Commissioner of Internal Revenue vs. Isabela Cultural Corporation (GR 135210, 11 July 2001)
Third Division, Panganiban (J): 3 concur, 1 on leave
Facts: In an investigation conducted on the 1986 books of account of Isabela Cultural Corporation had the preliminary finding that the corporation incurred a total income tax deficiency of P9,985,392.15, inclusive of increments. Upon protest by [respondent’s] counsel, the said preliminary assessment was reduced to the amount of P325,869.44. On 23 February 1990, the corporation received from the Commissioner an assessment letter, dated 9 February 1990, demanding payment of the amounts of P333,196.86 and P4,897.79 as deficiency income tax and expanded withholding tax inclusive of surcharge and interest, respectively, for the taxable period from 1 January 1986 to 31 December 1986. In a letter, dated 22 March 1990, filed with the Commissioner’s office on 23 March 1990, the corporation requested a reconsideration of the subject assessment. Supplemental to its protest was a letter, dated 2 April 1990, filed with the Commissioner office on 18 April 1990, to which were attached certain documents supportive of its protest, as well as a Waiver of Statute of Limitation, dated 17 April 1990, where it was indicated that the Commissioner would only have until 5 April 1991 within which to asses and collect the taxes that may be found due from the corporation after the re-investigation. On 9 February 1995, the corporation received from the Commissioner a Final Notice Before Seizure, dated 22 December 1994. In said letter, the Commissioner demanded payment of the subject assessment within 10 days from receipt thereof. Otherwise, failure on its part would constrain the Commissioner to collect the subject assessment through summary remedies. The corporation considered said final notice of seizure as the Commissioner’s final decision.
The corporation filed a petition for review with the Court of Tax Appeals (CTA) on 9 March 1995 (CTA Case 5211). The CTA having rendered judgment dismissing the petition, the corporation filed a petition with the Court of Appeals, anchored on the argument that the Commissioner’s issuance of the Final Notice Before Seizure constitutes its decision on the corporation’s request for reinvestigation, which the corporation may appeal to the CTA. In its Decision of 19 August 1998 (CA-GR SP 46383), the Court of Appeals reversed the Court of Tax Appeals. The CA considered the final notice sent by the Commissioner as the latter’s decision, which was appealable to the CTA. The appellate court reasoned that the final Notice before seizure had effectively denied the corporation’s request for a reconsideration of the commissioner’s assessment. The appellate court ordered the case be remanded to the CTA.
The Commissioner filed a petition for review on certiorari before the Supreme Court. The Supreme Court denied the petition and affirmed the assailed decision.
1. Normal procedure as to assessment of delinquent taxes; Final decision
In the normal course, the revenue district officer sends the taxpayer a notice of delinquent taxes, indicating the period covered, the amount due including interest, and the reason for the delinquency. If the taxpayer disagrees with or wishes to protest the assessment, it sends a letter to the BIR indicating its protest, stating the reasons therefor, and submitting such proof as may be necessary. That letter is considered as the taxpayer’s request for reconsideration of the delinquent assessment. After the request is filed and received by the BIR, the assessment becomes a disputed assessment on which it must render a decision. That decision is appealable to the Court of Tax Appeals for review. Prior to the decision on a disputed assessment, there may still be exchanges between the commissioner of internal revenue (CIR) and the taxpayer. The former may ask clarificatory questions or require the latter to submit additional evidence. However, the CIR’s position regarding the disputed assessment must be indicated in the final decision. It is this decision that is properly appealable to the CTA for review.
2. Final Notice Before Seizure is the final decision of the Commissioner
The Final Notice Before Seizure, transmitted after the corporation requested for reconsideration of the assessment made by the Commissioner as to delinquent taxes, should be considered as the commissioner’s decision disposing of the request for reconsideration filed by the corporation, who received no other response to its request. Not only was the Notice the only response received; its content and tenor supported the theory that it was the CIR’s final act regarding the request for reconsideration. The very title expressly indicated that it was a final notice prior to seizure of property. The letter itself clearly stated that respondent was being given “this LAST OPPORTUNITY” to pay; otherwise, its properties would be subjected to distraint and levy.
3. Section 228 NIRC; Protesting an Assessment
Section 228 of the National Internal Revenue Code states that a delinquent taxpayer may nevertheless directly appeal a disputed assessment, if its request for reconsideration remains unacted upon 180 days after submission thereof. Section 228 provides that “Within a period to be prescribed by implementing rules and regulations, the taxpayer shall be required to respond to said notice. If the taxpayer fails to respond, the Commissioner or his duly authorized representative shall issue an assessment based on his findings. Such assessment may be protested administratively by filing a request for reconsideration or reinvestigation within thirty (30) days from receipt of the assessment in such form and manner as may be prescribed by implementing rules and regulations. Within sixty (60) days from filing of the protest, all relevant supporting documents shall have become final. If the protest is denied in whole or in part, or is not acted upon within one hundred eighty (180) days from submission of documents, the taxpayer adversely affected by the decision or inaction may appeal to the Court of Tax Appeals within (30) days from receipt of the said decision, or from the lapse of the one hundred eighty (180)-day period; otherwise the decision shall become final, executory and demandable.”
4. Final demand letter for payment of delinquent taxes may be considered a decision on a disputed or protested assessment; Commissioner of Internal Revenue v. Ayala Securities Corporation
In Commissioner of Internal Revenue v. Ayala Securities Corporation, it was held that the letter is tantamount to a denial of the reconsideration of the corporation’s protest of the assessment made by the Commissioner, considering that the said letter was in itself a reiteration of the demand by the BIR for the settlement of the assessment already made, and for the immediate payment of the amount in spite of the vehement protest of the corporation. This certainly is a clear indication of the firm stand of the Commissioner against the reconsideration of the disputed assessment, in view of the continued refusal of the corporation to execute the waiver of the period of limitation upon the assessment in question.
5. Final demand letter for payment of delinquent taxes may be considered a decision on a disputed or protested assessment; Surigao Electric Co., Inc. vs. Court of Tax Appeals and CIR vs. Union Shipping
Similarly, in Surigao Electric Co., Inc. vs. Court of Tax Appeals and again in CIR v. Union Shipping Corp., it was held that the letter of demand unquestionably constitutes the final action taken by the commissioner on the company’s several requests for reconsideration and re-computation. In this letter the commissioner not only in effect demanded that the company pay the amount but also gave warning that in the event it failed to pay, the said commissioner would be constrained to enforce the collection thereof by means of the remedies provided by law. The tenor of the letter, specifically the statement regarding the resort to legal remedies, unmistakably indicated the final nature of the determination made by the commissioner of the company’s deficiency franchise tax liability.
6. BIR should always indicate to the taxpayer in clear and unequivocal language what constitutes final action on a disputed assessment; Purpose
The BIR should always indicate to the taxpayer in clear and unequivocal language what constitutes final action on a disputed assessment. The object of this policy is to avoid repeated requests for reconsideration by the taxpayer, thereby delaying the finality of the assessment and, consequently, the collection of the taxes due. Furthermore, the taxpayer would not be groping in the dark, speculating as to which communication or action of the BIR may be the decision appealable to the tax court.
7. Commissioner vs. Algue not applicable
Commissioner v. Algue is not in point. In that case, the Warrant of Distraint and Levy, issued to the taxpayer without any categorical ruling on its request for reconsideration, was not deemed equivalent to a denial of the request. Because such request could not in fact be found in its records, the BIR cannot be presumed to have taken it into consideration. The request was considered only when the taxpayer gave a copy of it, duly stamp-received by the BIR. Hence, the Warrant was deemed premature. In the present case, petitioner does not deny receipt of the Company’s protest letter. As a matter of fact, it categorically relates the following in its “Statement of Relevant Facts”. Having admitted as a fact the company’s request for reconsideration, the Commissioner must have passed upon it prior to the issuance of the Final Notice Before Seizure.
