G.R. No. 162852 – 488 Phil. 218 – 447 SCRA 214 – Taxation Law – NIRC Rules – Assessment of Taxes – Formal Assessment Notice – Waiver of the Statute of Limitations
In April 1995, the Philippine Journalists, Inc. (PJI) filed its income tax return for the year 1994. In 1995, a tax audit was conducted by the Bureau of Internal Revenue (BIR) where it was found that PJI was liable for a tax deficiency. In September 1997, PJI asked that it be allowed to present its evidence to dispute the finding. In the same month, the Comptroller of PJI (Lorenza Tolentino) executed a waiver of the statute of limitations whereby PJI agreed to waive the running of the prescriptive period of the government’s right to make an assessment. Said right was set to expire on April 17, 1998 but due to the additional evidence that PJI sought to present, the government needed more time.
And so a reinvestigation took place which yielded the same result – PJI is liable for tax deficiencies. In December 1998, a formal assessment notice (FAN) was sent via registered mail to PJI. Subsequently, a warrant for distraint/levy was issued against the assets of PJI.
PJI filed a protest which eventually reached the Court of Tax Appeals. PJI averred that the waiver executed by Tolentino was incomplete; that no acceptance date was indicated to show that the waiver was accepted by BIR; that no copy was furnished PJI; that the waiver was an unlimited waiver because it did not indicate as to how long the extension of the prescriptive period should last. As such, there was no valid waiver of the statute of limitations which in turn make the FAN issued in December 1998 void.
The Commissioner of Internal Revenue (CIR) argued that the placing of the acceptance date is merely a formal requirement and not vital to the validity of the waiver; that there is no need to furnish PJI a copy of the waiver because in the first place, it was PJI, through its representative, who was making the waiver so it should know about it; and that there is no need to place a specific date as to how long the prescriptive period should be extended because PJI was waiving the prescriptive period and was not asking to extend it.
The Court of Tax Appeals (CTA) ruled in favor of PJI. But the Court of Appeals reversed the CTA as it ruled in favor of the CIR.
ISSUE: Whether or not the arguments of the CIR is valid.
HELD: No. The requirement to place the acceptance date is not merely formal. The waiver of the statute of limitations is not a unilateral act by the taxpayer. The BIR has to accept it hence the need for a BIR representative to affix his signature and the date of acceptance. There is also therefore a need to furnish a copy to the taxpayer for the latter to be apprised that his waiver has been accepted. It must be noted that the waiver is an agreement between the taxpayer and the BIR that the period to issue an assessment and collect the taxes due is extended to a date certain and not to waive the right to invoke the defense of prescription. The waiver does not mean that the taxpayer relinquishes the right to invoke prescription unequivocally particularly where the language of the document is equivocal. For the purpose of safeguarding taxpayers from any unreasonable examination, investigation or assessment, our tax law provides a statute of limitations in the collection of taxes. Thus, the law on prescription, being a remedial measure, should be liberally construed in order to afford such protection.
