any info such as, but not ltd to - costs & volume of production - receipts or sales & gross incomes - names, addresses, financial statements of corp, mutual fund co, insurance co, regional operating HQ of multinat’l companies, joint accts, ass’ns, joint ventures of consortia & registered partnerships AND their members C. summon - person liable for tax or required to file return - officer / employee of such person - person having possession, custody, care of books of accts & acctg records of person liable for tax - any other person … to appear before Commissioner or his rep at time & place specified in summons AND produce books, papers, records, data AND give testimony D. take testimony under oath E. cause revenue officers & employees to - make canvass of revenue district / region AND - inquire after & concerning all persons who may be liable to pay internal revenue tax & all persons owning or having the care, mgmt or possession of object w/ respect to w/c tax is imposed - Nothing in this Sec is construed as granting Commissioner the authority to inquire into bank deposits other than in Sec 6(F). Sec 6, NIRC Power of the Commissioner to Make assessments and Prescribe additional Requirements for Tax Administration and Enforcement. A. Examination of Returns & Determination of Tax Due. - After return was filed, Commissioner or rep may authorize exam of taxpayer AND assessment of correct amt of tax. - Failure to file return shall not prevent Commissioner fr authorizing exam of taxpayer. - Return, statement of declaration filed in ofc authorized to rcv shall not be w/drawn. - W/in 3y fr filing, the same may be modified, changed, amended, provided no notice for audit / investigation of

return, statement or declaration has been actually served upon taxpayer. B. Failure to Submit Required Returns, Statements, Reports & Documents. - When report required shall not be forthcoming w/in time fixed OR when there’s reason to believe that report is false, incomplete or erroneous, Commissioner shall assess proper tax on best evidence obtainable. - In case person fails to file return or other doc at time prescribed OR willfully or otherwise files false / fraudulent return or doc, Commissioner shall make / amend return fr his own knowledge and fr info as he can obtain, w/c is prima facie correct & sufficient. C. Authority to Conduct Inventory-taking, surveillance and to Prescribe Presumptive Gross Sales and Receipts. - Commissioner may, anytime during taxable yr, order inventory-taking of taxpayer for determining internal revenue tax liabilities OR place operations of person, natural / juridical, under observation / surveillance if there’s reason to believe that person isn’t declaring correct income, sales, receipts. - Findings may be used as basis for assessing taxes for other months / qtrs of same or diff taxable yrs. Such assessment is deemed prima facie correct. - When it’s found that person failed to issue receipts & invoices OR when there’s reason to believe that books of accts or records don’t correctly reflect declarations made or to be made in return, Commissioner, after taking into acct the sales, receipts, income, other taxable base of other persons engaged in similar businesses under similar situations OR after considering other relevant info, may prescribe min amt of gross receipts, sales, taxable base. Such amt prescribed is prima facie correct for determining internal revenue tax liabilities. D. Authority to Terminate Taxable Period. - When it comes to knowledge of Commissioner that taxpayer is (1) retiring fr biz subject to tax OR (2) intending to leave Phils OR remove prop therefrom OR hide prop OR (3) performing act tending to obstruct collection of tax for past or current qtr / yr OR render the same totally / partly ineffective unless proceedings are begun immediately, Commissioner shall - declare tax period terminated anytime AND - send notice of decision w/ request for payment of tax - said taxes are due & payable immediately AND subject to penalties unless pd w/in time fixed in demand by Commissioner E. Authority of the Commissioner to Prescribe Real Property Values. - Commissioner is authorized to divide Phils into diff zones / areas AND upon consultation w/ appraisers fr pvt & public sectors, determine FMV of real props in ea zone / area. - For computing internal revenue tax, value of prop is whichever is higher of: 1. FMV as determined by Commissioner OR 2. FMV as shown in schedule of values of Provincial & City Assessors F. Authority of Commissioner to inquire into Bank Deposit Accounts. - Notwithstanding contrary provision of RA No 1405 & other laws, Commissioner is authorized to inquire into bank deposits of: 1. decedent to determine gross estate 2. taxpayer who filed application for compromise of tax liability under Sec 204(A2) by reason of financial incapacity to pay tax liability - In case taxpayer files application to compromise payment of tax liabilities on claim that financial position demonstrates clear inability to pay, his application isn’t considered unless & until he waives in writing his privilege under RA No 1405 or under other laws. Such waiver constitutes authority of Commissioner to inquire into bank deposits of taxpayer. G. Authority to Accredit and Register Tax Agents. - Commissioner shall accredit & register, based on professional competence, integrity & moral fitness, individuals & gen professional partnerships and their reps

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TAXATION who prepare & file tax returns, statements, reports, protests, papers w/ or who appear before, Bureau for taxpayers. - Commissioner shall - create nat’l & regional accreditation boards, members of w/c serve for 3y - designate fr among senior officials of Bureau, 1 chairman & 2 members for ea board, subject to rules as Sec of Finance promulgates upon recommendation of Commissioner. - Individuals & gen professional partnerships and their reps who are denied accreditation by Commissioner and / or accreditation boards may appeal to Sec of Finance, who shall rule on appeal w/in 60d fr receipt of appeal. Failure of Sec of Finance to rule is deemed as approval of application for accreditation. H. Authority of the Commissioner to Prescribe Additional Procedural or Documentary Requirements. - Commissioner may prescribe manner of compliance w/ documentary / procedural requirement in connection w/ submission / preparation of FS accompanying tax returns. Sec 203, NIRC Period of Limitation Upon Assessment and Collection. - Except as provided in Sec 222, internal revenue taxes are assessed w/in 3y after last day prescribed for filing of return. No proceeding in court w/o assessment for collection shall be begun after expiration of period - Where return is filed beyond period prescribed, the 3y period is counted fr day the return was filed. - A return filed before last day prescribed for filing is considered as filed on last day. Sec 222, NIRC Exceptions as to Period of Limitation of Assessment and Collection of Taxes. a. - In case of false / fraudulent return w/ intent to evade tax OR failure to file return - tax may be assessed OR proceeding in court for collection may be filed w/o assessment w/in 10y after discovery of falsity, fraud or omission - In a fraud assessment w/c became final & executory, the fact of fraud is judicially taken cognizance of in civil / crim action for collection. b. - If before expiration of time prescribed in Sec 203 for assessment, both Commissioner & taxpayer agreed in writing to assessment after such time, tax may be assessed w/in period agreed upon. - Period agreed upon may be extended by subsequent written agreement made before expiration of period previously agreed upon. c. - Internal revenue tax w/c was assessed w/in period of limitation prescribed in (a) may be collected by - distraint OR - levy OR - proceeding in court … w/in 5y ff assessment d. - Internal revenue tax w/c was assessed w/in period agreed upon in (b) may be collected by - distraint OR - levy OR - proceeding in court … w/in period agreed upon in writing before expiration of 5y period. - Period agreed upon may be extended by subsequent written agreements made before expiration of period previously agreed upon. e. - Nothing in (d) & (a) is construed to authorize exam & investigation / inquiry into tax return filed in accordance w/ tax amnesty law or decree. Sec 223, NIRC Suspension of Running of Statute of Limitations.

- Running of Statute of Limitations in Sec 203 & 222 on making of assessment AND beginning of distraint / levy / proceeding in court, is suspended for period during w/c Commissioner is prohibited fr making assessment or beginning distraint / levy / proceeding in court AND for 60d thereafter - when taxpayer requests for reinvestigation w/c is granted by Commissioner - when taxpayer can’t be located in address in return filed upon w/c tax is being assessed / collected - if taxpayer informs Commissioner of change in address, running of Statute of Limitations isn’t suspended - when warrant of distraint / levy is served upon taxpayer, his rep, or member of household w/ sufficient discretion AND no prop could be located - when taxpayer is out of Phils Sec 228, NIRC Protesting of Assessment. - When Commissioner or rep finds that proper taxes shld be assessed, he shall first notify taxpayer. - Preassessment notice isn’t required when a. finding for deficiency tax is result of mathematical error in computation of tax as appearing on face of return b. discrepancy was determined between tax w/held and amt actually remitted by w/holding agent c. taxpayer who opted to claim refund / tax credit of excess creditable w/holding tax for taxable period was determined to have carried over & automatically applied the same amt claimed against estimated tax liabilities for taxable qtr or qtrs of succeeding taxable yr d. excise tax due on exciseable articles hasn’t been pd e. article locally purchased / imptd by exempt person has been sold, traded, transferred to non-exempt persons - Taxpayer are informed in writing of law AND facts on w/c assessment is made. Otherwise, assessment is void. - W/in period prescribed by IRR, taxpayer is required to respond to notice. - If taxpayer fails to respond, Commissioner or rep issues assessment based on findings. - Such assessment may be protested administratively by filing request for reconsideration OR reinvestigation w/in 30d fr receipt of assessment. - W/in 60d fr filing of protest, supporting docs shall have been submitted. Otherwise, assessment becomes final. - If protest is denied in whole or in part, or isn’t acted upon w/in 180d fr submission of docs, taxpayer may appeal to CTA w/in 30d fr receipt of decision or fr lapse of 180d period. Otherwise, decision becomes final, executory, demandable. Sec 3, Revenue Regulation 12-99 Due Process Requirement in Issuance of Deficiency Tax Assessment. 3.1 Mode of procedures in issuance of deficiency tax assessment 3.1.1 Notice for informal conference. - Revenue Officer who audited taxpayer's records shall state in report WON taxpayer agrees w/ his findings that taxpayer is liable for deficiency tax. - If taxpayer isn’t amenable, based on Officer's report, taxpayer is informed in writing by Revenue District Office OR Special Investigation Division, as case may be (in case of Revenue Regional Offices) OR by Chief of Division concerned (in case of BIR Nat’l Ofc) of discrepancy in taxpayer's payment of internal revenue taxes, for purpose of "Informal Conference" to afford taxpayer opportunity to present his side. - If taxpayer fails to respond w/in 15d fr receipt of notice for informal conference, he is considered in default. Revenue District Officer OR Chief of Special Investigation Division of Revenue Regional Office OR Chief of Division in Nat’l Ofc shall endorse case to Assessment Division of Revenue Regional Office OR to Commissioner or his rep for rvw & issuance of deficiency tax assessment, if warranted. 3.1.2 Preliminary Assessment Notice (PAN). - If after rvw & evaluation by Assessment Division OR Commissioner / rep, it’s determined that there’s basis to assess taxpayer for deficiency tax, said Ofc shall issue to

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TAXATION taxpayer, at least by registered mail, a Preliminary Assessment Notice (PAN) for proposed assessment, showing in detail, facts & law, rules, regulations, jurisprudence on w/c proposed assessment is based. - If taxpayer fails to respond w/in 15d fr receipt of PAN, he’s considered in default. Formal letter of demand & assessment notice is caused to be issued by Office, calling for payment of deficiency tax liability, inclusive of penalties. 3.1.3 Exceptions to Prior Notice of the Assessment. - Notice for informal conference AND PAN aren’t required in ff cases. Issuance of formal assessment notice for payment of deficiency tax liability is sufficient when i. finding for deficiency tax is result of mathematical error in computation of tax appearing on face of tax return ii. discrepancy was determined between tax w/held and amt actually remitted by w/holding agent iii. taxpayer who opted to claim refund / tax credit of excess creditable w/holding tax for taxable period was determined to have carried over & automatically applied the same amt claimed against estimated tax liabilities for taxable qtr or qtrs of succeeding taxable yr iv. excise tax due on excisable articles hasn’t been pd v. article locally purchased / imptd by exempt person was sold, traded, transferred to non-exempt persons 3.1.4 Formal Letter of Demand and Assessment Notice. - Formal letter of demand & assessment notice is issued by Commissioner or rep. - Letter of demand shall state facts, law, rules, regulations, jurisprudence on w/c assessment is based. Otherwise, formal letter of demand & assessment notice is void. The same shall be sent to the taxpayer only by registered mail or by personal delivery. If sent by personal delivery, the taxpayer or his duly authorized representative shall acknowledge receipt thereof in the duplicate copy of the letter of demand, showing the following: (a) His name; (b) signature; (c) designation and authority to act for and in behalf of the taxpayer, if acknowledged received by a person other than the taxpayer himself; and (d) date of receipt thereof. 3.1.5 Disputed Assessment. - Taxpayer or rep may protest administratively against formal letter of demand & assessment notice w/in 30d fr date of receipt. - If there are several issues involved but taxpayer only disputes / protests against validity of some of issues, taxpayer is required to pay deficiency tax attributable to undisputed issues. Collection letter is issued to taxpayer calling for payment of said deficiency tax, incl surcharge and / or interest. - No action is taken on disputed issues until taxpayer pd deficiency tax attributable to undisputed issues. - Prescriptive period for assessment / collection of tax attributable to disputed issues is suspended. - Taxpayer shall state facts, law, rules, regulations, jurisprudence on w/c protest is based. Otherwise, protest is void & w/o force & effect. - If there are several issues in disputed assessment and taxpayer fails to state facts, law, rules, regulations, jurisprudence on some of issues, the same are considered undisputed. Taxpayer is required to pay deficiency tax attributable thereto. - Taxpayer shall submit required docs in support of protest w/in 60d fr filing of letter of protest. Otherwise, assessment becomes final, executory, demandable. - The phrase "submit required docs" includes submission / presentation of docs for scrutiny & evaluation by Revenue Officer. Revenue Officer shall state this fact in his report. - If taxpayer fails to file protest w/in 30d fr receipt of letter / notice, assessment becomes final, executory, demandable. - If protest is denied, in whole or in part by Commissioner, taxpayer may appeal to CTA w/in 30d fr receipt of decision. Otherwise, assessment becomes final, executory, demandable. - In general, if protest is denied, in whole or in part, by Commissioner or rep, taxpayer may appeal to CTA w/in 30d fr receipt of decision. Otherwise, assessment becomes final, executory, demandable.

- If taxpayer elevates protest to Commissioner w/in 30d fr date of receipt of final decision of Commissioner's rep, latter's decision isn’t considered final, executory, demandable. Protest is decided by Commissioner. - If Commissioner or rep fails to act on protest w/in 180d fr date of submission of required docs, taxpayer may appeal to CTA w/in 30d fr lapse of 180d period. Otherwise, assessment becomes final, executory, demandable. 3.1.6 Administrative Decision on a Disputed Assessment. - Decision of Commissioner or rep shall state a. facts, law, rules, regulations, jurisprudence on w/c decision is based (otherwise, decision is void; same isn’t considered a decision on disputed assessment) AND b. that the same is his final decision 3.1.7 Constructive Service. - If notice to taxpayer is served by registered mail, and no response is rcvd fr taxpayer w/in prescribed period fr date of posting in the mail, the same is considered actually / constructively rcvd by taxpayer. - If personally served on taxpayer or his rep who, however, refused to acknowledge receipt, the same is constructively served on taxpayer. - Constructive svc is considered effected by leaving the same in premises of taxpayer AND this fact is attested to, witnessed & signed by at least 2 revenue officers other than revenue officer who constructively served. - Revenue officer who constructively served makes written report w/c forms part of docket of this case. TAX ASSESSMENT TAX AUDIT LETTER OF AUTHORITY / AUDIT NOTICE PRE-ASSESSMENT NOTICE (PAN) / WHEN NOT REQUIRED NOTICE OF ASSESSMENT OR FORMAL ASSESSMENT NOTICE (FAN) DEFICIENCY / DELINQUENCY JEOPARDY ASSESSMENT POWER OF THE COMMISSIONER TO ASSESS DEFICIENCY TAX / BEST EVIDENCE OBTAINABLE CIR v. Hantex Trading Co. Inc. - The best evidence envisaged in NIRC includes 1. corporate & acctg records of taxpayer 2. acctg records of other taxpayers engaged in same line of biz 3. evidence fr other taxpayers who had personal transactions or fr whom subject taxpayer rcvd any income 4. info secured fr gov’t ofcs / agencies - Law allows BIR access to all relevant or material records & data in the person of taxpayer. It places no limit / condition on type / form of medium by w/c record subject to order of BIR is kept. The standard isn’t the form of record but where it might shed light on accuracy of taxpayer’s return. - Where the records of taxpayer are manifestly inaccurate & incomplete, Commissioner may look to other sources of info to establish income made by taxpayer. - Best evidence obtainable may consist of hearsay evidence, such as testi of 3rd parties or accts or other records of other taxpayers similarly circumstanced as subject taxpayer, hence, inadmissible in regular proceeding in regular courts. Gen rule is that administrative agencies such as BIR aren’t bound by technical rules of evidence. - However, best evidence obtainable under NIRC doesn’t include mere photocopies of records / docs. Such are mere scraps of paper and have no probative value. Where accuracy of return is being checked, gov’t is entitled to use orig records rather than accept purported copies w/c present the risk of error / tampering. - In the absence of acctg records of taxpayer, his tax liability may be determined by estimation. Petitioner isn’t required to compute tax liabilities w/ mathematical exactness. Approximation in calculation is justified. However, the rule doesn’t apply where estimation is arrived at arbitrarily or capriciously.

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TAXATION - Gen rule: tax assessments by tax examiners are presumed correct & made in good faith. It is presumed, however, that such assessment was based on sufficient evidence. Prima facie correctness of assessment doesn’t apply upon proof that assessment is w/o foundation, arbitrary, capricious. Where BIR came out w/ “naked assessment”, determination of tax due is w/o rational basis. Wintelecom v. CIR - BIR’s failure to return docs to taxpayer wouldn’t make assessment by BIR null & void. Presumption of regularity in official fcn of gov’t officials isn’t defeated by mere allegation that petitioner was deprived of opportunity to fully contest subject assessments. Petitioner was given chance to present position before Court w/ option to require respondent to bring alleged documentary evidence. Respondent couldn’t be considered at fault for petitioner's negligence in failing to retain copies of subject documentary evidence. - While Commissioner has power to make assessments based on best evidence obtainable, he must also be able to present such evidence before Court in the event that litigation ensues. Best evidence obtainable includes those w/c can’t be admitted in judicial proceeding where rules on evidence are strictly observed. - Cited Commissioner of Internal Revenue vs. Hantex

b. Period to Assess Deficiency Tax PRESCRIPTION ORDINARY – 3 yrs fr date of filing return (Sec 203) EXTRAORDINARY – 10 yrs fr discovery of fraud, falsity or omission (Sec 222) Estate of Fidel Reyes v. CIR - Cited Aznar v. CTA - False returns don’t necessarily mean w/ intent to evade taxes. - Whenever intent to evade taxes exists, fraud already exists. SUSPENSION OF PRESCRIPTIVE PERIOD / EXCEPTIONS Revenue Memorandum Order No. 20-90 as amended by Revenue Delegation Authority Order No. 05-01 - Internal revenue taxes may be assessed / collected after ordinary prescriptive period, if before its expiration, both Commissioner & taxpayer agreed in writing to assessment and / or collection after said period. - Period agreed upon may be extended by subsequent written agreement made before expiration of period previously agreed upon. - This written agreement between Commissioner & taxpayer is the Waiver of the Statute of Limitations. - Ff procedures shld be followed: 1. - Waiver must be in form identified hereof. - Form may be reproduced by Ofc concerned but there shld be no deviation fr such form. - The phrase "but not after ______ 19 ___" shld be filled up. This indicates expiry date of period agreed upon to assess / collect tax after regular 3y period of prescription. - Period agreed upon constitutes time w/in w/c to effect assessment / collection of tax in addition to ordinary prescriptive period. 2. - Waiver is signed by taxpayer himself OR his rep. - In case of corp, waiver must be signed by any of its responsible officials. - Soon after waiver is signed by taxpayer, Commissioner of Internal Revenue or revenue official authorized by him, as provided, shall sign waiver indicating that Bureau has accepted & agreed to waiver. - Date of acceptance by Bureau shld be indicated. - Both date of execution by taxpayer & date of acceptance by Bureau shld be before expiration of period of prescription or before lapse of period agreed upon in case subsequent agreement is executed. 3. Revenue officials authorized to sign waiver: See RDAO 0501. 4.

- Waiver is executed in 3 copies - orig copy to be attached to docket of case - 2nd copy for taxpayer - 3rd copy for Ofc accepting the waiver - Fact of receipt by taxpayer of his / her file copy is indicated in orig copy. 5. - Procedures shall be strictly followed. - Revenue official found not to have complied, resulting in prescription of right to assess / collect is administratively dealt with. Revenue Delegation Authority Order No. 05-01 Revenue Officials Authorized to Sign the Waiver - Ff are authorized to sign & accept Waiver of the Defense of Prescription Under the Statute of Limitations A. For National Office cases 1. Assistant Commissioner (ACIR): for tax fraud & policy Enforcement Service cases 2. ACIR, Large Taxpayers Service: for large taxpayers cases other than those under Subsec B 3. ACIR, Legal Service: for cases pending verification & awaiting resolution of certain legal issues prior to prescription and for issuance / compliance of Subpoena Duces Tecum 4. ACIR, Assessment Service (AS): for cases w/c are pending in or subject to rvw / approval by ACIR, AS 5. ACIR, Collection Service: for cases pending action in Collection Svc B. For cases in Large Taxpayers District Office (LTDO) - Chief of LTDO shall sign & accept waiver for cases pending investigation / action in his possession. C. For Regional cases 1. Revenue District Officer: cases pending investigation / verification / reinvestigation in RDOs 2. Regional Director: cases pending in Divisions in Regional Ofc, incl cases pending approval by Regional Director - To prevent undue delay in execution & acceptance of waiver, asst heads of offices are likewise authorized to sign under meritorious circumstances in absence of abovementioned officials. - Authorized revenue official ensures that waiver is duly accomplished & signed by taxpayer or rep before affixing his signature. - In case authority is delegated by taxpayer to rep, revenue official sees to it that delegation is in writing & duly notarized. Waiver isn’t accepted by BIR unless duly notarized. Revenue Memorandum Circular 6-2005 (Execution of Waiver of the Statute of Limitations) Cited Philippine Journalists Inc v. CIR: 1. Waiver of statute of limitations must conform strictly w/ RMO 20-90 to be valid & binding. 1.1. Waiver must specify definite agreed date between BIR & taxpayer w/in w/c former may assess & collect revenue taxes. 1.2. Waiver must be accepted by Commissioner or his rep. Date of acceptance must be indicated. 1.3. Taxpayer must be furnished copy of waiver accepted by BIR. 2. Waiver is derogation of taxpayer's right to security against prolonged & unscrupulous investigations and must be carefully & strictly construed. 3. Waiver isn’t a waiver of right to invoke defense of prescription. It’s an agreement between taxpayer & BIR that period to issue assessment & collect taxes is extended to date certain. 4. Waiver isn’t a unilateral act by taxpayer or BIR, but a bilateral agreement. Revenue Memorandum Circular 48-90 (Counting of 3yr prescriptive period in the issuance of the notice of assessment, or warrants of distraint, levy & garnishment) - Except in case of false or fraudulent return or failure to file return, period w/ w/c to make assessment is 3y after return is filed. Tax may be collected by distraint OR levy OR garnishment OR by proceeding in court w/in 3y after assessment of tax.

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TAXATION - When period covers leap yr, question is raised as to when last day of prescriptive period expires. - Years are of 365 days ea as provided in A 13, NCC. - A 3-yr prescriptive period has aggregate no. of 1,095 days (365d x 3y = 1,095d), reckoned fr date of filing of return, or fr issuance of assessment, as case may be. - The 3-yr prescriptive period expires on 1,095th day, notwithstanding the fact that w/in the period, there’s leap yr w/c is of 366d. - NAMARCO v. Tecson explained procedure in computation of prescriptive period. - In computation of period of time w/in w/c act is to be done, 1st day shld be excluded AND last day included. - To prevent future assessments fr being time-barred, assessment notice / warrants shld be issued on or before 1,095th day. - However, to make sure that prescription will not set in, all concerned are instructed to issue assessment notices & warrants not later than 90d before expiration of 3y prescriptive period.

cases where period for assessment extends indefinitely bec this deprives taxpayer of the assurance that it’ll no longer be subjected to further investigation for taxes after expiration of reasonable period of time. - Waiver of statute of limitations is a derogation of taxpayer’s right to security against prolonged & unscrupulous investigations and must be carefully & strictly construed. - Waiver of statute of limitations isn’t a waiver of right to invoke the defense of prescription. It’s an agreement between taxpayer & BIR that period to issue assessment and collect taxes is extended to date certain. It doesn’t mean that taxpayer relinquishes the right to invoke prescription unequivocally particularly where language of doc is equivocal. Exceptions to law on prescription shld be strictly construed. - In this case, waiver is invalid bec it 1. didn’t comply w/ RMO 20-90; no specified date between BIR and taxpayer 2. signed only by revenue district officer, not the Commissioner 3. has defect in date of acceptance 4. was not given copy furnished the taxpayer

CIR v. CTA - In cases of omission, CIR has 10y w/in w/c to assess. - But even if assessment is w/in prescribed period, it doesn’t follow that it’s a valid assessment in its entirety.

c. Requisites of a Valid Assessment

CIR v. Gonzales - Fraud is a question of fact. Circumstances must be alleged & proved as to its existence and non-existence is final unless clearly shown to be erroneous. - A return need not be complete in all particulars. It’s sufficient if it complies substantially w/ the law: 1. return is made in good faith and isn’t false or fraudulent 2. it covers entire period 3. it contains info as to various items of such definiteness as to permit computation & assessment of tax - Law imposes upon taxpayer the burden of supplying by return the info upon w/c assessment is based. His duty complied w/, taxpayer isn’t bound to do anything more than wait for Commissioner to assess. Code gives Commissioner 5y to assess. If taxpayer failed to observe the law, Commissioner has longer period. Non-observance consists in 1. filing false return 2. filing fraudulent return w/ intent to evade tax 3. filing no return at all Republic v. Ker & Company - Fraud is a question of fact w/c must be alleged & proved. - Prescriptive period to collect deficiency taxes shall be suspended for period during w/c Commissioner is prohibited fr beginning a distraint and levy or instituting a proceeding in court, and for 60d thereafter. Pendency of taxpayer’s appeal in CTA and in SC had effect of temporarily staying the hands of the Commissioner. Aznar v. CTA - The proper interpretation is that in the 3 diff cases of (1) false return, (2) fraudulent return w/ intent to evade tax, (3) failure to file a return, tax may be assessed or proceeding in court for collection of tax may be begun w/o assessment, any time w/in 10y after discover of (1) falsity, (2) fraud or (3) omission. - There is a difference between false return and fraudulent return. While the first merely implies deviation fr truth, intentional or not, the second implies intentional or deceitful entry w/ intent to evade tax. - Fraud can’t be presumed but must be proven. Fraudulent intent couldn’t be deduced fr mistakes however frequent they may be, esp if such mistakes emanate fr erroneous entries or erroneous classification of items in acctg methods utilized for determination of tax liabilities. - Fraud contemplated by law is actual & not constructive. It must be intentional fraud, consisting of deception willfully and deliberately done or resorted to in order to induce another to give up some legal right. Negligence, slight or gross, isn’t equivalent to fraud w/ intent to evade tax. Phil Journalists Inc. v. Commissioner - NIRC provides for statute of limitations on assessment & collection of internal revenue taxes to safeguard interest of taxpayer against unreasonable investigation. Unreasonable investigation contemplates

Rep v. IAC - Even assuming that deficiency tax assessment were correct, since taxpayer has already pd to gov’t by way of amnesty taxes and were granted not merely an exemption but an amnesty, gov’t is estopped fr collecting the difference between deficiency tax assessment and amt already pd by them as amnesty tax. - An amnesty partakes of an absolute forgiveness or waiver by gov’t of its right to collect what otherwise would be due it. Bonifacia Sy Po v. CTA - The rule on “best evidence obtainable” applies when tax report required by law for purpose of assessment isn’t available or when tax report is incomplete or fraudulent. - Tax assessments by tax examiners are presumed correct & made in good faith. Taxpayer has duty to prove otherwise. In the absence of proof of irregularities in performance of duties, assessment duly made by BIR examiner and approved by superior officers will not be disturbed. All presumptions are in favor of correctness of tax assessments. Meralco v. Savellano Mandamus doesn’t lie to compel Commissioner of Internal Revenue to impose a tax assessment not found by him to be proper. Elegado v. CTA It is illogical to suggest that a provisional assessment can supersede an earlier assessment w/c had become final & executory. CIR v. Island Garment Cited Collector v. Benipayo Collector v. Benipayo - An assessment fixes & determines tax liability of taxpayer. As soon as it is served, an obligation arises on the part of the taxpayer concerned to pay amt assessed & demanded. Hence, assessments shldn’t be based on mere presumptions no matter how reasonable or logical said presumptions may be. - To stand the test of judicial scrutiny, the assessment must be based on actual facts. The presumption of correctness of assessment being a mere presumption cannot be made to rest on another presumption. CIR v. Construction Resources of Asia Inc. Cited CIR v. Bohol Land Trans Co: “All presumptions are in favor of correctness of tax assessments. The burden of proof is on the taxpayer to show the contrary. Good faith of tax assessors and the validity of their actions are presumed.”” Marcos v. CA - If there’s issue as to validity of BIR’s decision to assess estate taxes, this shld’ve been pursued thru proper administrative & judicial avenues. - In case of failure to file return, the tax may be assessed any time w/in 10y after omission, and any tax assessed may be collected by levy upon real prop w/in 3y ff assessment of tax.

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TAXATION - The mere fact that decedent has pending cases involving ill-gotten wealth doesn’t affect enforcement of tax assessments over props indubitably included in his estate. CIR v. Hantex Trading Co Inc, supra Menguito v. CIR - If taxpayer denies ever having rcvd an assessment fr BIR, it’s incumbent upon the latter to prove by competent evidence that notice was rcvd by addressee. - Since respondent hasn’t adduced sufficient evidence that petitioner had in fact rcvd pre-assessment notice & post-reporting notice required by law, it can’t be assumed that petitioner had been served said notices. ATR Kim Eng Financial Corp v. CIR - A taxpayer’s claim for tax refund can proceed independently, despite existence of deficiency income tax assessment bec the remedy for assessment appeals vary fr claims for refund. - Court can’t assume jurisdiction over assessments w/c haven’t been duly protested by taxpayer. Court can’t be compelled by respondent to take cognizance of assessments w/c appear to be undisputed & worse, not yet served. - When taxpayer rcvs assessment, he’s accorded due process of protesting assessment & eventually appealing the same to SC. - Assessment must be sent to & rcvd by taxpayer AND must demand payment of taxes w/in specified period. Failure of respondent to establish receipt by petitioner of assessment notice to petitioner's new address renders assessment notice invalid. Azucena Reyes v. CIR - Sec 228 is clear and mandatory re protesting of assessment. - The old requirement of merely notifying the taxpayer of CIR’s findings was changed in 1998 to informing the taxpayer of not only the law, but also of the facts on w/c assessment would be made; otherwise the assessment itself would be invalid. - Sec 228 on protesting assessment, being procedural, can be applied retroactively. - A void assessment bears no valid fruit. The law imposes a substantive, not merely formal requirement. To proceed w/ tax collection w/o first establishing valid assessment is violative of principle in administrative investigation: taxpayers shld be able to present their case and adduce supporting evidence. Barcelon Roxas Securities Inc. v. CIR - CIR has 3y fr last day for filing of return to send an assessment notice. - Assessment is made w/in prescriptive period if notice to this effect is released, mailed or sent by CIR to taxpayer w/in said period. Receipt by taxpayer w/in prescriptive period isn’t necessary. The rule doesn’t dispense w/ requirement that taxpayer shld actually rcv, even beyond prescriptive period, the assessment notice w/c was timely released, mailed and sent. - When mail matter is sent by registered mail, there exists a presumption in R131, that it was rcvd in regular course of mail. The facts to be proved to raise this presumption are (a) that the letter was properly addressed w/ postage prepaid, (b) that it was mailed. This is a disputable presumption subject to controversion. Direct denial of receipt shifts burden upon party favored by presumption to prove that the mailed letter was rcvd by addressee. CIR v. Dominador Menguito - The stringent requirement that assessment notice be satisfactorily proven to have been issued & released or, if receipt is denied, that assessment notice was served on taxpayer, applies only to formal assessments under Sec 228 of NIRC, but not to post-reporting notices / pre-assessment notices. - The issuance of valid formal assessment is substantive prerequisite to tax collection. It contains not only computation of tax liabilities but also demand for payment w/in prescribed period, signaling the time when penalties & interests begin to accrue against taxpayer & enabling the latter to determine his remedies. Due process requires that it must be served on & rcvd by taxpayer. - Post-reporting notice & pre-assessment notice don’t bear gravity of formal assessment notice. They merely hint at the initial findings of BIR against taxpayer & invites latter to "informal" conference / clarificatory mtg. Neither notice contains declaration of tax liability of taxpayer or demand for payment thereof. Hence, lack of such inflicts

no prejudice on taxpayer for as long as latter is properly served formal assessment notice.

Protesting an assessment / Remedy before payment a. How to Protest or Dispute an Assessment Administratively WHEN TO FILE PROTEST – WITHIN 30 DAYS FROM RECEIPT OF FAN Professional Services Inc. v. CIR - Petitioner had 30d to file protest fr receipt of Formal Letter of Demand and the Assessment Notice. - When mail matter was rcvd by registered mail, there exists presumption that it was rcvd in regular course of mail. To raise this presumption, it must be proven that 1. the letter was properly addressed w/ postage prepaid AND 2. it was mailed - As RoC applies by analogy or in suppletory character, the date of mailing of pleadings, motions, papers, as shown by post office stamp on envelope or registry receipt, is considered as date of filing; envelope is attached to record of case. - Respondent has burden of proving that petitioner's protest to FAN was actually mailed after prescriptive period by presenting mail envelope used by petitioner duly stamped by Phil Postal Corp showing date when protest was sent by registered mail. WHERE TO FILE OTHER REQUIREMENTS - Submission of relevant documents - Payment under protest not required under NIRC EFFECT OF PROTEST – ASSESSMENT DEEMED DISPUTED; SUSPENSION OF THE PRESCRIPTIVE PERIOD TO COLLECT BPI v. CIR - RR 12-85: Protest to assessment a. Request for reconsideration: plea for re-evaluation of assessment on the basis of existing records w/o need of add’l evidence; may involve both question of fact or law or both b. Request for reinvestigation: plea for re-evaluation of assessment on basis of newly-discovered or add’l evidence; may also involve question of fact or law or both - Under Sec 224, running of prescriptive period for collection of taxes can only be suspended by a request for reinvestigation, not reconsideration. - Tax Code also requires that the request for reinvestigation had been granted by BIR Commissioner to suspend the running of prescriptive periods for assessment & collection. - The burden of proof that taxpayer’s request for reinvestigation had actually been granted is on BIR Commissioner. Grant may be expressed in communications w/ taxpayer or implied fr actions of Commissioner or his rep. - Statute of limitations on assessment & collection of nat’l internal revenue taxes may be suspended if taxpayer executes valid waiver and in instances in Sec 224 w/c include a request for reinvestigation granted by BIR Commissioner. Outside of these statutory provisions, SC also recognized one other exception to the statute of limitations on collection of taxes in Collector v. Suyoc: “There are cases where taxpayer may be prevented fr setting up defense of prescription even if he hasn’t previously waived it in writing as when by his repeated requests or positive acts the gov’t has been, for good reason, persuaded to postpone collection to make him feel that the demand wasn’t unreasonable or that no harassment / injustice is meant by gov’t.” EFFECT OF FAILURE TO PROTEST / FAILURE TO SUBMIT RELEVANT DOCUMENTS Standard Chartered Bank v. CIR - The "relevant supporting docs" mentioned in the law refers to docs w/c taxpayer feels would be necessary to support his protest AND not what Respondent Commissioner feels shld be submitted, otherwise, Petitioner taxpayer would always be at mercy of BIR w/c may require production of docs w/c taxpayer couldn’t produce.

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TAXATION - Where BIR finds that add’l docs must be submitted, it shld have informed taxpayer-protester to submit docs in order that complete determination of propriety of assessment may be had. Unique Dyeworks v. CIR - Petitioner isn’t required to submit other evidence w/c he feels will be unnecessary to his protest. Where BIR finds that add’l docs must be submitted, it shld inform taxpayer to submit the docs or else it is remiss in informing the latter. Oceanic Wireless Network Inc. v. CIR - Request for reconsideration must be made w/in 30d fr taxpayer’s receipt of tax deficiency assessment, otherwise, decision becomes final, unappealable and demandable. - A tax assessment that has become final, executory, enforceable for failure of taxpayer to assail the same as provided in Sec 228 can no longer be contested. - For CTA to acquire jurisdiction, assessment must first be disputed by taxpayer & ruled upon by Commissioner to warrant decision fr w/c petition for rvw may be taken to CTA. - Where adverse ruling was rendered by Commissioner re disputed assessment or claim for refund / credit, taxpayer may appeal the same w/in 30d after receipt thereof. CIR v. Solidbank Corp - Cited Standard Chartered Bank – Phil Branches v. CIR - The determination of 'relevant supporting docs' initially rests upon one who filed protest. However, where BIR finds that add’l docs must be submitted, it shld’ve informed taxpayer-protester to submit docs in order that complete determination of propriety of assessment may be had. - Finality of assessment simply means that where taxpayer decides to forego w/ opportunity to present docs in support of claim w/in 60d fr filing of protest, it merely lost its chance to further contest assessment. - Non-compliance w/ submission of necessary docs would either mean that - petitioner no longer wishes to further submit any doc for reason that its protest letter filed was more than enough to support its claim OR - petitioner failed to comply thus it can no longer give justification w/ regard to its objections as to correctness of assessment notices - Nonetheless, the necessity of submission of supporting docs lies on petitioner. It can’t be left to the discretion of respondent for in doing so would leave petitioner's case at the mercy of respondent. It’s for petitioner to decide WON supporting docs are necessary to support protest, for it’s in the best position, being the affected party, to determine w/c docs are necessary & essential to garner favorable decision fr respondent. DIFFERENCES AND SIMILARITIES OF PROTEST CASES Marcos v. CA, supra Mambulao Lumber Company v. Republic - In a suit for collection of internal revenue taxes, where assessment has already become final & executory, action to collect is akin to an action to enforce a judgment. No inquiry can be made as to the merits of orig case or justness of judgment. Petitioner is already precluded fr raising defense of prescription. - Where taxpayer didn’t contest assessment, such became final & properly collectible by means of ordinary court action. Taxpayer can’t dispute assessment w/c is being enforced by judicial action. He shld’ve disputed it before it was brought to court. Dayrit v. Cruz - Payment of taxes being admittedly a burden, taxpayers shld not be left w/o any recourse when they feel aggrieved due to erroneous & burdensome assessments made by BIR agent or by Commissioner. - However, remedy of aggrieved taxpayer isn’t w/o any limitation. A taxpayer’s right to contest assessments, particularly the right to appeal to CTA, may be waived or lost. - A suit for collection of internal revenue taxes where assessment has already become final and executory, the action to collect is akin to an action to enforce judgment. No inquiry can be made as to the merits of the orig case or the justness of the judgment.

CIR v. Wyett Suaco - Settled is the rule that the prescriptive period provided by law to make a collection by distraint or levy or by proceeding in court is interrupted once a taxpayer requests for reinvestigation or reconsideration of assessment. - The statutory period of limitation for collection may be interrupted if by taxpayer’s repeated requests or positive acts the gov’t has been for good reasons persuaded to postpone collection to make him feel that the demand was not unreasonable or that no harassment or injustice is meant by the gov’t.

b. CIR Renders Decision on the Disputed Assessment PERIOD TO DECIDE: WITHIN 180 DAYS FROM SUBMISSION OF RELEVANT DOCUMENT CIR’S ACTIONS EQUIVALENT TO DENIAL OF PROTEST - filing of civil / crim case against taxpayer - issuing a warrant of distraint & levy Antam Consolidated Inc. v. CTA and CIR - Cited Surigao Electric v CA - CIR shld always indicate to taxpayer in clear & unequivocal language whenever his action on assessment questioned by taxpayer constitutes his final determination, as contemplated by sec 7 & 11 of RA 1125. - On the basis of this indicium indubitably showing that CIR’s action is final, aggrieved taxpayer would then be able to take recourse to tax court at opportune time. Taxpayer would be able to determine when his right to appeal to tax court accrues. This would also obviate all desire & opportunity on part of taxpayer to continually delay finality of assessment by repeated requests for recomputation & reconsideration. - On the part of CIR, this would encourage his ofc to conduct careful study of every questioned assessment & render correct & definite decision in the first instance. This would also deter CIR fr unfairly making taxpayer grope in the dark as to w/c actions constitutes decision appealable to tax court. This rule of conduct would meet pressing need for fair play, regularity, orderliness in administrative action. - Appealable decision of CIR may be embodied in letter to taxpayer, signifying denial of protest. - While decision of CIR is usually expressed in form of letter to taxpayer, a civil suit for collection can also be considered as denial of protest of assessment. - The decision may yet come in another form, that is, issuance by CIR of warrant of distraint & levy. In CIR v. Algue, SC held that as a rule, warrant of distraint & levy is "proof of finality of assessment.” - The issuance of warrant of distraint & levy by CIR is considered as "disputed assessment" for purposes of filing appeal to CTA. There’s nothing more compelling than issuance by CIR of warrant of distraint & levy w/c is preparatory to actual auction sale of taxpayer's prop to satisfy tax liability.

c. Remedy of the Taxpayer CIR v. Union Shipping - Issuance of warrant of distraint & levy is proof of finality of assessment. It’s the most drastic action of all media of enforcing the collection of tax, and is tantamount to an outright denial of MFR of assessment. - CIR shld always indicate to taxpayer in clear & unequivocal language what constitutes his final determination of the disputed assessment. - CIR, not having clearly signified his final action, legally the period to appeal has not commenced to run. It was only when the summons on civil suit for collection were rcvd that the period to appeal commenced to run. CIR v. Algue - Accdg to RA 1125, appeal may be made w/in 30d after receipt of decision or ruling challenged. As a rule, warrant of distraint & levy if proof of the finality of the assessment and renders hopeless a request for reconsideration. But there is a special circumstance in this case that prevents application of this doctrine. In this case, the letter of protest was not taken into account before warrant of distraint & levy was issued bec it couldn’t be located in ofc of CIR. During the

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TAXATION intervening period, the warrant was premature and could not be served. Advertising Asso v. CA Commissioner shld always indicate to taxpayer in clear & unequivocal language what constitutes his final determination of the disputed assessment. IF PROTEST DENIED - In case final decision is rendered by Commissioner’s duly authorized rep, taxpayer may appeal to Commissioner w/in 30d fr receipt of decision. In this case, the rep’s decision shall not be considered final, executory and demandable, and Commissioner shall decide case. (RR 12-99) - Appeal to CTA the final decision of CIR on disputed assessment w/in 30d fr receipt of decision. CIR FAILS TO ACT ON THE PROTEST WITHIN 180 DAYS FROM SUBMISSION OF RELEVANT DOCUMENTS File appeal w/in 30d fr lapse of 180d or wait for CIR’s decision Lascona Land Co Inc. v. CIR In cases of inaction, Sec 228 of Tax Code merely gave taxpayer an option: 1. he may appeal to CTA w/in 30d fr lapse of 180d period provided for OR 2. he may wait until Commissioner decides on his protest before he elevates his case - The taxpayer was given this option so that in case his protest isn’t acted upon w/in 180d period, he may be able to seek immediate relief & need not wait for indefinite period of time for Commissioner to decide. - But if he chooses to wait for positive action on part of Commissioner, then the same couldn’t result in assessment becoming final, executory & demandable. Moog Controls Corp Phil Branch v. CIR - RR 12-99 isn’t inconsistent w/ Sec 228. It merely implements Sec 228 by establishing guideline on nature of decision rendered by authorized rep of CIR on disputed assessment. Taxpayer is given choice whether to appeal decision to CIR or to CTA. Decision of authorized rep will not attain finality if taxpayer appeals the same to CIR who shall then be required to decide protest himself. - Sec 228 requires that taxpayer shall comply w/ periods indicated defining the stages of protest. One of those is the 180d time frame given to CIR to decide protest. Thereafter, taxpayer has 30d to appeal to this Court which is jurisdictional. Petitioner's right to seek judicial relief accrues only upon lapse of 180d period in cases of inaction by CIR. If petitioner doesn’t comply w/ 180d period, right to file action hasn’t yet accrued and the lapse of 180d after filing of petition hadn’t cured such defect. RCBC v. CIR - Jurisdiction of CTA has been expanded to incl not only decisions / rulings, but also inaction of CIR. Decisions, rulings, inaction of CIR are necessary to vest CTA w/ jurisdiction to entertain appeal, provided it’s filed w/in 30d after receipt of decision / ruling OR w/in 30d after expiration of 180d fixed by law for CIR to act on disputed assessment. The 30d period is jurisdictional and failure to comply bars appeal and deprives CTA of jurisdiction. - In case CIR failed to act on disputed assessment w/in 180d period, taxpayer can either 1. file petition for rvw w/ CTA w/in 30d 2. await final decision of CIR on disputed assessments and appeal such final decision to CTA w/in 30d after receipt of copy of decision … these options are mutually exclusive. EFFECT OF FAILURE TO APPEAL MATTER APPEALABLE TO THE CTA; WHAT CONSTITUTES FINAL DECISION OF THE CIR ON THE DISPUTED ASSESSMENT CIR v. Isabela Cultural Corp. - In the normal course, revenue district officer sends taxpayer a notice of delinquent taxes, indicating period covered, amt due incl interest, and reason for delinquency. If taxpayer disagrees, it sends letter to BIR indicating protest, stating the reasons and submitting necessary

proof. That letter is considered as taxpayer’s request for reconsideration. Assessment becomes disputed assessment on w/c it must render decision. That decision is appealable to the CTA. - CIR’s position regarding disputed assessment must be indicated in final decision. It’s this decision that is properly appealable to the CTA. - Sec 228 states that delinquent taxpayer may nevertheless directly appeal a disputed assessment, if its request for reconsideration remains unacted upon 180d after submission. - Final demand letter for payment of delinquent taxes may be considered a decision on disputed assessment. - BIR shld always indicate to taxpayer in clear & unequivocal language what constitutes final action on disputed assessment. The object of this policy is to avoid repeated requests for reconsideration by taxpayer, thereby delaying finality of assessment and consequently, collection of taxes. Furthermore, the taxpayer wouldn’t be groping in the dark. Oceanic Wireless Network Inc. v. CIR - A demand letter for payment of delinquent taxes may be considered a decision on disputed assessment. The determination on WON demand letter is final is conditioned upon language used or tenor of letter being sent to taxpayer. - CIR shld always indicate to taxpayer in clear & unequivocal language what constitutes his final determination of disputed assessment. - Authority to make tax assessments may be delegated to subordinate officers. Said assessment has the same force & effect as that issued by Commissioner himself, if not rvwd or revised by latter. - A request for reconsideration must be made w/in 30d fr taxpayer’s receipt of tax deficiency assessment, otherwise, the decision becomes final, unappealable and demandable. A tax assessment that has become final, executory, and enforceable for failure of taxpayer to assail as provided in Sec 228 can no longer be contested. - For the CTA to acquire jurisdiction, assessment must first be disputed by taxpayer and ruled upon by CIR to warrant a decision fr w/c petition for review may be taken to CTA. Where an adverse ruling has been rendered by CIR w/ reference to disputed assessment or claim for refund / credit, taxpayer may appeal the same w/in 30d after receipt thereof. Allied Banking Corp. v. CIR - The protest referred to in disputed assessment that’s properly appealable to CTA is a protest on FAN & Formal Letter of Demand as opposed to protest on PAN. - Court in Division can only take cognizance of appeal fr decision / inaction of CIR on disputed assessment but not fr final decision of Commissioner's duly authorized rep i.e. Deputy Commissioner, where no protest on FAN is filed by taxpayer either w/ Commissioner's authorized rep or w/ Commissioner. - This is in consonance w/ principle of exhaustion of administrative remedies w/c requires that resort be first made to administrative authorities in cases falling under their jurisdiction to allow them to carry out their fcns & discharge responsibilities w/in specialized areas of competence. The administrative agency is in the best position to correct any previous error committed in its forum. - It’s duty / legal obligation of aggrieved party to determine if appeal is allowed to superior admin officer w/in agency concerned prior to filing action in court.

Claims for refund and credit of taxes / Remedy after payment a. Who may file claim for refund / tax credit DEFINE TAXPAYER / WITHHOLDING AGENT Cebu Portland v. Collector - It is the petitioner (taxpayer) and not its customers that may ask for refund of whatever amts it’s entitled for percentage or sales tax it pd. CIR v. Procter & Gamble Phil Mfg Corp - The term “taxpayer” is defined in NIRC as referring to any person subject to tax imposed by the title on Tax on Income. - The w/holding agent who is required to deduct & w/hold any tax is made personally liable for such tax. The w/holding agent is directly & independently liable for correct amt of tax that shld be w/held fr dividend remittances. W/holding agent is subject to deficiency assessments, surcharges, penalties.

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TAXATION - A “person liable for tax” is a person subject to tax and properly considered a taxpayer. The terms liable for tax and subject to tax both connote legal obligation to pay a tax. Silkair (Singapore) Pte Ltd v. CIR The proper party to question, or seek refund of, an indirect tax is the statutory taxpayer, the person on whom the tax is imposed by law and who pd the same even if he shifts the burden therof to another. Diageo Phils Inc. v. CIR - In taxation, a "person liable for tax" is a "person subject to tax" & properly considered a "taxpayer". Such a person shld be regarded as a party in interest, or as person w/ sufficient legal interest, to bring suit for refund of taxes he believes were illegally collected fr him. - Right to refund / tax credit of excise taxes is available to those persons in NIRC, for they’re the ones primarily & legally liable to pay excise taxes. Sec 130(D) is a tax incentive available to manufacturerexporter who has pd excise taxes. However, to avail of this privilege, manufacturer-exporter has to prove the fact that it has actually pd excise taxes. - Excise tax is considered as indirect tax. Unlike direct tax, where taxpayer is directly liable on transaction it engaged in, an indirect tax is primarily pd by persons who can shift burden upon someone else. It’s one where incidence of or liability for payment of tax falls on one person, but the burden can be shifted to another. - In indirect taxation, distinguish between liability for tax & burden of the tax. The amt of tax pd may be shifted by seller to the buyer. What’s transferred isn’t the liability for tax, but the tax burden. - In indirect taxes, the proper party who can question / seek refund is the person on whom tax is imposed by law & who pd tax even when he shifts burden to another. The reason is obvious: where burden of tax is shifted to buyer, the amt passed on to it is no longer tax but becomes added cost on goods purchased w/c constitutes part of purchase price, and w/c purchaser has to pay to seller to obtain goods.

b. Administrative Claim for Refund CASES WHERE REFUND NOT ALLOWED Sec 204, NIRC Authority of the Commissioner to Compromise, Abate and Refund or Credit Taxes. - Commissioner may A. compromise payment of internal revenue tax when: 1. reasonable doubt as to validity of claim against taxpayer exists OR 2. financial position of taxpayer demonstrates clear inability to pay assessed tax. - Compromise settlement of tax liability is subject to min amts: - For financial incapacity, min compromise rate equivalent to 10% of basic assessed tax - For other cases, min compromise rate equivalent to 40% of basic assessed tax - Where basic tax involved exceeds P1M or where settlement offered is < prescribed min rates, compromise is subject to approval of Evaluation Board w/c is composed of Commissioner & 4 Deputy Commissioners. B. abate or cancel tax liability when 1. tax or portion thereof appears to be unjustly / excessively assessed OR 2. administration & collection costs involved don’t justify collection of amt due. - Crim violations may be compromised except those: a. already filed in court OR b. involving fraud C. - credit / refund taxes erroneously / illegally rcvd OR penalties imposed w/o authority - refund value of internal revenue stamps when they’re returned in good condition by purchaser - redeem / change unused stamps that have been rendered unfit for use AND refund their value upon proof of destruction

- No credit / refund is allowed unless taxpayer files in writing w/ Commissioner a claim for credit / refund w/in 2y after payment of tax / penalty. - A return filed showing overpayment is considered as written claim for credit / refund. - A Tax Credit Certificate validly issued may be applied against internal revenue tax, excluding w/holding taxes, for w/c taxpayer is directly liable. - Any request for conversion into refund of unutilized tax credits may be allowed, subject to Sec 230 provided, the orig copy of Tax Credit Certificate showing creditable balance is surrendered to revenue officer for verification & cancellation. - In no case shall tax refund be given resulting fr availment of incentives granted pursuant to special laws for w/c no actual payment was made. - Commissioner shall submit to Chairmen of Committee on Ways & Means of both Senate & House of Reps every 6 mos, a report on exercise of his powers under this Sec. Said report is presented to Oversight Committee in Congress that determines that said powers are reasonably exercised & that the gov’t isn’t unduly deprived of revenues. REFUND WITHOUT CLAIM (PAYMENT UNDER PROTEST NOT A REQUIREMENT) Sec 229, NIRC Recovery of Tax Erroneously or Illegally Collected. - No suit / proceeding is maintained in any court for recovery of any nat’l internal revenue tax alleged to have been erroneously / illegally assessed / collected OR of penalty claimed to have been collected w/o authority, OR of any sum alleged to have been excessively or wrongfully collected, until claim for refund / credit is filed w/ Commissioner; but suit / proceeding may be maintained WON such tax, penalty, sum was pd under protest / duress. - No such suit / proceeding shall be filed after 2y fr date of payment of tax / penalty regardless of any supervening cause that may arise after payment. - Commissioner may, even w/o written claim, refund / credit any tax, where on the face of the return upon w/c payment was made, payment appears clearly to have been erroneously pd. CIR v. Philamlife - The prescriptive period of 2y shld commence to run only fr the time that the refund is ascertained, w/c can only be determined after final adjustment return is accomplished. - Even if the 2y period had already lapsed, the same isn’t jurisdictional and may be suspended for reasons of equity and other special circumstances. - Vitug, concur: - Corporate income tax payments for 1st 3 quarters of taxable yr shld, for purposes of 2y prescriptive period, be deemed to have been pd on 15th of April or of 4th month ff close of fiscal yr covering the entire taxable income of preceding calendar / fiscal yr. CIR v. Tokyo Shipping - A claim for refund is in the nature of a claim for exemption and shld be construed in strictissimi juris against taxpayer. - Taxpayer has burden of proof to establish factual basis of its claim for tax refund. San Carlos v. CIR - Once a taxpayer opts for either a refund or the automatic tax credit scheme, and signified his option in accordance w/ regulation, this doesn’t ipso facto confer on him the right to avail of the same immediately. An investigation is necessary to enable Commissioner to determine correctness of returns and the tax amt to be credited. - An opportunity must be given the internal revenue branch of the govt to investigate & confirm the veracity of claims of taxpayer. CIR v. CA and Citytrust - The grant of refund is founded on assumption that the tax return is valid, that is, the facts stated are true & correct. The deficiency assessment, though not yet final, created a doubt as to and constitutes challenge against truth & accuracy of facts stated in return w/c, by itself, can’t be basis for grant of refund.

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TAXATION - To grant refund w/o determination of proper assessment of tax due will result in multiplicity of proceedings / suits. If the deficiency assessment shld subsequently be upheld, the gov’t will be forced to institute anew a proceeding for recovery of erroneously refunded taxes w/c must be filed w/in 10y after discovery of falsity, fraud or omission in false / fraudulent return. - In determining WON petitioner is entitled to refund of amt pd, it’s necessary to determine how much the gov’t is entitled to collect as taxes. CIR v. CA and Atlas Consolidated - Claims for refund shld be made w/in 2y fr date of payment of the tax sought to be refunded.

c. Remedy of the Taxpayer CIR v. Acesite Phil Hotel Corp - Cited UST Cooperative Store v. City of Manila - There’s erroneous payment of taxes when a taxpayer pays under mistake of fact, as for instance in a case where he isn’t aware of an existing exemption in his favor at the time payment was made. Such payment is not voluntary and can be recovered / refunded. - Tax refunds are based on the principle of quasi-contract or solutio indebiti and pertinent laws are found in Civil Code. - When money is pd to another under the influence of a mistake of fact, on the mistaken supposition of the existence of a specific fact, where it wouldn’t have been known that the fact was otherwise, it may be recovered. The ground is that money pd thru misapprehension of facts belongs in equity and in good conscience to the person who pd it. - The gov’t is w/in the scope of solutio indebiti. - Cited CIR v. Fireman’s Fund Insurance Co - No person shall unjustly enrich himself at the expense of another. The gov’t isn’t exempted fr application of this doctrine.

yr is filed that the taxpayer would know whether tax is still due or refund can be claimed based on the adjusted & audited figures. - Cited Collector v. Prieto - When a tax is pd in installments, the prescriptive period of 2y in NIRC shld be counted fr date of final payment. - Cited CIR v. Palanca - Where tax acct was pd on installment, the computation of 2y prescriptive period shld be fr date of last installment. CIR v. PNB - Limiting the right to carry-over the balance of advance payment of tax only to immediately succeeding taxable yr is unfair & improper if there is intent to apply the entire amt to future tax obligations. - Cited Commissioner v. Philamlife - Availment of tax credit due for reasons other than erroneous collection of taxes may have diff prescriptive period. Absent any provision in Tax Code or special laws, that period is 10y under A1144, CC. CIR v. Primetown Property Group Inc - The 2y prescriptive period is reckoned fr filing of the final adjustment return. - CC A13 says that a yr is equivalent to 365 days. - Cited National Marketing Corp v. Tecson - A yr is equivalent to 365 days regardless of whether it’s a regular yr or leap yr. - However, the Administrative Code of 1987 says that a year is understood to be 12 calendar months. - The Administrative Code, being the more recent law, governs computation of legal periods. Lex posteriori derogat priori. 30 DAY PERIOD TO APPEAL IS JURISDICTIONAL Gibbs v. CIR Court had no jurisdiction over petition in this case bec it was filed beyond the 30d period.

CIR – NO DECISION Petition for refund must be filed w/ CTA w/in 2y fr date of payment of tax.

THE 2 YR PERIOD TO INITIATE JUDICIAL PROCEEDINGS NOT JURISDICTIONAL, BUT A POSITIVE REQUIREMENT

CIR RENDERS A DECISION

CIR v. Philamlife, supra

Maceda v. Macaraig There’s no legal obstacle to the BIR granting, even w/o suit by taxpayer, tax credit / refund claimed, assuming that - claim was made seasonably AND - amts covered were actually pd previously to BIR

THE TWO PERIODS (30 DAYS AND 2 YRS) MUST CONCUR

APPEAL TO CTA BY FILING A PETITION FOR REVIEW WITHIN 2 YRS FROM DATE OF PAYMENT TO INITIATE JUDICIAL REMEDY CIR v. Concepcion - Cited Republic v. Lim - Taxpayer’s failure to appeal to CTA in due time made assessment in question final, executory and demandable. - The expedient of an appeal fr denial of tax request for cancellation of warrant of distraint & levy can’t be utilized for purpose of testing the legality of an assessment w/c had become conclusive & binding on taxpayer. There being no appeal, the procedure in NIRC isn’t available to revive the right to contest validity of assessment once the same was irretrievably lost not only by failure to appeal but likewise by lapse of reglementary period w/in w/c to appeal. CIR v. TMX Sales - Sec 232 NIRC requires that books of accts of companies / persons w/ gross quarterly sales / earnings exceeding P25000 be audited and examined yearly by an independent CPA and their ITRs be accompanied by balance sheets, profit & loss statements, schedules listing income producing properties and incomes therefrom, and other related statements. - Before accountant can make certification on FS or render auditor’s opinion, an audit of the books of accts has to be conducted. - Since the audit is to be conducted yearly, it is the Final Adjustment Return where figures of gross receipts & deductions have been audited & adjusted, that is truly reflective of the results of the operations. It is only when the Adjustment Return covering the whole

d. Requirements for Refund Cases Collector v. Prieto - As the taxpayers were only asking for refund of inheritance taxes, it was unnecessary for them to implead, or for the court to order the impleading of the executrix and the other heirs. They aren’t indispensable parties bec, w/o them, court was in a position to render final determination of inheritance tax liability. ACCRA Investments Corp v. CA - There is a need to file a return first before claim for refund can prosper. Commissioner mandates that corporate taxpayer opting to ask for refund must show in its final adjustment return the income it rcvd fr all sources and the amt of w/holding taxes remitted by its w/holding agents to BIR. - The 2yr prescriptive period w/in w/c to claim a refund commences to fun, at the earliest, on the date of the filing of the adjusted final tax return. CIR v. Alltel Intl Resource Management - Cited CIR v. CA and Citytrust Sithe Phils Holdings v. CIR - Sec 76 of 1997 Tax Code: Every taxpayer-corp is required to file final adjustment return reflecting all items of gross income & deductions as well as total taxable income for the taxable yr. By filing thereof, it enables taxpayer to ascertain whether it has tax still due or excess income tax based on adjusted & audited figures. If it’s shown that taxpayer has tax still due, then he must pay balance; if he has overpd income tax, he could carry it over to succeeding taxable yr or he may credit / refund excess amt pd. - Orig option to refund excess tax is actually negated by act of carrying over excess amt to succeeding taxable yr. The option to carry-over excess tax credit is irrevocable.

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TAXATION - To be entitled to refund of excess creditable w/holding tax at source, 3 requirements: 1. claim for refund was filed w/in 2y prescriptive period 2. the fact of w/holding is established by copy of statement issued by payor (w/holding agent) to payee 3. the income upon w/c taxes were w/held were incl in return of recipient Calamba Steel Center Inc v. CIR - A tax refund may be claimed even beyond the taxable yr ff that in w/c tax credit arises, provided that the claim for such refund is filed w/ internal revenue commissioner w/in 2y after payment of said taxes. - Recognition of the entitlement to a tax refund doesn’t necessarily mean the automatic payment of sum claimed in final adjustment return. The amt of claim must still be proven in normal course. - A taxable corp is entitled to a tax refund when the sum of quarterly income taxes it pd during taxable yr exceeds its total income tax due also for that yr. The refundable amt that’s shown on its final adjustment return may be credited, at its option, against its quarterly income tax liabilities for the next taxable yr. - If the excess income taxes pd in a given taxable yr haven’t been entirely used by taxable corp against its quarterly income tax liabilities for the next taxable yr, the unused amt of excess may still be refunded, provided that the claim for such refund is made w/in 2y after payment of the tax. - The phrase “succeeding taxable yr” in par 2 of Sec 69 is a limitation that applies only to a tax credit, not a tax refund. - To be able to claim a tax refund, a taxpayer only needs to - declare the income payments it rcvd as part of gross income AND - establish the fact of w/holding - The proper interpretation of the provisions in tax refund is a question of law that doesn’t call for an examination of probative value of the evidence. Philam Asset Management Inc. v. CIR - Sec 76 offers 2 options to a taxable corp whose total quarterly income tax payments in a given taxable yr exceeds its total income tax due: 1. filing for tax refund - tax on income that’s pd in excess of amt due may be refunded provided that taxpayer properly applies for refund 2. availing of a tax credit - applying the refundable amt, as shown on FAR of a given taxable yr, against estimated quarterly income tax liabilities of the succeeding taxable yr - These options are alternative in nature. The choice of one precludes the other. - A corp must signify its intent by marking the corresponding option box in the FAR. This requirement is only for facilitating tax collection. Failure to signify intent in FAR doesn’t mean outright barring of valid request for refund, shld one still choose this option later on. Tax credit shld be construed merely as alternative remedy to tax refund subject to prior verification. - Requiring that the ITR or FAR of succeeding yr be presented to BIR in requesting tax refund has no basis in law & jurisprudence. - Sec 76 requires FAR for the preceding, not succeeding taxable yr. - RR 12-94 merely provides that claims for refund of income taxes deducted & w/held fr income tax payments shall be given due course only when 1. it’s shown in ITR that income payments rcvd is being declared part of the taxpayer’s gross income AND 2. fact of w/holding is established by copy of w/holding tax statement, issued by payor to payee - There’s no automatic grant of tax refund. BIR shld be given the opportunity to investigate & confirm the veracity of taxpayer’s claim. - BIR ought to have on file its own copies of petitioner’s FAR for succeeding yr, on basis of w/c it could rebut assertion that there was subsequent credit of excess income tax payments for previous yr. - Despite failure of petitioner to make appropriate marking in BIR form, filing of its written claim effectively serves as expression of its choice to request tax refund, instead of tax credit. To assert that future claim for tax refund will be instantly hindered by failure to signify intent in FAR is to render nugatory the 2y prescriptive period.

- The carry-over option in Sec 76 is permissive. A corp that’s entitled to a tax refund / credit for excess payment of quarterly income taxes may carry over & credit excess income taxes pd in given taxable yr against estimated income tax liabilities of succeeding quarters. Once chosen, the carry-over is irrevocable for the taxable period and no application for refund or issuance of tax credit certificate shall be allowed. - Tax refunds are construed strictly against taxpayer. Atlas Consolidated v. CIR - Those seeking tax refunds / credits bear the burden of proving factual bases of their claims and of showing that legislature intended to entitle them to such claims. - A judicial claim for refund / tax credit in CTA is by no means an original action but an appeal by way of petition for rvw of previous unsuccessful administrative claim. Petitioner has to convince appellate court that the quasi-judicial agency didn’t have reason to deny its claims. Systra Phils, Inc. v. CIR - A corp entitled to a tax credit / refund of excess estimated quarterly income taxes pd has 2 options 1. to carry over excess credit 2. to apply for issuance of tax credit certificate or claim cash refund - If option to carry over is exercised, this is irrevocable for that taxable period. - The corp must signify in the adjustment return its intent to carry over or claim refund. These remedies are in the alternative and choice of one precludes the other. - This is the IRREVOCABILITY RULE and is in the last sentence of Sec 76. The rule prevents taxpayer fr claiming twice the excess quarterly taxes pd.

Jurisdiction of the Court of Tax Appeals Rule 1, Revised Rules of the CTA TITLE AND CONSTRUCTION Sec 1. Title of the Rules. - Revised Rules of the Court of Tax Appeals Sec 2. Liberal construction. - The Rules are liberally construed to promote objective of securing just, speedy, inexpensive determination of every action & proceeding. Sec 3. Applicability of the Rules of Court. - RoC in the Phils apply suppletorily to these Rules. Rule 2, Revised Rules of the CTA THE COURT, ITS ORGANIZATION AND FUNCTIONS Sec 1. Composition of the Court. - Court is composed of presiding justice AND 5 assoc justices appointed by Pres of Phils. - Court shall sit - en banc OR - in 2 Divisions of 3 justices ea, incl presiding justice, who is Chair of 1st Division Sec 2. Exercise of powers and functions. - Court exercises adjudicative powers, fcns & duties en banc or in Divisions. - Court sits en banc in exercise of administrative, ceremonial, non-adjudicative fcns. Sec 3. Court en banc, quorum and voting. - Presiding justice or, in his absence, the most senior justice in attendance presides over sessions of Court en banc. - Attendance of 4 justices constitutes quorum for sessions en banc. - Presence at deliberation AND affirmative vote of 4 justices of Court en banc are necessary for rendition of decision OR resolution on any case / matter submitted for consideration. - Where necessary majority vote can’t be had - petition is dismissed

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TAXATION - in appealed cases, judgment / order appealed fr stands affirmed - on all incidental matters, petition / motion is denied - No decision of Division of Court may be reversed / modified except by affirmative vote of 4 justices of Court en banc acting on the case. - Interlocutory orders / resolutions are acted upon by majority vote of justices present constituting quorum. Sec 4. The Court in Divisions; quorum and voting. - Chairman of Division or, in his absence, its senior member presides over sessions of Court in Divisions. - Attendance of at least 2 justices of Court is necessary to constitute quorum for sessions in Divisions. - Presence at deliberation AND affirmative vote of at least 2 justices are required for pronouncement of judgment / final resolution of Court in Divisions. Sec 5. Hearings. - Court en banc or in Divisions conducts hearings on days & times & places it may fix, w/ notice to parties. - Fri of ea wk is devoted to hearing motions, unless for special reasons, Court en banc or in Divisions shall, motu proprio or upon motion, fix another day for hearing of any motion. Sec 6. Disqualification of justices. a. Mandatory. - No justice / officer / employee of Court shall intervene, directly / indirectly, in mgmt / control of any pvt enterprise w/c may be affected by fcns of Court. - Justices are disqualified fr sitting in any case on same grounds under Sec 1, R137, RoC. - No person who has once served in Court as presiding justice or associate justice is qualified to practice as counsel before Court for 1y fr retirement / resignation as such. b. Disclosure & consent of parties & lawyers. - A justice disqualified under Sec 1(1), R 137 may, instead of w/drawing fr case / proceeding, disclose on records the basis of disqualification. - If, based on disclosure, the parties & lawyers, independently of justice’s participation, all agree in writing that reason for inhibition is immaterial / unsubstantial, justice may participate. - The agreement, signed by all parties & lawyers, is incorporated in record of action / proceeding. c. Voluntary. - A justice may, in his sound discretion, disqualify himself fr sitting in case / proceeding, for just / valid reasons other than those mentioned. - A justice who inhibits shall immediately notify in writing the presiding justice AND members of his Division. Sec 7. Motion to inhibit a justice. - When motion for inhibition of justice is filed, the Court, en banc or in Division, acts upon motion. - If motion for inhibition is based on discretionary ground, Court refers motion to justice involved for his appropriate action. Rule 3, Revised Rules of the CTA PLACE OF OFFICE, SEAL AND OFFICE HOURS Sec 1. Place of office. - Court has principal ofc in Metro Manila. Sec 2. Court seal. - Seal of Court is circular in form AND of the usual size. - It bears, in center, a design of coat of arms of Republic of Phils w/ the words BATAS AT BAYAN immediately underneath. - On the upper margin running fr left to right are the words COURT OF TAX APPEALS and on lower margin the words REPUBLIKA NG PILIPINAS. Sec 3. Seal, where affixed. - Seal of Court is affixed to all - summons - subpoena - notices

- decisions - orders - resolutions - certified copies of official records - other papers that Court may require to be sealed Sec 4. Office hours. - Ofc of Clerk of Court is open for transaction of biz & rcving petitions, complaints, pleadings, motions, other papers, during 8am to 430pm, Mon to Fri, except on such days designated by law / executive proclamation as non-working official holidays. Sec 218, NIRC Injunction not Available to Restrain Collection of Tax. - No court has authority to grant injunction to restrain collection of nat’l internal revenue tax, fee, charge imposed by Code. RA 1125, as amended by RA 9282 AN ACT CREATING THE COURT OF TAX APPEALS Sec 1. Court; Justices; Qualifications; Salary; Tenure. - There is hereby created a Court of Tax Appeals (CTA) - of same level as CA - possessing all inherent powers of Court of Justice - consists of a. Presiding Justice AND b. 5 Associate Justices - Incumbent Presiding Judge & Assoc Judges continue in ofc & bear new titles. - Presiding Justice & most Senior Assoc Justice serve as chairmen of the 2 Divisions. - The add’l 3 Justices & succeeding members of Court are appointed by Pres upon nomination by Judicial & Bar Council. - Presiding Justice is so designated in his appointment; the Assoc Justices have precedence accdg to date of appointments, or when appointments of 2 or more of them bear same date, accdg to order in w/c appointments were issued by Pres. - They have same qualifications, rank, category, salary, emoluments, privileges, be subject to same inhibitions & disqualifications, enjoy the same retirements & other benefits as those provided for Presiding Justice & Assoc Justices of CA. - Whenever salaries of Presiding Justice & Assoc Justices of CA are increased, such increases are deemed correspondingly extended to Presiding Justice & Assoc Justices of CTA. - Presiding Justice & Assoc Justices hold office during good behavior - until they reach age of 70 or become incapacitated to discharge duties of ofc - unless sooner removed for same causes & in same manner for members of judiciary of equivalent rank Sec 2. Sitting En Banc or Division; Quorum; Proceedings. - CTA may sit - en banc OR - in 2 Divisions, ea consisting of 3 Justices - 4 Justices constitute quorum for sessions en banc; 2 Justices for sessions of Division. - When required quorum can’t be constituted due to vacancy, disqualification, inhibition, disability, other lawful cause, Presiding Justice designates any Justice of other Divisions to sit temporarily therein. - Affirmative votes of 4 members of Court en banc or 2 members of Division is necessary for rendition of decision / resolution. Sec 3. Clerk of Court; Division Clerks of Court; Appointment; Qualification; Compensation. - CTA has a Clerk of Court AND 3 Division Clerks of Court appointed by SC. - No person is appointed Clerk of Court or Division Clerk of Court unless duly authorized to practice law in Phils. - Clerk of Court & Division Clerks of Court exercise same powers & duties re matters w/in Court's jurisdiction, as exercised by Clerk of Court & Division Clerks of Court of CA, in so far as the same may be applicable or analogous. They are under direction of the Court. - Clerk of Court & Division Clerks of Court have same rank, privileges, salary, emoluments, retirement, benefits as those provided for Clerk of Court & Division Clerks of Court of CA.

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TAXATION Sec 4. Other Subordinate Employees. - SC appoints all officials & employees of CTA, in accordance w/ Civil Svc Law. - SC fixes their salaries & prescribes their duties. Sec 5. Disqualifications. - No Justice / officer / employee of CTA shall intervene, directly / indirectly, in mgmt / control of any pvt enterprise w/c may be affected by fcns of Court. - Justices are disqualified fr sitting in any case on same grounds under R 137, RoC for disqualification of judicial officers. - No person who has once served in Court in permanent capacity, either as Presiding Justice or Assoc Justice thereof, is qualified to practice as counsel before the Court for 1y fr retirement / resignation. Sec 6. Place of Office. - CTA has principal ofc in Metro Manila and shall hold hearings at time & place as it may, by order in writing, designate. Sec 7. Jurisdiction. - CTA shall exercise a. exclusive appellate jurisdiction to rvw by appeal 1. decisions of CIR re - disputed assessments - refunds of internal revenue taxes, fees, charges - penalties - other matters under NIRC or other laws administered by BIR 2. inaction by CIR re - disputed assessments - refunds of internal revenue taxes, fees, charges - penalties - other matters under NIRC or other laws administered by BIR … where NIRC provides specific period of action, in w/c case inaction is deemed a denial 3. decisions, orders, resolutions of RTC - in local tax cases originally decided / resolved by them in exercise of orig or appellate jurisdiction 4. decisions of Commissioner of Customs re - liability for customs duties, fees, charges - seizure, detention or release of prop affected - fines, forfeitures or other penalties - other matters under Customs Law or other laws administered by BoC 5. decisions of CBAA - in exercise of appellate jurisdiction over cases re assessment & taxation of real prop originally decided by provincial or city board of assessment appeals 6. decisions of Sec of Finance - on customs cases elevated to him automatically for rvw fr decisions of Commissioner of Customs adverse to gov’t under Sec 2315, TCC 7. decisions of Sec of Trade & Industry (non-agri) and Sec of Agriculture (agri) re - dumping & countervailing duties - safeguard measures … where either party may appeal decision to impose / not to impose said duties b. jurisdiction over cases involving criminal offenses 1. exclusive orig jurisdiction over all crim offenses fr violations of NIRC or TCC and other laws administered by BIR or BoC - Offenses / felonies where principal amt of taxes & fees, exclusive of charges & penalties, claimed is < P1M or where there’s no specified amt claimed shall be tried by regular courts; jurisdiction of CTA is appellate. - Crim action & corresponding civil action for recovery of civil liability for taxes & penalties shall be simultaneously instituted w/ and jointly determined in same proceeding by CTA, the filing of crim action being deemed to necessarily carry w/ it the filing of civil action, and no right to

reserve filling of civil action separately fr crim action is recognized 2. exclusive appellate jurisdiction in crim offenses: a. over appeals fr judgments, resolutions, orders of RTC in tax cases originally decided by them, in territorial jurisdiction b. over petitions for rvw of judgments, resolutions, orders of RTC in exercise of appellate jurisdiction over tax cases originally decided by MeTC, MTC and MCTC in respective jurisdiction Sec 8. Court of record; seal; proceedings. - CTA is a court of record and has a seal w/c is judicially noticed. - It prescribes form of its writs & processes. - It has power to promulgate rules for conduct of biz of the Court, and as may be needful for uniformity of decisions; such proceedings aren’t governed strictly by technical rules of evidence. Sec 9. Fees. - Court shall fix reasonable fees for - filing of appeal - certified copies of any transcript of record, entry, other doc - other authorized svcs rendered by Court or its personnel Sec 10. Power to Administer Oaths; Issue Subpoena; Punish for Contempt. - Court has power to - administer oaths - rcv evidence - summon witnesses by subpoena duces tecum … subject in all respects to same restrictions & qualifications as applied in judicial proceedings of similar nature - Court, in accordance w/ R71 RoC, has power to punish for contempt for same causes, under same procedure & w/ same penalties provided therein. Sec 11. Who May Appeal; Mode of Appeal; Effect of Appeal. - Party adversely affected by decision, ruling, inaction of CIR, Commissioner of Customs, Sec of Finance, Sec of Trade & Industry or Sec of Agriculture, CBAA or RTC may file appeal w/ CTA w/in 30d after receipt of decision / ruling or after expiration of period fixed by law for action. - Appeal is made by filing petition for rvw under procedure analogous to that under R42, w/ CTA w/in 30d fr receipt of decision / ruling or in case of inaction, fr expiration of period fixed by law to act thereon. - A Division of CTA hears the appeal. - With respect to decisions / rulings of CBAA and RTC in its appellate jurisdiction, appeal is made by filing petition for rvw under procedure analogous to that under R43, w/ CTA, w/c hears case en banc. - All other cases involving rulings, orders, decisions filed w/ CTA in Sec 7 are raffled to its Divisions. - A party adversely affected by ruling, order, decision of Division of CTA may file MFR or new trial before same Division w/in 15d fr notice thereof. - In crim cases, the gen rule applicable in regular Courts on matters of prosecution & appeal likewise apply. - No appeal taken to CTA fr decision of CIR or Commissioner of Customs or RTC, provincial, city or municipal treas or Sec of Finance, Sec of Trade & Industry and Sec of Agriculture, as case may be shall suspend payment, levy, distraint, and / or sale of prop of taxpayer for satisfaction of tax liability - When in opinion of Court the collection by aforementioned gov’t agencies may jeopardize interest of gov’t and / or taxpayer the Court any stage of proceeding may suspend collection and require taxpayer either to deposit amt claimed or to file surety bond for not more than double the amt w/ the Court. - In crim & collection cases gov’t may directly file said cases w/ CTA covering amts w/in exclusive & orig jurisdiction. Sec 12. Taking of evidence. - Court may, upon proper motion or on its initiative, direct that case, or issue thereof, be assigned to 1 of its members for taking of evidence, when

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TAXATION - determination of question of fact arises upon motion or otherwise in any stage of proceedings - taking of acct is necessary - determination of issue of fact requires exam of long acct - Hearing before member proceeds as though same was made before Court. - Upon completion of hearing, member shall promptly submit to Court his report in writing, stating his findings & conclusions; thereafter, Court renders decisions on the case, adopting, modifying, rejecting the report in whole or in part, or Court may, in its discretion recommit it w/ instructions, or rcv further evidence. Sec 13. Decision, Maximum Period for Termination of Cases. - Cases brought before Court shall be decided in accordance w/ Sec 15(1), Art VIII of 1987 Consti. - Decisions of Court shall be - in writing, stating clearly & distinctly the facts & law on w/c based AND - signed by Justices concurring - Court provides for publication of its decision in Official Gazette as may best be adopted for public info & use. - Justices shall ea certify on their applications for leave, and upon salary vouchers presented by them for payment, or upon payrolls under w/c their salaries are paid, that all proceedings, petitions, motions w/c have been submitted to Court for determination / decision for period required by law or Consti, have been determined / decided on or before date of making certificate; no leave is granted and no salary is pd w/o such certificate. Sec 14. Effect of decision that tax is barred by statute of limitations. - If assessment or collection is barred by any statute of limitations, decisions of Court to that effect is considered as its decision that there’s no deficiency in respect of such tax. Sec 15. Publicity of proceedings and publication of decisions. - All decisions of, and all evidence rcvd by Court & divisions, incl transcript of stenographic reports of hearings, are public records open to inspection of public. - After decision of Court has become final the Court may, upon motion of taxpayer or gov’t permit w/drawal, by part entitled thereto of orig of books, docs & records, and models, diagrams, other exhibits, introduced in evidence, or Court may, on its own motion, make other disposition as it deems advisable. - Court provides for publication of its decisions in Official Gazette in such form & manner as may be best adopted for public info & use. Sec 16. Damages. - Where appeal is found to be frivolous, or that proceedings were instituted merely for delay, Court may assess damage against appellants in amt not exceeding P500, w/c is collected in same manner as fines / other penalties authorized by law. Sec 17. Violation of penal law. - When it appears to Court that a crime or other violation of law was committed, or, that there are reasonable grounds to believe that any official, employee, pvt person is guilty of crime, offense or violation, Court refers matter to proper dep’t, bureau or ofc for investigation or institution of crim or admin action as facts may warrant. Sec 18. Appeal to the Court of Tax Appeals En Banc. - No civil proceeding re matter arising under NIRC, TCC or LGC is maintained, except as provided, until & unless appeal was previously filed w/ CTA & disposed of in accordance w/ provisions of this Act. - Party adversely affected by resolution of Division of CTA on MFR or new trial, may file petition for rvw w/ CTA en banc. Sec 19. Review by Certiorari. - Party adversely affected by decision / ruling of CTA en banc may file w/ SC a verified petition for rvw on certiorari pursuant to R 45 of Rules of Civil Procedure. Sec 13, RA 9282

Distraint of Personal Property and / or Levy on Real Property. - Upon issuance of ruling, order, decision by CTA favorable to nat’l gov’t, CTA issues order authorizing BIR, thru Commissioner to seize & distraint any goods, chattels, effects, and personal prop, incl stocks & other securities, debts, credits, bank accts, and interests in & rights to personal prop AND / OR levy real prop in sufficient qty to satisfy tax / charge together w/ any increment thereto. This remedy isn’t exclusive and shall not preclude Court fr availing of other means under RoC.

a. Why was the CTA created? Phil Refining Co v. CA The CTA is a highly specialized body specifically created for the purpose of reviewing tax cases.

b. Jurisdiction of the CTA Rule 4, Revised Rules of the CTA JURISDICTION OF THE COURT Sec 1. Jurisdiction of the Court. - Court exercises exclusive orig jurisdiction over OR appellate jurisdiction to rvw by appeal the cases specified in RA 1125 Sec 7, as amended by RA 9282 Sec 7. Sec 2. Cases within the jurisdiction of the Court en banc. - Court en banc exercises exclusive appellate jurisdiction to rvw by appeal: a. decisions / resolutions on MFR or MNT of Court in Divisions in its exclusive appellate jurisdiction over: 1. cases fr BIR, BoC, DoF, DTI, DA 2. local tax cases decided by RTC in orig jurisdiction 3. tax collection cases decided by RTC in orig jurisdiction involving final & executory assessments for taxes, fees, charges, penalties, where principal amt of taxes & penalties claimed is < P1M b. decisions, resolutions, orders of RTC in local tax cases decided / resolved in appellate jurisdiction c. decisions, resolutions, orders of RTC in tax collection cases decided / resolved in appellate jurisdiction d. decisions, resolutions, orders on MFR or MNT of Court in Division in its exclusive orig jurisdiction over tax collection cases e. decisions of CBAA in its appellate jurisdiction over assessment & taxation of real prop originally decided by provincial / city board of assessment appeals f. decisions, resolutions, orders on MFR or MNT of Court in Division in its exclusive orig jurisdiction over cases involving crim offenses fr violations of NIRC or TCC AND other laws administered by BIR or BoC g. decisions, resolutions, orders on MFR or MNT of Court in Division in its exclusive appellate jurisdiction over crim offenses in preceding subpar h. decisions, resolutions, orders of RTC in appellate jurisdiction over crim offenses in (f). Sec 3. Cases within the jurisdiction of the Court in Divisions. - Court in Divisions exercises: a. exclusive orig / appellate jurisdiction to rvw by appeal: 1. decisions of CIR re - disputed assessments - refunds - penalties - other matters under NIRC or other laws administered by BIR 2. inaction by CIR re - disputed assessments - refunds - penalties - other matters under NIRC or other laws administered … where NIRC or other applicable law provides specific period for action - In disputed assessments, inaction of CIR w/in 180d period under Sec 228 NIRC is - deemed a denial for allowing taxpayer to appeal his case to Court AND

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TAXATION - not necessarily a formal decision of CIR on the tax case - Should taxpayer opt to await final decision of CIR on disputed assessments beyond 180d period, taxpayer may appeal final decision to Court under Sec 3(a) R8 of these Rules - In claims for refund of taxes erroneously / illegally collected, taxpayer must file petition for rvw w/ Court prior to expiration of 2y period under Sec 229 NIRC 3. decisions, resolutions, orders of RTC in local tax cases decided / resolved by them in orig jurisdiction 4. decisions of Commissioner of Customs re - liability for duties, fees, charges - seizure, detention, release of prop affected - fines, forfeitures, penalties - other matters under Customs Law or other laws administered by BoC 5. decisions of Sec of Finance on customs cases elevated automatically for rvw fr decisions of Commissioner of Customs adverse to gov’t under Sec 2315 TCC 6. decisions of Sec of Trade & Industry (non-agri) AND Sec of Agriculture (agri) re - dumping duties - countervailing duties - safeguard measures … where either party may appeal decision to impose or not to impose said duties b. exclusive jurisdiction over cases involving crim offenses 1. orig jurisdiction over crim offenses fr violations of NIRC or TCC AND other laws administered by BIR or BoC, where principal amt of taxes & fees, exclusive of charges & penalties, is P1M or more 2. appellate jurisdiction over appeals fr judgments, resolutions, orders of RTC in orig jurisdiction in crim offenses fr violations of NIRC or TCC AND other laws administered by BIR or BoC, where - principal amt of taxes & fees, exclusive of charges & penalties, is < P1M OR - there’s no specified amt claimed c. exclusive jurisdiction over tax collections cases 1. orig jurisdiction in tax collection cases involving final & executory assessments for taxes, fees, charges, penalties, where principal amt of taxes & fees, exclusive of charges & penalties, claimed is P1M or more 2. appellate jurisdiction over appeals fr judgments, resolutions, orders of RTC in tax collection cases originally decided by them w/in territorial jurisdiction. Asia Int’l Auctioneers Inc v. Parayno - Jurisdiction is the power & authority of court to hear, try, decide a case. The issue may be raised at any stage of proceedings, even on appeal. Courts may take cognizance of the issue even if not raised by parties themselves. - Premature invocation of court’s intervention is fatal to one’s cause of action. If a remedy w/in the administrative machinery can still be resorted to by giving the administrative officer every opportunity to decide on a matter w/in his jurisdiction, such remedy must first be exhausted before court’s power of judicial rvw can be sought. The party w/ admin remedy must not only initiate prescribed admin procedure but also pursue it to conclusion before seeking judicial intervention to give the admin agency an opportunity to decide the matter itself correctly and prevent unnecessary resort to court.

c. Final decisions of the CIR on disputed assessment MEANING OF DISPUTED ASSESSMENT

d. Who may appeal to the CTA Sec 7 and 11, RA 1125, supra

e. Limitations New issues can’t be raised for the first time on appeal. What are the exceptions? CIR v. Procter & Gamble Phil Mfg Corp, supra

The BIR shldn’t be allowed to defeat an otherwise valid claim for refund by raising question of alleged incapacity for the first time on appeal before SC. The question was neither raised on administrative level nor on CTA level. Marquez Lim v. Collector of Internal Revenue and CTA Right to opportunity to present taxpayer’s case shldn’t be curtailed. But this right shldn’t be abused. In this case, the diff petitions for reconsideration have been on the same ground. CTA gave ample opportunities for reconsideration. CIR v. Villa - Jurisdiction over subject matter is fundamental for a court to act on given controversy. It’s conferred by law, not by consent of parties. It can be challenged at any stage of proceedings and for lack of it, court can dismiss a case ex mero motu. - To inquire into existence of jurisdiction over subject matter is the primary concern of a court, for thereon would depend the ability of its proceedings. CIR v. Joseph The 30d period fixed by law w/in w/c taxpayer may question any ruling of CIR before Tax Appeals Court is jurisdictional. Meralco Securities v. Savellano, supra

f. Procedure in the CTA Rule 5, Revised Rules of the CTA FORM AND STYLE OF PAPERS Sec 1. Style. - Papers filed w/ Court shall be - either printed or typewritten AND - fastened on upper left hand corner - Papers shall have caption, date & signature, and copies. Sec 2. Size and specifications. - Printed / typewritten papers shall be typed doubled-spaced on good quality, unglazed, plain white paper - 8 1/2 X 13 in (legal size) OR 8 1/4 X 11 3/4 in (A4 size) - at least substance twenty - printed on one side only - w/o covers - Margins - left hand side: not < 1 1/2 in - at the top, bottom, right hand side: not < 1 in Sec 3. Citations. - Citations are indented at least 1 in fr inside margin & typed single-spaced. Sec 4. Number of copies. - Parties shall file 11 signed copies of every paper for cases before Court en banc, 6 signed copies for cases before Division, in addition to signed orig copy, except as otherwise directed by Court. - Papers to be filed in more than 1 case shall include one add’l copy for ea add’l case. Sec 5. Clear and legible copies. - All copies shall be clear and legible. Rule 6, Revised Rules of the CTA PLEADINGS FILED WITH THE COURT Sec 1. Complaint; contents. - Complaint - contains allegations showing jurisdiction of Court AND concise statement of complete facts of plaintiff’s cause/s of action - verified - w/ certification against forum shopping Sec 2. Petition for review; contents. - Petition for rvw - contains - allegations showing jurisdiction of Court

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TAXATION - concise statement of complete facts - summary statement of issues - reasons relied upon for rvw - verified - w/ certification against forum shopping - A clearly legible duplicate orig or certified true copy of decision appealed fr is attached to petition. Sec 3. Payment of docket fees. - Clerk of Court shall not rcv petition for rvw for filing unless petitioner submits proof of payment of docket fees. - Upon receipt of petition / complaint, it’ll be docketed & assigned a number, w/c is placed by parties on all papers thereafter filed. - Clerk of Court will then issue summons to respondent / defendant. Sec 4. Bill of particulars. a. REQUIREMENTS FOR BILL OF PARTICULARS - Court - on own initiative OR - upon motion of party filed - before responding to pleading OR - if no responsive pleading is permitted, w/in 10d after svc of pleading … may order party to submit detailed statement of nature of claim / defense / any matter stated in pleading, which isn’t averred w/ sufficient definiteness / particularity. - Order / motion shall point out - defects complained of AND - details desired - After svc of bill of particulars or of more definite pleading, moving / adverse party may file responsive pleading w/in 10d. b. FAILURE TO COMPLY - If order issued pursuant to (a) isn’t complied w/ w/in 10d after notice of order, or w/in such time as Court may fix, Court may - strike out the pleading to w/c motion was directed OR - make other order as it deems just - Court may upon motion set aside the order OR modify it. c. MOTION FOR BILL OF PARTICULARS, WHEN NOT ALLOWED - No motion for bill of particulars is allowed in cases under Sec 3(a)(3) & 3(c)(2) of R4. Sec 5. Answer. a. Time for filing and contents. - W/in 15d after svc of summons, respondent / defendant shall file answer, w/c includes defenses in law and specific provisions of law & jurisprudence and grounds for dismissal of the petition or complaint, or which shall prevent and bar recovery. (Rule of Procedure for Civil Forfeiture, Asset Preservation and Freeze Order, Sec. 9, par. 2a; and RCTA, Rule 7, sec. 1a) b. Transmittal of records. - Respondent CIR, Commissioner of Customs, Sec of Finance, Sec of Agriculture / Trade & Industry, w/in 10d after answer, the chair of CBAA and presiding judges of RTC, w/in 10d fr receipt of notice, shall certify & fwd to Court all records of case, w/ pages duly numbered. - If records are in separate folders, the folders will also be numbered. - If there are no records, such fact is manifested to Court w/in same 10d. - Court may, on motion and for good cause, grant extension to submit records. - Failure to transmit records w/in time or allowed by Court may constitute indirect contempt of court. Sec 6. Entry of appearance. - Atty may enter appearance by signing initial pleading. - Atty may later enter appearance only by filing entry of appearance w/ written conformity of client. - Initial pleading / entry of appearance shows: 1. atty’s address w/c mustn’t be Post Ofc Box number 2. Roll of Attorneys Number 3. date & no. of current membership due in IBP per Official Receipt, or Lifetime Member Number 4. current PTR no. w/ date & place of issuance 5. MCLE certificate no., date of issue, unless exempt

- Attorney / party entering his appearance serves copy of entry of appearance upon opposing party. - Atty who appears in open court w/o having filed written appearance must - give biz address to Clerk of Court AND - file written appearance w/in 48 hrs fr open court appearance - Atty / party who has filed appearance AND changes address of record shall notify Clerk of Court AND adverse party. Separate notice of change of address is filed for ea add’l case. Rule 7, Revised Rules of the CTA PROCEDURE IN THE COURT OF TAX APPEALS Sec 1. Applicability of the Rules of the Court of Appeals, exception. - Procedure in Court en banc or in Divisions in orig & appealed cases is the same as those in petitions for rvw & appeals before CA (R 42, 43, 44, 46 of RoC), except as otherwise provided in these Rules. Rule 8, Revised Rules of the CTA PROCEDURE IN CIVIL CASES Sec 1. Review of cases in the Court en banc. - In cases under exclusive appellate jurisdiction of Court en banc, petition for rvw of decision / resolution of Court in Division must be preceded by filing of timely MFR or MNT w/ Division. Sec 2. Review of cases in the Court in Division. - In appealed cases under jurisdiction of Court in Division in Sec 3(a)(1) to 3(a)(6) and 3(c)(2) of R4, party filing is called Petitioner. Party against whom case is filed is called Respondent. Pleading is entitled Petition for Review. - In tax collection cases originally filed w/ Court under Sec 3(c)(1) of R4, party filing is called Plaintiff. Party against whom case is filed is called the Defendant. Pleading is entitled Complaint. - In appealed tax collection cases, the orig captions are retained. Party filing appeal is called Appellant. Party against whom appeal is filed is the Appellee. Sec 3. Who may appeal; period to file petition. a. - Party adversely affected by - decision, ruling, inaction of CIR on disputed assessments or claims for refund OR - decision, ruling of Commissioner of Customs, Sec of Finance / Trade & Industry / Agriculture, or RTC in its orig jurisdiction … may appeal to Court by petition for rvw filed w/in 30d after receipt of copy of decision / ruling OR expiration of period fixed by law for CIR to act on disputed assessments. - In case of inaction of CIR on claims for refund of internal revenue taxes erroneously / illegally collected, taxpayer must file petition for rvw w/in 2y period fr payment / collection of taxes. b. - Party adversely affected by decision / resolution of Division of Court on MFR or MNT may appeal to Court by filing before it a petition for rvw w/in 15d fr receipt of copy of questioned decision / resolution. - Upon proper motion AND payment of full amt of docket & other lawful fees & deposit for costs before expiration of reglementary period, Court may grant add’l period not exceeding 15d fr expiration of orig period w/in w/c to file petition for rvw. c. - Party adversely affected by decision / ruling of CBAA & RTC in their appellate jurisdiction may appeal to Court by filing before it petition for rvw w/in 30d fr receipt of copy of questioned decision / ruling. Sec 4. Where to appeal; mode of appeal. a. - Appeal fr - decision, ruling, inaction of CIR on disputed assessments or claim for refund - decision, ruling of Commissioner of Customs, Sec of Finance / Trade & Industry / Agriculture, and RTC in their orig jurisdiction

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TAXATION … is taken to Court by filing before it petition for rvw as provided in R42, RoC. - Court in Division acts on appeal. b. - Appeal fr decision / resolution of Court in Division on MFR or MNT is taken to Court by petition for rvw as provided in R43, RoC. - Court en banc acts on appeal. c. - Appeal fr decision / ruling of CBAA or RTC in their appellate jurisdiction is taken to Court by filing before it petition for rvw as provided in R43, RoC. - Court en banc acts on appeal. Rule 9, Revised Rules of the CTA PROCEDURE IN CRIMINAL CASES Sec 1. Review of cases in the Court. - Rvw of crim cases in Court en banc or in Division is governed by applicable provisions of R124, RoC. Sec 2. Institution of criminal actions. - Crim actions before Court in Division in its orig jurisdiction are instituted by filing of information in name of People of the Philippines. - In crim actions re violations of NIRC & other laws enforced by BIR, the CIR must approve their filing. - In crim actions re violations of TCC & other laws enforced by BoC, the Commissioner of Customs must approve their filing. - Institution of crim action interrupts running of period of prescription. Sec 3. Prosecution of criminal actions. - Crim actions are conducted & prosecuted under direction & control of public prosecutor. - In crim actions re violation of NIRC or other laws enforced by BIR, and TCC or other laws enforced by BoC, prosecution may be conducted by deputized legal officers. Sec 4. Warrant of arrest. - W/in 10d fr filing of information, Division of Court to w/c case was raffled evaluates resolution of the public prosecutor & its supporting evidence. - Division may immediately dismiss case if evidence on record clearly fails to establish probable cause. - If Division finds probable cause, it issues warrant of arrest signed by Chair of Division. - In case of doubt, Division may order prosecutor to present add’l evidence, ex parte, w/in 5d fr notice. Sec 5. When search warrant may issue. - Division may issue search warrant signed by Chair following requirements of R126, RoC. Sec 6. Bail, how amount fixed; approval. - Amt of bail to be posted in case filed w/ Court is fixed & approved by Division to w/c case is raffled. - Where accused is arrested, detained, placed in custody outside Metro Manila, any judge of RTC of place where arrest is made may accept & approve bail for his release & appearance before Division to w/c case is assigned. - Judge who accepted bail & released accused shall - inform Division that issued the order of arrest of his action AND - forward to it the papers relative to case Sec 7. Conditions of the bail. - Conditions of bail are that the accused shall - appear & answer complaint / information in Division to w/c it’s raffled / transferred for trial AND - submit himself to its orders & processes - If convicted, and case is appealed to Court en banc OR SC, he’ll surrender himself for execution of judgment as Court en banc or SC renders. - If case is to be tried anew or remained for new trial, he shall - appear before Division to w/c it may be remanded AND - submit himself to its orders & processes

Sec 8. Release order. - Clerk of Court issues corresponding release order. Sec 9. Appeal; period to appeal. a. - Appeal to Court in crim cases decided by RTC in its orig jurisdiction is taken by - filing notice of appeal, Sec 3(a) & 6, R122, RoC, w/in 15d fr receipt of copy of decision / final order w/ court w/c rendered final judgment / order appealed from AND - serving copy upon adverse party - Court in Division acts on appeal. b. - Appeal to Court en banc in crim cases decided by Court in Division is taken by filing petition for rvw, R43, RoC, w/in 15d fr receipt of copy of decision / resolution appealed from. - Court may extend time for filing of petition for rvw for add’l period not exceeding 15d. c. - Appeal to Court in crim cases decided by RTC in their appellate jurisdiction is taken by filing petition for rvw, R43, RoC, w/in 15d fr receipt of copy of decision / final order appealed from. - Court en banc acts on appeal. Sec 10. Solicitor General as counsel for the People and government officials sued in their official capacity. - SolGen represents People of the Philippines & gov’t officials sued in official capacity in all cases brought to Court in its appellate jurisdiction. - He may deputize legal officers of BIR in cases under NIRC or other laws enforced by BIR OR legal officers of BoC in cases under TCC or other laws enforced by BoC, to appear in behalf of officials sued in official capacity - deputized legal officers remain under direct control & supervision of SolGen Sec 11. Inclusion of civil action in criminal action. - In cases w/in jurisdiction of Court, crim action AND civil action for recovery of civil liability for taxes & penalties are deemed jointly instituted in same proceeding. - Filing of crim action carries w/ it filing of civil action. - No right to reserve filing of civil action separately fr crim action is allowed. Rule 11, Revised Rules of the CTA PRE-TRIAL Sec 1. Applicability. - Rule on pre-trial under R18 & 118 RoC, as amplified in AM 03-109-SC, applies to cases w/in orig jurisdiction of Court - except that parties may not be allowed to compromise crim liability OR submit case to mediation, arbitration, other mode of ADR Sec 2. Mandatory pre-trial. - In civil cases, Clerk of Court sets case for pre-trial on first available date immediately ff 10th day after filing of answer. - In crim cases, Clerk of Court sets case for pre-trial - not later than 10d after arraignment, if accused is detained - nor later than 30d if accused is on bail Sec 3. Setting for an earlier date. - Where, due to urgency, either party desires that pre-trial be set on earlier date, party shall so state in pleading, in w/c event Clerk of Court sets pre-trial on first available date immediately after filing of answer. Sec 4. Duty of the Court. - Court confers w/ parties in pre-trial conferences w/ view to - narrowing issues - making admissions of or stipulating on facts - simplifying presentation of evidence - assisting in preparation for trial or possible disposition of case in whole or in part w/o trial Sec 5. Procedure in civil cases. - In civil cases, parties submit, at least 3d before pre-trial, their pre-trial briefs containing:

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TAXATION a. statement of willingness to compromise civil liability, except that case isn’t subject to referral to mediation, arbitration, other mode of ADR b. summary of admitted facts & proposed stipulation of facts c. issues d. docs / exhibits to be presented, their purpose. - No evidence is allowed to be presented & offered during trial other than those pre-marked & identified, unless allowed by Court to prevent manifest injustice e. manifestation of having availed themselves of discovery procedures or referral to commissioners f. no. & names of witnesses, substance of testimonies, approx no. of hrs that will be required by parties for presentation of witnesses - Consequence on party at fault is same as the effect of failure to appear. - Failure to file pre-trial brief or to comply w/ contents has same effect as failure to appear at pre-trial. Sec 6. Procedure in criminal cases. a. Before prelim conference - Before pre-trial conference, Court may issue order referring case to Division Clerk of Court for prelim conference of parties at least 3d prior to pre-trial to 1. mark docs / exhibits to be presented by parties AND copies to be attached to records after comparison 2. consider other matters as may aid in disposition 3. inform parties that no evidence is allowed to be presented & offered during trial other than those identified & marked during pre-trial unless allowed by Court to prevent manifest injustice b. During prelim conference - Division Clerk of Court shall 1. mark docs to be presented as exhibits AND copies attached to records after comparison 2. ascertain undisputed facts & admission on genuineness and due execution of docs marked as exhibits 3. consider other matters as may aid in disposition of case - Prelim conference is recorded in minutes to be signed by both parties & counsel. - Division Clerk of Court shall attach minutes AND exhibits to case record before pre-trial. c. During pre-trial conference - Court considers ff: 1. stipulation of facts & issues 2. marking for identification of evidence 3. waiver of objections to admissibility of evidence 4. modification of order of trial 5. such matters as will promote trial of crim & civil aspects - Agreements or admissions made during pre-trial conference shall be - in writing AND - signed by accused AND counsel … otherwise, they can’t be used in evidence against accused. - Agreements are subject to approval of Court. - Court may impose sanctions / penalties on accused / counsel / prosecutor who doesn’t appear at pre-trial conference AND doesn’t offer acceptable excuse. d. Pre-trial order - After pre-trial conference, Court issues pre-trial order. - Order shall bind parties, limit the trial to matters not disposed of and control the course of action during trial, unless modified by Court to prevent manifest injustice. Rule 12, Revised Rules of the CTA TRIAL Sec 1. Procedure. - Court conducts trial in accordance w/ R30 RoC in civil cases and R119 in crim cases. Sec 2. Power of the Court to receive evidence. - Court may rcv evidence in ff:

a. cases w/in orig jurisdiction of Court in Division, Sec 3, R4 of these Rules AND b. appeals in both civil & crim cases where Court grants new trial pursuant to Sec 2, R53 and Sec 12, R124, RoC. Sec 3. Taking of evidence by a justice. - Court may, motu proprio or upon motion, direct that case or issue therein, be assigned to 1 of its members for taking of evidence, when - determination of question of fact arises - taking of acct is necessary - determination of issue of fact requires exam of long acct - Hearing before justice proceeds as though the same was made before the Court. - Upon completion of hearing, justice shall submit to Court a written report, stating his findings & conclusions. - Court renders decision, adopting, modifying, or rejecting report in whole or in part. - Court may - recommit it to justice w/ instructions OR - rcv further evidence Sec 4. Taking of evidence by Court official. - In default or ex parte hearings, or where parties agree in writing, Court may delegate reception of evidence to Clerk of Court, Division Clerks of Court, their assistants who are members of Phil bar, or any Court attorney. - Reception of documentary evidence by Court official is for sole purpose of marking, comparison w/ original, and identification by witnesses of documentary evidence. - Court official has no power to rule on objections to any question or to admission of exhibits, w/c objections shall be resolved by Court upon submission of his report & transcripts w/in 10d fr termination of hearing. Sec 5. Presentation of voluminous documents or long accounts. - Ff rules govern presentation of voluminous docs / long accts: a. Summary & CPA certification. - Party who desires to introduce in evidence voluminous docs / long accts must, upon motion & approval by Court, refer docs to independent CPA for presenting: 1. summary containing, among others, chronological listing of no., dates, amts covered by invoices / receipts AND amt(s) of taxes pd 2. certification of independent CPA attesting to correctness of contents of summary - Name of CPA or partner of professional partnership of CPAs in charge must be stated in motion. - Court issues commission authorizing him to conduct audit and testify. b. Pre-marking and availability of originals. - Docs covering accounts / payment to be introduced in evidence must be pre-marked by party concerned AND submitted to Court to be accessible to adverse party who desires to check the summary & CPA certification. - Orig copies of voluminous receipts, invoices, accts must be ready for verification & comparison in case doubt is raised. Rule 13, Revised Rules of the CTA TRIAL BY COMMISSIONER Sec 1. Appointment of independent Certified Public Accountant (CPA). - Party desiring to present voluminous docs in evidence before Court may secure svcs of independent CPA at its own expense. - Court shall commission the latter as officer of Court solely for performing audit fcns as Court may direct. Sec 2. Duties of independent CPA. - Independent CPA performs audit functions in accordance w/ generally accepted acctg principles: a. examination of receipts, invoices, vouchers, long accts b. - reproduction of AND comparison of reproduction w/ AND certification that the same are faithful copies of orig docs - pre-marking of documentary exhibits consisting of voluminous docs

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TAXATION c. preparation of schedules / summaries containing chronological listing of no., dates, amts covered AND the amt(s) of taxes pd d. making findings as to compliance w/ substantiation requirements e. submission of formal report w/ certification of authenticity & veracity of findings and conclusions in performance of audit f. testifying on formal report g. other functions as Court may direct Sec 3. Findings of independent CPA. - Submission by independent CPA of pre-marked documentary exhibits is subject to verification & comparison w/ orig docs, availability of w/c is primary responsibility of party possessing such docs and, secondarily, by independent CPA. - Findings & conclusions of independent CPA - may be challenged by parties AND - isn’t conclusive upon Court, w/c may, in whole or in part, adopt findings & conclusions subject to verification Sec 4. Other referral to commissioner. - Court may apply procedure R32 RoC. - When parties stipulate that commissioner’s findings of fact are final, only questions of law are thereafter considered. Sec 5. Compensation of Commissioner. - Court allows commissioners reasonable compensation. Rule 14, Revised Rules of the CTA JUDGMENT, ITS ENTRY AND EXECUTION Sec 1. Rendition of judgment. - Court decides cases in accordance w/ Sec 15(1), Art VIII, 1987 Consti. - Conclusions are reached in consultation by Members on merits of case before assignment to a Member for writing of decision. - Presiding justice / chair of Division includes the case in agenda for mtg of Court en banc or in Division, for deliberation. - If majority of justices of Court en banc or in Division agree on draft decision, ponente finalizes decision for signature of concurring justices & promulgation. - Justice may submit separate written concurring OR dissenting opinion w/in 20d fr date of voting on case. - Concurring & dissenting opinions, w/ the majority opinion, are jointly promulgated & attached to the rollo. - In deciding, Court may not limit itself to issues stipulated by parties but may also rule upon related issues. Sec 2. Form of decision. - Decision OR final resolution of Court is - in writing, stating findings of fact & conclusions of law AND - signed by justices concurring - Findings & conclusions are contained in decision / final resolution itself. - In appealed cases, Court may adopt by reference the findings & conclusions set forth in decision, order, resolution appealed from. - Decision of Court is accompanied by certification signed by presiding justice / acting presiding justice, chair or most senior member as acting chair of Court en banc or in Division in ff form: “Pursuant to AVIII, Sec 13 of Constitution, it’s hereby certified that conclusions in above decision were reached in consultation before case was assigned to writer of opinion of Court.” Sec 3. Amended decision. - Action modifying / reversing decision of Court en banc or in Division is denominated as Amended Decision. Sec 4. Resolution. - Disposition of Court en banc or in Divisions other than on merits is embodied in Resolution. Sec 5. Promulgation and notice of decision and resolution. - Clerk of Court or Deputy Clerk of Court has direct responsibility for promulgation of decision & resolution of Court. - He sees to it that

- decision & resolution are properly signed by concurring & dissenting justices AND - certification is accomplished - Promulgation: filing of decision / resolution w/ Clerk of Court / Division Clerk of Court, who - annotates date & time of receipt - attests to it by his signature thereon - serves notice of decision / resolution upon parties or their counsel, furnishing them w/ certified true copies - In crim cases originally filed w/ & decided by Court in Division, the chairman causes decision / resolution to be filed w/ Division Clerk of Court in sealed envelope, who schedules promulgation, giving notice to - prosecution - accused personally / thru bondsman or warden - counsel … requiring their presence at promulgation. - Promulgation consists of rdg by Division Clerk of Court of dispositive portion of decision / resolution in presence of - accused AND - justice of Division that rendered the same - If accused is detained, warden shall produce him before Court. - If he’s detained outside Metro Manila, Court may authorize executive judge of RTC w/ territorial jurisdiction over place of detention to promulgate decision / resolution at such place. Sec 6. Entry of judgment and final resolution. - If no appeal / MFR / MNT is filed w/in time provided, Clerk of Court shall enter judgment / final resolution in book of judgment. - Date when judgment / final resolution becomes executory is deemed the date of entry. - Entry - contains dispositive part of judgment / final resolution - is signed by Clerk of Court - w/ certification that judgment / resolution has become final & executory Sec 7. Execution of judgment. - Upon expiration of period to appeal fr judgment / order that disposes of action / proceeding AND no appeal was perfected, execution issues as matter of right, on motion. - If appeal was perfected & finally resolved, execution may be applied for in court of origin, - on motion of judgment oblige, submitting certified true copy of - judgment / final order sought to be enforced AND - its entry - w/ notice to adverse party Rule 15, Revised Rules of the CTA MOTION FOR RECONSIDERATION OR NEW TRIAL Sec 1. Who may and when to file motion. - Aggrieved party may seek reconsideration / new trial of any decision, resolution, order of Court. - He shall file MFR / MNT w/in 15d fr date he rcvd notice of decision, resolution, order in question. Sec 2. Opposition. - Adverse party may file opposition to MFR / MNT w/in 10d after receipt of copy of MFR / MNT. Sec 3. Hearing of the Motion. - MFR / MNT, as well as opposition, shall embody all supporting arguments. Movant sets same for hearing on next available motion day. - Upon expiration of period set forth, w/o any opposition, MFR / MNT is considered submitted for resolution - unless Court deems it necessary to hear parties on oral argument, in w/c case Court issues proper order Sec 4. Effect of filing the motion. - Filing of MFR / MNT suspends running of period w/in w/c appeal may be perfected. Sec 5. Grounds of motion for new trial. - MNT may be based on 1 or more of ff causes materially affecting substantial rights of movant:

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TAXATION a. fraud, accident, mistake, excusable negligence w/c ordinary prudence couldn’t have guarded against AND by reason of w/c aggrieved party has probably been impaired in his rights OR b. newly discovered evidence, w/c - he couldn’t, w/ reasonable diligence, have discovered & produced at trial AND - if presented, would probably alter result. - MNT includes all grounds then available; those not included are deemed waived. Sec 6. Contents of motion for reconsideration or new trial and notice. - Motion is in writing, stating grounds, a written notice of w/c is served by movant on adverse party. - MNT is proved in manner provided for proof of motions. - Motion for cause in subpar (a) of preceding sec is supported by affidavits of merits w/c may be rebutted by counter-affidavits. - Motion for cause in (b) is supported by affidavits of witnesses by whom evidence is expected to be given OR by duly authenticated docs proposed to be introduced in evidence. - MFR / MNT that doesn’t comply w/ foregoing provisions is deemed pro forma, w/c shall not toll reglementary period for appeal. Sec 7. No second motion for reconsideration or for new trial. - No party is allowed to file 2nd MFR of decision, final resolution or order; or MNT. Sec 8. Ruling. - Court resolves MFR / MNT w/in 3 mos fr time it’s deemed submitted for resolution. Rule 16, Revised Rules of the CTA APPEAL Sec 1. Appeal to Supreme Court by petition for review on certiorari. - Party adversely affected by decision / ruling of Court en banc may appeal by filing w/ SC a verified petition for rvw on certiorari w/in 15d fr receipt of copy of decision / resolution, as provided in R45 RoC. - If such party filed MFR / MNT, period herein fixed runs fr party’s receipt of copy of resolution denying MFR / MNT. Sec 2. Effect of appeal. - MFR / MNT filed before Court is deemed abandoned if, during its pendency, movant appeals to SC.

Appeal from the CTA Division to CTA En Banc, from CTA En Banc, to the SC Magsaysay Lines v. CA - Where an aggrieved party files MFR fr adverse decision of CTA, he has only the balance of reglementary period w/in w/c to appeal, reckoned fr receipt of notice of resolution denying his MFR. - Cited Liboro v. CA - Motion for extension of time to file petition for rvw w/ CA is allowed. - While generally, rvw on appeal isn’t a matter of right but of sound judicial discretion, still, appeal is an essential part of our judicial system and courts shld proceed w/ caution so as not to deprive a party of right to appeal, particularly if meritorious. - Dismissal of appeal on purely technical grounds is frowned upon, since policy of courts is to encourage hearings of appeals on merits. - As for the period of extension, although rules provide for 15d, in meritorious cases, CA may grant longer period. Liboro v. CA - As matter of gen policy, motions for extension of time to file petition for rvw of final decisions of CTA or quasi-judicial agency pursuant to Circular No 1-91 may be granted by CA for period of not > 15d, save in exceptionally meritorious cases where CA may grant longer period. - Motion for extension of time, w/c must contain proof of svc on lower court, tribunal, office, quasi-judicial agency, as well as on adverse parties, must be filed AND docket fee pd w/in reglementary period of appeal.

Judy Ann Santos v. People - Gen rule: denial of motion to quash, being merely interlocutory order isn’t proper subject of appeal or petition for certiorari. - This case doesn’t fall under the exceptions such as - in promotion of public welfare & policy OR - order was rendered w/ grave abuse of discretion, or w/o or in excess of jurisdiction - Court order is final if it puts an end to particular matter resolved or settles definitely the matter disposed of, such that no further questions can come before court except execution of order. The term "final" judgment or order signifies judgment / order w/c disposes of cause as to all parties, reserving no further questions / directions for future determination. - Court order is merely interlocutory if it’s provisional AND leaves substantial proceeding to be had in connection w/ its subject. "Interlocutory" refers to something intervening between commencement & end of suit w/c decides some point but isn’t final decision of whole controversy.

Collection of Internal Revenue Taxes a. Prescriptive Period to Collect SEC 203 – 5 YRS FROM RECEIPT OF ASSESSMENT SEC 222 – 5 YRS FROM RECEIPT OF ASSESSMENT CIR v. Wyeth Suaco, supra CIR v. Phil Global Communication Inc - Law prescribed 3y fr date return was actually filed or fr last date prescribed for filing, whichever came later, w/in w/c BIR may assess nat’l internal revenue tax. Law increased the prescriptive period to 10y when false / fraudulent return was filed w/ intent of evading tax OR no return was filed at all. The 10y period began to run only fr date of discovery by BIR of falsity, fraud, omission. - If BIR issued assessment w/in 3y or 10y period, law provided another 3y after assessment for collection of tax due thru administrative process of distraint and / or levy or thru judicial proceedings. The 3y period for collection of assessed tax began to run on the date the assessment notice had been released, mailed or sent by BIR. BPI v. CIR - The statute of limitations on assessment & collection of nat’l internal revenue taxes was shortened fr 5y to 3y by BP Blg 700. CIR has 3y fr date of actual filing of tax return to assess a nat’l internal revenue tax or to commence court proceedings for collection thereof w/o assessment. - When it validly issues assessment w/in 3y period, it has another 3y to collect tax due by distraint, levy, court proceeding. Assessment is deemed made & 3y period for collection begins to run on date the assessment notice had been released, mailed, or sent to taxpayer. - Under Tax Code, to suspend running of prescriptive periods for assessment & collection, request for reinvestigation must be granted by CIR. Burden of proof that request for reinvestigation had been actually granted is on CIR. Such grant may be expressed in communications w/ taxpayer or implied fr action of CIR or his rep. BPI v. CIR - Period for respondent to assess & collect internal revenue tax is limited to 3y. - Respondent has 3y, counted fr date of actual filing of return or last date prescribed by law for filing of return, whichever comes later, to assess nat’l internal revenue tax or to begin court proceeding for collection thereof w/o assessment. - When respondent validly issues assessment against taxpayer for deficiency taxes, w/in either 3y or 10y period, respondent has another 3y after assessment to collect nat’l internal revenue tax due by distraint, levy, and/or court proceeding. - Waiver of Statute of Limitations, to be valid, must be: 1. in writing 2. agreed to by both Commissioner & taxpayer 3. before expiration of ordinary prescriptive periods for assessment & collection 4. for definite period beyond ordinary prescriptive periods for assessment & collection

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TAXATION - The period agreed upon can still be extended by subsequent written agreement, provided that it’s executed prior to expiration of first period agreed upon. - BIR issued RMO 20-90 on Apr 4, 1990 to lay down procedure for proper execution of waiver. - Prescriptive period / statute of limitations benefits both gov’t & taxpayer. Gov’t is benefited bec tax officers would be obliged to act properly in making assessments. Taxpayer is benefited bec after lapse of period of prescription, he’d have feeling of security against unscrupulous tax agents who’d find excuse to inspect books of taxpayer to take advantage of every opportunity to abuse law-abiding taxpayers. - In waivers, both date of execution by taxpayer AND date of acceptance by respondent must be before expiration of period of prescription. Date of acceptance is vital bec it determines WON acceptance was made w/in prescriptive period; for if acceptance was made after, the same is ineffectual bec there’s no more period to extend. - NIRC also recognizes instances when running of Statute of Limitations on assessment & collection of nat’l internal revenue taxes could be suspended, even in absence of waiver. - Running of prescriptive period for collection of taxes is suspended thru request for reinvestigation, not thru request for reconsideration. - NIRC requires that request for reinvestigation must be granted by Commissioner to suspend running of prescriptive periods for assessment & collection. - Burden of proof that taxpayer's request for reinvestigation was actually granted is on respondent Commissioner. Grant may be expressed in communications w/ taxpayer or implied fr actions of respondent or his reps in response to request for reinvestigation.

Remedies Available to the Government a. Administrative Remedies / Summary Remedies Sec 205, NIRC Remedies for the Collection of Delinquent Taxes. - Civil remedies for collection of internal revenue taxes, fees, charges, increment thereto resulting fr delinquency are by: a. - distraint of goods, chattels, effects, other personal prop, incl stocks, securities, debts, credits, bank accts and interest in & rights to personal prop AND - levy upon real prop & interest in rights to real prop b. civil OR crim action - Either of these or both simultaneously may be pursued in discretion of authorities charged w/ collection of taxes. - Remedies of distraint & levy isn’t availed of where amt of tax involved is not > P100. - Judgment in crim case shall not only impose penalty but also order payment of taxes subject of crim case as finally decided by Commissioner. - BIR advances amts needed to defray costs of collection by means of civil / crim action, incl preservation / transportation of personal prop distrained & advertisement and sale thereof, as well as of real prop & improvements thereon. Sec 206, NIRC Constructive Distraint of the Property of a Taxpayer. - To safeguard interest of gov’t, Commissioner may place under constructive distraint the property of - delinquent taxpayer - taxpayer who’s retiring fr biz subject to tax - taxpayer intending to - leave Phils - remove his prop therefrom - hide / conceal his prop - perform any act tending to obstruct proceedings for collecting tax due or w/c may be due - Constructive distraint of personal prop is effected by requiring taxpayer / any person having possession / control of prop - to sign receipt covering prop distrained - to obligate himself to preserve the same - not to dispose of the same in any manner w/o express authority of Commissioner - In case taxpayer / person having possession / control refuses / fails to sign receipt, revenue officer effecting constructive distraint proceeds to

- prepare list of prop AND - leave, in presence of 2 witnesses, a copy thereof in premises where prop distrained is located … after w/c prop is deemed to be under constructive distraint. Sec 207, NIRC Summary Remedies. A. Distraint of Personal Property - Upon failure of person owing delinquent tax / revenue to pay at time required, Commissioner or his rep, if amt involved is in excess of P1M OR Revenue District Officer, if amt is P1M or less, shall seize & distraint personal prop incl interests in & rights to personal prop in sufficient qty to satisfy tax, charge, increment incident to delinquency, expenses of distraint, cost of subsequent sale. - Report is, w/in 10d fr receipt of warrant, submitted by distraining officer to Revenue District Officer AND Revenue Regional Director. - Commissioner or his rep, subject to rules promulgated by Sec of Finance, upon recommendation of Commissioner, has power to lift order of distraint. - Report by Revenue Regional Director may be required by Commissioner as often as necessary. B. Levy on Real Property. - After expiration of time required to pay delinquent tax / revenue, real prop may be levied upon, before, simultaneously or after distraint of personal prop of delinquent. - Internal revenue officer designated by Commissioner or his rep shall prepare certificate - showing name of taxpayer AND amts of tax, penalty due - w/c operates w/ force of legal execution throughout Phils - Levy is effected by writing upon certificate a description of prop upon w/c levy is made. - Written notice is mailed to / served upon - Register of Deeds where prop is located AND - delinquent taxpayer OR if absent fr Phils - agent / manager of biz OR - occupant of prop - In case warrant of levy on real prop isn’t issued before or simultaneously w/ warrant of distraint on personal prop AND personal prop isn’t sufficient to satisfy delinquency, Commissioner or his rep shall, w/in 30d after execution of distraint, proceed w/ levy on real prop. - W/in 10d after receipt of warrant, report on levy is submitted by levying officer to Commissioner or his rep. - Report by Revenue Regional Director may be required by Commissioner as often as necessary - Commissioner or his rep, subject to rules promulgated by Sec of Finance, upon recommendation of Commissioner, has authority to lift warrants of levy. Sec 208, NIRC Procedure for Distraint and Garnishment. - Officer serving warrant of distraint shall make acct of personal prop distrained. Copy of acct, signed by himself, is left either - w/ owner OR - w/ person fr whose possession personal prop were taken OR - at dwelling / place of biz of such person AND w/ someone of suitable age & discretion - Add a statement of sum demanded AND note of time & place of sale. - Stocks & other securities are distrained by serving copy of warrant of distraint upon - taxpayer AND - pres, manager, treas, other responsible officer of corp, company, assn, w/c issued stocks / securities - Debts & credits are distrained by leaving copy of warrant of distraint w/ - person owing debts or having in possession / control such credits OR - his agent … Warrant is sufficient authority to person to pay to Commissioner the amt of debts / credits.

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TAXATION - Bank accts are garnished by serving warrant of garnishment upon - taxpayer AND - pres, manager, treas, other responsible officer of bank … Upon receipt of warrant of garnishment, bank turns over to Commissioner so much of accts as sufficient to satisfy claim of gov’t. Sec 209, NIRC Sale of Property Distrained and Disposition of Proceeds. - Revenue District Officer or his rep, other than the officer in Sec 208 shall, accdg to rules prescribed by Sec of Finance, upon recommendation of Commissioner, cause notification to be exhibited - in not < 2 public places in municipality / city where distraint is made (one is at Ofc of Mayor) - specifying - time & place of sale (not < 20d after notice) - articles distrained - At time & place fixed, revenue officer sells personal prop distrained - at public auction, to highest bidder for cash OR - thru licensed commodity / stock exchanges, w/ approval of Commissioner - In case of stocks & securities - Officer making sale executes bill of sale w/c he delivers to buyer, cc corp, company, assn w/c issued the stocks / securities - Upon receipt of copy of bill, the corp, company, assn - makes corresponding entry in its books - transfers stocks / securities in the name of buyer - issues, if required, certificates of stock / securities - Any residue over & above what’s required to pay claim, incl expenses, is returned to owner of prop sold. - Expenses chargeable embrace only actual expenses of seizure & preservation of prop. No charge is imposed for svcs of local internal revenue officer or deputy. Sec 210, NIRC Release of Distrained Property Upon Payment Prior to Sale. - If prior to consummation of sale all proper charges are pd to officer conducting the sale, the goods distrained are restored to owner. Sec 211, NIRC Report of Sale to Bureau of Internal Revenue. - W/in 2d after sale, officer - makes report of proceedings in writing to Commissioner AND - preserves copy of such report as official record Sec 212, NIRC Purchase by Government at Sale Upon Distraint. - When amt bid for prop under distraint isn’t equal to amt of tax or is very much less than actual market value, Commissioner or deputy may purchase the same in behalf of nat’l gov’t for the amt of taxes, penalties, costs due. - Prop so purchased may be resold by Commissioner or deputy, subject to rules prescribed by Sec of Finance. Net proceeds shall be remitted to Nat’l Treasury & accounted for internal revenue. Sec 213, NIRC Advertisement and Sale. - W/in 20d after levy, officer proceeds to advertise prop / portion thereof necessary to satisfy claim & cost of sale - Advertisement - covers at least 30d - effectuated by - posting notice at main entrance of municipal bldg / city hall AND in public & conspicuous place in barrio in w/c real estate lies AND - publication once a wk for 3 wks in newspaper of gen circulation in municipality / city where prop is located - contains - statement of amt of taxes & penalties due - time & place of sale - name of taxpayer against whom taxes are levied

- description of prop - Any time before day fixed for sale, taxpayer may discontinue proceedings by paying taxes, penalties, interest. - If he doesn’t, sale proceeds either - at main entrance of municipal bldg / city hall OR - on premises to be sold … as officer determines AND as notice of sale specifies. - W/in 5d after sale, a return by distraining / levying officer is entered upon records of - Revenue Collection Officer - Revenue District Officer - Revenue Regional Director - Revenue Collection Officer, in consultation w/ Revenue District Officer, makes out & delivers to purchaser a certificate - showing the proceedings - describing the prop sold - stating the name of purchaser - setting out amt of taxes, penalties, interest - In case proceeds of sale exceeds claim & cost of sale, excess is turned over to owner of prop. - Revenue Collection Officer, upon approval by Revenue District Officer may, out of his collection, advance amt sufficient to defray costs of collection by means of summary remedies incl - preservation / transportation in case of personal prop - advertisement & sale, both in personal & real prop, incl improvements found on the latter - In his monthly collection reports, advances are reflected & supported by receipts. Sec 214, NIRC Redemption of Property Sold. - W/in 1y fr sale, the delinquent taxpayer OR anyone for him, has right of paying to Revenue District Officer the amt of public taxes, penalties, interest thereon fr date of delinquency to date of sale, w/ interest on purchase price at 15% per annum fr date of purchase to date of redemption. - Such payment entitles person paying to delivery of certificate issued to purchaser AND certificate fr Revenue District Officer that he has redeemed the prop. - Revenue District Officer pays over to purchaser the amt by w/c prop has been redeemed. Prop thereafter is free fr lien of taxes & penalties. - Owner isn’t deprived of possession of prop AND is entitled to rents & other income thereof until expiration of time allowed for redemption. Sec 215, NIRC Forfeiture to Government for Want of Bidder. - In case there’s no bidder for real prop OR if highest bid is for amt insufficient to pay taxes, penalties, costs, the Internal Revenue Officer conducting the sale declares prop forfeited to gov’t. - W/in 2d, he makes return of proceedings & forfeiture w/c is spread upon records of his office. - Register of Deeds, upon registration w/ his ofc of such declaration of forfeiture, transfers title to gov’t w/o necessity of order fr court. - W/in 1y fr date of forfeiture, the taxpayer OR anyone for him may redeem prop by paying to Commissioner or Revenue Collection Officer the full amt of taxes, penalties, interest, costs of sale. If prop isn’t redeemed, forfeiture becomes absolute. Sec 216, NIRC Resale of Real Estate Taken for Taxes. - Commissioner has charge of any real estate obtained by gov’t in payment of taxes, penalties, costs under this Code or in compromise / adjustment of any claim therefor. - Commissioner may, upon giving of not < 20d notice, sell & dispose of the same - at public auction OR - w/ prior approval of Sec of Finance, at pvt sale - In either case, proceeds shall be deposited w/ Nat’l Treasury. - Acctg of the same is rendered to Chair, CoA. Sec 217, NIRC Further Distraint or Levy. - Remedy by distraint of personal prop AND levy on realty may be repeated until full amt due, incl expenses, is collected.

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TAXATION Sec 220, NIRC Form and Mode of Proceeding in Actions Arising under this Code. - Civil & crim actions / proceedings instituted in behalf of gov’t under NIRC or other law enforced by BIR shall be - brought in the name of gov’t of Phils AND - conducted by legal officers of BIR - No civil / crim action for recovery of taxes OR enforcement of fine, penalty, forfeiture NIRC is filed in court w/o approval of CIR. Sec 221, NIRC Remedy for Enforcement of Statutory Penal Provisions. - Remedy for enforcement of statutory penalties shall be by criminal / civil action, as situation requires, subject to approval of Commissioner. Sec 224, NIRC Remedy for Enforcement of Forfeitures. - Forfeiture of chattels & fixtures is enforced by - seizure AND - sale / destruction of forfeited property - Forfeiture of real prop is enforced by - judgment of condemnation AND - sale … in legal action / proceeding, civil or crim. Sec 225, NIRC When Property to be Sold or Destroyed. - Sales of forfeited chattels & fixtures is effected, so far as practicable, in same manner & conditions as public notice and time & manner of sale as are prescribed for sales of personal prop distrained for non-payment of taxes. - Distilled spirits, liquors, cigars, cigarettes, products of tobacco, and all apparatus for illicit production of such may, upon forfeiture, be destroyed by order of Commissioner, when sale for consumption / use is injurious to public health or prejudicial to enforcement of law. - Other articles subject to excise tax, w/c were manufactured / removed in violation of NIRC AND dies for printing / making of internal revenue stamps & labels w/c are imitation of or purport to be lawful stamps or labels may, upon forfeiture, be sold / destroyed in discretion of Commissioner. - Forfeited prop shall not be destroyed until at least 20d after seizure. Sec 226, NIRC Disposition of funds Recovered in Legal Proceedings or Obtained from Forfeitures. - All judgments & monies recovered & rcvd for taxes, costs, forfeitures, fines, penalties are pd to Commissioner or deputies as taxes themselves are required to be pd, and except as provided, are accounted for & dealt w/ the same way. Sec 227, NIRC Satisfaction of Judgment Recovered Against any Internal Revenue Officer. - When action is brought against Internal Revenue officer to recover damages by reason of act done in performance of official duty AND Commissioner is notified of action in time to make defense, thru SolGen, any judgment, damages, costs recovered in such action is satisfied by Commissioner, upon approval of Sec of Finance, or if the same be pd by person sued shall be reimbursed to him. - No such judgment, damages, costs is pd / reimbursed in behalf of person who acted negligently, in bad faith, w/ willful oppression. DISTRAINT OF PERSONAL PROPERTY LEVY OF REAL PROPERTY

- If person liable to pay internal revenue tax, neglects / refuses to pay after demand, the amt is a lien in favor of gov’t fr the time when assessment was made by Commissioner until pd, w/ interests, penalties, costs, upon all prop & rights to prop belonging to taxpayer. - This lien isn’t valid against mortgagee purchaser or judgment creditor until notice of lien is filed by Commissioner in Register of Deeds of province / city where prop is situated. Revenue Memorandum Circular No. 2-94 MEMORANDUM OF AGREEMENT BETWEEN LAND REGISTRATION AUTHORITY (LRA) AND BIR RELATIVE TO REGISTRATION OF INSTRUMENTS INVOLVING REAL PROP OR REAL RIGHTS THEREIN OR ANY CHATTEL MORTGAGE, NOTICE OF LIEN ON PROP OF DELINQUENT TAXPAYERS - LRA & BIR mutually agreed to coordinate by adopting ff procedures: I. 1. RDO in District Office shall: a. furnish Register of Deeds, in advance, serial numbers of all CARs accountable forms b. furnish Register of Deeds on monthly basis, summary list of information of CARs issued 2. Commissioner or rep shall file w/ Register of Deeds notice of tax / levy on real props of delinquent taxpayers. 3. BIR shall furnish LRA w/ pertinent copies of RRs, RMOs, RMCs and other revenue issuances II. - Administrator of LRA thru reps particularly the Register of Deeds shall 1. register docs only upon presentation of Certificate Authorizing Registration (CAR) or Certificate of Tax Clearance / Exemption issued by authorized revenue officials 2. annotate at the back of Transfer Certificate of Title to be issued to transferee corp of the props involved in exchange transaction under Sec 34 NIRC, the ff Memorandum: XXX 3. annotate at back of TCT to be issued covering new lands sold / lands donated in favor of vendee / donee corp / assn, a lien that lands are to be used exclusively for socialized housing project, Sec 20, RA 7279 4. assist BIR in identifying real props of delinquent taxpayers 5. register Notice of Tax Lien filed by Commissioner or rep w/ Office of Register of Deeds 6. provide BIR w/ other info of uncovered transactions 7. allow BIR authorized officer to access records of Register of Deeds upon presentation of approved requests by Commissioner, Deputy Commissioner, Asst Commissioner, Regional Director, Revenue District Officer 8. disseminate revenue issuances, regulations, revenue memorandum orders pertinent to transfer of real prop or rights therein to Registers of Deeds III. - LRA & BIR shall create inter-agency committee to oversee implementation. Republic v. Enriquez Claim of gov’t predicated on tax lien is superior to claim of pvt litigant predicated on judgment. Tax lien attaches not only fr svc of warrant of distraint of personal prop but fr time the tax became due & payable. CIR v. NLRC - Cited Republic v. Peralta - Claim for unpd internal revenue taxes gives rise to a tax lien upon all props & assets, movable & immovable, of insolvent as taxpayer. This tax claim must be given preference over any other claim of any other creditor, in respect of any and all props of insolvent. - A110 of Labor Code applies only in case of bankruptcy or judicial liquidation of employer.

FORFEITURE TAX LIEN Sec 219, NIRC Nature and Extent of Tax Lien.

HSBC v. Rafferty - Lien: legal claim / charge on property, real or personal, as security for payment of some debt / obligation - Unless statute is otherwise, rule is that a valid lien created on real / personal estate is enforceable against prop in the hands of any

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TAXATION person, other than bona fide purchaser for value w/o notice, who subsequently acquires estate. Possession of movables isn’t necessary to validity of a lien, whether created by contract or by act of law. Such lien will attach upon movable prop, even in the hands of bona fide purchaser w/o notice. - The tax lien doesn’t establish itself upon prop w/c was transferred to innocent purchaser prior to demand. Where statute makes taxes on personal prop a lien thereon, purchaser of such prop takes the same free fr any lien for taxes if title passes before such lien attaches by levy, distraint, or otherwise. - In order that lien may follow prop into the hands of 3rd party, it’s further essential that latter shld have notice, actual or constructive. (Consti prohibits taking of prop w/o due process of law) - The lien w/c law favors is specific or particular lien and not general lien. However, policy of law is against upholding secret liens & charges against prop of innocent purchasers / encumbrances for value. NO INJUNCTION TO RESTRAIN COLLECTION OF TAXES Northern Lines v. CTA Although Court had in previous cases enjoined execution of final & executory judgment bec of change in situation of parties that would render execution inequitable, such change in situation must be proven as a fact. EXCEPTION Sec 11, RA 1125, supra Rule 10, Revised Rules of the CTA SUSPENSION OF COLLECTION OF TAX Sec 1. No suspension of collection of tax, except as herein prescribed. - No appeal taken to Court suspends payment, levy, distraint, sale of any prop of taxpayer for satisfaction of tax liability, except as prescribed. Sec 2. Who may file. - Where collection of amt of taxpayer’s liability, sought by demand for payment, by levy, distraint, sale of prop of taxpayer, or by whatever means, may jeopardize interest of gov’t or taxpayer, interested party may file motion for suspension of collection of tax liability. Sec 3. When to file. - Motion for suspension of collection of tax may be filed - w/ petition for rvw OR w/ answer OR - in separate motion … at any stage of proceedings. Sec 4. Contents and attachments of the motion. - Motion for suspension of collection of tax shall - be verified AND - state facts & grounds relied upon - Affidavits & other documentary evidence are attached, w/c, if uncontroverted, are admissible in evidence as proof of facts alleged in motion. Sec 5. Opposition. - Unless shorter period is fixed by Court bec of urgency of motion, adverse party shall, w/in 5d after receipt of copy of motion, file opposition thereto, w/c states facts & grounds relied upon. Sec 6. Hearing of the motion. - Movant shall, upon receipt of opposition, set motion for hearing at next available motion day. Court shall give preference to the motion over all other cases, except crim cases. - At hearing, parties submit evidence. - If warranted, Court may grant motion if movant deposits w/ Court an amt in cash equal to value of prop under dispute OR filing w/ Court surety bond in amt not > 2X the disputed amt / value. - For expediency, Court, motu proprio or upon motion, may consolidate hearing of motion for suspension of collection of tax w/ hearing on merits of case.

Sec 7. Corporate surety bonds. - In selection & qualification of surety companies, see AM No. 047-02-SC, dated July 20, 2004.

b. Judicial Remedies Sec 281, NIRC Prescription for Violations of any Provision of this Code. - All violations of any provision of NIRC prescribe after 5y. - Prescription begins to run fr day of commission of violation; if the same be not known, fr the discovery thereof & institution of judicial proceedings for investigation & punishment. - Prescription is interrupted when proceedings are instituted against guilty persons; it runs again if proceedings are dismissed for reasons not constituting jeopardy. - Term of prescription shall not run when offender is absent fr Phils. Ungab v. Cusi - Crim prosecution of violations of NIRC is w/in cognizance of CFI. While there can be no civil action to enforce collection before assessment procedures have been followed, there’s no requirement for precise computation and assessment of tax before there can be a crim prosecution under the Code. - Petition for reconsideration of assessment may affect suspension of prescriptive period for collection of taxes, but not prescriptive period of crim action for violation of law. CIR v. CA / Resolution on MR - Before one is prosecuted for willful attempt to evade / defeat any tax, the fact that a tax is due must first be proved. - Reading Ungab v. Cusi, the pronouncement therein that deficiency assessment isn’t necessary prior to prosecution is qualified by Court w/ its statement fr Guzik v. US: The crime is complete when violator has knowingly & willfully filed fraudulent return w/ intent to evade & defeat part or all of the tax. - For crim prosecution to proceed before assessment, there must be a prima facie showing of a willful attempt to evade taxes. - Padilla, dissent: - Lack of final determination of manufacturer’s exact tax liability is not a bar to crim prosecution for fraudulent tax evasion. While precise computation & assessment is required for civil action to collect tax deficiency, NIRC doesn’t require such computation & assessment prior to crim prosecution for fraudulent tax evasion. - Gov’t isn’t bound or estopped by mistakes, inadvertence and connivance of its officials & employees w/ fraudulent schemes to defraud gov’t. CIR v. Pascor Realty and Development Corp - Sec 222 NIRC: where false / fraudulent return is submitted or in failure to file return, proceedings in court may be commenced w/o assessment. - Sec 205 NIRC: civil & crim aspects of case may be pursued simultaneously. - Cited Ungab v. Cusi - CIR had, in tax evasion cases, discretion on whether to issue assessment or to file crim case against taxpayer or both - Crim charge need only be supported by prima facie showing of failure to file required return. This fact need not be proven by assessment. - The issuance of assessment must be distinguished fr filing of a complaint. Before assessment is issued, there is a pre-assessment notice sent to taxpayer. Taxpayer has chance to submit position papers to prove that assessment is unwarranted. If CIR is unsatisfied, assessment is then sent to taxpayer. In contrast, crim charge need not go through all these. It’s filed directly w/ DOJ. Taxpayer is notified that case was filed against him, not that CIR has issued an assessment. - A crim complaint is instituted not to demand payment, but to penalize taxpayer for violation of NIRC.

Statutory Offenses and Penalties a. Civil Penalties / Surcharge / Interest Sec 247, NIRC General Provisions.

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TAXATION a. - Additions to tax / deficiency tax prescribed in this Ch apply to all taxes, fees, charges imposed in NIRC. - Amt added to tax is collected at the same time, in same manner and as part of tax. b. If w/holding agent is gov’t, its agencies, political subdivisions, instrumentalities, GOCC, the employee responsible for w/holding & remittance of tax is personally liable for additions to tax prescribed. c. "Person", as used in this Ch, includes an officer / employee of corp who as such, is under duty to perform the act in respect of w/c violation occurs. Sec 248, NIRC Civil Penalties. A. - There is, in addition to tax required to be pd, a penalty equivalent to 25% of amt due, in ff: 1. failure to file return AND pay tax due on date prescribed 2. unless otherwise authorized by Commissioner, filing return w/ internal revenue officer other than those w/ whom return is required to be filed 3. failure to pay deficiency tax w/in time prescribed in notice of assessment 4. failure to pay full / part of amt of tax shown on return OR full amt of tax due for w/c no return is required to be filed, on or before date prescribed B. - In case of willful neglect to file return w/in period prescribed OR in case false / fraudulent return is willfully made, penalty to be imposed is 50% of tax or of deficiency tax, in case payment was made on basis of return before discovery of falsity / fraud. - Substantial underdeclaration of taxable sales, receipts, income, OR substantial overstatement of deductions, determined by Commissioner pursuant to rules to be promulgated by Sec of Finance, constitutes prima facie evidence of false / fraudulent return. - Failure to report sales, receipts, income in amt exceeding 30% of that declared per return & claim of deductions in amt exceeding 30% of actual deductions, shall render taxpayer liable for substantial underdeclaration of sales, receipts, income OR overstatement of deductions. Sec 249, NIRC Interest. A. In General. - There is assessed & collected on unpd amt of tax, interest at 20% per annum OR higher rate as prescribed by rules, fr date prescribed for payment until amt is fully pd. B. Deficiency Interest. - Deficiency in tax due, as defined, is subject to interest prescribed in (A), assessed & collected fr date prescribed for payment until full payment. C. Delinquency Interest. - In case of failure to pay: 1. amt of tax due on return to be filed 2. amt of tax due for w/c no return is required 3. deficiency tax, surcharge or interest thereon on due date in notice & demand of Commissioner … there shall be, on unpd amt, interest at rate prescribed in (A) until amt is fully pd, w/c interest forms part of the tax. D. Interest on Extended Payment. - If person required to pay tax is qualified & elects to pay tax on installment under NIRC, but fails to pay tax or installment or part of amt / installment on or before date prescribed OR where Commissioner authorized extension of time to pay tax / deficiency tax / part thereof, there is interest at rate hereinabove prescribed on tax / deficiency tax / part thereof unpd fr date of notice & demand until it’s pd. Sec 250, NIRC Failure to File Certain Information Returns. - In case of ea failure to - file information return, statement, list OR - keep any record OR - supply any info required by NIRC or Commissioner

… on date prescribed, unless it’s shown that failure is due to reasonable cause & not willful neglect, there is, upon notice & demand by Commissioner, to be pd by person P1,000 for ea failure. - The aggregate amt to be imposed for all such failures during a calendar yr shall not exceed P25,000. Sec 251, NIRC Failure of a Withholding Agent to Collect and Remit Tax. - Person required to w/hold, account for and remit tax or who - willfully fails to w/hold, account for and remit tax OR - aids / abets to evade such tax or payment thereof … is, in addition to other penalties under this Ch, liable upon conviction to penalty equal to total amt of tax not w/held, accounted for and remitted. APPLICABLE INTEREST RATE: 20% COMPUTATION OF INTEREST DEFICIENCY V. DELINQUENCY TAX SURCHARGE: 25% OR 50% FALSE V. FRAUDULENT RETURN Aznar v. CTA, supra FRAUD ASSESSMENT CIR v. Javier, Jr. - Sec 248 of NIRC: taxpayer who files false return is liable to pay fraud penalty of 50% of tax due fr him or of deficiency tax in case payment was made on basis of return filed before discovery of falsity / fraud. - Cited Aznar v. CTA - Fraud is never imputed and courts never sustain findings of fraud upon circumstances which, at most, create only suspicion. Mere understatement of tax is not itself proof of fraud for purpose of tax evasion. MANDATORY IMPOSITION OF PENALTIES SUBSTANTIAL UNDERDECLARATION OF INCOME SALES & RECEIPTS (>30% = PRIMA FACIE EVIDENCE OF FRAUD) SUBSTANTIAL OVERSTATEMENT OF DEDUCTION (>30% = PRIMA FACIE EVIDENCE OF FRAUD)

b. Issuance of / Printing of Receipts; Registration of Name; Violations; Penalties Sec 236, NIRC Registration Requirements. A. Requirements. - Every person subject to internal revenue tax registers once w/ Revenue District Officer: 1. w/in 10d fr date of employment 2. on or before commencement of biz 3. before payment of any tax due 4. upon filing of return, statement, declaration as required - Registration contains taxpayer's name, style, place of residence, biz and such other info as required by Commissioner in the form prescribed. - Person maintaining head ofc, branch, facility shall register w/ Revenue District Officer w/ jurisdiction over head ofc, branch, facility. - "Facility" may include but isn’t limited to sales outlets, places of production, warehouses, storage places. B. Annual Registration Fee. - Annual reg fee in amt of P500 for every separate / distinct establishment / place of biz, incl facility types where sales transactions occur, shall be pd upon registration & every yr thereafter on or before last day of Jan. - Cooperatives, individuals earning purely compensation income, locally or abroad, and overseas workers aren’t liable to reg fee imposed.

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TAXATION - Reg fee is pd to - authorized agent bank w/in revenue district OR - Revenue Collection Officer OR - authorized Treasurer of city / municipality where ea place of biz / branch is registered C. Registration of Each Type of Internal Revenue Tax. - Every person required to register w/ BIR under (A), shall - register ea type of internal revenue tax for w/c he’s obligated - file a return AND pay taxes - update registration of any changes in accordance w/ (E) D. Transfer of Registration. - In case registered person decides to transfer place of biz or head ofc or branches, it’s his duty to update registration status by filing application for registration info update in form prescribed. E. Other Updates. - Any person registered shall, when applicable, update registration info w/ Revenue District Ofc where he’s registered, specifying any change in type & taxpayer details. F. Cancellation of Registration. - Registration of person who ceases to be liable to a tax type is cancelled upon filing w/ Revenue District Ofc where he’s registered an application for registration info update in form prescribed. G. Persons Commencing Business. - Any person, who expects to realize gross sales / receipts subject to VAT in excess of amt prescribed under Sec 109(z) for the next 12 mo. period fr commencement of biz, shall - register w/ Revenue District Ofc w/c has jurisdiction over head ofc / branch AND - pay annual reg fee in (B) H. Persons Becoming Liable to the Value-added Tax. - Any person whose gross sales / receipts in any 12 mo. period exceeds the amt prescribed under Sec 109(z) for exemption fr VAT shall - register in accordance w/ (A) - pay annual registration fee w/in 10d after end of last month of that period - be liable to VAT commencing fr 1st day of the month ff his registration I. Optional Registration of Exempt Person. - Any person whose transactions are exempt fr VAT under Sec 109(z) OR person whose transactions are exempt fr VAT under Sec 109(a), (b), (c), (d), who opts to register as VAT taxpayer w/ respect to export sales only - may update registration info, not later than 10d before beginning of taxable qtr AND - shall pay annual reg fee - Commissioner may deny application for registration incl updates prescribed under (E). - For purposes of Title IV, any person who registered VAT as tax type is referred to VAT-registered person who is assigned only 1 TIN. J. Supplying of Taxpayer Identification Number (TIN). - Any person required to make, render, file a return, statement, other doc is supplied w/ or assigned a TIN w/c he shall indicate in return, statement, doc filed w/ BIR for proper ID for tax purposes AND w/c he shall indicate in certain docs, such as but not ltd to ff: 1. sugar quedans, refined sugar release order, similar instruments 2. domestic bills of lading 3. docs to be registered w/ Register of Deeds of Assessor's Office 4. registration certificate of transportation equipment by land, sea, air 5. docs to be registered w/ SEC 6. bldg construction permits 7. application for loan w/ banks, financial institutions, other financial intermediaries 8. application for mayor's permit 9. application for biz license w/ DTI 10. other docs w/c may be required under rules to be promulgated by Sec of Finance, upon recommendation of Commissioner. - Where registered taxpayer dies, the administrator / executor registers estate in accordance w/ (A). A new TIN is supplied.

- In case of nonresident decedent, executor / administrator shall register estate w/ Revenue District Ofc where he’s registered. In case executor / administrator isn’t registered, registration of estate is made w/ and TIN supplied by Revenue District Ofc w/ jurisdiction over his legal residence. - Only 1 TIN is assigned to a taxpayer. - Any person who secures > 1 TIN is criminally liable under Sec 275 on 'Violation of Other Provisions of this Code or Regulations in General'. Sec 237, NIRC Issuance of Receipts or Sales or Commercial Invoices. - All persons subject to internal revenue tax shall, for ea sale / transfer of mdse OR svcs rendered valued at P25 or more, issue registered receipts OR sales / commercial invoices - prepared at least in duplicate - showing the date of transaction, qty, unit cost, description of mdse / nature of svc - In case of sales, receipts, transfers in amt of P100 or more OR regardless of the amt, where sale / transfer is made by person liable to VAT to another also liable to VAT OR where receipt is issued to cover payment made as rentals, commissions, compensations, fees - receipts / invoices are issued w/c show name, biz style if any, address of purchaser, customer, client - Where purchaser is VAT-registered, in addition to info herein required, invoice / receipt shall further show TIN of purchaser. - The orig of ea receipt / invoice is issued to purchaser, customer, client at the time transaction is effected, who, if engaged in biz or in exercise of profession, shall keep the same in his place of biz for period of 3y fr close of taxable yr in w/c invoice / receipt was issued. - Duplicate is kept & preserved by issuer, also in his place of biz, for like period. - Commissioner may exempt any person subject to internal revenue tax fr compliance w/ this Sec. Sec 238, NIRC Printing of Receipts or Sales or Commercial Invoices. - All persons engaged in biz shall secure fr BIR authority to print receipts, sales / commercial invoices before printer can print the same. - No authority to print receipts, sales / commercial invoices is granted unless receipts / invoices to be printed - are serially numbered AND - shall show name, biz style, TIN, biz address of person to use the same, and other info required by rules to be promulgated by Sec of Finance, upon recommendation of Commissioner - All persons who print receipt, sales / commercial invoices shall maintain logbook / register of taxpayers who availed of printing svcs. Logbook / register contains ff: 1. names, TIN of persons for whom receipts, sales / commercial invoices were printed 2. no. of booklets, no. of sets per booklet, no. of copies per set, serial no. of receipts / invoices in ea booklet Sec 239, NIRC Sign to be Exhibited by Distiller, Rectifier, Compounder, Repacker and Wholesale Liquor Dealer. - Every person engaged in distilling / rectifying spirits, compounding liquors, repacking wines / distilled spirits AND every wholesale liquor dealer shall keep conspicuously on the outside of place of biz a sign exhibiting, in letters not < 6 cms. high, - his name / firm style - words "Registered Distiller", "Rectifier of Spirits", "Compounder of Liquors", "Repacker of Wines or Distilled Spirits", or "Wholesale Liquor Dealer" - assessment no. Sec 240, NIRC Sign to be Exhibited by Manufacturer of Products of Tobacco. - Every manufacturer of cigars, cigarettes, tobacco AND every wholesale dealer in leaf tobacco / manufactured products of tobacco shall place on outside of bldg where biz is carried on, so it can be distinctly seen, a sign stating his full name & biz, assessment no., in letters not < 6 cms. high.

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TAXATION Sec 241, NIRC Exhibition of Certificate of Payment at Place of Business. - Certificate / receipts showing payment of taxes issued to person engaged in biz subject to annual reg fee is kept conspicuously exhibited in plain view in OR at place where biz is conducted. - In case of peddler or other persons not having fixed place of biz, these are kept in possession of holder, subject to production upon demand of any internal revenue officer. Sec 242, NIRC Continuation of Business of Deceased Person. - When individual who pd annual reg fee dies AND biz is continued by person/s interested in estate, no add’l payment is required for residue of term w/c tax was pd. - Person/s interested shld, w/in 30d fr death of decedent, submit to BIR or regional / revenue District Ofc inventories of goods / stocks had at time of death. - Requirement under this Sec also be applies in case of transfer of ownership OR change of name of biz establishment. Sec 243, NIRC Removal of Business to Other Location. - Any biz for w/c annual reg fee was pd may, subject to rules prescribed by Sec of Finance, upon recommendation of Commissioner, be removed & continued in any other place w/o payment of add’l tax during term for w/c payment was made. Sec 263, NIRC Unlawful Possession or Removal of Articles Subject to Excise Tax without Payment of the Tax. - Person who owns and / or is found in possession of imptd articles subject to excise tax, the tax on w/c hasn’t been pd OR person who owns and / or is found in possession of imptd taxexempt articles other than those to whom they’re legally issued is punished by: a. fine of not < P1,000 nor > P2,000 AND imprisonment of not < 60d but not > 100d - if appraised value, incl duties & taxes, of articles doesn’t exceed P1,000 b. fine of not < P10,000 but not > P20,000 AND imprisonment of not < 2y but not > 4y - if appraised value, incl duties & taxes, of articles exceeds P1,000 but doesn’t exceed P50,000 c. fine of not < P30,000 but not > P60,000 AND imprisonment of not < 4y but not > 6y - if appraised value, incl duties & taxes, of articles is > P50,000 but doesn’t exceed P150,000 d. fine of not < P50,000 but not > P100,000 AND imprisonment of not < 10y but not > 12y - if appraised value, incl duties & taxes, of articles exceeds P150,000 - Person in possession of locally manufactured articles subject to excise tax, tax on w/c hasn’t been pd OR person in possession of articles w/c are exempt fr excise tax other than those to whom the same is lawfully issued is punished w/ - fine of not < 10X the amt of excise tax due but not < P500 AND imprisonment of not < 2y but not > 4y. - Manufacturer, owner, person in charge of article subject to excise tax who removes / allows / causes unlawful removal of such articles fr place of production or bonded warehouse, upon w/c excise tax hasn’t been pd AND person who knowingly aids / abets in removal or conceals the same after illegal removal, for 1st offense, is punished w/ - fine of not < 10X the amt of excise tax due but not < P1,000 AND imprisonment of not < 1y but not > 2y - Mere unexplained possession of articles subject to excise tax, w/c hasn’t been pd, is punishable under this Sec.

c. Compliance Requirements KEEPING OF BOOKS OF ACCOUNTS Sec 232, NIRC Keeping of Books of Accounts. A. Corporations, Companies, Partnerships or Persons Required to Keep Books of Accounts.

- All corp, companies, partnerships, persons required to pay internal revenue taxes shall keep journal AND ledger OR their equivalents. - Those whose quarterly sales, earnings, receipts, output don’t exceed P50,000 shall keep & use simplified set of bookkeeping records authorized by Sec of Finance where in all transactions & results of operations are shown and fr w/c taxes due may readily be ascertained. - Those whose gross quarterly sales, earnings, receipts, output exceed P150,000 shall have books of accts audited & examined yearly by independent CPAs; their ITRs accompanied w/ accomplished Account Information Form (AIF) w/c contains info lifted fr certified balance sheets, profit & loss statements, schedules listing incomeproducing properties & income therefrom and other relevant statements. B. Independent Certified Public Accountant Defined. - It means an accountant who possesses independence as defined in rules of Board of Accountancy pursuant to PD No. 692, otherwise known as Revised Accountancy Law. Sec 233, NIRC Subsidiary Books. - Corps, companies, partnerships, persons keeping the books of accts in preceding Sec may, at their option, keep subsidiary books. - Where subsidiaries are kept, they form part of acctg system of taxpayer, subject to same rules as to keeping, translation, production, inspection as applicable to journal & ledger. Sec 234, NIRC Language in which Books are to be Kept; Translation. - Corps, companies, partnerships, persons shall keep books / records in Sec 232 in native language, English, Spanish. - If in addition to said books / records, taxpayer keeps other books / records in language other than native language, English, Spanish, he shall make true & complete translation of entries into native language, English, Spanish. - Translation must be - made by bookkeeper OR taxpayer OR in his absence, by manager - certified under oath - integral part of books of accts - Keeping of such books / records in any language other than native language, English, Spanish, is prohibited. Sec 235, NIRC Preservation of Books and Accounts and Other Accounting Records. - All books of accts, incl subsidiary books, acctg records of corps, partnerships, persons, are preserved by them for period beginning fr last entry in ea book until last day prescribed by Sec 203 w/in w/c Commissioner is authorized to make assessment. - Books & records are subject to exam & inspection by internal revenue officers. - For income tax purposes, exam & inspection shall be made only once in taxable yr, except in ff: a. fraud, irregularity, mistakes, as determined by Commissioner b. taxpayer requests reinvestigation c. verification of compliance w/ w/holding tax laws d. verification of capital gains tax liabilities e. in exercise of Commissioner's power under Sec 5(B) to obtain info fr other persons … in w/c case, another / separate exam & inspection may be made. - Exam & inspection of books of accts & other acctg records are done in taxpayer's ofc or place of biz or in ofc of BIR. - Corps, partnerships, persons that retire fr biz shall, w/in 10d fr date of retirement or w/in such period as allowed by Commissioner in special cases, submit books of accts, incl subsidiary books & other acctg records to Commissioner or his deputies for exam, after w/c they are returned. - Corps & partnerships contemplating dissolution must notify Commissioner AND shall not be dissolved until cleared of any tax liability. - Any provision of existing general / special law to the contrary notwithstanding, books of accts AND other records of tax-

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TAXATION exempt orgs or grantees of tax incentives are subject to exam by BIR for purposes of ascertaining compliance w/ conditions under w/c they’ve been granted tax exemptions / tax incentives, and their tax liability, if any. SECURING OF A TAX IDENTIFICATION NUMBER (TIN) Sec 236, NIRC, supra

d. Crimes / Offenses / Penalties / Forfeitures REVISED PENALTIES Sec 253, NIRC General Provisions. a. - Any person convicted of crime penalized by NIRC shall, in addition to being liable for payment of tax, be subject to penalties imposed herein. - Payment of tax due after apprehension isn’t valid defense in any prosecution for violation of any provision of NIRC or in any action for forfeiture of untaxed articles. b. - Any person who willfully aids / abets in commission of crime penalized herein OR who causes commission of such offense by another is liable in same manner as principal. c. - If offender isn’t citizen of Phils, he’s deported immediately after serving sentence w/o further proceedings for deportation. - If he’s public officer / employee, max penalty prescribed is imposed AND he’s dismissed fr public svc & perpetually disqualified fr holding any public office, to vote, to participate in election. - If he’s a CPA, certificate as CPA is, upon conviction, automatically revoked. d. - In case of assn, partnerships, corp, the penalty is imposed on partner, pres, GM, branch mgr, treas, officer-in-charge, employees responsible. e. - The fines to be imposed for violation of NIRC shall not be lower than fines imposed herein OR twice the amt of taxes, interest, surcharges due fr taxpayer, whichever is higher. Sec 254, NIRC Attempt to Evade or Defeat Tax. - Person who willfully attempts to evade / defeat tax under NIRC OR payment thereof shall, in addition to other penalties provided, upon conviction, be punished by fine not < P30,000 but not > P100,000 AND imprisonment of not < 2y but not > 4y. - Conviction or acquittal under this Sec isn’t a bar to filing of civil suit for collection of taxes. Sec 255, NIRC Failure to File Return, Supply Correct and Accurate Information, Pay Tax Withhold and Remit Tax and Refund Excess Taxes Withheld on Compensation. - Person required to pay tax, make return, keep record, or supply correct & accurate info, who willfully fails to pay, make return, keep record, supply correct & accurate info, or w/hold / remit taxes, or refund excess taxes w/held on compensation, shall, in addition to other penalties, upon conviction, be punished by fine of not < P10,000 AND imprisonment of not < 1y but not > 10y. - Person who attempts to make it appear that he or another has filed return / statement OR actually files return / statement and subsequently w/draws the same after securing official receiving seal / stamp of receipt of internal revenue ofc shall, upon conviction, be punished by fine of not < P10,000 but not > P20,000 AND imprisonment of not < 1y but not > 3y. Sec 256, NIRC Penal Liability of Corporations. - Corp, assn, gen co-partnership liable for acts / omissions penalized under NIRC, in addition to penalties upon responsible officers, partners, employees shall, upon conviction for ea act / omission, be punished by fine of not < P50,000 but not > P100,000.

Sec 257, NIRC Penal Liability for Making False Entries, Records or Reports, or Using Falsified or Fake Accountable Forms. A. - Financial officer OR independent CPA engaged to examine & audit books under Sec 232(A) AND any person under his direction who: 1. - willfully falsifies report / statement bearing on exam / audit OR - renders report / accountancy work w/c hasn’t been verified by him personally or under his supervision or by member of his firm or member of his staff in accordance w/ sound auditing practices 2. - certifies FS of biz containing essential misstatement of facts / omission re transactions, taxable income, deduction, exemption of client B. - Any person who: 1. not being an independent CPA OR financial officer, examines & audits books of taxpayers 2. offers to sign & certify FS w/o audit 3. offers taxpayer the use of accounting bookkeeping records for internal revenue purposes not in conformity w/ requirements in NIRC / rules 4. knowingly makes false entry OR enters false / fictitious name in books of accts or record 5. keeps 2 or more sets of records / books of accts 6. commits act / omission in violation of this Sec 7. fails to keep books of accts / records in Sec 232 in native language, English, Spanish OR to make true & complete translation in Sec 234 OR whose books / records kept in native language, English, Spanish, and found to be at material variance w/ books / records kept in another language 8. willfully attempts to evade / defeat any tax under NIRC OR knowingly uses fake / falsified revenue official receipts, Letters of Authority, certificates authorizing registration, Tax Credit Certificates, Tax Debit Memoranda, other accountable forms … shall, upon conviction for ea act / omission, be punished by fine not < P50,000 but not > P100,000 AND imprisonment of not < 2y but not > 6y. - If offender is CPA, certificate as CPA is automatically revoked upon conviction. - In case of foreigners, conviction under NIRC results in immediate deportation after serving sentence, w/o further proceedings for deportation. Sec 258, NIRC Unlawful Pursuit of Business. - Person who carries on biz for w/c annual reg fee is imposed w/o paying tax shall, upon conviction for ea act / omission, be punished by fine of not < P5,000 but not > P20,000 AND imprisonment of not < 6 mos but not > 2y. - In case of person engaged in distilling, rectifying, repacking, compounding, mfg article subject to excise tax, he shall, upon conviction for ea act / omission, be punished by fine of not < P30,000 but not > P50,000 AND imprisonment of not < 2y but not > 4y. Sec 259, NIRC Illegal Collection of Foreign Payments. - Person who knowingly undertakes collection of foreign payments under Sec 67 w/o license OR w/o complying w/ implementing rules, shall, upon conviction for ea act / omission, be punished by fine of not < P20,000 but not > P50,000 AND imprisonment of not < 1y but not > 2y. Sec 260, NIRC Unlawful Possession of Cigarette Paper in Bobbins or Rolls, Etc. - It’s unlawful for any person to have in possession cigarette paper in bobbins / rolls, cigarette tipping paper / cigarette filter tips, w/o authority issued by Commissioner. - Person, importer, manufacturer of cigar & cigarettes, found guilty under this Sec is, upon conviction for ea act / omission,

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TAXATION punished by fine of not < P20,000 but not > P100,000 AND imprisonment for not < 6y & 1d but not > 12yrs. Sec 261, NIRC Unlawful Use of Denatured Alcohol. - Person who - for mfg any beverage uses denatured alcohol / alcohol specially denatured to be used for motive power or w/drawn under bond for industrial uses or alcohol knowingly misrepresented to be denatured to be unfit for oral intake OR knowingly sells / offers any beverage made in whole or in part fr such alcohol OR - uses such alcohol for manufacture of liquid medicinal preparations taken internally OR knowingly sells / offers such preparations containing as ingredient such alcohol … shall upon conviction for ea act / omission be punished by fine of not < P20,000 but not > P100,000 AND imprisonment for not < 6y & 1d but not > 12y. - Person who - unlawfully recovers / attempts to recover by distillation or other process any denatured alcohol OR - knowingly sells / offers, conceals, disposes of alcohol so recovered / redistilled … is subject to same penalties under this Sec. Sec 262, NIRC Shipment or Removal of Liquor or Tobacco Products under False Name or Brand or as an Imitation of any Existing or Otherwise Known Product Name or Brand. - Person who ships, transports, removes spirituous, compounded, fermented liquors, wines or manufactured products of tobacco under any other than proper name / brand known to trade as designating the kind & quality of contents of the cask, bottle, package OR as imitation of existing product name / brand OR causes such act, shall, upon conviction for ea act / omission, be punished by fine of not < P20,000 but not > P100,000 AND imprisonment of not < 6y & 1d but not > 12y. Sec 264, NIRC Failure or refusal to Issue Receipts or Sales or Commercial Invoices, Violations related to the Printing of such Receipts or Invoices and Other Violations. a. - Person required to issue receipts, sales / commercial invoices, who - fails / refuses to issue such - issues receipts / invoices that don’t truly reflect and / or contain all info required - uses multiple / double receipts / invoices … is, upon conviction for ea act / omission, punished by fine of not < P1,000 but not > P50,000 AND imprisonment of not < 2y but not > 4y. b. - Person who commits any of acts enumerated is penalized in same manner & extent as in this Sec: 1. printing of receipts / invoices w/o authority fr BIR 2. printing of double / multiple sets of invoices / receipts 3. printing of unnumbered receipts / invoices, not bearing the name, biz style, TIN, biz address of person / entity. Sec 265, NIRC Offenses Relating to Stamps. - Person who commits any of ff acts is, upon conviction, punished by fine of not < P20,000 but not > P50,000 AND imprisonment of not < 4y but not > 8y a. making, importing, selling, using, possessing w/o express authority fr Commissioner, any die for printing / making stamps, labels, tags, playing cards b. erasing cancellation marks of stamp previously used OR altering written figures / letters / cancellation marks on internal revenue stamps c. possessing false, counterfeit, restored, altered stamps, labels, tags OR causing commission of such offense d. selling / offering any box / package containing articles subject to excise tax w/ false, spurious, counterfeit stamps / labels OR selling fr any such fraudulent box, package, container

e. giving away, accepting, selling, buying, using containers on w/c stamps aren’t completely destroyed Sec 266, NIRC Failure to Obey Summons. - Person who, being summoned to appear to testify OR appear & produce books, records, memoranda, papers OR furnish info, neglects to appear / produce / furnish info, shall, upon conviction, be punished by fine of not < P5,000 but not > P10,000 AND imprisonment of not < 1y but not > 2y. Sec 267, NIRC Declaration under Penalties of Perjury. - Any declaration, return, statement required under NIRC, in lieu of oath, shall contain written statement that they’re made under penalties of perjury. - Person who willfully files declaration, return, statement containing info w/c isn’t true & correct as to every material matter shall, upon conviction, be subject to penalties for perjury under RPC. Sec 268, NIRC Other Crimes and Offenses. A. Misdeclaration or Misrepresentation of Manufacturers Subject to Excise Tax. - Manufacturer who, in violation of Title VI, misdeclares in sworn statement or in sales invoice, any pertinent data is punished by summary cancellation / w/drawal of permit to engage in biz as manufacturer of articles subject to excise tax. B. Forfeiture of Property Used in Unlicensed Business or Dies Used for Printing False Stamps, Etc. - All chattels, machinery, removable fixtures used in unlicensed production of articles subject to excise tax are forfeited. - Dies & other equipment used for printing / making internal revenue stamp, label, tag w/c is in imitation of or purports to be lawful are also forfeited. C. Forfeiture of Goods Illegally Stored or Removed. - Unless authorized by Commissioner, articles subject to excise tax shldn’t be stored / allowed to remain in distillery warehouse, bonded warehouse, place where made, after tax has been pd, otherwise, such articles are forfeited. - Articles w/drawn fr such place or fr customs custody or imported w/o payment of required tax is forfeited. Sec 269, NIRC Violations Committed by Government Enforcement Officers. - Every official, agent, employee of BIR or other agency of gov’t charged w/ enforcement of NIRC, who’s guilty of ff offenses shall, upon conviction for ea act / omission, be punished by fine of not < P50,000 but not > P100,000 AND imprisonment of not < 10y but not > 15y AND add’l penalty of perpetual disqualification to hold public ofc, to vote, to participate in public election a. extortion / willful oppression thru use of ofc OR willful oppression & harassment of taxpayer who refused his offers in (d) b. knowingly demanding / rcving any fee, other or greater sums that are authorized by law OR rcving fee, compensation, reward, except as by law prescribed, for performance of duty c. willfully neglecting to give receipts for any sum collected in duty OR willfully neglecting to perform duties enjoined by law d. offering / undertaking to accomplish, file, submit report / assessment on taxpayer w/o exam of books or tax liability OR offering / undertaking to submit report / assessment < the amt due for any consideration / compensation OR conspiring to defraud revenues or violate NIRC e. neglecting OR permitting violation of law f. making / signing false entry in any book OR making / signing false certificate / return g. allowing / conspiring to allow unauthorized retrieval, w/drawal, recall of return, statement, declaration after same was officially rcvd by BIR h. having knowledge of any violation of NIRC or fraud on revenues collectible by BIR, failure to report such to superior officer OR failure to report as required by law

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TAXATION i. w/o authority of law, demanding / accepting / attempting to collect any sum / thing of value for compromise, adjustment, settlement of charge / complaint for violation of NIRC - The foregoing paragraph notwithstanding, any internal revenue officer for w/c prima facie case of grave misconduct was established shall, after due notice & hearing of admin case and subject to Civil Service Laws, be dismissed. - "Grave misconduct" includes - issuance of fake letters of authority & receipts - forgery of signature - usurpation of authority - habitual issuance of unreasonable assessments Sec 270, NIRC Unlawful Divulgence of Trade Secrets. - Except as provided in Sec 71 & Sec 26 of RA 6388, any officer / employee of BIR who divulges / makes known in other manner than may be provided by law info re biz, income, estate of taxpayer, secrets, operation, style / work, apparatus of manufacturer / producer, or confidential info re biz of taxpayer, knowledge of w/c was acquired in official duties, shall upon conviction for ea act / omission, be punished by fine of not < P50,000 but not > P100,000 OR imprisonment of not < 2y but not > 5y OR both. Sec 271, NIRC Unlawful Interest of Revenue Law Enforcers in Business. - Internal revenue officer who is or becomes interested, directly / indirectly, in manufacture, sale, import of article subject to excise tax OR in manufacture / repair / sale of die for printing, making of stamps, labels shall upon conviction for ea act / omission, be punished by fine of not < P5,000 but not > P10,000 OR imprisonment of not < 2y & 1d but not > 4y OR both. Sec 272, NIRC Violation of Withholding Tax Provision. - Officer / employee of gov’t or its agencies, instrumentalities, political subdivisions, GOCCs, incl BSP, who, under NIRC or rules, has duty to deduct & w/hold internal revenue tax AND remit the same is guilty of ff offense shall, upon conviction for ea act / omission be punished by fine of not < P5,000 but not > P50,000 OR imprisonment of not < 6m & 1d but not > 2y OR both a. failing / causing failure to deduct & w/hold internal revenue tax b. failing / causing failure to remit taxes deducted & w/held w/in time prescribed c. failing / causing failure to file return / statement w/in time prescribed OR rendering / furnishing false / fraudulent return / statement Sec 273, NIRC Penalty for Failure to Issue and Execute Warrant. - Official who fails to issue / execute warrant of distraint / levy w/in 30d after expiration of time prescribed in Sec 207 OR is found guilty of abusing exercise thereof is automatically dismissed fr svc after due notice & hearing.

the value of prop but not < P5,000 OR imprisonment of not < 2y & 1d but not > 4y OR both. Sec 277, NIRC Failure to Surrender Property Placed Under Distraint and Levy. - Person w/ possession / control of prop / rights to prop upon w/c warrant of constructive distraint, or actual distraint & levy was issued shall, upon demand by Commissioner or deputies executing warrant, surrender such prop / right, unless prop / right is, at the time of demand, subject to attachment / execution under judicial process. - Person who fails / refuses to surrender such prop / right is liable in his own person & estate to gov’t in sum equal to value of prop / rights not surrendered but not exceeding amt of taxes (incl penalties, interest) for collection of w/c such warrant was issued, w/ cost & interest if any, fr date of warrant. In addition, s/he shall, upon conviction for ea act / omission, be punished by fine of not < P5,000 OR imprisonment of not < 6m & 1d but not > 2y OR both. Sec 278, NIRC Procuring Unlawful Divulgence of Trade Secrets. - Person who causes / procures officer / employee of BIR to divulge confidential info re biz, income, inheritance of taxpayer, knowledge of w/c was acquired in official duty & w/c is unlawful for him to reveal AND person who publishes / prints in manner not provided by law, any income, profit, loss, expenditure appearing in ITR, shall be punished by fine of not > P2,000 OR imprisonment of not < 6m nor > 5y OR both. Sec 279, NIRC Confiscation and Forfeiture of the Proceeds or Instruments of Crime. - In addition to penalty for violation of Title X, the same shall carry w/ it confiscation & forfeiture of proceeds of crime / value of goods, instruments, tools w/ w/c crime was committed. - If in proceedings, it’s established that instruments / tools belong to 3rd person, the same is confiscated & forfeited after due notice & hearing in separate proceeding if 3rd person leased, let, chartered, entrusted the same to offender. - In case lessee subleased, or borrower, charterer, trustee allowed use of instruments to offender, such instruments are likewise confiscated & forfeited. - Prop of common carriers aren’t subject to forfeiture when used in transaction of biz as common carrier, unless owner / operator was, at the time of illegal act, a consenting party / privy thereto, w/o prejudice to owner's right of recovery against offender in civil / crim action. - Articles which aren’t subject of lawful commerce are destroyed. Sec 280, NIRC Subsidiary Penalty. - If person convicted for violation of NIRC has no prop w/ w/c to meet fine imposed by court OR is unable to pay fine, he’s subject to subsidiary personal liability at rate of 1d for ea P8.50 subject to rules in A39 RPC. Sec 281, NIRC, supra

Sec 274, NIRC Penalty for Second and Subsequent Offenses. - In case of reincidence, max penalty prescribed for offense is imposed. Sec 275, NIRC Violation of Other Provisions of this Code or Rules and Regulations in General. - Person who violates NIRC or rule promulgated by DoF, for w/c no specific penalty is provided, shall, upon conviction for ea act / omission, be punished by fine of not > P1,000 OR imprisonment of not > 6m OR both. Sec 276, NIRC Penalty for Selling, Transferring, Encumbering or in Any Way Disposing of Property Placed Under Constructive Distraint. - Taxpayer, whose prop was placed under constructive distraint, who sells, transfers, encumbers, disposes of prop or part thereof w/o knowledge & consent of Commissioner, shall, upon conviction for ea act / omission, be punished by fine of not < 2X

COMPROMISE PENALTY Revenue Memorandum Order 1-90 AMENDMENTS TO THE PROVISIONS OF A “REVISED SCHEDULE OF COMPROMISE PENALTIES” FOR INTERNAL REVENUE VIOLATIONS AS PRESCRIBED IN RMO 26-86 XXX III. 1. Internal revenue officers shall apply Revised Schedule of Compromise Penalties in Annex "A". 2. Cases w/ fraud are referred to Legal Branch w/ jurisdiction over the case OR Prosecution Division, for institution of crim action. 3. In no case shall compromise penalty differ in amt fr those specified, except when approved by Commissioner or in proper case, by Regional Directors. 4. Although all amts of compromise penalties incident to violations are itemized in assessment notice and / or demand letter along w/ other administrative penalties like surcharge &

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TAXATION interest, the same shldn’t form part of total amt assessed / demanded but shld appear separately as suggestion to taxpayer to pay in lieu of crim prosecution. If pd, compromise penalties are collected & accounted for under usual procedures. 5. Since compromise penalties are only amts suggested in settlement of crim liability and may not be imposed / exacted on taxpayer in the event taxpayer refuses, violation is referred for crim action as mentioned. 6. Non-resident filers who commit violations shall pay equivalent amt of compromise penalty in pesos or its equivalent in US$. XXX

Ungab v. Cusi, supra

Estate of Fidel Reyes v. CIR, supra

CIR v. JAL - Willful neglect to file required tax return or fraudulent intent to evade payment of taxes, considering that the same is accompanied by legal consequences, can’t be presumed. - Fraud contemplated by law is actual & constructive. It must be intentional fraud, consisting of deception willfully and deliberately done or resorted to in order to induce another to give up some legal right. Negligence, slight or gross, isn’t equivalent to fraud w/ intent to evade tax contemplated by law. It must amount to intentional wrongdoing w/ sole object of evading tax.

TAX EVASION

CIR v. Pascor Realty, supra

Sec 254, NIRC, supra

Abatement of Tax / Tax Compromise

ELEMENTS OF TAX EVASION

a. Authority of the Commissioner to Abate Taxes

PERSONS LIABLE IN CASE TAXPAYER IS A JURIDICAL ENTITY PAYMENT OF TAX NOT A VALID DEFENSE PRESCRIPTION OF VIOLATIONS OF THE NIRC Revenue Memorandum Circular 101-90 DETERMINATION OF WHEN CAUSE OF ACTION FOR WILLFUL FAILURE TO PAY DEFICIENCY TAX OCCURS; AND PRESCRIPTION UNDER SEC 280 OF TAX CODE - Salient features of Lim Sr v. CA 1. When cause of action for willful failure to pay deficiency tax occurs. - It occurs when final notice & demand for payment is served on taxpayer. - Prior thereto, no violation is committed. - Offense is committed only after receipt is coupled w/ refusal to pay tax w/in allotted period. 2. Prescription under Section 280 of the Tax Code. a. 5y prescriptive period in offense / willful failure to pay deficiency tax assessment commences to run only after receipt of final notice & demand by taxpayer AND he refuses to pay. b. In protested assessment, 5y period starts fr svc of final notice & demand disposing of protest NOT fr date of orig assessment. c. An offense under Tax Code is considered discovered only after manner of commission & nature & extent of fraud was definitely ascertained. This occurs when BIR renders final decision & requires taxpayer to pay deficiency tax. This is a departure fr usual practice of reckoning date of discovery fr date of examiner's report on basis of what appears to have been enunciated by obiter dictum in People vs. Tierra. d. 5y prescriptive period in Sec 280 doesn’t commence to run by mere fact of discovery. This must be coupled by judicial proceedings, such as prelim investigation before Prosecutor's Ofc, before 5y limitation period begins to run. Offenses under Tax Code are seemingly imprescriptible for as long as period fr discovery & institution of judicial proceedings for investigation & punishment, up to filing of information in court doesn’t exceed 5y. Lim v. CA - By their nature, violations as charged could only be committed after svc of notice & demand for payment of deficiency taxes upon taxpayers. - Prior to receipt of letter-assessment, no violation has yet been committed by taxpayer. The offense was committed only after receipt was coupled w/ refusal to pay taxes due w/in allotted period. - Tax cases are practically imprescriptible for as long as the period fr discovery AND institution of judicial proceedings for its investigation & punishment, up to filing of information in court doesn’t exceed 5y. - In crim cases, statutes of limitations are acts of grace, a surrendering by sovereign of its right to prosecute. They rcv a strict construction in favor of gov’t and limitations in such cases will not be presumed in absence of clear legislation.

Revenue Regulation 15-06 IMPLEMENTING ONE-TIME ADMINISTRATIVE ABATEMENT OF PENALTIES / SURCHARGES & INTEREST ON DELINQUENT ACCTS & ASSESSMENT AS OF JUNE 30, 2006 Revenue Regulation 15-07 REGULATIONS ALLOWING FOR THE ABATEMENT OF PENALTIES / SURCHARGES & INTEREST ON DISPUTED / LITIGATED ASSESSMENTS - Sec 1. Purpose. - This is to give taxpayers the opportunity to settle prelim / final assessments, disputed / protested administratively / judicially, by way of application for payment of basic tax & abatement / cancellation of penalties, incl surcharge & interest. - Before assessment reaches finality, liability of taxpayer is not yet certain and imposition of penalties at this stage appears to be unjust and / or makes assessment excessive. - Sec 204(B): Commissioner is authorized to abate / cancel tax liability and / or penalties when tax / portion thereof appears to be unjustly / excessively assessed or administration & collection costs don’t justify collection of amt due. - Abatement of penalties would encourage taxpayers to pay basic tax assessed ASAP to avoid rigors of protracted protest / litigation process. - Abatement Program is also aimed to substantially reduce Bureau's rising inventory of disputed / litigated assessments by adopting more pragmatic & expedient approach to convert accts into much needed revenue. XXX RMC 66-06 CLARIFICATION TO REVENUE REGULATIONS NO. 15-2006 IMPLEMENTING SECTION 204(B) OF TAX CODE RMO 20-2007 SIMPLIFIED PROCESSING APPLICATION TO AVAIL TAXPAYER’S REMEDIES UNDER SEC 204(A), COMPROMISE SETTLEMENT AND SEC 204(B), ABATEMENT I. Background - NIRC empowers CIR to compromise / abate internal revenue tax liabilities as taxpayer's remedy. - Based on RRs, receiving, processing, evaluation of application, incl initial recommendation for approval / disapproval, were lodged in Revenue Regional Offices thru Revenue District Offices, for regional office cases AND to ACIR/HREA of Large Taxpayers Svc thru its investigating Offices. - Technical Working Groups (TWG) were created, both in Nat’l Ofc and Regional Offices, to review applications & make final recommendation to approving authority, after application was processed, analyzed, recommended for approval / disapproval. - However, applications have been forwarded by investigating ofcs to TWGs w/o any evaluation & recommendation.

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TAXATION - This Order is issued to mandate concerned offices to be mindful of their responsibilities re processing of application. II. Policies a. Abatement - BIR process applications for abatement of only surcharges, interest, compromise penalties. - Application for abatement of basic tax assessed or portion thereof, if any, aren’t covered by regulations & aren’t processed. - RDO investigation offices of LTS w/ jurisdiction over taxpayer-applicant shall, upon receipt of application for abatement w/ supporting docs - process the application - make evaluation - prepare report w/ recommendation to Technical Working Committee (TWC) - Report shall state basis of recommendation. - TWC shall - rvw report & recommendation AND - prepare final recommendation for approval of Commissioner - No application for abatement is initially processed / evaluated w/o payment of 100% of basic tax. b. Compromise Settlement - Recommendation / final report on application for compromise is signed / approved as stated: 1. Regional Evaluation Board (REB) - regional ofc cases involving basic tax assessment amounting to P500,000 or less - minor crim violations discovered by regional & district officials w/c were already delegated to REB 2. CIR - other cases w/c weren’t delegated - cases w/c, by law, have been entrusted to CIR 3. National Evaluation Board (NEB) - cases where basic tax exceeds P1M OR settlement offered is < prescribed min amt (10% for cases of financial incapacity; 40% for cases of doubtful validity of assessment) w/c, by law, have been entrusted to NEB - Prior to approval / disapproval, application for compromise settlement is likewise processed, evaluated, recommended by investigating offices w/ jurisdiction over taxpayer-applicant. - Processing & evaluation of regional ofc cases are undertaken by district offices while LTS cases are processed & evaluated by LTS investigating offices before submitting recommendation to respective TWGs. - TWG shall rvw report & recommendation and prepare final recommendation for approval of CIR / REB / NEB. - Application for compromise settlement isn’t forwarded to TWGs w/o being processed, evaluated, provided w/ recommendation by originating ofc. - RDO / head of LTS investigating ofc is directed to require all applicants to pay basic tax assessed, for abatement cases, and offers of compromise, for compromise settlement, upon filing of application for abatement / compromise settlement before application can be initially processed. - In case of ultimate disapproval of application, payments already made are treated as partial / installment payments of assessments. GROUNDS FOR ABATING TAXES & PENALTIES CONDITIONS

b. Power to Compromise Revenue Regulation 7-01 as amended by Revenue Regulations 30-02 and 8-2004 XXX - Sec 2. Cases which may be Compromised. - Ff may, upon taxpayer's compliance w/ basis under Sec 3, be subject matter of compromise settlement: 1. delinquent accts

2. cases under admin protest after issuance of FAN to taxpayer w/c are still pending 3. civil tax cases being disputed before courts 4. collection cases filed in courts 5. crim violations, other than those - already filed in court OR - involving crim tax fraud - Exceptions 1. w/holding tax cases, unless applicant-taxpayer invokes provisions of law that cast doubt on taxpayer's obligation to w/hold 2. crim tax fraud cases confirmed as such by CIR or his rep 3. crim violations already filed in court 4. delinquent accts w/ duly approved schedule of installment payments 5. cases where final reports of reinvestigation / reconsideration have been issued resulting to reduction in orig assessment AND taxpayer is agreeable to such decision by signing agreement form. On the other hand, other protested cases are handled by Regional Evaluation Board (REB) or National Evaluation Board (NEB) on case to case basis. 6. cases w/c become final & executory after final judgment of court, where compromise is requested on ground of doubtful validity of assessment 7. estate tax cases where compromise is requested on ground of financial incapacity of taxpayer - Sec 3. Basis For Acceptance of Compromise Settlement. - Commissioner may compromise payment of internal revenue tax on ff grounds: 1. Doubtful validity of the assessment. - Offer to compromise on this ground may be accepted when it’s shown that: a. delinquent acct / disputed assessment is resulting fr jeopardy assessment - jeopardy assessment: tax assessment w/c was assessed w/o benefit of complete / partial audit by revenue officer, who has reason to believe that assessment & collection of deficiency tax will be jeopardized by delay bec of taxpayer's failure to comply w/ audit & investigation requirements to present books and / or records or substantiate deductions, exemptions, credits b. assessment seems to be arbitrary AND there’s reason to believe that assessment lacks legal and / or factual basis c. taxpayer failed to file admin protest on acct of alleged failure to rcv notice of assessment AND there’s reason to believe that assessment lacks legal and / or factual basis d. taxpayer failed to file request for reinvestigation / reconsideration w/in 30d fr receipt of final assessment notice AND there’s reason to believe that assessment lacks legal and / or factual basis e. taxpayer failed to elevate to CTA adverse decision of Commissioner or his rep, in some cases, w/in 30d fr receipt AND there’s reason to believe that assessment lacks legal and / or factual basis f. assessments were issued on or after Jan 1, 1998 where demand notice allegedly failed to comply w/ formalities under Sec 228 NIRC g. assessments made based on "Best Evidence Obtainable Rule" AND there’s reason to believe that the same can be disputed by sufficient & competent evidence h. assessment was issued w/in prescriptive period as extended by taxpayer's execution of Waiver of Statute of Limitations the validity / authenticity of w/c is being questioned AND there’s reason to believe & evidence to prove that it’s not authentic i. assessment is based on issue where court of competent jurisdiction made adverse decision against Bureau, but for w/c SC hasn’t decided upon w/ finality 2. Financial Incapacity. - Offer to compromise based on this ground may be accepted upon showing that: a. corp ceased operation or is dissolved

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TAXATION - tax liabilities corresponding to Subscription Receivable or Assets distributed / distributable to stockholders representing return of capital at time of cessation of operation / dissolution shall not be considered for compromise b. taxpayer, as reflected in latest Balance Sheet supposed to be filed w/ BIR, is suffering fr surplus / earnings deficit resulting to impairment in orig capital by at least 50% - provided that amts payable or due to stockholders other than biz-related transactions w/c are properly includible in regular "accts payable" are by fiction of law considered as part of capital & not liability - provided further that taxpayer has no sufficient liquid asset to satisfy tax liability c. taxpayer is suffering fr net worth deficit (total liabilities exceed total assets) computed by deducting total liabilities (net of deferred credits & amts payable to stockholders / owners reflected as liabilities, except biz-related transactions) fr total assets (net of prepd expenses, deferred charges, pre-operating expenses, as well as appraisal increases in fixed assets), taken fr latest audited FS - provided that in case of individual taxpayer, he has no other leviable properties other than family home d. taxpayer is compensation income earner w/ no other source of income AND family's gross monthly compensation income doesn’t exceed levels of compensation income under Sec 4.1.1 AND taxpayer possesses no other leviable / distrainable assets, other than family home e. taxpayer has been declared by tribunal / authority / body / gov’t agency as bankrupt / insolvent - Commissioner shall not consider offer for compromise settlement on ground of financial incapacity of taxpayer - w/ Tax Credit Certificate (TCC) on hand or in transit - w/ pending claim for tax refund / credit - w/ existing finalized agreement or prospect of future agreement w/ any party that resulted or could result to increase in equity of taxpayer - No offer of compromise is entertained unless taxpayer waives in writing his privilege of secrecy of bank deposits; such waiver constitutes as authority of Commissioner to inquire into bank deposits of taxpayer. - Circumstances that would place taxpayer-applicant's inability to pay in serious doubt can be ground to deny application for compromise based on financial incapacity. - Sec 7. Report of the Commissioner on the Exercise of His Authority to Compromise to the Congressional Oversight Committee. - Commissioner shall submit to Congressional Oversight Committee thru Chairmen of Committee on Ways & Means of both Senate & House of Reps, every 6 mos of ea calendar yr, a report on exercise of his powers to compromise tax liabilities. - REB shld submit to Commissioner reports for the latter to be able to submit reports to Congressional Oversight Committee. RMO 27-2008 AMENDMENT TO RMO 20-2007 TO SYNCHRONIZE PROCEDURES PRESCRIBED THEREIN WITH REQUIREMENTS UNDER RR 30-2002, AS AMENDED BY RR 8-2004, ON EXERCISE OF COMPROMISE POWER OF BIR - Re last par of Sec 6 of RR 30-2002, as amended by RR 8-2004 AND last par of RMO 20-2007: There is apparent inconsistency in procedures prescribed under the two revenue issuances. - The inconsistency is resolved in accordance w/ rules that RR is higher in category than RMO. CASES THAT CAN BE COMPROMISED CASES THAT CANNOT BE COMPROMISED BASIS FOR ACCEPTANCE OF COMPROMISE SETTLEMENT

DOUBTFUL VALIDITY OF ASSESSMENT FINANCIAL INCAPACITY

Informer’s Rewards Sec 282, NIRC, supra Informer's Reward to Persons Instrumental in Discovery of Violations of NIRC and in Discovery & Seizure of Smuggled Goods A. For Violations of NIRC - Any person, except internal revenue official / employee, other public official / employee, or relative w/in 6th degree of consanguinity, who voluntarily gives definite & sworn info, not yet in possession of BIR, leading to discovery of frauds upon internal revenue laws / violations, resulting in recovery of revenues, surcharges & fees and/or conviction of guilty party and/or imposition of fine / penalty, is rewarded in sum - equivalent to 10% of revenues, surcharges / fees recovered and/or fine / penalty imposed & collected OR - P1,000,000 per case, w/cever is lower - Same is given to informer where offender offered to compromise violation and his offer was accepted by CIR & collected fr offender - If no revenue, surcharges / fees are actually recovered, no reward. - Info shall not refer to case already pending / previously investigated. - Reward is pd under rules issued by Sec of Finance, upon recommendation of Commissioner. B. For Discovery and Seizure of Smuggled Goods - Cash reward equivalent to 10% of FMV of smuggled & confiscated goods or P1M per case, w/cever is lower, is given to persons instrumental in discovery & seizure of smuggled goods. - Cash rewards of informers are subject to income tax, collected as final w/holding tax, at 10%. - Public officials, incumbent or retired, who acquired info in duty, are prohibited fr claiming informer’s reward. RMO 12-93, supra Basis of Reward to be given the informer - The taxes assessed & pd as result of valid info given is basis of reward of 15% (of tax, surcharge & fees pd), claim for w/c is processed by Legislative, Ruling & Research Division. - CIR shall recommend payment of reward, based on actual amt collected, subject to approval by Sec of Finance. Otherwise, claim is denied. Meralco Securities v. Savellano, supra Since no taxes are to be collected, no informer’s reward is due to pvt respondents. Informer’s reward is contingent upon payment & collection of unpd / deficiency taxes. An informer is entitled by way of reward only to a percentage of the taxes actually assessed & collected. Penid v. Virata What is vital is that the info given had led to or had been instrumental in discovery of fraud upon or violation of any provision of Internal Revenue or Tariff & Customs law AND that such discovery resulted in recovery / collection of revenues, surcharges, fees. CIR v. CoA, supra - That the informer’s reward was sought & given in relation to tax delinquencies of gov’t agencies provides no reason for disallowance. Where law doesn’t distinguish, none must be made. - Padilla, dissenting Enforcement sought to be strengthened by increasing informer’s reward refers to cases involving purely pvt taxpayers since no less than Consti provided for its own informer in case of gov’t entity-taxpayers. This informer is the CoA. PNOC v. CA, supra The provision on informer’s reward did not make distinction as to the manner the tax liability was collected – whether thru voluntary payment by taxpayer or thru garnishment of taxpayer’s prop.

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TAXATION Applicable is a maxim in statutory construction – when law does not distinguish, we should not.

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