CIR vs. 2100 Customs Brokers, Inc.

CTA (En Banc) Case No. 8972 Promulgated Jan 15, 2019

Facts:

On September 12, 2008, the BIR issued a Letter of Authority to (LOA) to audit the books of the
respondent 2100 Customs Brokers, Inc. (CBI) for all internal revenue taxes covering the fiscal year
ending March 31, 2007.
 CBI on December 15, 2009 executed a waiver extending the period to assess until December 31,
2010.

Preliminary Assessment Notice (PAN) dated September 20, 2010 with an assessed deficiency income tax,
VAT and WTC with a total amount of P57,640,481.92 inclusive of interest and penalties. CBI received the
PAN on September 29, 2010 which it contested on October 12, 2010.

In November 15, 2010, a Formal Assessment Notice (FAN) demanding the amount of P58,696,994.88
was issued in the amount of P58,696,994.88 for the deficiency taxes.
 Second waiver was signed by CBI extending the period to assess until June 30, 2011

CBI protested the FAN on December 14, 2010 but the BIR denied the protest and it issued the Final
Decision on Disputed Assessment (FDDA) demanding the payment of deficiency taxes amounting to
P63,045,400.69.
 FDDA was issued on July 13, 2011
o CBI appealed the FDDA on August 18, 2011
o Decision denying the appeal dated December 5, 2014 was received by CBI on December
18, 2014.

CBI elevated the case to the CTA division and the Court ruled that the assessment was void and without
legal consequence because the 3-year period of prescription has already prescribed.
 The Court claimed that the waivers made by CBI were not valid since they were not compliant
with the pertinent regulations and jurisprudence.

Thereafter, BIR filed its appeal in CTA en banc insisting that the 2 waivers extended the period of
assessment until June 30, 2011 and accordingly, the FAN was timely issued on November 15, 2010.
 It insisted that the waivers were compliant with RMO No. 20-90
o Executed in 3 copies, dated and signed by authorized representatives and duly accepted
by the BIR.

CBI argues that the waivers were indeed invalid. Also, the doctrine of estoppel and in pari delicto do not
apply in this case.

Issue:

Is the assessment made by the BIR invalid for being made beyond the prescriptive period?
Ruling:

Yes, the assessment made by the BIR was invalid for being made beyond the prescriptive period.

Looking closely at the facts of the instant case, the Court held that the FAN on November 15, 2010 was
issued beyond the prescriptive period of assessment.
 VAT – latest date to issue the assessment was on April 26, 2010
 WTC – latest date to issue the assessment was on April 15, 2010
 Income Tax – not discussed. Either way the Court ruled that the FAN was issued way beyond the
last day of making the assessment.

The BIR cannot rely on the waivers in this case to extend the period for assessment. Under RMO 20-90
the requirements for the execution of the waiver are as follows:
1. It must be in the proper form;
2. It must be signed by the taxpayer himself or his duly authorized representative;
3. It must be duly notarized;
4. It must be signed and accepted by the CIR or his duly authorized representative
5. Date of execution and acceptance should be before the expiration of the period of prescription
or before the lapse of period agreed upon in case a subsequent agreement is executed;
6. Executed in 3 copies

These requirement must be strictly followed by the BIR.

The Court ruled that the first waiver was invalid for lack of notarized written authority of its
representative to sign it. Also, respondent CBI was not properly furnished a copy of the first waiver after
it was accepted by the BIR. Therefore, since the first waiver is void the FAN that was issued beyond the
prescriptive period is also void. The discussion of the validity of the second waiver is futile.

Further, the Court ruled that the BIR cannot hide from the doctrine of estoppel since there is a detailed
procedure for the proper execution of the waiver, which the BIR must strictly follow. The BIR cannot
hide behind the doctrine having caused the defects of the waiver.