B.

Section 203,222,223

1.

3.

a.

b.

c.

d.

e.

f. CIR vs. Transitions Optical Philippines, Inc.

Estoppel applies against a taxpayer who did not only raise at the earliest opportunity its representative's
lack of authority to execute two (2) waivers of defense of prescription, but was also accorded, through
these waivers, more time to comply with the audit requirements of the Bureau of Internal Revenue.
Nonetheless, a tax assessment served beyond the extended period is void.

Facts:

This Petition for Review on Certiorari seeks to nullify and set aside the decision and Resolution of the
Court of Tax Appeals En Banc, cancelling the deficiency assessments against Transitions Optical
Philippines, Inc. (Transitions Optical).

In this case, two (2) waivers were executed by the parties extending the prescriptive
periods for assessment. These waivers were not accompanied by a notarized written
authority to act on behalf of the respondent. Likewise, neither the Revenue District
Office’s acceptance date nor respondent’s receipt of the BIR’s acceptance was
indicated in either of the waiver.

The respondent performed acts that induced the BIR to defer the issuance of the assessment.
Records reveal that to extend the BIR's prescriptive period to assess respondent for deficiency taxes
for taxable year 2004, respondent executed two (2) waivers. The first Waiver extended the period to
assess until June 20, 2008, while the second Waiver, extended the period to assess the taxes until
November 30, 2008. As a consequence of the issuance of said waivers, petitioner delayed the
issuance of the assessment.

When respondent filed its protest on November 26, 2008 against the Preliminary Assessment
Notice, it merely argued that it is not liable for the assessed deficiency taxes and did not raise as an
issue the invalidity of the waiver and the prescription of petitioner's right to assess the deficiency
taxes. In its protest against the FAN, respondent argued that the year being audited in the FAN has
already prescribed at the time such FAN was mailed. Respondent even stated in that protest that it
received the letter (referring to the FAN dated November 28, 2008) five (5) days after the waiver it
issued had prescribed.
Issues:

First, whether the two (2) Waivers of the Defense of Prescription entered into by the parties on were
valid; and

whether the assessment of deficiency taxes against respondent Transitions Optical Philippines, Inc.
for taxable year 2004 had prescribed.

Held:
Estoppel applies in this case.
Respondent's acts also show its implied admission of the validity of the waivers. Respondent never
raised the invalidity of the Waivers at the earliest opportunity. Respondent does not dispute
petitioner's assertion that respondent repeatedly failed to comply with petitioner's notices, directing it
to submit its books of accounts and related records for examination by the Bureau of Internal
Revenue. Respondent also ignored the Bureau of Internal Revenue's request for an Informal
Conference to discuss other "discrepancies" found in the partial documents submitted. The Waivers
were necessary to give respondent time to fully comply with the Bureau of Internal Revenue notices
for audit examination and to respond to its Informal Conference request to discuss the
discrepancies. Thus, having benefitted from the Waivers executed at its instance, respondent is
estopped from claiming that they were invalid and that prescription had set in.
The assessment of deficiency taxes against respondent Transitions Optical Philippines, Inc. for
taxable year 2004 had prescribed Even as respondent is estopped from questioning the
validity of the waivers, the court held that assessment is still void since the Final
Assessment Notice (FAN) was served beyond the supposed extended period.
Counting of three (3) year prescription period begins from the receipt of the FAN.

g. Republic of the Philippines vs GMCC United Development Corporation

The case is a Petition for Review on Certiorari assailing the Court of Appeals' Decision , and Resolution. The
Court of Appeals affirmed the Resolution of the Department of Justice, which dismissed the criminal
complaint for tax evasion filed by the Bureau of Internal Revenue against GMCC United Development
Corporation's corporate officers on the ground that the period to assess the tax had already prescribed.

When GMCC still failed to comply with the Subpoena Duces Tecum, issued by the BIR, the revenue officers
were constrained to investigate GMCC through Third Party Information.

The investigation revealed that, GMCC, executed two dacion en pago agreements to pay for the obligations of
GMCC's sister companies, to Rizal Commercial Banking Corporation. GMCC allegedly failed to declare the
income it earned from these agreements for taxation purposes in 1998. Moreover, these transactions
constituted a donation in favor of GMCC's sister companies for which GMCC failed to pay the corresponding
donor's tax. The BIR also assessed the value added tax over the said transactions.
It was also discovered that in 1999, GMCC sold condominium units and parking slots to a Valencia K.
Wong. However, GMCC did not declare the income it earned from these transactions in its 1999 Audited
Financial Statements.

Thus, the Bureau of Internal Revenue issued a Notice to Taxpayer to GMCC, which GMCC ignored. It was only
when the Bureau of Internal Revenue issued the Final Assessment Notice that GMCC responded, GMCC
protested the issuance of the Final Assessment Notice citing that the period to assess and collect the tax had
already prescribed. The Bureau of Internal Revenue denied the protest in a Final Decision dated February 10,
2005.

In light of the discovered tax deficiencies, the Bureau of Internal Revenue, on October 7, 2005, filed with the
Department of Justice a criminal complaint for violation of Sections 254, 255, and 267, of the National Internal
Revenue Code against GMCC, its president, Jose C. Go, and its treasurer, Xu Xian Chun.

In his Counter-Affidavit, Go prayed that the complaint be dismissed, arguing, among others, that the action
had already prescribed and that GMCC did not defraud the government. Assuming that the period to assess
red

had not yet prescribed, GMCC argued that there was nothing to declare since it earned no income from
the dacion en pago transactions. Furthermore, even though the dacion en pago transactions were not included
in the GMCC 1998 Financial Statement, they had been duly reflected in the GMCC 2000 Financial Statement.

Issue: Whether the 10-year prescriptive or the three-year period is applicable in this case.

Held:

It is the three-year prescriptive period that applies in this case.

The power of the Commissioner of Internal Revenue to assess and collect taxes is provided under Section 2
of the National Internal Revenue Code:

SEC. 2. Powers and Duties of the Bureau of Internal Revenue - The Bureau of Internal Revenue shall be under
the supervision and control of the Department of Finance and its powers and duties shall comprehend the
assessment and collection of all national internal revenue taxes, fees, and charges, and the enforcement of
all forfeitures, penalties, and fines connected therewith, including the execution of judgments in all cases
decided in its favor by the Court of Tax Appeals and the ordinary courts.

The Bureau shall give effect to and administer the supervisory and police powers conferred to it by this Code
or other laws.

However, this power to assess and collect taxes is limited by Section 203 of the National Internal Revenue
Code:

SEC. 203. Period of Limitation Upon Assessment and Collection.- Except as provided in Section 222, internal
revenue taxes shall be assessed within three (3) years after the last day prescribed by law for the filing of the
return, and no proceeding in court without assessment for the collection of such taxes shall be begun after
the expiration of such period: Provided, That in a case where a return is filed beyond the period prescribed by
law, the three (3)-year period shall be counted from the day the return was filed.

(The law prescribing a limitation of actions for the collection of the income tax is beneficial both to the
Government and to its citizens; to the Government because tax officers would be obliged to act promptly in
the making of assessment, and to citizens because after the lapse of the period of prescription citizens would
have a feeling of security against unscrupulous tax agents who will always find an excuse to inspect the books
of taxpayers, not to determine the latter's real liability, but to take advantage of every opportunity to molest
peaceful, law-abiding citizens. Without such a legal defense[,] taxpayers would furthermore be under
obligation to always keep their books and keep them open for inspection subject to harassment by
unscrupulous tax agents. The law on prescription being a remedial measure should be interpreted in a way
conducive to bringing about the benefit purpose of affording protection to the taxpayer within the
contemplation of the Commission which recommend the approval of the law)

Petitioner failed to convince that respondents filed a fraudulent tax return. The respondents may have erred
in reporting their tax liability when they recorded the assailed transactions in the wrong year, but such error
stemmed from the wrong application of the law and is not an indication of their intent to evade payment. If
there were really an intent to evade payment, respondents would not have reported and subsequently paid
the income tax, albeit in the wrong year.

As found by the Court of Appeals, there is no clear and deliberate intent to evade payment of taxes in relation
to the dacion en pago transactions or on the sale transaction with Valencia Wong.The dacion en
pago transactions, though not included in the 1998 Financial Statement, were properly listed in GMCC's
Financial Statement for the year 2000.

For the ten-year period under Section 222(a) to apply, it is not enough that fraud is alleged in the complaint,
it must be established by clear and convincing evidence. The petitioner, having failed to discharge the burden
of proving fraud, cannot invoke Section 222(a). Having settled that the case falls under Section 203 of the
Tax Code, the three-year prescriptive period should be applied.

h. CIR vs FMF Dev. Corp., 556 SCRA 698

Facts:

On April 15, 1996, FMF filed its Corporate Annual Income Tax Return for taxable year 1995 and declared a
loss

On May 8, 1996, however, it filed an amended return and declared a loss

The BIR then sent FMF pre-assessment notices, all dated

October 6, 1998, informing it of its alleged tax liabilities.

FMF filed a protest against these notices with the BIR and requested for a reconsideration/reinvestigation.

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 notices... 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... reflecting FMF's alleged deficiency taxes

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.

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

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

On appeal to the Court of Appeals, the decision of the CTA was affirmed... the waiver did not strictly comply
with RMO No. 20-90.

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 also argues that the requirements in RMO No. 20-90 are merely directory... 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... urther, it contends that respondent's execution of the waiver was a... renunciation of its right
to invoke prescription.

Further, it contends that respondent's execution of the waiver was a... renunciation of its right to invoke
prescription.

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... it
was not furnished a copy of the BIR-accepted waiver.

Moreover, a waiver of the statute of limitations is not a waiver of the right to invoke the defense of...
prescription.
Moreover, a waiver of the statute of limitations is not a waiver of the right to invoke the defense of...
prescription

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.

Issues:

WHETHER OR NOT RESPONDENT'S WAIVER OF THE STATUTE OF LIMITATIONS WAS VALIDLY EXECUTED.

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

whether it validly extended the original three-year prescriptive period so as to make Assessment Notice No.
33-1-00487-95 valid

) Is the... waiver valid?

Did the three-year period to assess internal revenue taxes already prescribe?

Ruling:

October 25, 1999

Under Section 203[15] 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.

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

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.

waiver shall be signed by the taxpayer himself or his duly authorized representative.

The date of such acceptance... by the Bureau should be indicated.

before the expiration of the period of prescription

Commissioner For tax cases involving more than P1M... waiver must be executed in three (3) copies,... docket
of the case... copy for the taxpayer... 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.

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.
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.

does not mean that the taxpayer relinquishes the right to invoke prescription unequivocally, particularly where
the language of the document is equivocal... 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.

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.

i. CIR vs. Stanley Works Inc.

CIR v. STANLEY WORKS SALES, GR No. 187589, 2014-12-03

Facts:
Petitioner is the duly appointed officer of the Bureau of Internal Revenue (BIR) mandated to
exercise the powers and perform the duties of his office including, among others, the power
to decide disputed assessments, refunds of internal revenue taxes, fees and other...
charges, penalties imposed in relation thereto, or other matters arising under the National
Internal Revenue Code. Respondent, on the other hand, is a domestic corporation duly
organized and existing under Philippine laws and duly registered with the Securities and
Exchange
Commission. Its office address is at the 5th Floor, Pan Pacific Hotel, Adriatico Street corner
Gen. Malvar Street, Manila.
On January 1, 1979, respondent and Stanley Works Agencies (Pte.) Limited, Singapore
(Stanley-Singapore) entered into a Representation Agreement. Under such agreement,
Stanley-Singapore appointed respondent as its sole agent for the selling of its products
within the Philippines... on an indent basis.
On April 16, 1990, respondent filed with the BIR its Annual Income Tax Return for taxable
year 1989.
On March 19, 1993, pursuant to Letter of Authority dated July 3, 1992, the BIR issued
against respondent a Pre-Assessment Notice (PAN) No. 002523 for 1989 deficiency income
tax.
On March 29, 1993, respondent received its copy of the PAN.
On April 12, 1993, petitioner, through OTC Domingo C. Paz of Revenue Region No. 4B-2 of
Makati, issued to respondent Assessment Notice No. 002523-89-6014 for deficiency
income tax for taxable year 1989. The Notice was sent on April 15, 1993 and respondent
received it on April
21, 1993.
On May 19, 1993, respondent, through its external auditors Punongbayan & Araullo, filed a
protest letter and requested reconsideration and cancellation of the assessment.
On November 16, 1993, a certain Mr. John Ang, on behalf of respondent, executed a
"Waiver of the Defense of Prescription Under the Statute of Limitations of the National
Internal Revenue Code" (Waiver). Under the terms of the Waiver, respondent waived its
right to raise the... defense of prescription under Section 223 of the NIRC of 1977 insofar as
the assessment and collection of any deficiency taxes for the year ended December 31,
1989, but not after June 30, 1994. The Waiver was not signed by petitioner or any of his
authorized representatives and... did not state the date of acceptance as prescribed under
Revenue Memorandum Order No. 20-90. Respondent did not execute any other Waiver or
similar document before or after the expiration of the November 16, 1993 Waiver on June
30, 1994.
On January 6, 1994, respondent, through its external auditors Punongbayan & Araullo,
wrote a letter to the Chief of the BIR Appellate Division and requested the latter to take
cognizance of respondent's protest/request for reconsideration, asserting that the dispute
involved... pure questions of law. On February 22, 1994, respondent sent a similar letter to
the Revenue District Officer (RDO) of BIR Revenue Region No. 4B-2 and asked for the
transmittal of the entire docket of the subject tax assessment to the BIR Appellate Division.
On September 30, 1994, respondent, through its external auditors Punongbayan & Araullo,
submitted a Supplemental Memorandum on its protest to the BIR Revenue Region No. 4B-
2.
On September 20, 1995, respondent, through its external auditors Punongbayan & Araullo,
filed a Supplemental Memorandum with the BIR Appellate Division.
On November 29, 2001, the Chief of the BIR Appellate Division sent a letter to respondent
requiring it to submit duly authenticated financial statements for the worldwide operations of
Stanley Works and a sworn declaration from the home office on the allocated share of...
respondent as a "branch office."
On December 11, 2001, respondent, through its counsel, the Quisumbing Torres Law
Offices, wrote the BIR Appellate Division and asked for an extension of period within which
to comply with the request for submission of documents. On January 15, 2002, respondent
sent a request for... an extension of period to submit a Supplemental Memorandum.
On March 4, 2002, respondent, through its counsel, the Quisumbing Torres Law Offices,
submitted a Supplemental Memorandum alleging, inter alia, that petitioner's right to collect
the alleged deficiency income tax has prescribed.
On March 22, 2004, petitioner rendered a Decision denying respondent's request for
reconsideration and ordering respondent to pay the deficiency income tax plus interest that
may have accrued.
Issues:
Whether or not petitioner's right to collect the deficiency income tax of respondent for
taxable year 1989 has prescribed.
Whether or not respondent's repeated requests and positive acts constitute "estoppel" from
setting up the defense of prescription under the NIRC.[6]
Ruling:
The CTA Division ruled that the request for reconsideration did not suspend the running of
the prescriptive period to collect deficiency income tax. There was no valid waiver of the
statute of limitations, as the following infirmities were found: (1) there was no... conformity,
either by respondent or his duly authorized representative; (2) there was no date of
acceptance to show that both parties had agreed on the Waiver before the expiration of the
prescriptive period; and (3) there was no proof that respondent was furnished a copy of the
Waiver. Applying jurisprudence and relevant BIR rulings, the waiver was considered
defective; thus, the period for collection of deficiency income tax had already prescribed.
The CTA En Banc affirmed the CTA First Division Decision dated 6 May 2008 and
Resolution dated 14 July 2008. The Waiver executed by respondent on 16 November 1993
could not be used by petitioner as a basis for extending the period of assessment and
collection, as... there was no evidence that the latter had acted upon the waiver. Hence, the
unilateral act of respondent in executing said document did not produce any effect on the
prescriptive period for the assessment and collection of its deficiency tax. As to the issue
of... estoppel, the court ruled that this measure could not be used against respondent, as it
was petitioner who had failed to act within the prescribed period on the protest asking for a
reconsideration of the assessment.
Principles:
Under the former law, the right of the Government to collect the tax does not prescribe.
However, in fairness to the taxpayer, the Government should be estopped from collecting
the tax where it failed to make the necessary investigation and assessment within 5 years...
after the filing of the return and where it failed to collect the tax within 5 years from the date
of assessment thereof. Just as the government is interested in the stability of its collection,
so also are the taxpayers entitled to an assurance that they will not be subjected... to further
investigation for tax purposes after the expiration of a reasonable period of time. (Vol. II,
Report of the Tax Commission of the Philippines, pp. 321-322)
Petitioner cannot take refuge in BPI[18] either, considering that respondent and BPI are
similarly situated. Similar to BPI, this is a simple case in which the BIR Commissioner and
other BIR officials failed to act promptly in resolving... and denying the request for
reconsideration filed by the taxpayer and in enforcing the collection on the
assessment. Both in BPI and in this case, the BIR presented no reason or explanation as
to why it took many years to address the Protest of the taxpayer.
The statute of limitations imposed by the Tax Code precisely intends to protect the taxpayer
from prolonged and unreasonable assessment and investigation by the BIR.
( "Waiver of the Defense of Prescription Under the Statute of Limitations of the National Revenue Code"
should not be construed as a waiver of the right to invoke the defense of prescription. The waiver is just
an agreement between the taxpayer and the BIR to extend the period to date certain, within which the
latter could still assess or collect taxes due.

In order for a waiver to become valid, the BIR must ensure compliance with the requirements of RMO 20-
90, as they have the burden of securing the right of the government to assess and collect tax deficiencies.
Failure to comply with the requirements of the said memorandum will render the waiver defective and
therefore invalid. The following are the requisites for a valid waiver:

1. The waiver must be in the proper form prescribed by the RMO 20-90 subsequently revised by
RDAO No. 05-01. The phrase “but not after_____19__” which indicates the expiry date of the
period agreed upon to assess/collect the tax after the regular three-year period of prescription,
should be filled up;
2. The waiver must be signed by the taxpayer himself or his duly authorized representative;
3. The waiver must be duly notarized;
4. The CIR or the revenue official authorized by him must sign the waiver indicating that the BIR has
accepted and agreed to the waiver. Date of acceptance should be indicated.
5. Execution and acceptance by the taxpayer and BIR respectively, must be within the period of
prescription, and,
6. The waiver must be executed in three copies, the original copy to be attached to the docket, the
second copy for the taxpayer and the third for the Office accepting the waiver.

It has been emphasized also in the same decision that a waiver is not a unilateral act of the taxpayer but
is a bilateral agreement between two parties to extend the period to a date certain. Hence, the BIR must
act on it either by conforming to or by disagreeing with the extension. The waiver does not imply that the
taxpayer relinquishes the right to invoke prescription unequivocally. The right of the BIR to assess or collect
will prescribe after the stated extended period in the waiver unless a subsequent agreement has been
executed. )

j.

k.

l. CIR vs Kudos Metal

FACTS:

CIR assessed Kudos Metal Corporation for taxable year 1998. A Waiver of the Statute
of Limitations was executed on December 2001. The CTA issued a Resolution
canceling the assessment notices issued against Petitioner for having been issued
beyond the prescriptive period as the waiver purportedly failed to (a) have the valid
officer execute the same (i.e., only the Assistant Commissioner signed it and not the
CIR); (b) the date of acceptance was not indicated; (c) the fact of receipt by the
taxpayer was not indicated in the original copy.

ISSUE:

Has the CIR’s right to assess prescribed?

HELD:

YES. The requirements for a valid waiver as laid down in RMO 20-90 and RDAO No. 5-
01 are mandatory to give effect to Section 222 of the Tax Code. Specifically, the flaws in
the waiver executed by Kudos Metal were as follows: (a) there was no notarized written
authority in favor of the signatory for the company; (b) there is no stated date of
acceptance by the Commissioner or his representative; and (c) the fact of the receipt of
the copy was not indicated in the original waivers.

Neither can it be said that by merely executing the waiver the taxpayer is already
estopped from disputing an action by the CIR beyond the statutory 3-year period since
the exception under the Suyoc case (i.e., when the delays were due to taxpayer’s acts)
does not apply.

Note: Requisites of a valid waiver: (i) acceptance date; (ii) expiry date; (iii) signed by
authorized officer of taxpayer and BIR; (iv) notarized; (v) fact of receipt must be
indicated in the copies

FACTS

The CTA En Banc ruled for canceling the assessment notices issued against respondent for having been
issued beyond the prescriptive period. It found the first Waiver of the Statute of Limitations incomplete
and defective for failure to comply with the provisions of Revenue Memorandum Order (RMO) No. 20-
90. Thus: the waiver failed to indicate the date of acceptance. Such date of acceptance is necessary to
determine whether the acceptance was made within the prescriptive period; And, the fact of receipt by
the taxpayer of his file copy was not indicated on the original copy. The requirement to furnish the
taxpayer with a copy of the waiver is not only to give notice of the existence of the document but also of
the acceptance by the BIR and the perfection of the agreement. The subject waiver is therefore
incomplete and defective. As such, the three-year prescriptive period was not tolled or extended and
continued to run.

Petitioner argues that the government’s right to assess taxes is not barred by prescription as the two
waivers executed by respondent, through its accountant, effectively tolled or extended the period
within which the assessment can be made. In disputing the conclusion of the CTA that the waivers are
invalid, petitioner claims that respondent is estopped from adopting a position contrary to what it has
previously taken. Petitioner insists that by acquiescing to the audit during the period specified in the
waivers, respondent led the government to believe that the “delay” in the process would not be utilized
against it. Thus, respondent may no longer repudiate the validity of the waivers and raise the issue of
prescription.Respondent maintains that prescription had set in due to the invalidity of the waivers
executed by Pasco, who executed the same without any written authority from it, in clear violation of
RDAO No. 5-01.

ISSUE

Whether the belated assessment of the CIR is still valid and effective on the ground that respondent is
already in estoppel.

HELD

NO.

Section 203 of the National Internal Revenue Code of 1997 (NIRC) mandates the government to assess
internal revenue taxes within three years from the last day prescribed by law for the filing of the tax
return or the actual date of filing of such return, whichever comes later. Hence, an assessment notice
issued after the three-year prescriptive period is no longer valid and effective. Exceptions however are
provided under Section 222 of the NIRC.

Section 222 (b) of the NIRC provides that the period to assess and collect taxes may only be extended
upon a written agreement between the CIR and the taxpayer executed before the expiration of the
three-year period. RMO 20-90 issued on April 4, 1990 and RDAO 05-01 issued on August 2, 2001 lay
down the procedure for the proper execution of the waiver

Due to the defects in the waivers, the period to assess or collect taxes was not extended. Consequently,
the assessments were issued by the BIR beyond the three-year period and are void.

m. RCBC vs. CIR

FACTS:

 January 23, 1997, RCBC executed 2 waivers of Defense of Prescription. Under the statute of
limitation of the NIRC covering the Internal Revenue Taxes due for 1994 and 1995 extending the
assessment up to Dec. 31, 2000.
 January 27, 2000: RCBC received a formal letter of demand together with assessment notices
for deficiency taxes. RCBC filed a Protest and then, a Petition for Review before the CTA
pursuant to Sec. 228 of the 1997 Tax Code.
 Dec. 6, 2000: It again received a letter of demand which drastically reduced the deficiency tax
except from the onshore tax and document stamp tax (DST).
 RCBC argued the validity of the waivers for not being signed and for the onshore tax, it should
not be primarily liable since it is only a withholding agent.
 CTA terminated the assessment for other deficiencies except for the FCDU shore tax and DST
charging 20% deficiency tax. Being denied in CTA en banc, it raised the matter to the Supreme
Court. While the case is pending, the DST deficiency was paid after the BIR approved its
application for abatement.
ISSUES: W/N RCBC as payee bank can be held liable for deficiency on shore tax which is
mandatory by law to be collected at source in the form of a final withholding tax.

HELD: Petition is denied. As held in Chamber of Real Estate and Builder's Association Inc. v.
Executive Sec., the purpose of the withholding tax system are:

1. to provide the taxpayer with a convenient way of paying his tax liability
2. to ensure the collection of tax
3. to improve the governments cashflow.
 Under the withholding tax system, the payor is the taxpayer upon whom the tax is imposed,
while the withholding agent simply acts as an agent or a collector of the government to ensure
the collection of taxes
 The liability of the withholding agent is independent from that of the taxpayer.
 The former cannot be made liable for the tax due because it is the latter who earned the income
subject to withholding tax.
 The withholding agent is liable only insofar as he failed to perform his duty to withhold the tax
and remit the same to the government. The liability for the tax, however, remains with the
taxpayer because the gain was realized and received by him.
 RCBC cannot evade its liability for FCDU Onshore Tax by shifting the blame on the payor-
borrower as the withholding agent.
 The CTA, as a specialized court dedicated exclusively to the study and resolution of tax
problems, has developed an expertise on the subject of taxation and shall be accorded the
highest respect and shall be presumed valid, in the absence of any clear and convincing proof to
the contrary

n. CIR vs. Phoenis Assurance Inc.