CIR v FITNESS by DESIGN The act of informing the taxpayer on both legal and

factual bases of the assessment is mandatory, as the

April 11, 1996: Fitness filed its Annual Income Tax requirement enables the taxpayer to make an
Return for 1995 effective protest or appeal of the assessment or
decision.
June 9, 2004: Fitness received a copy of the Final
Assessment Notice; assessed tax deficiency of 10M The assessment must not include only a computation
for 1995 of the tax liabilities but also a demand for payment
within a period prescribed.
June 25, 2004: Fitness filed a protest
The FAN is not a valid assessment.
 The Commissioner’s period to assess had
already prescribed  Lacks the definite amount of tax liability for
which the taxpayer is accountable; stated
February 2, 2005: Commissioner issued a warrant of
that the amount indicated therein is :still
distraint and/or levy
subject to modification depending on the
March 1, 2005: Fitness filed before CTA First Division a date of payment.
petition for review  No due date was stated; there was a request
to pay within the time shown in the enclosed
 Commissioner’s answer: right to assess had
assessment notice, which remained
not yet prescribed under Sec 222 of the NIRC unaccomplished.
because the ITR filed by Fitness was false and
fraudulent; may be assessed within 10 years.

CTA First Division: in favor of Fitness.

 The right to assess had already expired

 The Final Assessment Notice is invalid for
failure to comply with the requirements
under Sec 228 of the NIRC

Commissioner appealed to the CTA en banc, which

affirmed CTA First Division’s ruling.

Issue: Whether or not the FAN issued against Fitness is

a valid assessment pursuant to Sec 228 of the NIRC.

NEGATIVE.

“Assessment” – determination of the amounts due

from a person obligated to make payments;
determination of taxes due from a taxpayer under
the NIRC.

Assessment process:

 Filing of tax return

 Examination for assessment
 Notice for informal conference
 Informal conference
 Endorsement to the assessment division of
the Revenue Regional office for review
 Preliminary Assessment Notice
 Formal Assessment Notice

“The FAN shall state all the facts, jurisprudence and

law on which the assessment is based; otherwise
these shall be void”
CIR v UNITED SALVAGE AND TOWAGE
United is engaged in the business of sub-contracting
work for contractors engaged in petroleum
operations in the PH.

United found by CIR to be liable for income

deficiency tax, withholding tax, value-added tax
and documentary stamp tax for 1992, 1994, 1997
and 1998.

CIR issued demand letters with attached assessment

notices for withholding tax for compensation and
expanded withholding tax for 1992, 94 and 98.

1998 and 2001: United filed administrative protests as

to the 1994 and 98 EWT assessments, respectively.

February 2003: United appealed to the CTA First

Division on the ground that:

 the notices of assessment did not contain

facts, law and jurisprudence and is thus void;
 right to assess prescribed for failure to issue a
valid notice of assessment.

CTA First Divison: Notices of assessment cancelled for

failure to comply with Sec 228 of the NIRC, right to
assess prescribed.

CTA en banc: Affirmed.

Issue: Whether or not the notice of assessment is a

valid notice of assessment.

NEGATIVE.

Sec 228 requires that the taxpayer be informed in

writing of the facts, law, rules and regulations or
jurisprudence upon which the assessment is based;
otherwise, the assessment is void.

Perusal of the FAN for the deficiency EWT will show

that aside from the tabulation of the alleged
deficiency taxes due, no other detail regarding the
assessment was provided.

The law requires that the legal and factual bases of

the assessment be stated in the formal letter of
demand and assessment notice, and cannot be
presumed, as per Sec 3.1.4 of the Revenue
Regulation 12-99.

At the time the notices were issued, RA 8424 was

already in effect; the application of RR 12-99 in this
case is valid as administrative rules interpreting a
statute and not declarative of rights and obligations
is given retroactive effect as to the date of the
effectivity of the statute.
ALLIED BANKING CORPORATION v CIR Being a final decision of the CIR, the same is within
the jurisdiction of the CTA as per Sec 7 of the NIRC,
BIR issued a PAN to Allied Banking for deficiency as the CTA has exclusive appellate jurisdiction over
documentary stamp tax (12M) and gross receipts tax decisions and inactions of the CIR.
(38M).

May 18, 2004: Received by Allied Banking.

May 27, 2004: Allied Banking filed a protest.

July 16, 2004: BIR wrote a FAN to Allied.

September 29, 2004: Petitioner filed a petition for

review before the CTA.

 CIR answer: motion to dismiss on the ground

of failure to file an administrative protest on
the FAN

CTA First Division: granted motion to dismiss; it is

neither the assessment nor the FAN that is
appealable to the CTA, but the decision of the CIR
itself.

CTA en banc: denied the petition for review; it is

absolutely necessary for the taxpayer to file first an
administrative protest in order for the CTA to acquire
jurisdiction.

Issue: Whether or not the FAN can be construed as a

final decision of the CIR appealable to the CTA.

AFFIRMATIVE.

Petitioner timely filed a protest from the PAN, then

CIR issued a FAN, from which the proper recourse,
strictly applying the law, should have been an
administrative protest within 30 days from the receipt
thereof. Allied Banking, however, filed a petition for
review before the CTA.

A careful reading of the FAN, however, would show

estoppel on CIR against any claim of exhaustion of
administrative remedies.

The FAN was worded as: “It is requested that the

above deficiency be paid immediately… this is our
final decision based on investigation, which may be
appealed within 30 days from the receipt”

The demand letter would show that it is already a

final decision and that the remedy is to appeal the
same.

 The use of “appeal” instead of “protest”

 Appeal refers to the filing of a petition before
the CTA; if before the CIR was the intent, the
letter should have used “protest”,
“reinvestigation” or “reconsideration”
PAGCOR v CIR An examination of Sec 228 of the NIRC as well as Sec
3.1.5 of the Revenue Regulations 12-99 would show
PAGCOR is a GOCC created to regulate and that PAGCOR, as a protesting taxpayer, has three
operate clubs and casinos for amusement and options:
recreation.
 Protest denied by the CIR or his authorized
PAGCOR provides car plans to its employees, representative:
shouldering 60% of the car plan availment. o appeal to CTA within 30 days of the
receipt.
October 10, 2007: PAGCOR received a notice for an
 Protest denied by CIR’s authorized
informal conference with regard to its internal
representative:
revenue taxes in 2004, for deficiencies in VAT,
o Appeal to the CIR within 30 days.
withholding tax on VAT, EWT and Fringe Benefits Tax.
 Failure of the CIR of his authorized
BIR abandoned all claims pursuant to a court ruling representative to act upon the protest within
exempting PAGCOR from VAT; only assessment on 180 days:
FBT subsisted. o Appeal to the CTA within 30 days
from the lapse of the 180 day-period.
January 17, 2008: PAFCOR received a FAN (48M).
There is no mention of an appeal to the CIR from
January 24, 2008: PAGCOR filed a protest on the FAN failure to act by its representatives.
addressed to RD Misajon.
First option: no justification for appeal to CA because
August 14, 2008: PAGCOR elevated its protest to the the RD did not release any decision on the protest.
CIR due to inaction of the officer.
Second option: PAGCOR should have waited for the
March 11, 2009: PAGCOR filed the instant petition
denial by the RD; elevation to the CIR without denial
alleging inaction on its protest on the disputed FBT
by the RD then filed a petition before the CTA;
deficiency.
neither Sec 228 nor 3.1.5 provides for a remedy for
CTA First Divisiom: in favor of CIR. RD’s failure to act.

 Petition for review before CTA was filed out of Third option: PAGCOR should have waited until
time October 27, 2008 or 180 days from April 30 2008,
o PAGCOR filed its administrative when it submitted all supporting documents before
protest on January 24, 2008. the RD. It then had until Nov 26 to file a petition
o CIR had 180 days to act upon the before the CTA. This PAGCOR also failed to do.
same, or until July 22.
The Court reiterates that a petition before the CAT
o After expiration of the period without
may only be filed after a whole or partial denial by
action, taxpayer had 30 days to file the CIR or its authorized representative.
petition for review, or until August 21,
2008. This leads to a lack of cause of action for the petition
o PAGCOR filed the petition to review before the CTA, there being no denial to anchor its
on March 11, 2009. cause of action on.

CTA en banc: Affirmed.

Issue: Whether or not there was a late filing of the

petition for review.

NEGATIVE. In fact, it was a premature filing.

CIR v ASALUS CORPORATION underdeclaration (exceeding 30%) of the taxable
sales, receipts or income.
December 16, 2010: Asalus received a notice of
informal conference from the revenue distric office There is no need then for the CIR to present evidence
of the BIR, with regard to its VAT transactions. unless the taxpayer overcomes this rebuttable
presumption.
December 29, 2010: Asalus replied questioning the
same. The audit investigation revealed undeclared VAT
sales more than 30% of that declared. Asalus’ lone
January 10, 2011: CIR issued a PAN finding deficiency witness testified that not all membership fees were
VAT of 413M. Protest by Asalus was denied. reported in the VAT returns.
August 26, 2011: Asalus received a FAN for There was substantial compliance with the
deficiency VAT in 2007 to the amount of 95M. requirements of Sec 228. The PAN categorically
stated that the running of the three-year period is not
September 6, 2011: Asalus filed a protest that the
applicable bur rather the 10-year period as per Sec
assessment had prescribed pursuant to Sec 203 of
222.
the NIRC.
If there was sufficient information of the legal and
October 16, 2012: Final Decision on the Disputed
factual bases of the assessment so that the taxpayer
Assessment was received by Asalus for 106M
may make an effective protest against it, there is
deficiency VAT.
substantial compliance of Sec 228.
Petition for review was filed before the CTA.
It is clear that the application of Sec 22 was stated in
CTA Division: VAT assessment issued on Aug 2011 had the PAN and all subsequent communications and
prescribed and deemed invalid. The 10-year correspondence between the parties made a
prescriptive period under Sec 222 cannot apply as reference to the PAN.
there was no indication in the FAN or FDDA that a
false VAT return had been filed. Only in the PAN was
it stated that a false or fraudulent return had been
made.

CTA en banc: Affirmed.

Issue: Whether or not there was sufficient allegation

of false or fraudulent return against Asalus.

AFFIRMATIVE.

General rule is that internal revenue taxes shall be

assessed within three years from the last day
prescribed by law in the filing of the return, or when
the return is filed beyond the period, from the day it
was actually filed.

EXC: Section 222: in cases of false or fraudulent

returns with intent to evade tax or failure to file a
return, assessment may be made within10 years from
the discovery of such falsity, fraud or omission.

Three cases: false return; fraudulent return with intent

to evade tax; failure to return.

Mere showing that there is false return, without

allegations as to intent to evade tax, is sufficient to
warrant application of Sec 222.

Under Sec 248 of the NIRC, there is prima facie

evidence of false return if there is a substantial
CIR v DASH ENGINEERING August 9, 2004: Dash filed its administrative claim
before the CIR, before the expiration of the two-year
Dash is a corporation engaged in the export of sales period.
of computer-aided engineering and design.
The 120 days ended in December 7, 2004, from
July 24, 2004: Dash filed its quartetly VAT returns for which the 30 days granted to Dash to file a judicial
the second and third quarters of 2003. claim began to run, and ended in January 6, 2005.
August 9, 2004: Dash filed a claim for tax credit or Dash only sought judicial relief on May 5, 2005.
refund for 2M with regard to its unutilized input VAT
attributable to its zero-rated sales.

May 5, 2005: Petition for review before the CTA for

failure of the CIR to act upon the claim.

CTA Division: Partial grant of 1M, as the claims were

filed within the two-year prescriptive period.

CTA en banc: affirmed.

Issue: Whether or not the judicial claim for refund was

filed within the prescriptive period provided under
the Tax Code.

NEGATIVE.

Sec 204 and 229, which speaks of the two-year

prescriptive period in the refund of erroneously or
illegally collected taxes, had been previously
declared by the Court as inapplicable to claims for
excess input VAT.

 Input VAT is not excessively collected

because at the time input VAT is collected,
the amount paid is correct and proper.

Sec 112 is the appropriate provision for claims of

excess input VAT. It states that the application fo the
issuance of a tax credit certificate or refund with
regard to excess input VAT must be within 2 years
after the close of the taxable quarter when the sales
were made.

This was, in San Roque, qualified to apply only to filing

of administrative claims and not judicial claims
before the CTA. As long as the administrative claim
was filed within the two-year period, the 30-day
period given to file a judicial claim need not fall
within the 2-year period.

Dash complied with the two-year period.

Sec 112 provides that in appeal may be made in

cases of full or partial denial of the tax refund or
credit, or the failure of the Commissioner to act on
the application, within 30 days from the denial or
after the expiration of the 120 day period.

The 120+30 day period under Sec 112 is mandatory

and jurisdictional, as per San Roque.
CBK v CIR Sec 229, however, further requires that a judicial
claim for refund may not be maintained until a claim
CBK is a limited partnership engaged in the for refund had been duly filed with the CIR.
operations of hydroelectric power generating plants
in Laguna. There is no issue that the administrative and judicial
claims for refund were filed within the two-year
CBK borrowed money from foreign banks which prescriptive period.
remitted interest payments from May 2001 to 2003,
allegedly withholding final taxes based on the
following rates, paying the same to BIR:
With respect to the remittance filed on March 10,
 15% for Fortis-Belgium, Fortis-Netherlands and 2003: CIR contends failure to exhaust administrative
Raiffesen Bank remedies.
 20% for Industrial bank of Japan and Mizuho
Had CBK awaited the action of the CIR on its claim,
Bank
it would have lost not only its right to seek judicial
CBK contends that under the relevant tax treaties, recourse, but its right to recover erroneously paid
interest income derived from such banks are subject taxes to the government, leading to irreparable
only to the preferential tax rate of 10%. damage to CBK.

April 14, 2003: CBK filed a refund for its excess final
withholding taxes allegedly erroneously withheld
With respect to remittance filed on June 10, 2003: CIR
and collected for the years 2001 and 2002.
contends that it was deprived of the opportunity to
March 4, 2005: CBK claimed a refund for the excess act upon the claim; it had been filed March 9, 2005
final withholding taxes in 2003. when the last day of filing was until June 10, 2005.

Alleged inaction of the CIR prompted petition It is true that CBK could have waited for 3 months if
before the CTA: only to give the BIR the chance to administratively
determine the correctness of the claim. However,
 June 6, 2003: excess of 6M for 2001. the Court cannot, for that reason alone, deny a
 March 5, 2004:excess of 8M for 2002. legitimate claim that is timely filed as per Sec 229 of
 March 9, 2005: excess of 1M for 2003. the NIRC.
CTA Division: granted the petitions and ordered the It must be noted that Sec 229, as worded, only
refund of 15M. requires that an administrative claim be priorly filed,
and does not require that the claimant give the CIR
Motion for reconsideration reduced the grant to 14M
the opportunity to act on the claim.
for failure to obtain ITAD (International Tax Affairs
Division) ruling prior to availing of the preferential tax The claim before the CIR is intended only as a notice
rate. that unless the tax erroneously collected is refunded,
court action will follow; to give the Commissioner the
CBK elevated the matter to the CTA en banc.
opportunity to reconsider his mistake.
CTA en banc: affirmed

Issue: Whether or not CBK deprived the CIR of

opportunity to act on its administrative claim for
refund of excess withholding taxes.

NEGATIVE.

Sec 204 and 229 pertain to the refund of erroneously

collected taxes.

 Sec 204: administrative claims

 Sec 229: judicial claims

In both instances, the claim must be filed within two

years from the date of the payment of the tax or
penalty.
DIAGEO PH v CIR Sec 204 of the NIRC states that no credit or refund
shall be allowed unless the taxpayer files a claim for
Diageo is a domestic corporation engaged in the credit or refund within the time fixed by law.
import, export and manufacture of all kinds of
beverages and liquors, registered with the BIR as an The person then entitled to a tax refund is the
excise taxpayer. statutory taxpayer, or the person liable for or subject
to tax.
From November 1, 2003 to December 31, 2004, it
purchased alcohol from its supplier for the This is unlike the case in VAT where the subsequent
manufacture of its beverages. The purchase price purchaser is expressly allowed by law, under the tax
included among others 12M as excise taxes. credit method, to refund or credit input taxes passed
onto it by a supplier.
Diageo timely filed an application for tax refund/
issuance of tax credit certificates corresponding to
the excise taxes which the supplier paid but was
passed on as part of the purchase price.

Failure of the CIR to act prompted Diageo to file a

petition for review before the CTA.

CTA Division: dismissed the petition on the ground

that Diageo is not the real party in interest.

CTA en banc: affirmed.

Petition before the SC: Diageo as real party in

interest as it paid the excise tax as part of the
purchase price.

Issue: Whether or not Diego is the real party in

interest.

NEGATIVE.

Sec 130 of the NIRC, on which Diego anchors his

claim of refund, actually works against him.

Section D thereof states that when goods locally

produced or manufactured are actually exported,
any excise tax paid thereon shall be credited or
refunded upon submission of proof of actual
exportation.

The phrase “any excise tax paid thereon shall be

credited or refunded” requires that the claimant be
the same person who paid the excise tax.

The case of Silkair stated that the proper party to

question or seek a refund of an indirect tax is the
statutory taxpayer, the person on whom the tax is
imposed by law and who paid the same even when
the burden is actually shifted to another.

Excise tax partakes the nature of an indirect tax as

the liability for its payment falls on one person but the
burden may be shifted to another, in this case, as
part of the purchase price.

But what is transferred is merely the burden, not the

liability.
PAL v CIR
July 24 to 28, 2004: Caltex sold 800k liters of imported
fuel to PAL for the latter’s domestic operations.

PAL received from Caltex an aviation billing invoice

which reflects $52k as excise taxes.

PAL sought refund of the same before the CIR, on the

ground that its operating franchise grants tax
exemption privileges on purchase an importation of
gas, fuel and oil, including those passed to it by its
seller/importer.

PAL filed a petition before the CTA due to inaction

of the CIR.

CTA Division: denied PAL’s claim based on the

Court’s ruling in Silkair, that only a statutory taxpayer
may seek a refund of the excise taxes paid.

CTA en banc: affirmed.

Issue: Whether or not PAL has the legal personality to

claim refund for the excise taxes that Caltex paid.

AFFIRMATIVE.

First, a background:

Sec 129: excise taxes are imposed upon two kinds of

goods: (1) goods manufactured in the PH and (2)
those imported.

(1) Sec 130: taxpayer is obligated to file the return

and pay the excise taxes thereon.

(2) Sec 131: importer is obliged to pay the excise tax

thereon.

However, these persons may shift the tax burden to

its subsequent purchasers, making excise tax an
indirect tax.

Jurisprudence states that in cases of indirect taxes,

the shifting of the economic burden is a largely
contractual affair only between the parties, such
that even if the purchaser effectively pays the value
of excise tax, the manufacturer or importer is still
regarded as the statutory taxpayer.

Sec 204 states that it is the taxpayer that is entitled to

a claim for refund. This is supported by jurisprudence
as for example, the case of Silkair.

However, PAL’s case is an exception, as the law

expressly grants to PAL an exemption from both
direct and indirect taxes; in this case, PAL must be
allowed to claim refund even if it is not the statutory
taxpayer, by virtue of its operating franchise.