COMMISSIONER OF INTERNAL REVENUE, Petitioner VS.
NEXT MOBILE, INC., Respondent (G.R. No. 212825, December 7, 2015)
FACTS:
On April 15, 2002, respondent Next Mobile filed with the BIR its Annual Income Tax Return for taxable year ending December
31, 2001. Respondent also filed its Monthly Remittance Returns of Final Income Taxes Withheld, its Monthly Remittance Return
of Expanded Withholding Taxes and its Monthly Remittance Returns of Income Taxes Withheld on Compensation.
Respondent received a copy of the Letter of Authority from the Regional Director Nestor S. Valeroso to examine respondent’s
books of accounts and other accounting records and withholding taxes for the period covering January 1, 2001 – December 31,
2001.
Ma. Lida Sarmiento, respondent’s Director of Finance, subsequently executed several waivers of the Statute of Limitations to
extend the prescriptive period of assessment of taxes due in taxable year ending 2001.
On September 26, 2005, respondent received from the BIR Preliminary Assessment Notice dated September 16, 2005 to which
it filed a Reply. On October 25, 2005, respondent received a Formal Letter of Demand (FLD) and Assessment Notices/Demand,
demanding the payment of deficiency income tax, final withholding tax, expanded withholding tax, increments for late remittance
of taxes withheld, and compromise penalty for failure to file returns/late filing/late remittance of taxes withheld.
CTA Former First Division Ruling – Granted respondent’s Petition for Review and declared the FLD and Assessment
Notices/Demand cancelled and withdrawn for being issued beyond the three-year prescriptive period provided by law. It was
held that the adverted FLD and the FAN were issued beyond the three-year prescriptive period. Petitioner failed to substantiate
its allegation by clear and convincing proof that respondent filed a false or fraudulent return. Also, the Waivers executed by
Sarmiento did not validly extend the three-year prescriptive period to assess respondent for deficiency income tax.
CTA En Banc Ruling – Denied Petition for Review and affirmed the Decision of the former CTA First Division.
ISSUE:
Whether or not the CIR’s right to assess respondent’s deficiency taxes had already prescribed for being beyond the three-year
prescriptive period provided by law.
RULING: NO
Section 203 of NIRC mandates BIR to assess internal revenue taxes within 3 years from the last day prescribed by law for the
filing of the tax return. Hence, an assessment notice issued after the three-year prescriptive period is not valid and effective but
with exceptions provided.
Section 222(b) of the NIRC provides that the period to assess and collect taxes may only be extended upon a written
agreement between the CIR and the taxpayer executed before the expiration of the three-year prescriptive period.
In the instant case, the CTA found the Waivers defective because of the following:
a. They were executed without a notarized board authority;
b. The dates of acceptance by the BIR were not indicated therein; and
c. The fact of receipt by respondent of its copy of the Second Waiver was not indicated on the face of the original Second
Waiver.
Here, respondent through Sarmiento, executed five Waivers in favour of petitioner. However, her authority to sign these
Waivers was not presented upon their submission to the BIR. In fact, later on, her authority to sign was questioned by
respondent itself, the very same entity that caused her to sign such in the first place. Thus it is clear that respondent violated
RMO No. 20-90 which stated that in case of a corporate taxpayer, the waiver must be signed by its responsible officials and
RDAO 01-05 which requires presentation of a written and notarized authority to the BIR.
In this case, respondent, after deliberately executing defective waivers, raised the very same deficiencies it caused to avoid the
tax liability determined by the BIR during the extended assessment period. It must be remembered that by virtue of these
waivers, respondent was given the opportunity to gather and submit documents to substantiate its claims before the CIR during
the investigation. It was able to postpone the payment of taxes, as well as contest negotiate the assessment against it. Yet after
enjoying these benefits, respondent challenged the validity of the Waivers when the consequences thereof were not in its
favour. (Estopped)
It is true that petitioner was also at fault here because it was careless in complying with the requirements of RMO No. 20-90 and
RDAO 01-05. Nevertheless, petitioner’s negligence may be addressed by enforcing the provisions imposing administrative
liabilities upon the officers responsible for these errors. The BIR’s right to assess and collect taxes should not be jeopardized
merely because of the mistakes and lapses of its officers, especially in cases like this where the taxpayer is obviously in bad
faith.
The Court resolves to GRANT the petition and let this case be remanded to the Court of Tax Appeals for further
proceedings.
