Assessment

1. Tax audit/Assessment
(Issuance of Letter of Authority)
Definition
It is a written notice to a taxpayer to the effect that the amount stated therein is due as tax and
containing a demand for the payment. It is a finding by the taxing agency that the taxpayer has not
paid his correct taxes.

Powers of the Commisioner NIRC S6 & S5

S6. Power of the Commissioner to Make assessments and Prescribe additional
Requirements for Tax Administration and Enforcement

Q: What are the powers of the Commissioner in the assessment of taxes?

A: The CIR or his duly authorized representative is authorized to use the following powers: (Sec. 6,
NIRC)
1. Examination of return and determination of tax due
2. Use of the best evidence available
3. Authority to conduct inventory taking, surveillance and prescribe gross sales and receipts if
there is reason to believe that the taxpayer is not declaring his correct income, sales or receipts for
internal revenue purposes
4. Authority to terminate taxable period in the following instances:
a. Taxpayer is retiring from business subject to tax;
b. Taxpayer is intending to leave the Philippines or to remove his property therefrom or
to hide or conceal his property and
c. Taxpayer is performing any act tending to obstruct the proceedings for the collection
of taxes.
5. Authority to prescribe real property values
6. Authority to inquire into bank deposits accounts in the following instances:
a. A decedent to determine his gross estate;
b. Any taxpayter who has filed an application for compromise of his tax liability by
reason of financial incapability to pay;
c. A specific taxpayer/s is subject of a request for the supply of tax information a
foreign tax authority pursuant to an intentional convention or agreement on tax matters to
which the Philippines is a signatory or a party of. Provided that the requesting foreign tax
authority is able to demonstrate the foreseeable relevance of certain information required to
be given to the request. (Sec. 3 & 8, RA 10021)
d. Where the taxpayer has signed a waiver authorizing the Commissioner or his duly
authorized representative to inquire into the bank deposits.
7. Authority to accredit and register tax agents
8. Authority to prescribe additional procedural or documentary requirements.
Q: What is the Best Evidence Obtainable?
A: Any data, record, papers, documents or any evidence gathered by internal revenue officers from
government offices/agencies, corporations, employees, clients, patients, tenants, lessees, vendees and
from all other sources with whom the taxpayer had previous transactions or from whom he received
any income.
Q: When may the CIR assess the tax on best obtainable evidence?
A: FINE
1. When a return is required by law as a basis for assessment of internal revenue tax shall not be
forthcoming within the time fixed by law or regulation (No return filed); or
2. Any return which is False, Incomplete or Erroneous. (Sec. 6, NIRC)
Q: Does the power of the CIR to inquire into bank deposits of a taxpayer conflict with RA
1405, Secrecy of Bank Deposits Law?
A: The limited power of the CIR does not conflict with RA 1405 because the provisions of the Tax Code
granting this power is an exception to the Secrecy of Bank Deposits Law as embodied in a later
legislation.
Furthermore, in case a taxpayer applies for an application to compromise the payment of his tax
liabilities on his claim that his financial position demonstrates a clear inability to pay the tax assessed,
his application shall not be considered unless and until he waives in writing his privilege under RA

1405, and such waiver shall constitute the authority of the CIR to inquire into the bank deposits of the
taxpayer. (1998 Bar Question)

S5. Power of the Commissioner to Obtain Information, and to Summon,

Examine, and Take Testimony of Persons)

Q: What is the power of the CIR to obtain information, and to summon, examine and take
testimony of persons?
A: This power is for ascertaining the correctness of any return, or in making a return when none has
been made, or in determining the liability of any person for any internal revenue tax, or in collecting
any such liability, or in evaluating tax compliance, the Commissioner is authorized:
1. To examine any book, paper, record, or other data which may be relevant or material to such
inquiry;
2. To obtain on a regular basis from any person other than the person whose internal revenue
tax liability is subject to audit or investigation, or from any office or officer of the national and local
governments, government agencies and instrumentalities, including the BSP and GOCCs, any
information such as, but not limited to, costs and volume of production, receipts or sales and gross
incomes of taxpayers, and the names, addresses, and financial statements of corporations, mutual
fund companies, insurance companies, regional operating headquarters of multinational companies,
joint accounts, associations, joint ventures of consortia and registered partnerships, and their
members;
3. To summon the person liable for tax or required to file a return, or any officer or employee of
such person, or any person having possession, custody, or care of the books of accounts and other
accounting records containing entries relating to the business of the person liable for tax, or any other
person, to appear before the CIR or his duly authorized representative at a time and place specified in
the summons and to produce such books, papers, records, or other data, and to give testimony;
4. To take such testimony of the person concerned, under oath, as may be relevant or material
to such inquiry; and
5. To cause revenue officers and employees to make a canvass from time to time of any
revenue district or region and inquire after and concerning all persons therein who may be liable to pay
any internal revenue tax, and all persons owning or
having the care, management or possession of any object with respect to which a tax is imposed. (Sec.
5, NIRC)

Requisites for valid assessment

Q: What are the requisites for a valid assessment?

A: The assessment must:
1. Be in writing and signed by the BIR;
2. Contain the law and the facts on which the assessment is made; and
3. Contain a demand for payment within the prescribed period. (Sec. 228, NIRC)

Methods of income determination constructive, inventory

Constructive Method of Income Determination

Q: If the taxpayers record or methods of accounting are not reflective of his true income,
what methods may be utilized by the CIR to determine the correct taxable income of the
taxpayer?
A: NCPBUTTS
1. Net worth method
2. Cash expenditure method
3. Percentage method
4. Bank deposit method
5. Unit and value method
6. Third party information or access to records method
7. Surveillance and assessment method
8. Such methods as in the opinion of the BIR Commissioner clearly reflect the income (1969
Bar Question)

Q: A Co., a DC, is a big manufacturer of consumer goods and has several suppliers of raw
materials. The BIR suspects that some of the suppliers are not properly reporting their
income on their sales to A Co. The CIR therefore: 1) Issued an access letter to A Co. to
furnish the BIR information on sales and payments to its suppliers. 2) Issued an access
letter to X Bank to furnish the BIR on deposits of some suppliers of A Co. on the alleged
ground that the suppliers are committing tax evasion. A Co., X Bank and the suppliers have
not been issued by the BIR letter of authority to examine. A Co. and X Bank believe that
the BIR is on a "fishing expedition" and come to you for counsel. What is your advice?
A: I will advise A Co. and X Bank that the BIR is justified only in getting information from the former but
not from the latter. The BIR is authorized to obtain information from other persons other than those
whose internal revenue tax liability is subject to audit or investigation. However, this power shall not
be construed as granting the CIR the authority to inquire into bank deposits. (Sec. 5, NIRC) (1999 Bar
Question)
Q: BIR assessed the taxpayer for alleged deficiency taxes. The assessment was based on
photocopies of 77 Consumption Entries furnished by an informer, the taxpayer understated
its importations. However, the BIR failed to secure certified true copies of the subject
Consumption Entries from the Bureau of Customs since, according to the custodian, the
originals had been eaten by termites. Can the BIR base its assessment on mere
photocopies of records/documents?
A: No, mere photocopies of the Consumption Entries have no probative weight if offered as proof of
the contents thereof. While it is true that under the Tax Code, the BIR can assess taxpayers based on
the best evidence obtainable and that tax assessments are presumed correct and made in good
faith, it is elementary that the assessment must be based on actual facts. The best evidence
obtainable provided under the Tax Code does not include mere photocopies of records or documents.
The presumption of the correctness of an assessment, being a mere presumption, cannot be made to
rest on another presumption. (CIR v. Hantex Trading Co., Inc., GR 136975, Mar. 31, 2005)
Q: B Corp. received an Audit Notice authorizing the examination of its books of accounts
and other accounting records for all internal revenue taxes for the period Jan. 31, 1998 to
Dec. 31, 1998. Under the aforesaid Audit Notice, B Corp. was assessed deficiency VAT on
payments made in 1997 to a nonresident foreign corporation. B Corp. protested the
assessment alleging, among others, that the audit conducted regarding the 1997 royalty
payment is beyond the authority of the auditing officers under the Audit Notice and the
right to assess VAT on such royalty payment has prescribed. Is the assessment made on
the royalty payment outside the scope of the Audit Notice and has the right of the
government to assess deficiency VAT thereon prescribed?
A: B Corp. paid royalties to a NRFC in 1997 but failed to pay VAT thereon. Hence, B Corps VAT liability
is incontrovertible. Notwithstanding the absence of an Audit Notice to conduct a tax investigation for
the year 1997, the CTA ruled, on the basis of Sec. 6 (A) and (B), NIRC, that the power of the CIR to
assess B Corp. deficiency VAT is valid. The CTA further ruled that the power of the government to
assess deficiency VAT has not prescribed since the royalty payment was not reflected in the 1997 and
1998 VAT returns of B Corp. For filing false returns, the ten year prescriptive period for the assessment
of deficiency taxes applies. (Business One, Inc. v. CIR, CTA Case No. 6832, Oct. 7, 2008)
Inventory Method for Income Determination
Q: What are the Inventory methods for income determination?
A: The International Accounting Standard enumerated the following:
1. Last In First Out (LIFO)
2. First In First Out (FIFO)
3. Weighted Average
4. Specific identification
Q: What is LIFO and FIFO?
A: A method of assigning costs to both inventory and cost of goods sold. With regard to LIFO the
assumption is that the most recent inventory is the one sold first as compared to FIFO wherein the
inventory items are sold in the order they are acquired.
Q: What is Weighted Average?
A: A method of assigning cost which requires that we compute the weighted average cost per unit at
the time of each sale, equals the cost of goods available for sale divided by the units available. Thus,

the cost of goods sold would be dependent on the average acquisition cost of the inventory currently
available when a sale is done.
Q: What is Specific Identification?
A: A meticulous method wherein each item in inventory can be identified with a specific purchase and
invoice, when each item is sold the sales record should also contain the same. Thus the cost of goods
sold would depend on which item was sold for that particular sale.

Jeopardy assessment

Q: What are the different kinds of assessments and what is jeopardy assessment?
A:
1. Pre-Assessment informs the taxpayer of the findings of the examiner who recommends a
deficiency assessment. The taxpayer is usually given 10 days from notice within which to explain his
side.
2. Self-Assessment one in which the tax is assessed by the taxpayer himself.
3. Official Assessment issued by the BIR in case the taxpayer fails to respond to the pre-assessment,
or his explanation is not satisfactory to the CIR.
4. Illegal and Void Assessment tax assessor has no power to assess at all.
5. Erroneous Assessment assessor has power to assess but errs in the exercise thereof.
6. Jeopardy Assessment a delinquency tax assessment made without the benefit of a complete or
partial investigation by a belief that the assessment and collection of a deficiency tax will be
jeopardized by delay caused by the taxpayers failure to:
a. Comply with audit and investigation requirements to present his books of accounts and/or pertinent
records, or
b. Substantiate all or any of the deductions, exemptions or credits claimed in his return.
Note: This is issued when the revenue officer finds himself without enough time to conduct an appropriate
or thorough examination in view of the impending expiration of the prescriptive period for assessment. To
prevent the issuance of a jeopardy assessment, the taxpayer may be required to execute a waiver of the
statute of limitations.

Tax delinquency vs. tax deficiency

Q: What is Delinquency Tax and Deficiency Tax?

A:
1. Delinquency Tax a taxpayer is considered delinquent in the payment of taxes when:
a. Self-assessed tax per return filed by the taxpayer on the prescribed date was not paid at all
or only partially paid; or
b. Deficiency tax assessed by the BIR becomes final and executory.
2. Deficiency Tax
a. The amount by which the tax imposed by law as determined by the CIR or his authorized
representative exceeds the amount shown as tax by the taxpayer upon his return; or
b. If no amount is shown as tax by the taxpayer upon his return is made by the taxpayer, then
the amount by which the tax as determined by the CIR or his authorized representative exceeds the
amounts previously assessed or collected without assessment as deficiency.
Q: Distinguish Delinquency Tax from Deficiency Tax?

Delinquency Tax

Deficiency Tax
Collection
Can immediately be collected administratively
Can be collected through administrative and/or
through the issuance of a warrant of distraint and
judicial remedies but has to go through the process
levy, and/or judicial action
of filling the protest by the taxpayer against the
assessment and the denial of such protest by the
BIR
Civil Action
The filing of a civil action for the collection of the
The filling of a civil action at the ordinary court for
delinquent tax in the ordinary court is a proper
collection during the pendency of protest may be
remedy
the subject of a motion to dismiss. In addition to a
motion to dismiss, the taxpayer must file a petition
for review with the CTA to toll the running of the
prescriptive period
Penalties
A delinquent tax is subject to administrative
A deficiency tax is generally not subject to the
penalties such as 25% surcharge, interest, and
25% surcharge, although subject to interest and
compromise penalty
compromise penalty

Prescriptive period for assessment

Q: What are the prescriptive periods for the assessment of taxes?

A:
1. Where a return was filed:
GR: The period for assessment is within 3 years after the date the return was due or if the return is
filed after the due date prescription will start on the date the return was filed.
XPNS:
a. If there is failure to file the required return, the period is within 10 years after the date of
discovery of the omission to file the return.
Note: Date of discovery must be made within the three-year period following the general rule.

b. If the return is filed but it is false or fraudulent and made with intent to evade the tax, the
period is 10 years from the date of discovery of the falsity or fraud.
Note: Nothing in Sec. 222 (A) shall be construed to authorize the examination and investigation or
inquiry into any tax return filed in accordance with the provisions of any tax amnesty law or decree.

c. Where the CIR and taxpayer, before the expiration of the 3-year period have agreed in
writing to the extension of the period, the period so agreed upon may thereafter be extended by
subsequent agreements in writing made before the expiration of the period previously agreed upon.
d. Where there is a written waiver or renunciation of the original 3-year limitation signed by the
taxpayer.
Note: Requests for reconsideration of tax assessments, as required by the BIR, must be
accompanied by a waiver of statute of limitations accomplished by the taxpayer.

2. The return was amended substantially The prescriptive period shall be counted from the
filing of the amended return.
Q: When is a return considered filed for purposes of prescription?
A: When the return is valid and appropriate.
1. Valid When it has complied substantially with the requirements of law.
2. Appropriate When it is a return for the particular tax required by law.
Q: What is the effect of filing a defective return?
A: If the return was defective, it is as if no return was filed. The corollary prescription will be 10 years
from and after the discovery of the failure or omission and not the 3 year prescriptive period. There is
an omission when the taxpayer failed to file a return for the particular tax required by law. (Butuan
Sawmill v. CTA, GR L-20601, Feb. 28, 1966)

Suspension of running of statute limitations

Q: What are the grounds for suspension of the prescriptive periods?

A: LOW-PARA

1. When taxpayer cannot be Located in the address given by him in the return, unless he
informs the CIR of any change in his address thru a written notice to the BIR;
2. When the taxpayer is Out of the Philippines (Sec. 223, NIRC)
3. When the Warrant of distraint and levy is duly served upon the taxpayer, his authorized
representative or a member of his household with sufficient discretion and no property is located
(proper only for suspension of the period to collect);
4. Where the CIR is prohibited from making the assessment or beginning distraint or levy or a
proceeding in court for 60 days thereafter, such as where there is a Pending petition for review in the
CTA from the decision on the protested assessment (Republic v. Ker & Co., GR L-21609);
5. Where CIR and the taxpayer Agreed in writing for the extension of the assessment, the tax
may be assessed within the period so agreed upon (Sec. 222 [b], NIRC);
6. When the taxpayer Requests for reinvestigation which is granted by the Commissioner
(Collector v. Suyoc Consolidated Mining Co., GR L-11527, Nov. 25, 1958);
Note: A request for reconsideration alone does not suspend the period to assess/collect.

7. When there is an Answer filed by the BIR to the petition for review in the CTA (Hermanos v.
CIR, GR. No. L-24972. Sept. 30, 1969) where the court justified this by saying that in the answer filed
by the BIR, it prayed for the collection of taxes.

2. Issuance of preliminary assessment notice (PAN)

Q: What is a Pre-Assessment Notice (PAN)?
A: It is a communication issued by the Regional Assessment Division, or any other concerned BIR
Office, informing a taxpayer who has been audited of the findings of the RO, following the review of
these findings.
Q: What are the requirements of a valid PAN?
A:
1. In writing; and
2. Should inform the taxpayer of the law and the facts on which the assessment is made (Sec. 228,
NIRC)
Note: This is to give the taxpayer the opportunity to refute the findings of the examiner and give a more
accurate and detailed explanation regarding the assessments. The absence of any of the requirements shall
render the assessment void.

Q: Within what period must the taxpayer respond to PAN?

A: If the taxpayer disagrees with the findings stated in the PAN, he have 15 days from receipt of the
PAN, to file a written reply contesting the proposed assessment. (Sec. 3.1.2, RR 12-99)
Q: What is the effect of taxpayers failure to respond within 15 days?
A: The taxpayer shall be considered in default, in which case a formal letter of demand and
assessment notice shall be issued by the BIR. (Sec. 3.1.2, RR 12-99)

Exceptions to PAN (Issuance of FAN is sufficient)

Q: Under what instances is PAN no longer required?

A: Same as the instances where NIC may be dispensed with, to wit: MEDEC
1. When the finding for any deficiency tax is the result of Mathematical error in the
computation of the tax appearing on the face of the tax return filed by the taxpayer; or
2. When the Excise tax due on excisable articles has not been paid; or
3. When a Discrepancy has been determined between the tax withheld and the amount
actually remitted by the withholding agent; or
4. When an article locally purchased or imported by an Exempt person, such as, but not limited
to, vehicles, capital equipment, machineries and spare parts, has been sold, traded or transferred to
non-exempt persons; or

5. When a taxpayer who opted to claim a refund or tax credit of excess creditable withholding
tax for a taxable period was determined to have Carried over and automatically applied the same
amount claimed against the estimated tax liabilities for the taxable quarter or quarters of the
succeeding taxable year. (Sec 3.1.3, RR 12-99)
Q: In the investigation of the withholding tax returns of AZ Medina Security Agency (AZ)
for the taxable years 1997 and 1998, a discrepancy between the taxes withheld from its
employees and the amounts actually remitted to the government was found. Accordingly,
before the period of prescription commenced to run, the BIR issued an assessment and a
demand letter calling for the immediate payment of the deficiency withholding taxes in the
total amount of P250,000.00. Counsel for AZ protested the assessment for being null and
void on the ground that no pre-assessment notice had been issued. Is the contention of the
counsel tenable?
A: No, the contention of the counsel is untenable. Sec. 228, NIRC expressly provides that no preassessment notice is required when a discrepancy has been determined between the tax withheld and
the amount actually remitted by the withholding agent. Since the amount assessed relates to
deficiency withholding taxes, the BIR is correct in issuing the assessment and demand letter calling for
the immediate payment of the deficiency withholding taxes. (2002 Bar Question)

3. Reply to PAN
Q: What is a reply?
A: A reply is the answer of the taxpayer in contesting the findings of the revenue officers contained in
a PAN and must be filed within 15 days from receipt of the PAN. Failure of the taxpayer to file a reply
would now enable the RO to issue a FAN. However no liability for additional or deficiency tax arises
from such failure. The tax code used the term reply to distinguish it from a protest.

Reply vs. Protest

Effect of Reply

4. Issuance of formal letter of demand and assessment notice/final assessment notice

Requisites of formal letter of demand/FAN

Effect of defective FLD/FAN

Q: What is a Notice of Assessment/Formal Letter of Demand (FAN)?

A: It is a declaration of deficiency taxes issued to a taxpayer who fails to respond to a PAN within the
prescribed period of time, or whose reply to the PAN was found to be without merit.
Q: Who issues the FAN?
A: It shall be issued by the Commissioner or his duly authorized representative.
Q: In what form shall the FAN be and what should it contain?
A:
1. In writing; and
2. Shall state the facts, the law, rules and regulations, or jurisprudence on which the
assessment is based, otherwise, the FAN shall be void. (Sec. 228, NIRC; Sec. 3.1.4 RR 12-99)
Q: What does the phrase in writing under Sec. 228 mean?
A: It does not exclusively mean written words. Writing consists of letters, word, numbers, or their
equivalent, set down by handwriting, typewriting, printing, photostating, photographing, magnetic
impulse, mechanical or electronic recording, or other form of data compilation. Indubitably, figures are
also writings and if the numerical presentation is understandable enough, then there is no reason
why it should be automatically rejected as inadequate compliance with the law. (Sevilla, et. al., v. CIR,
CTA Case 6211, Oct. 4, 2004)
Q: What are the remedies of the taxpayer after the issuance of a FAN?
A: The taxpayer may protest the assessment within 30 days from receipt otherwise the assessment
becomes final, executory, demandable and not appealable to the CTA.
Q: Enron, a duly registered Subic Bay Freeport Zone enterprise received a FAN from the CIR
despite filing its protest letter to the preliminary five-day letter. Enron filed a Petition for

Review with the CTA since the CIR failed to resolve its protest against the FAN within the
mandated 180-day period. Enron alleged that the BIR failed to provide the legal and factual
basis of the assessment in violation of Sec. 3.1.4, RR 12-99. Finding for Enron, the CTA held
that the FAN sent to the Company failed to comply with the requirements of a written
notice set by the law as there was no mention of the applicable law and facts. The CIR then
elevated the case to the SC claiming that Enron was informed of the legal and factual
bases of the deficiency assessment against it.
1. Was there a valid assessment?
2. Is the notice requirement satisfied when the BIR advised the taxpayers representative
of the tax deficiency during the pre-assessment stage, and furnished the taxpayer of a
copy of the audit working papers?
A:
1. There was no valid assessment made. The CIR merely issued a formal assessment and
indicated therein the supposed tax, surcharge, interest and compromise penalty due thereon. The ROs
in the issuance of the
FAN did not provide Enron with the written bases of the law and facts on which the subject assessment
is based. The CIR did not bother to explain how it arrived at such an assessment. Furthermore, he
failed to mention the specific provision of the Tax Code or rules and regulations which were not
complied with by Enron.
2. The advice of tax deficiency given to the taxpayers employee during the pre-assessment
stage, as well as the preliminary five-day letter, were not valid substitutes for the mandatory notice in
writing of the legal and factual bases of the assessment. (CIR v. Enron Subic Power Corp., GR 166387,
Jan. 19, 2009)

5. Disputed/ Protested assessment

When to file a protest
Q: What is the procedure to be followed in protesting an assessment?
A:
1. BIR issues assessment notice.
2. The taxpayer files an administrative protest against the assessment. Such protest may
either be a request for reconsideration or for reinvestigation. The protest must be filed within 30 days
from receipt of assessment.
3. All relevant documents must be submitted within 60 days from filing of protest; otherwise,
the assessment shall become final and unappealable.
4. In case the CIR decides adversely or if no decision yet at the lapse of 180 days, the taxpayer
may appeal to the CTA Division, 30 days from the receipt of the decision or from the lapse of the 180
days otherwise the decision shall become final, executory and demandable. (RCBC v. CIR, GR 168498,
Apr. 24, 2007)
5. If the decision is adverse to the taxpayer, he may file a motion for reconsideration or new
trial before the same Division of the CTA within 15 days from notice thereof.
6. In case the resolution of a Division of the CTA on a motion for reconsideration or new trial is
adverse to the taxpayer, he may file a petition for review with the CTA en banc.
7. The ruling or decision of the CTA en banc may be appealed with the Supreme Court through
a verified petition for review on certiorari pursuant to Rule 45 of the 1997 Rules of Civil Procedure.
Q: A taxpayer receives two final assessments, one for Net Income Tax (NIT) and one for
VAT. If the taxpayer would only like to protest the one for NIT and not the one for VAT, what
should he do to file a protest for the NIT?
A: The taxpayer should first pay the tax due under the VAT, where he does not intend to file a protest.
Note: This is not payment under protest for this is neither a tax under the TCC nor a Real Property Tax. (RR
12-99)

Forms of protest

Q: What are the kinds of protest to an assessment?

A:
1. Request for reconsideration - a claim for re-evaluation of the assessment based on existing
records without need of additional evidence. It may involve a question of fact or law or both. It does
not toll the statute of limitations.

2. Request for reinvestigation - a claim for re-evaluation of the assessment based on newlydiscovered or additional evidence. It may also involve a question of fact or law or both. It tolls the the
statute of limitations.
Note: Under Sec. 223, NIRC, the running of the prescriptive period can only be suspended by a request for
reinvestigation, not a request for reconsideration.
RECONSIDERATION
Involves re-evaluation of assessment
based on existing records.
It does not toll the Statute of
Limitations.

REINVESTIGATION
Involves presentation of newlydiscovered or additional evidence.
It tolls the Statute of Limitations

Submission of documents within 60 days from filing of protest

Q: What is a supporting document?

A: These are documents which the taxpayer feels would be necessary to support his protest and not
what the Commissioner feels should be submitted, otherwise, the taxpayer would always be at the
mercy of the BIR which may require production of such documents which taxpayer could not produce.
(Standard Chartered Bank v. CIR, CTA case No. 5696, Aug. 16, 2001)
1. The 60 day period is counted from the filling of the protest.
2. Non-submission of the documents renders the assessment final, executory and demandable.

Effect of failure to protest

Q: What is the effect of failure to protest a FAN?

A: It makes the FAN final and executory, and the taxpayer loses his right to contest the assessment, at
the administrative and judicial levels. Thus the filing of the protest within 30 days from the receipt of
the assessment would be mandatory for the taxpayer to use the other administrative and judicial
remedies.

Period for the protest to be acted upon

If no decision has been submitted within 180 days from submission of documents, appeal to the CTA
Division or 30 days from receipt of adverse decision

6. Administrative decision on a disputed assessment

Rendition of decision by Commissioner
1) Denial of protest
a) CIRs actions equivalent to denial of protest
(1) Filing of criminal action against taxpayer
(2) Issuing a warrant of distraint and levy
Q: What are the forms of denial of the protest?

A:
1. Direct Denial of Protest By an administrative decision on a disputed assessment, stating
the facts, applicable law, rules and regulations or jurisprudence on which such decision is based
otherwise, the decision shall be void in which case the same shall not be considered a decision on a
disputed assessment and that the same is his final decision. (RR 12-99)
2. Indirect Denial of Protest:
A. Formal and final letter of demand from the BIR to the taxpayer.
b. Civil collection can also be considered as denial of protest of assessment (BIR v.
Union Shipping Corp., GR 66160, May 21, 1990)
c. Commissioner did not rule on the taxpayers motion for reconsideration of the
assessment, the period to appeal will only start when the respondent would receive the
summons for the civil action for collection of deficiency tax (BIR v. Union Shipping Corp., GR
66160, May 21, 1990)
Note: Preliminary collection letter may serve as assessment notice. (United International Pictures v. CIR, GR
110318, Aug. 28, 1996)

d. Issuance of warrant of distraint and levy to enforce collection of deficiency assessment is outright
denial of the request for reconsideration (Hilado v. CIR. CTA case 1256, Feb. 25, 1964)

b) Inaction by Commissioner
Remedies of taxpayer to action by Commissioner
1) In case of denial of protest
Q: What is the remedy available to the taxpayer if the CIR denies his protest in whole or in
part?
A: The remedy is to appeal such decision to the CTA within 30 days from receipt of the decision
otherwise, the assessment will become final, executor and demandable.
Note: If the taxpayer elevates his protest to the CIR within 30 days from date of receipt of the final decision
of the CIRs duly authorized representative, such decision will not be final and executory.

2) In case of inaction by Commissioner within 180 days from submission of

documents
Q: What are the options given to the taxpayer if there would be inaction by the CIR within
180 days from submission of the documents?
A: The taxpayer has two alternative options:
1. File a petition for review with the CTA within 30 days after the expiration of the 180-day
period; or
2. Wait for the final decision of the CIR on the disputed assessment and appeal the final
decision to the CTA within 30 days from the receipt of the decision.

3) Effect of failure to appeal

Q: What is the effect of the failure to appeal by a taxpayer?
A:
1. The decision or assessment becomes final and executory.
2. In an action for the collection of the tax by the government, the taxpayer is barred from reopening the question already decided.
3. The assessment is considered correct which may be enforced by summary or judicial
remedies.
4. In a proceeding for collection of tax by judicial action, the taxpayers defenses are similar to
those of the defendant in a case for the enforcement of a judgment by judicial action.
5. The assessment which has become final and executor cannot be superseded by a new
assessment.

Collection

Q: What is the method used in the collection of taxes?

A: The legislature may adopt any reasonable method for the effective enforcement of the collection of
taxes, subject to:
1. The right of the person to notice; and
2. The opportunity to be heard.
Note: The power to impose taxes is clothed with the implied authority to devise ways and means to
accomplish collection in the most effective manner. Without this implied power, the ends of government may
fail. (CIR v. Pineda, GR L-22734, Sept. 15, 1967)

a. Requisites
Q: What is the requirement before collection can be made?
A: Collection is only allowed when there is already a final assessment made for the determination of
the tax due. Assessments are deemed final when:
1. The taxpayer failes to file a protest 30 days from receipt of the assessment
2. After the 180 day period and the CIR has not yet acted on the protest the taxpayer fails to
appeal it
3. After 30 days from the receipt of the decision of the CIR the taxpayer fails to appeal.

b. Prescriptive periods
Q: What are the prescriptive periods for the collection of tax?
A:
GR:
1. Where an assessment was made - period for collection (by distraint or levy or by a
proceeding in court) is within 3 years following the assessment has been released, mailed, or sent.
(BPI v. CIR, GR 139736, Oct. 17, 2005)
2. In the case of a false or fraudulent return with intent to evade tax or of failure to file a
return, a proceeding in court for the collection of such tax may be filed
without assessment, at any time within 10 years after the discovery of the falsity, fraud or omission.
(Sec.222 [a], NIRC)
XPNs:
1. The same exceptions relative to the prescriptive periods for assessment are also applicable.
2. If the government makes another assessment or the assessment made is revised, the
prescriptive period for collection of such tax should be counted from the date the last or revised
assessment was made.
3. Where an action is brought to enforce a compromise, the prescriptive period is 10 years
from the time the right of action accrues as fixed in the Civil Code. (Art. 1144 [1], NCC)
Note: When it comes to self-assessed taxes where a return is filed by the taxpayer. The taxpayer is the one
to assess himself and such assessment is deemed to be adopted by the government. Thus, the filing of the
return would also be the date of the assessment.

c. Distraint of personal property including garnishment

1) Summary remedy of distraint of personal property
a) Procedure for distraint and garnishment
b) Sale of property distrained and disposition of proceeds
(1) Release of distrained property upon payment prior to sale
c) Purchase by the government at sale upon distraint
d) Report of sale to BIR
e) Constructive distraint to protect the interest of the government
d. Summary remedy of levy on real property
1) Advertisement and sale

2) Redemption of property sold

3) Final deed of purchaser
e. Forfeiture to government for want of bidder
1) Remedy of enforcement of forfeitures
(a) Action to contest forfeiture of chattel
(b) Resale of real estate taken for taxes
(c) When property to be sold or destroyed
(d) Disposition of funds recovered in legal proceedings or obtained
from forfeiture
f.

Further distraint or levy

g. Tax lien
h. Compromise
1)
Authority of the Commissioner to compromise and abate taxes
i. Civil and criminal actions
1) Suit to recover tax based on false or fraudulent returns
3. Refund
a. Grounds and requisites for refund
b. Requirements for refund as laid down by cases
1) Necessity of written claim for refund
2) Claim containing a categorical demand for reimbursement
3) Filing of administrative claim for refund and the suit/proceeding
before the CTA within 2 years from date of payment
regardless of any supervening cause
c. Legal basis of tax refunds
d. Statutory basis for tax refund under the Tax Code
1)
Scope of claims for refund
2)
Necessity of proof for claim or refund
3)
Burden of proof for claim of refund
4)
Nature of erroneously paid tax/illegally assessed collected
5)
Tax refund vis--vis tax credit
6) Essential requisites for claim of refund
e. Who may claim/apply for tax refund/tax credit
1) Taxpayer/withholding agents of non-resident foreign corporation
f. Prescriptive period for recovery of tax erroneously or illegally collected
g. Other consideration affecting tax refunds
B.

Government Remedies

1. Administrative remedies
a. Tax lien
b. Levy and sale of real property
c. Forfeiture of real property to the government for want of bidder
d. Further distraint and levy
e. Suspension of business operation
f. Non-availability of injunction to restrain collection of tax
2. Judicial remedies
3. Statutory Offenses and Penalties
a. Civil penalties
1) Surcharge
2) Interest
a)
In General
b) Deficiency interest
c) Delinquency interest
d)
Interest on extended payment
4. Compromise and Abatement of taxes
a. Compromise
CIR vs. Abad, etc. (G.R. No. L-19627, June 27, 1968)
b. Abatement

IV. Judicial Remedies; Republic Act 1125 The Act that Created the Court of Tax Appeals
(CTA), as amended, and the Revised Rules of the Court of Tax Appeals
A.

Jurisdiction of the Court of Tax Appeals

1. Exclusive appellate jurisdiction over civil tax cases
a. Cases within the jurisdiction of the Court en banc
b. Cases within the jurisdiction of the Court in divisions
2. Criminal cases
a. Exclusive original jurisdiction
b. Exclusive appellate jurisdiction in criminal cases

B.

Judicial Procedures
1. Judicial action for collection of taxes
a. Internal revenue taxes
b. Local taxes
1)
Prescriptive period
2. Civil cases
a. Who may appeal, mode of appeal, effect of appeal
1)
Suspension of collection of tax
a) Injunction not available to restrain collection
2)
Taking of evidence
3) Motion for reconsideration or New trial
b. Appeal to the CTA, en banc
c. Petition for review on certiorari to the Supreme Court
3. Criminal cases
a. Institution and prosecution of criminal actions
1) Institution on civil action in criminal action
b. Appeal and period to appeal
1) Solicitor General as counsel for the People and government
officials sued in their official capacity

a. Petition for review on certiorari to the Supreme Court