TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban JUICY NOTES (PROF.

CABANEIRO) A2011 1
Chapter VII: TAX REMEDIES – REMEDIES OF THE RELEASE OF ASSESSMENT NOTICE OR DEMAND BEFORE THE LAPSE
GOVERNMENT – OF THE PRESCRIPTIVE PERIOD
 The assessment may be subject to revision by the BIR. If revised,
STATUTE OF LIMITATIONS the prescriptive period will commence to run from the safe when
such revised assessment is mailed, released or sent. So, it is not
ASSESSMENT:
from the date the original assessment is mailed etc. but from the
PRESCRIPTION OF GOVERNMENT’S RIGHT TO ASSESS TAXES date the revised assessment has been mailed.
General Rule (Sec 203, NIRC)  The making of assessment is prescriptible.
 Assessment shall be made within three (3) years after the last day
 The Supreme Court held in case that so long as the release thereof
prescribed by law for the filing of the return or from the day the is effected before prescription sets in, the assessment is deemed
return was filed in case the return was filed beyond the period made on time even though the same is actually received by the
prescribed by law.
taxpayer after the expiration of the prescription period. [Basilan
 A return filed before April 15 shall be considered filed on such date. Estates, Inc. v. Commissioner, 21 SCRA 17]
Exceptions (Sec 222, NIRC)  The law does not require that the demand or notice be received
1. Also a proceeding in court for the collection of such tax may be filed
within the prescriptive period. (Republic vs Tan)
without assessment  Where the taxpayer-addressee makes a direct denial of receipt of a
2. Assessment may be made within ten (10) years after the discovery mailed demand letter, such denial shifts the burden to the
of the falsity, fraud or omission in the following cases:
government to prove that such letter was such indeed received by
a. in case of the false or fraudulent return with intent to the taxpayer. (Republic vs CA)
evade tax; or
b. failure to file a return
IMPORTANT CONSIDERATIONS RE PRESCRIPTION OF
c. by mutual agreement between government and
GOVERNMENT’S RIGHT TO ASSESS TAXES:
taxpayer (which must be in writing) before the lapse. A. DATE OF FILING TAX RETURNS – A MATERIAL FACTOR IN
 In case the Commissioner and the taxpayer agree in writing to a
RESOLVING QUESTIONS ON PRESCRIPTION
different period before the expiration of the original prescriptive
 The date of the filing of tax return is important for
period. The period so agreed upon may be extended by purposes of determining whether or not the tax was
subsequent written agreement before the expiration of the
assessed within the prescriptive period.
period previously agreed upon.
 Since prescription is an affirmative defense, it is incumbent upon
the taxpayer to prove that a return had been filed by him,
WHEN IS A TAX ASSESSMENT DEEMED MADE?
otherwise, there is a basis for the BIR to assess the tax within
 It is not the issue date of the demand and/or notice that is the
the 10 year period, on the ground that no return was filed by
reckoning point in prescription but rather it is the date when the the taxpayer. (Republic vs Marsman Dev’t.)
demand letter is released, mailed or sent to the taxpayer that
constitutes an actual assessment. (Republic vs Limaco)
B. EFFECT OF FILING A AMENDED RETURN
 Example: If it was received by the taxpayer in a particular date  The Supreme Court held that where the amended return is
(Dec. 5, 1997), you should count the prescriptive period for making
substantially different from the original return, the right of the
an assessment from the date it was mailed, released or sent by the
Bureau of Internal Revenue to assess the tax is counted from
BIR and not from the receipt of the notice of assessment by the the filing of the amended return. [Commissioner v. Phoenix
taxpayer.
Assurance Co. Ltd. L-19127, May 20, 1965].
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TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban JUICY NOTES (PROF. CABANEIRO) A2011 2
C. EFFECT OF FILING A WRONG RETURN False vs. Fraudulent return
 If what was filed was a wrong return, the 10 year period still  False return is a deviation from the truth or fact whether
applies. This is true even if the information embodied in the intentional or not.
wrong return could enable the BIR to assess the tax liability of  Fraudulent return is intentional and deceitful with the aim of
the taxpayer. (Butuan Sawmill vs CTA) evading the correct tax due.
 Distinction must be made between false returns due to
D. PRESCRIPTIVE PERIOD FOR MAKING AN ASSESSMENT & mistakes, carelessness or ignorance and fraudulent returns with
COLLECTION intent to evade taxes.
With prior Without prior  The fraud contemplated by law is actual and not constructive. It
assessment assessment must amount to intentional wrong doing with the sole object of
avoiding the tax. It necessarily follows that a mere mistake
I. Return filed is not false 3 years from the 3 years from the
cannot be considered as fraudulent intent. Thus, if both the
or fraudulent date of actual date of actual
petitioner and the respondent Commissioner committed
filing. If it was filed filing or from the
a. Return was file but mistakes in making the entries in the returns and the
earlier than the date last day fixed by law
there exist a assessment respectively under the inventory method of
fixed by the Tax Code. for filing such return.
deficiency determining tax liability, it would be unfair to treat the mistakes
b. Return was filed of the petitioner and the respondent, as tainted with fraud for
but no payment each year from 1946 to 1951, inclusive. [Aznar v. Commissioner,
COLLECTION: Within
has been made Aug. 23, 1974]
5 years from the date
of assessment
Fraud
II.  Fraud is a question of fact and the circumstances constituting
Failure/Falsify/Fraudulent fraud must be alleged and proved.
10 years from the Taxes may be
 Fraud must be a product of a deliberate intent to evade taxes.
a. Intentional failure discovery of such collected even Hence, mere under-declaration does not necessarily imply fraud.
to file a return omission of failure, without prior
 Fraud must be actual and not constructive. It must amount to
b. False return falsity or fraud assessment and
intentional wrong doing with the sole purpose of avoiding the
c. Fraudulent return prescriptive period is
tax. A mere mistake cannot be considered as fraudulent intent.
10 years from the
COLLECTION: 5 discovery of failure
years from the date or omission, falsity or
of assessment. fraud.
Notes: The rule is if prior assessment has been made, the BIR can avail of
the administrative and judicial remedy. But if without prior assessment, the
BIR can only avail of the judicial remedies.
Return must be the one prescribed by the BIR. SO, if you file your
Books of Accounts in lieu of that return, that does not constitute return.

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TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban JUICY NOTES (PROF. CABANEIRO) A2011 3
ASSESSMENT PROCEDURE b. IF he appeal the decision of the BIR of the Commissioner to the CTA
1. File tax return but he did not appeal the decision of the CTA to CA, the decision of
2. Letter of authority to examine the CTA shall be final and executory.
If satisfied, collection. c. If he appeal to the CA but the CA decision affirming that decision of
3. Notice of Informal Conference the BIR was not appealed to the SC, CA decision shall be final and
If satisfied with explanation, collection. executory.
4. Pre-assessment notice d. If appealed to SC but SC affirm the decision of the CA, SC decision is
5. Response – 15 days final and executory.
6. Notice of assessment and letter of demand  If the decision of the BIR is final and executory, the
7. Administrative protest – Reconsideration or reinvestigation assessment made cannot be questioned. The issue of
Submission of all relevant supporting documents – within 60 prescription can no longer be raised except if the BIR
days from protest submitted the particular issue for the resolution of the Court,
8. Denial or non-action of the Commissioner – 180 days that is considered as waiver on the part of the BIR and such
9. Appeal to the CTA – within 30 days from decision or the lapse of issue of prescription may be subject to resolution.
180 days  There is no provision in the TAX Code that prohibits the BIR
10. Appeal to the CA – within 15 days from notice from filing an action for collection even if the resolution on
CA decides within 12 months the motion for reconsideration on the assessment made is
11. Petition for review on certiorari to the Supreme Court still pending.
 When the case is pending before the CTA, collection may
COLLECTION also be made by filing of an answer to the petition for
General Rule review with the CTA. This is tantamount to a filing of
 Collection may be instituted within 5 years following the assessment collection of tax. This will also stop the running of the
of the tax [Sec. 222C] prescriptive period for collection of taxes.
 Collection of taxes is prescriptible.
Exception
 A proceeding in court for collection, without assessment, may be When does the five year prescriptive period start to run?
instituted within ten years after the discovery of falsity, fraud, or  The period of limitation to collect is counted from the assessment of
omission in the case of a false or fraudulent return with intent to the tax.
evade tax or failure to file a return [Sec. 222A]  Assessment is deemed made at the time the demand or assessment
notice has been sent, released or mailed to the taxpayer.
PRINCIPLES GOVERNING THE FILING OF AN ACTION FOR  The actual sending or release to the taxpayer of the assessment
COLLECTION BY THE BIR notice or demand is, therefore, necessary in order to determine the
actual date when the tax being collected was assessed.
Collection is proper under the following situations:
a. BIR assessment is considered final and executory, if no protest or
dispute has been made by the taxpayer. IF protested by the
taxpayer but he did not appeal, the BIR decision on such protest,
the effect is that the BIR decision shall be considered final and
executory.

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TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban JUICY NOTES (PROF. CABANEIRO) A2011 4
When is the tax deemed collected for purposes of the prescriptive Procedure for waiver of prescription period under Rev. M.O. 20-90
period 1. Waiver must be in accordance with the prescribed form;
 Collection through summary remedies is effectuated by summary 2. Waiver must be signed by the taxpayer himself or his authorized
methods when the government avails of the distraint and levy representative;
procedure. 3. The Commissioner of his duly authorized agent must sign the
 If collection is to be effected through judicial remedies, the collection waiver indicating the BIR’s acceptance of the waiver.
of the tax is begun by the filing of the complaint with the proper
court. Prescription of the government’s right to recover an erroneously
 However, if the decision of the Commissioner on a protested refunded tax ([Guagua Electric Co., Inc. v. Commissioner 19 SCRA 790]
assessment is appealed to the CTA, the collection of the tax is  Same as the three-year prescriptive period for making assessments.
considered begun when the government files its answer to the
taxpayer’s petition for review. Equitable recoupment and prescription
 The rule in this jurisdiction is not to allow the setting off the
May there be a judicial action to collect a tax liability even if there prescribed tax against a tax refund; for if that were so, this would
is no previous assessment? only encourage negligence on the part of our collecting officers who
 Yes. A proceeding in court for collection-without-assessment may be would feel despite prescription in the thought that they could always
instituted within ten years after the discovery of falsity, fraud, or collect the prescribed tax through the expedient of set-off (CIR vs
omission in the case of a false or fraudulent return. UST)
 Two possibilities that could arise:
1. Taxpayer files a false or fraudulent return with intent to evade Suspension of the running of the Statute of limitations
taxes.  The running of the Statute of Limitations provided in Sec. 203 and
2. Tax payer does not file any return at al. 222 on the making of assessment and the beginning of distraint or
levy or a proceeding in court for collection, in respect of any
Tax obligation secured by bond deficiency, shall be suspended under any of the following
 Where the tax obligation is secured by a bond, the prescriptive circumstances:
period for the action for the forfeiture of the bond is governed by 1. When the Commissioner is prohibited from making the
the Civil Code: 10 years to enforce a written contractual obligation. assessment or beginning the distraint, levy, or proceeding in
court and for sixty days thereafter;
Waiver of the Statute of Limitations 2. When the taxpayer requests for a reinvestigation which is
 Sec. 222B of the NIRC allows the taxpayer and the government granted by the Commissioner;
to extend by mutual agreement the prescriptive periods for the 3. When the taxpayer cannot be located in the address given
assessment and collection of taxes. Such an agreement must be by him in the return filed upon which tax is being assessed
in writing. or collected, unless the taxpayer has informed the
 The waiver must be signed by the parties before the lapse of the Commissioner of any change in address;
three-year prescriptive period. A waiver is ineffectual if it is 4. When the warrant of distraint or levy is duly served upon
executed beyond the original prescriptive period. the taxpayer, his authorized representative, or a member of
 The extended period may again be extended provided the new his household with sufficient discretion, and no property
period be agreed upon before the lapse of the extended period. could be located; and
5. When the taxpayer is out of the Philippines.
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TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban JUICY NOTES (PROF. CABANEIRO) A2011 5
Examples when the Commissioner is prohibited from assessing or Rule of prescription in criminal cases (SEC. 281. ,NIRC)
collecting the tax  All violations of any provision of this Code shall prescribe after Five
1. The filing of a petition for review in the Court of Tax Appeals from (5) years.
the decision of the Commissioner on a protested assessment  Prescription shall begin to run from the day of the commission of the
interrupts the running of the prescriptive period for collection. violation of the law, and if the same be not known at the time, from
[Republic v. Ker & Co., Ltd. 18 SCRA 207] the discovery thereof and the institution of judicial proceedings for
2. When the CTA enjoins the collection of the tax under Sec. 11 of RA its investigation and punishment.
1125.  The prescription shall be interrupted when proceedings are instituted
against the guilty persons and shall begin to run again if the
Request for reinvestigation which should be granted or acted upon proceedings are dismissed for reasons not constituting jeopardy.
by the Commissioner  The term of prescription shall not run when the offender is absent
 It should be emphasized that a mere request for reinvestigation from the Philippines.
without any corresponding action on the part of the Commissioner
does not interrupt the running of the prescriptive period. When defense of prescription may be raised even on appeal
 Criminal Case involving tax violations
Will an extra-judicial demand interrupt the prescription period?  The defense of prescription can be raised or invoked by the
 No. Sec. 22 of the NIRC enumerates the instances when the accused even if the case had already been decided by the
prescription is interrupted, and an extra-judicial demand is not one lower court but pending decision on appeal.
of them.  Civil Action for the collection of Taxes
 The defense of prescription, if not raised in the lower court,
GROUNDS FOR THE SUSPENSION OF PRESCRIPTIVE PERIOD IN is barred permanently.
THE COLLECTION OF TAXES: (Code: N.A.P.O.C.A.R. –sounds  Reason: Issues or defenses not raised in the administrative
like NAPOCOR. Pag may NAPOCOR may kuryente, pag may kuryente may proceeding and/or in the lower court cannot be raised for
ground) the first time on appeal.
1. No property could be allocated;
Prescriptive Period in Criminal Cases – when does it start to run?
2. Agreement between the BIR and the taxpayer to the effect that the
 It is important to note that the reckoning point for purposes of
prescriptive period shall be suspended pending the negotiation;
prescription will depend on the nature of the tax avoidance.
3. If the BIR is Prohibited from a distraint or levy of real property;
 By its nature, the violation could only be committed after service of
4. If the taxpayer is Out of the Philippines;
notice and demand for payment of the deficiency taxes upon the
5. If the address of the taxpayer Cannot be located;
taxpayer. This is so because prior to the finality of the assessment,
6. The filing of an Answer to the petition for review executed by a
the taxpayer has not committed any violation for nonpayment of the
taxpayer with the CTA;
tax. The offense was committed only after the finality of the
7. When a Request for reinvestigation has been granted by the BIR.
assessment coupled with the taxpayer’s willful refusal to pay the
taxes within the allotted period. (Lim, Sr. vs CA)

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TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban JUICY NOTES (PROF. CABANEIRO) A2011 6
EXERCISES: A taxpayer requested for reinvestigation of his tax liability. Did it
suspend the period to assess and collect?
Taxpayer: Prescriptive Period: Suspended (2000) SUGGESTED ANSWER:
Mr. Reyes, a Filipino citizen engaged in the real estate business, filed his No. A mere request for reinvestigation does not suspend the period to
1994 income tax return on March 20, 1995. On December 15, 1995, he left assess and collect. Section 223 of the NIRC provides that the period shall
the Philippines as an immigrant to join his family in Canada. After the be suspended “when the taxpayer requests for a reinvestigation which is
investigation of said return, the BIR issued a notice of deficiency income tax granted by the Commissioner.” Thus, it is not only the request for
assessment on April 15, 1998. Mr. Reyes returned to the Philippines as a reinvestigation which will toll the period. There must be a showing that the
balikbayan on December 8, 1998. Finding his name to be in the list of same was granted by the CIR. (BPI v. CIR, GR No. 139736, 17 October
delinquent taxpayers, he filed a protest against the assessment on 2005)
the ground that he did not receive the notice of assessment and that the
assessment had prescribed. Will the protest prosper? Explain. Collection of Taxes: Prescription (2001)
SUGGESTED ANSWER: May the collection of taxes be barred by prescription? Explain your answer.
No. Prescription has not set in because the period of SUGGESTED ANSWER:
limitations for the Bureau of Internal Revenue to issue an assessment was Yes. The collection of taxes may be barred by prescription.
SUSPENDED during the time that Mr. Reyes was out of the Philippines or The prescriptive periods for collection of taxes are governed by the tax law
from the period December 15, 1995 up to December 8, 1998.(Sec. 223 in imposing the tax. However, if the tax law does not provide for prescription,
relation to Sec. 203, both of the NIRC of 1997) the right of the government to collect taxes becomes imprescriptible.

What is the purpose of a waiver of the statute of limitations to Imprescriptibility of Tax Laws (1997)
assess and collect internal revenue taxes? Taxes were generally imprescriptible; statutes, however, may provide
SUGGESTED ANSWER otherwise. State the rules that have been adopted on this score by The
A waiver of the statute of limitations under the NIRC, to a certain extent, is a National Internal Revenue Code.
derogation of the taxpayers' right to security against prolonged and SUGGESTED ANSWER:
unscrupulous investigations and must therefore be carefully and strictly The statute of limitation for assessment of tax if a return is filed is within
construed. The waiver of the statute of limitations is not a waiver of the right three (3) years from the last day prescribed by law for the filing of the return
to invoke the defense of prescription. It is an agreement between the or if filed after the last day, within three years from date of actual filing. If
taxpayer and the BIR that the period to issue an assessment and collect the no return is filed or the return filed is false or fraudulent, the period to
taxes due is extended to a date certain. The waiver does not mean that the assess is within TEN YEARS from discovery of the omission, fraud or falsity.
taxpayer relinquishes the right to invoke prescription unequivocally The period to collect the tax is within FIVE YEARS from date of assessment.
particularly where the language of the document is equivocal. For the In the case, however, of omission to file or if the return filed is false or
purpose of safeguarding taxpayers from any unreasonable examination, fraudulent, the period to collect is within TEN YEARS from discovery without
investigation or assessment, our tax law provides a statute of limitations in need of an assessment.
the collection of taxes. Thus, the law on prescription, being a remedial
measure, should be liberally construed in order to afford such protection.
As a corollary, the exceptions to the law on prescription should perforce be
strictly construed. (Philippine Journalists, Inc. v. CIR, G.R. No. 162852,
December 16, 2004)

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