G.R. No.

L-13453 February 29, 1960

ALLISON J. GIBBS and ESTHER K. GIBBS, petitioners,

vs.
COLLECTOR OF INTERNAL REVENUE and COURT of TAX APPEALS, respondents.

Ozaeta, Gibbs and Ozaeta for the petitioners.

Office of the Solicitor General Edilberto Barot, Solicitor Felicisimo R. Rosete and Special Atty. Jose
G. Azurin for the respondents.

BARRERA, J.:

From the resolution of respondent Court of Tax Appeals (in C.T.A. Case No. 418) dismissing, for
lack of jurisdiction, their petition for review and refund of income taxes paid, petitioners Allison J.
Gibbs and Esther K. Gibbs, interposed the present petition for review.

On March 14, 1956, petitioners protested the deficiency income tax assessment in the amount of
P12,284.00, exclusive of surcharge and interest, for the year 1950, issued against them by the
respondent Collector of Internal Revenue, on the ground that said deficiency assessment was based
on a disallowance of bad debts and losses claimed in their income tax return for 1950.

On August 28, 1956, respondent Collector rejected petitioners' protest and reiterated his demand.
On October 3, 1956, petitioners sent a check in the amount of P12,284.00 (Check No. C-643963) to
respondent Collector as payment of said deficiency assessment, at the same time demanding the
immediate refund of the amount paid.

On October 26, 1956, respondent Collector denied the request for refund, and required petitioners to
pay the amounts of P1,469.04 and P1,997.26 as surcharge, interest, and compromise penalty.
Notice of said denial was received by petitioners on November 14, 1956.

On September 27, 1957, petitioners filed with respondent Court a petition for review and refund, with
a motion for suspension of collection of penalties. On October 7, 1957, respondent Collector filed a
motion to dismiss, on the ground that the petition was filed beyond the 30-day period provided under
Section 11, in relation to Section 7, of Republic Act No. 1125, which motion, was opposed by
petitioners on October 24, 1957.

On December 2, 1957, respondent court dismissed the petition, in a resolution which, in part, reads:

Petitioners paid the tax in question on October 3, 1956, at the same time asking for the
refund of the same. He received the letter of respondent denying said request for refund on
November 14, 1956. Pursuant to Section 11 of Republic Act No. 1125, petitioners had only
30 days from November 14, 1956, or up to December 15, 1956, within which to file their
appeal to this Court. However, petitioners appealed from the aforesaid decision of
respondent only on September 27, 1957, more than ten (10) months from November 14,
1956. Obviously, the appeal has been filed beyond the 30-day period set by law.

Petitioners contend that Section 306 of the Revenue Code provides that judicial proceedings
may be instituted for recovery of an internal revenue tax within two years from the date of
payment. This was so before the enactment of Republic Act No. 1125 . . .petitioners should
have appealed to this Court within 30 days from November 14, 1956, that is, not later than
 December 15, 1956, pursuant to Section 11 of Republic Act No. 1125. As the appeal was
filed on September 27, 1957, we have no jurisdiction to entertain the same.

On December 11, 1957, petitioners filed a motion for reconsideration of said order, but the same
was denied by respondent court on January 31, 1958. Hence, this petition for review.

The only issue to be resolved in this case is whether or not petitioners' appeal (petition for review
and refund) from the decision of respondent Collector of Internal Revenue, was filed with respondent
Court of Tax Appeals within the statutory period.

Section 7 of Republic Act No. 1125,1 in part, provides:

SEC. 7. Jurisdiction.—The Court of Tax Appeals shall exercise exclusive appellate

jurisdiction to review by appeal, as herein provided:

(1) Decisions of the Collector of Internal Revenue in cases involving disputed

assessments, refunds of internal revenue taxes, fees or other charges, penalties imposed in
relation thereto, or other matters arising under the National Internal Revenue Code or other
law or part of law administered by the Bureau of Internal Revenue; . . . (Emphasis supplied.)

And Section 11 of the same Act, in part, states that:

SEC. 11. Who may appeal; effect of appeal.—Any person, association or corporation
adversely affected by a decision or ruling of the Collector of Internal Revenue, the Collector
of Customs or any provincial or city Board of Assessment Appeals may file an appeal in the
Court of Tax Appeals within thirty days after the receipt of such decision or ruling. . . .
(Emphasis supplied.)

It is not disputed that petitioners received on November 14, 1956, notice of respondent Collector's
decision denying their request for a refund of the deficiency assessment paid by them. Pursuant to
the above-quoted provision of Section 11 of Republic Act 1125, they had 30 days from said date
within which to file their appeal (petition for review and refund) with respondent court. However, they
filed said appeal only on September 27, 1957, or more than ten (10) months thereafter, much
beyond the aforementioned 30-day period within which to file the same. Consequently, respondent
court had acquired no jurisdiction to entertain said appeal and the dismissal of the same was proper.

Petitioners, however, contend that although their appeal was filed beyond said 30-day period,
respondent court still had jurisdiction over the same, by virtue of the provision of Section 306 of the
National Internal Revenue Code,2which reads:

SEC. 306. Recovery of tax erroneously or illegally collected.—No suit or proceeding shall be
maintained in any court for the recovery of any national internal-revenue tax hereafter
alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed
to have been collected without authority, or of any sum alleged to have been excessive or in
any manner wrongfully collected, until a claim for refund or credit has been duly filed with the
Collector of Internal Revenue; but such suit or proceeding may be maintained, whether or
not such tax penalty, or sum has been paid under protest or duress. It any case, no such suit
or proceeding shall be begun after the expiration of two years from the date of payment of
the tax or penalty. (Emphasis supplied.)
The contention is devoid of any merit. In the case of Johnston Lumber Co., Inc. vs. Court of Tax
Appeals, et al. 101 Phil., 654; 54 Off. Gaz. [16] 5226, we held:

It is the contention of petitioner that the aforequoted provisions cannot stand side by side
because, whereas Section 306 of the Tax Code required the filing of a claim before an action
in court may be maintained, Republic Act No. 1125 which confers jurisdiction upon the Court
of Tax Appeals to take cognizance of appeals from the decisions of the Collector of Internal
Revenue does not require any more the filing of said claim but merely provides that said
appeal may be filed within 30 days from receipt of such decision or ruling.

A careful analysis of the provisions of both enactments would negative the assertion of
petitioner. The specific provision of Republic Act No. 1125 regarding appeal (Section 11) was
intended to cope with a situation where the taxpayer, upon receipt of a decision or ruling of
the Collector of Internal Revenue, elects to appeal to the Court of Tax Appeals instead of
paying the tax. For this reason, the latter part of said Section 11, provides that no such
appeal would suspend the payment of the tax demanded by the Government, unless for
special reasons, the Court of Tax Appeals would deem it fit to restrain said collection.
Section 306, of the Tax Code, on the other hand, contemplates of a case wherein the
taxpayer paid the tax, whether under protest or not, and later on decides to go to court for its
recovery. We can, therefore, conclude that where payment has already been made and the
taxpayer is merely asking for its refund, he must first file with the Collector of Internal
Revenue a claim for refund before taking the matter to the Court, as required by Section 306
of the National Internal Revenue Code and that appeals from decisions or rulings of the
Collector of Internal Revenue to the Court of Tax Appeals must always be perfected within
30 days after the receipt of the decision or ruling that is being appealed, as required by
Section 11 of Republic Act No. 1125. We see no conflict between the aforementioned
sections of said laws. (Emphasis supplied.)

Under the above ruling, it is clear that Section 306 of the National Internal Revenue Code should be
construed together with Section 11 of Republic Act No. 1125. In fine, a taxpayer who has paid the
tax, whether under protest or not, and who is claiming a refund of the same, must comply with the
requirements of both sections, that is, he must file a claim for refund with the Collector of Internal
Revenue within 2 years from the date of his payment of the tax, as required by said Section 306 of
the National Internal Revenue Code, and appeal to the Court of Tax Appeals within 30 days from
receipt of the Collector's decision or ruling denying his claim for refund, as required by said Section
11 of Republic Act No. 1125. If, however, the Collector takes time in deciding the claim, and the
period of two years is about to end, the suit or proceeding must be started in the Court of Tax
Appeals before the end of the two-year period without awaiting the decision of the Collector. This is
so because of the positive requirement of Section 306 and the doctrine that delay of the Collector in
rendering decision does not extend the peremptory period fixed by the statute.3

In the case of a taxpayer who has not yet paid the tax and who is protesting the assessment made
by the Collector of Internal Revenue, he must file his appeal with the Court of Tax Appeals within 30
days from his receipt of the Collector's assessment, as required by said Section 11 of Republic Act
No. 1125. Otherwise, his failure to comply with said statutory requirement would bar his appeal and
deprive the Court of Tax Appeals of its jurisdiction to entertain or determine the same.

We do not find the cases of Collector of Internal Revenue vs. Avelino, et al. (100 Phil., 327; 53 Off.
Gaz. 645) and Collector of Internal Revenue vs. Zulueta, et al. (100 Phil., 872; 53 Off. Gaz. [19]
6532) invoked by petitioners applicable to the instant case. The issue presented in both cited cases
was whether or not the Court of Tax Appeals may enjoin the Collector of Internal Revenue from
collecting through summary administrative methods, the income tax liabilities of Messrs. Avelino and
Zulueta, 3 years after the filing of their income tax returns, and not whether their petition for review
was seasonably filed with said court, in accordance with Section 11 of Republic Act No. 1125, or
Section 306 of the National Internal Revenue Code. Furthermore, the instant case involves a refund
of taxes paid, while the cited cases involved the legality of the collection of taxes by summary
administrative methods.

Appellants, in their supplemental brief, urge two additional grounds for the revocation of respondent
court's decision. It is claimed that since the letter-decision dated October 26, 1956 denying their
request for refund of the deficiency income tax paid by them, was signed not by the Collector, but
merely by the Deputy Collector of Internal Revenue, it could not be considered as a final decision on
their said request. They cite as authority, Section 309 of the National Internal Revenue Code reading
partly:

SEC. 309. Authority of Collector to make compromise and to refund taxes.— The Collector of
Internal Revenue may compromise any civil or other case arising under this Code or other
law or part of law administered by the Bureau of Internal Revenue, may credit or refund
taxes erroneously or illegally received, or penalties imposed without authority, and may remit
before payment any tax that appears to be unjustly assessed or excessive.

xxx xxx xxx

The authority of the Collector of Internal Revenue to credit or refund taxes or penalties,
under this section can only be exercised if the claim for credit or refund is made in writing
and filed with him within two years after the payment of the tax or penalty. (Emphasis
supplied.)

and No. 9 of Paragraph 4, Section 7, as amended, of the Internal Revenue Manual on Audit and
Investigation Procedure and General Circular No. V-182, providing:

9. The authority to remit before payment any tax that appears to be unjustly assessed or
excessive, or credit or refund taxes erroneously or illegally received under Section 309 of the
National Internal Revenue Code shall be exercised exclusively by the Collector of Internal
Revenue. (Emphasis supplied.)

Appellants contend that under the above-quoted provisions, only the Collector has the authority to
deal in refund cases. This is fallacious. In the first place, the cited provisions refer to the authority of
the Collector of Internal Revenue to compromise, or to credit or refund taxes erroneously or illegally
received, that is, when the action, in a manner of speaking, is against the Government. In such case,
the authority is vested exclusively in the Collector himself. The purpose is to assure that no improper
compromise, credit, or refund is made to the prejudice of the Government. But in the case before us,
the action taken by the Deputy Collector in his letter of October 26, 1956, was precisely to deny the
request for refund and demand the payment of the deficiency tax from petitioners. Certainly, this is
well within the authority of the Deputy Collector and is final and binding unless revoked by the
Collector.

The other point raised that the letter of October 26 is not final because in addition to denying the
refund it demanded payment of surcharges and interests is, likewise, without merit. The ruling in the
case of St. Stephen's Association, et al. vs. Collector of Internal Revenue (104 Phil., 314; 55 Off.
Gaz. [13] 2243) cited by petitioners, is inapplicable to the instant case, for there the Collector wrote
two letters to the taxpayers, one on April 6, 1955, denying their first request for the withdrawal and
cancellation of the assessment, and another on July 11, 1955, denying their second request and
stating in its last paragraph: "This decision becomes final thirty days after your receipt hereof unless
an appeal is taken to the Court of Tax Appeals within the same period, in accordance with the
provisions of Republic Act No. 1125." Undoubtedly, this second letter, and not the first was the final
decision of the Collector in that case, because it finally resolved the then pending petition for
reconsideration filed by the taxpayers. In the instant case, after the letter of October 26, 1956
denying petitioners' request for refund, no further action was taken either by petitioners or the
Collector, both parties treating the letter-decision as final. In fact, petitioner's next move was to file
their petition for review and refund with respondent court. The Collector, on the other hand,
consequent to his understanding that said letter-decision was final, filed his motion to dismiss with
respondent court, on the ground that petitioners' petition was filed out of time and, therefore, the
court acquired no jurisdiction to entertain the same.

Wherefore, finding no error in the decision of the court a quo, the same is hereby affirmed, with costs
against the petitioners. So ordered.

Commissioner of Internal Revenue vs Lascona Land CA G.R. SP No. 58061

FACTS: On March 27, 1998, the CIR issued assessment notice against Lascona Land Co., Inc.
informing the latter of its alleged deficiency income tax for the year 1993 in the amount of
P753,266.56. As a consequence, respondent filed a letter protest on April 20, 1998 which was
denied by Regional Director of BIR Makati. Aggrieved, respondent appealed the said decision to the
CTA on April 12, 1999 alleging that the Regional Director erred in ruling that the disputed
assessment had already become final, executory and demandable contrary to the mandate of
Section 228 of the National Internal Revenue Code of 1997. The CTA rendered the assailed
Decision dated January 4, 2000 nullifying the subject assessment.

ISSUE: Whether or not the assessment made by the CIR has already become final and executor

RULING: Yes. Ruling in favor of petitioner. Pursuant to Section 228 of the National Internal Revenue
Code (NIRC) of 1997, if the protest was not acted upon within a period of 180 days from the
submission of documents, such inaction allows the taxpayer to appeal to the Court of Tax Appeals
(CTA). If there is no appeal within 30 days after the lapse of the 180-day period, the matter/decision
under protest becomes final. On the other hand, any decision on a protest is appealable.

In the case at bar, it is undisputed that respondent filed its protest on April 20, 1998 and must have
submitted its supporting documents within 60 days therefrom or until June 19, 1998. Thereafter, the
petitioner has 180 days or until December 16, 1998 within which to act on the subject protest. In
turn, respondent has another 30 days reckoned from its actual receipt of the latter’s decision, if any,
or the lapse of the 180-day period counted from December 17, 1998 or until January 16, 1999,
whichever comes first, to elevate its appeal to the CTA. However, records show that respondent
appealed to the said court only on April 12, 1999, after almost three (3) months from the lapse of the
180-day period. As such, its appeal was clearly filed out of time rendering the disputed assessment
final and demandable.

G.R. No. 167765 June 30, 2008

COMMISSIONER OF INTERNAL REVENUE, petitioner,
vs.
FMF DEVELOPMENT CORPORATION, respondent.

DECISION

QUISUMBING, J.:

For review on certiorari is the Decision1 and Resolution2 dated January 31, 2005 and April 14, 2005,
respectively, of the Court of Appeals in CA- G.R. SP No. 79675, which affirmed the Decision3 dated
March 20, 2003 of the Court of Tax Appeals (CTA) in C.T.A. Case No. 6153. In effect, the Court of
Appeals cancelled the assessment notice issued by the Bureau of Internal Revenue (BIR) for the
deficiency income and withholding taxes for the taxable year 1995 of respondent FMF Development
Corporation (FMF), a domestic corporation organized and existing under Philippine laws.

The facts are as follows:

On April 15, 1996, FMF filed its Corporate Annual Income Tax Return for taxable year 1995 and
declared a loss of P3,348,932. On May 8, 1996, however, it filed an amended return and declared a
loss of P2,826,541. The BIR then sent FMF pre-assessment notices, all dated October 6, 1998,
informing it of its alleged tax liabilities.4 FMF filed a protest against these notices with the BIR and
requested for a reconsideration/reinvestigation.

On January 22, 1999, Revenue District Officer (RDO) Rogelio Zambarrano informed FMF that the
reinvestigation had been referred to Revenue Officer Alberto Fortaleza. He also advised FMF of the
informal conference set on February 2, 1999 to allow it to present evidence to dispute the BIR
assessments.

On February 9, 1999, FMF President Enrique Fernandez executed a waiver of the three-year
prescriptive period for the BIR to assess internal revenue taxes, hence extending the assessment
period until October 31, 1999. The waiver was accepted and signed by RDO Zambarrano.

On October 18, 1999, FMF received amended pre-assessment notices5 dated October 6, 1999 from
the BIR. FMF immediately filed a protest on November 3, 1999 but on the same day, it received
BIR’s Demand Letter and Assessment Notice No. 33-1-00487-95 dated October 25, 1999 reflecting
FMF’s alleged deficiency taxes and accrued interests, as follows:

Income Tax Assessment P1,608,015.50

Compromise Penalty on Income Tax Assessment 20,000.00

Increments on Withholding Tax on Compensation 184,132.26

Compromise Penalty on Increments on Withholding Tax

on Compensation 16,000.00

Increments on Withholding Tax on Management Fees 209,550.49

Compromise Penalty on Increments on Withholding Tax

on Management Fees 16,000.00

TOTAL P2,053,698.256
On November 24, 1999, FMF filed a letter of protest on the assessment invoking, inter alia,7 the
defense of prescription by reason of the invalidity of the waiver. In its reply, the BIR insisted that the
waiver is valid because it was signed by the RDO, a duly authorized representative of petitioner. It
also ordered FMF to immediately settle its tax liabilities; otherwise, judicial action will be taken.
Treating this as BIR’s final decision, FMF filed a petition for review with the CTA challenging the
validity of the assessment.

On March 20, 2003, the CTA granted the petition and cancelled Assessment Notice No. 33-1-00487-
95 because it was already time-barred. The CTA ruled that the waiver did not extend the three-year
prescriptive period within which the BIR can make a valid assessment because it did not comply with
the procedures laid down in Revenue Memorandum Order (RMO) No. 20-90.8 First, the waiver did
not state the dates of execution and acceptance of the waiver, by the taxpayer and the BIR,
respectively; thus, it cannot be determined with certainty if the waiver was executed and accepted
within the prescribed period. Second, the CTA also found that FMF was not furnished a copy of the
waiver signed by RDO Zambarrano. Third, the CTA pointed out that since the case involves an
amount of more than P1 million, and the period to assess is not yet about to prescribe, the waiver
should have been signed by the Commissioner of Internal Revenue, and not a mere RDO.9 The
Commissioner of Internal Revenue filed a motion for reconsideration, but it was denied.

On appeal to the Court of Appeals, the decision of the CTA was affirmed. Sustaining the findings of
the CTA, the Court of Appeals held that the waiver did not strictly comply with RMO No. 20-90. Thus,
it nullified Assessment Notice No. 33-1-00487-95. The fallo of the Court of Appeals’ decision reads:

WHEREFORE, finding the instant petition not impressed with merit, the same is DENIED
DUE COURSE and is hereby DISMISSED. No costs.

SO ORDERED.10

The Commissioner of Internal Revenue sought reconsideration, but it was denied.

Hence the instant petition, raising the following issues:

I.

WHETHER OR NOT RESPONDENT’S WAIVER OF THE STATUTE OF LIMITATIONS WAS

VALIDLY EXECUTED.

II.

WHETHER O[R] NOT THE PERIOD TO ASSESS HAD PRESCRIBED.

III.

WHETHER OR NOT THE COURT OF APPEALS CORRECTLY DISREGARDED

PETITIONER’S SUBSTANTIVE ARGUMENT.11

Essentially, the present controversy deals with the validity of the waiver and whether it validly
extended the original three-year prescriptive period so as to make Assessment Notice No. 33-1-
00487-95 valid. The basic questions to be resolved therefore are: (1) Is the waiver valid? and (2) Did
the three-year period to assess internal revenue taxes already prescribe?
Petitioner contends that the waiver was validly executed mainly because it complied with Section
222 (b)12 of the National Internal Revenue Code (NIRC). Petitioner points out that the waiver was in
writing, signed by the taxpayer and the Commissioner, and executed within the three-year
prescriptive period. Petitioner also argues that the requirements in RMO No. 20-90 are merely
directory; thus, the indication of the dates of execution and acceptance of the waiver, by the
taxpayer and the BIR, respectively, are not required by law. Petitioner adds that there is no provision
in RMO No. 20-90 stating that a waiver may be invalidated upon failure of the BIR to furnish the
taxpayer a copy of the waiver. Further, it contends that respondent’s execution of the waiver was a
renunciation of its right to invoke prescription. Petitioner also argues that the government cannot be
estopped by the mistakes committed by its revenue officer in the enforcement of RMO No. 20-90.

On the other hand, respondent counters that the waiver is void because it did not comply with RMO
No. 20-90. Respondent assails the waiver because (1) it was not signed by the Commissioner
despite the fact that the assessment involves an amount of more than P1 million; (2) there is no
stated date of acceptance by the Commissioner or his duly authorized representative; and (3) it was
not furnished a copy of the BIR-accepted waiver. Respondent also cites Philippine Journalists, Inc.
v. Commissioner of Internal Revenue13 and contends that the procedures in RMO No. 20-90 are
mandatory in character, precisely to give full effect to Section 222 (b) of the NIRC. Moreover, a
waiver of the statute of limitations is not a waiver of the right to invoke the defense of prescription.14

After considering the issues and the submissions of the parties in the light of the facts of this case,
we are in agreement that the petition lacks merit.

Under Section 20315 of the NIRC, internal revenue taxes must be assessed within three years
counted from the period fixed by law for the filing of the tax return or the actual date of filing,
whichever is later. This mandate governs the question of prescription of the government’s right to
assess internal revenue taxes primarily to safeguard the interests of taxpayers from unreasonable
investigation. Accordingly, the government must assess internal revenue taxes on time so as not to
extend indefinitely the period of assessment and deprive the taxpayer of the assurance that it will no
longer be subjected to further investigation for taxes after the expiration of reasonable period of
time.16

An exception to the three-year prescriptive period on the assessment of taxes is Section 222 (b) of
the NIRC, which provides:

xxxx

(b) If before the expiration of the time prescribed in Section 203 for the assessment of the
tax, both the Commissioner and the taxpayer have agreed in writing to its assessment after
such time, the tax may be assessed within the period agreed upon. The period so agreed
upon may be extended by subsequent written agreement made before the expiration of the
period previously agreed upon.

xxxx

The above provision authorizes the extension of the original three-year period by the execution of a
valid waiver, where the taxpayer and the BIR agreed in writing that the period to issue an
assessment and collect the taxes due is extended to an agreed upon date. Under RMO No. 20-90,
which implements Sections 203 and 222 (b), the following procedures should be followed:

1. The waiver must be in the form identified as Annex "A" hereof….

 2. The waiver shall be signed by the taxpayer himself or his duly authorized representative.
In the case of a corporation, the waiver must be signed by any of its responsible officials.

Soon after the waiver is signed by the taxpayer, the Commissioner of Internal Revenue or
the revenue official authorized by him, as hereinafter provided, shall sign the waiver
indicating that the Bureau has accepted and agreed to the waiver. The date of such
acceptance by the Bureau should be indicated. Both the date of execution by the
taxpayer and date of acceptance by the Bureau should be before the expiration of the period
of prescription or before the lapse of the period agreed upon in case a subsequent
agreement is executed.

3. The following revenue officials are authorized to sign the waiver.

A. In the National Office

xxxx

3. Commissioner For tax cases involving more than P1M

B. In the Regional Offices

1. The Revenue District Officer with respect to tax cases still pending
investigation and the period to assess is about to prescribe regardless of
amount.

xxxx

4. The waiver must be executed in three (3) copies, the original copy to be attached to the
docket of the case, the second copy for the taxpayer and the third copy for the Office
accepting the waiver. The fact of receipt by the taxpayer of his/her file copy shall be
indicated in the original copy.

5. The foregoing procedures shall be strictly followed. Any revenue official found not to
have complied with this Order resulting in prescription of the right to assess/collect shall be
administratively dealt with. (Emphasis supplied.)

Applying RMO No. 20-90, the waiver in question here was defective and did not validly extend the
original three-year prescriptive period. Firstly, it was not proven that respondent was furnished a
copy of the BIR-accepted waiver. Secondly, the waiver was signed only by a revenue district officer,
when it should have been signed by the Commissioner as mandated by the NIRC and RMO No. 20-
90, considering that the case involves an amount of more than P1 million, and the period to assess
is not yet about to prescribe. Lastly, it did not contain the date of acceptance by the Commissioner of
Internal Revenue, a requisite necessary to determine whether the waiver was validly accepted
before the expiration of the original three-year period. Bear in mind that the waiver in question is a
bilateral agreement, thus necessitating the very signatures of both the Commissioner and the
taxpayer to give birth to a valid agreement.17

Petitioner contends that the procedures in RMO No. 20-90 are merely directory and that the
execution of a waiver was a renunciation of respondent’s right to invoke prescription. We do not
agree. RMO No. 20-90 must be strictly followed. In Philippine Journalists, Inc. v. Commissioner of
Internal Revenue,18 we ruled that a waiver of the statute of limitations under the NIRC, to a certain
extent being a derogation of the taxpayer’s right to security against prolonged and unscrupulous
investigations, must be carefully and strictly construed. The waiver of the statute of limitations does
not mean that the taxpayer relinquishes the right to invoke prescription unequivocally, particularly
where the language of the document is equivocal.19 Notably, in this case, the waiver became
unlimited in time because it did not specify a definite date, agreed upon between the BIR and
respondent, within which the former may assess and collect taxes. It also had no binding effect on
respondent because there was no consent by the Commissioner. On this basis, no implied consent
can be presumed, nor can it be contended that the concurrence to such waiver is a mere formality.20

Consequently, petitioner cannot rely on its invocation of the rule that the government cannot be
estopped by the mistakes of its revenue officers in the enforcement of RMO No. 20-90 because the
law on prescription should be interpreted in a way conducive to bringing about the beneficent
purpose of affording protection to the taxpayer within the contemplation of the Commission which
recommended the approval of the law. To the Government, its tax officers are obliged to act
promptly in the making of assessment so that taxpayers, after the lapse of the period of prescription,
would have a feeling of security against unscrupulous tax agents who will always try to find an
excuse to inspect the books of taxpayers, not to determine the latter’s real liability, but to take
advantage of a possible opportunity to harass even law-abiding businessmen. Without such legal
defense, taxpayers would be open season to harassment by unscrupulous tax agents.21

In fine, Assessment Notice No. 33-1-00487-95 dated October 25, 1999, was issued beyond the
three-year prescriptive period. The waiver was incomplete and defective and thus, the three-year
prescriptive period was not tolled nor extended and continued to run until April 15, 1999. Even if the
three-year period be counted from May 8, 1996, the date of filing of the amended return, assuming
the amended return was substantially different from the original return, a case which affects the
reckoning point of the prescriptive period,22 still, the subject assessment is definitely considered time-
barred.

WHEREFORE, the petition is DENIED for lack of merit. The assailed Decision and Resolution dated
January 31, 2005 and April 14, 2005, respectively, of the Court of Appeals in CA-G.R. SP No. 79675
are hereby AFFIRMED. No pronouncement as to costs.

SO ORDERED.