a. When the finding for any deficiency tax is the result of mathematical error in the computation of the tax as appearing on the face of the return; or
b. When a discrepancy has been determined between the tax withheld and the amount actually remitted by the withholding agent; or
c. When a taxpayer opted to claim a refund or tax credit of excess creditable withholding tax for a taxable period was determined to have carried over and automatically applied the same amount claimed against the estimated tax liabilities for the taxable quarter or quarters of the succeeding table year; or
d. When the excess tax due on excisable articles has not been paid; or
e. When an article locally purchased or imported by an exempt person, such as, but not limited to vehicles, capital equipment, machineries and spare parts, has been sold, trade or transferred to non-exempt persons. (Sec. 228, NIRC of 1997)
29. The word assessment when used in connection with
taxation, may have more than one meaning. More commonly the
word “ assessment” means the official valuation of a taxpayer’ s property for purpose of taxation. The above definition of assessment finds application under tariff and customs taxation as well as local government taxation.
For real property taxation, there may be a special meaning
to the burdens that are imposed upon real properties that have been benefited by a public works expenditure of a local government. It is sometimes called a special assessment or a special
levy. (Commissioner of Internal Revenue v. Pascor Realty and
Development Corporation, et al., G.R. No. 128315, June 29, 1999)
For internal revenue taxation assessment as laying a tax.
The ultimate purpose of an assessment to such a connection is to ascertain the amount that each taxpayer is to pay. (Commissioner of
Internal Revenue v. Pascor Realty and Development Corporation, et al., G.R. No. 128315, June 29, 1999)
30. An assessment is a notice duly sent to the
taxpayer which is deemed made only when the BIR
releases, mails or sends such notice to the taxpayer.
(Commissioner of Internal Revenue v. Pascor Realty and Development Corporation, et al., G.R. No. 128315, June 29, 1999)
31. What is a self-assessed tax ?
SUGGESTED ANSWER: A tax that the taxpayer himself assesses or computes and pays to the taxing authority. It is a tax that self-assessed by the taxpayer without the intervention of an assessment by the tax authority to create the tax liability.
The Tax Code follows the pay-as-you-file system of taxation under which the taxpayer computes his own tax liability, prepares the return, and pays the tax as he files the return. The pay-as-you-file system is a self-assessing tax return.
Internal revenue taxes are self-assessing. [Dissent of J. Carpio in Philippine National Oil Company v. Court of Appeals, et al., G. R. No. 109976, April 26, 2005 and companion case citing Tupaz v. Ulep, 316 SCRA 118 (1999) in turn citing Vitug and Acosta, Tax Law and
Jurisprudence, 1st edition, 1997, p. 267]
A clear example of a self-assessed tax is the annual income tax, which the taxpayer himself computes and pays without the intervention of any assessment by the BIR. The annual income tax becomes due and payable without need of any prior assessment by the BIR. The BIR may or may not investigate or audit the annual income tax return filed by the taxpayer. The taxpayer’ s liability for the income tax does not depend on whether or not the BIR conducts such subsequent investigation or audit.
However, if the taxing authority is first required to investigate, and after such investigation to issue the tax assessment that creates the tax liability, then the tax is no longer self-assessed. (Dissent of J. Carpio in Philippine National Oil Company v. Court of Appeals, et al., G. R. No. 109976, April 26, 2005 and companion case)
32. On October 28, 1988 taxpayer bank received a notice of assessment from the BIR informing it that deficiency taxes are due from the said taxpayer bank without any findings of law or fact but supported only with a computation. On December 10, 1988, the taxpayer bank counsel filed a letter that “ as soon as this is explained and clarified in a proper notice of assessment, we shall inform you of the taxpayer’ s decision on whether to pay or protest the assessment.” The taxpayer bank insists that the assessment was not valid. Of course, BIR took the opposite view contending further that there was no seasonable protest, hence the tax is sue and collectible. Who is correct ?
SUGGESTED ANSWER: The BIR is correct. Under the old law Sec. 270, it is enough merely that the BIR Commissioner shall “ notify the taxpayer of his findings
The taxpayer bank counsel’ s December 10, 1988 letter is not a seasonable protest because it was filed thirty (30) days after receipt of the assessment on October 28, 1988. (Commissioner of Internal
Revenue v. Bank of Philippine Islands, G. R. No. 134062, April 17,
2007)
NOTES AND COMMENTS: The statement, “ The taxpayer shall be informed in writing of the law and the facts on which the assessment is made; otherwise the assessment shall be void” is an amendment to Sec. 270 (now renumbered to Sec. 228) which took effect only on January 1, 1998 upon the effectivity of the Tax Reform Act of 1997.
33. What are the prescriptive periods for making assessments of internal revenue taxes ?
SUGGESTED ANSWER:
a. Three (3) years from the last day within which to file a return or when the return was actually filed, whichever is later (Sec. 203, NIRC of 1997). The CIR has three (3) years from the date of actual filing of the tax return to assess a national internal revenue tax or to commence court proceedings for the collection thereof without an assessment. [Bank of Philippine Islands (Formerly Far East Bank
and Trust Company) v. Commissioner of Internal Revenue, G. R. No.
174942, March 7, 2008]
b. ten years from discovery of the failure to file the tax return or discovery of falsity or fraud in the return [Sec. 222 (a), NIRC of 1997) ; or
c. within the period agreed upon between the government and the taxpayer where there is a waiver of the prescriptive period for assessment (Sec. 222 (b), NIRC of 1997).
34. Purpose of period of limitations in taxation.
For the purpose of safeguarding taxpayers from any unreasonable examination, investigation or assessment, our tax law provides a statute of limitations in the collection of taxes. [Commissioner of Internal
Revenue v. B.F. Goodrich Phils, Inc., (now Sime Darby International Tire Co., Inc.), et al., G.R. No. 104171, February 24, 1999, 303 SCRA
546; Philippine Journalists, Inc. v. Commissioner of Internal Revenue, G. R. No. 162852, December 16, 2004;], as well as their assessments.
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 beneficent purpose of affording protection to the taxpayer within the contemplation of the Commission which recommend the approval of the law. [Republic of the Philippines v. Ablaza, 108 Phil. 1105, 1108, cited in Bank of Philippine Islands (Formerly Far East Bank and
Trust Company) v. Commissioner of Internal Revenue, G. R. No.
174942, March 7, 2008]
35. Unreasonable investigation contemplates cases where the period for assessment extends indefinitely because this
deprives the taxpayer of the assurance that it will not longer be subjected to further investigation for taxes after the expiration of a reasonable period of time. (Philippine Journalists, Inc. v.
Commissioner of Internal Revenue, G. R. No. 162852, December 16,
2004 with note to see Republic v. Ablaza, 108 Phil. 1105. 1108)
Laws on prescription should be liberally construed in favor of the taxpayer. Reason: for the purpose of safeguarding taxpayers from an unreasonable examination, investigation or assessment, our tax laws provide a statute of limitation on 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. Commissioner of Internal
Revenue, G. R. No. 162852, December 16, 2004 citing Commissioner of Internal Revenue v. B.F. Goodrich Phils, Inc (now Sime Darby International Tire Co., Inc.),., et al., G.R. No. 104171, February 24,
1999, 303 SCRA 546]
The prescriptive period was precisely intended to give the taxpayers peace of mind. (Commissioner of Internal Revenue v. B.F.
Goodrich Phils., Inc., et al., G.R. No. 104171, February 24, 1999)
36. A “ jeopardy assessment” is a delinquency tax
assessment which was assessed without the benefit of complete or partial audit by an authorized revenue officer, who has reason to believe that the assessment and collection of a deficiency tax will be jeopardized by delay because of the taxpayer’ s failure to comply with the audit and investigation requirements to present his books of accounts and/or pertinent records, or to substantiate all or any of the
deductions, exemptions, or credits claimed in his return. [Sec. 3.1 (a), Rev. Regs. No. 6-2000)
Jeopardy assessment is an indication of the doubtful validity of the assessment, hence it may be subject to a compromise. [Sec. 3.1 (a), Rev. Regs. No. 6-2000]
37. During Juliana’ s lifetime, her business affairs were managed by the Philippine Trust Company (Philtrust). She died on April 3, 2001.Two days after her death, Philtrust, through its Trust Officer, filed her Income Tax Return for 2000, without indicating that Juliana died.
On May 22, 2001, Philtrust filed a verified petition with the RTC for appointment as Special Administrator. This was denied by the court who appointed one of the heirs as Special Administrator. Philtrust’ s motion for reconsideration was denied.
After an investigation by the BIR of the decedent’ s income tax liability, it sent, on November 18, 2003, a demand letter and a Notice of Assessment to Juliana c/o Philtrust at the latter’ s address which was stated in the 1998 Income Tax Return. No response was made neither was the BIR advised that Juliana already died.
On June 18, 2005, the BIR Commissioner issued warrants of distraint and levy to enforce collection of the deficiency income tax liability which was served on Juliana’ s heir. On November 22, 2005, the BIR filed with the estate court a motion for allowance of claim. The heir claimed that there was no proper service of the notice of assessment and that the filing of the motion was time- barred. On the other hand the BIR made the submission that both the issuance of the assessment notice and the motion were all properly made on Philtrust. Furthermore the lapse of the 30-day period within which to protest made the assessment final, executory and uncontestable and not time barred.
Rule on the conflicting claims of the parties.
SUGGESTED ANSWER: I would rule in favor of the heir. There was no proper service of the notice of assessment because the death of Juliana automatically severed the legal relationship of principal and agent between her and Philtrust. The severed relationship could not be revived on the mere fact that Philtrust filed her Tax Return two days after her death.
Philtrust’ s failure to file a notice of death subjects it to penal sanctions which do not include the indefinite tolling of the prescriptive period for making deficiency tax assessments, or the waiver of the notice requirement for such assessments. (Estate of the late Juliana
Diez Vda. de Gabriel v. Commissioner of Internal Revenue, G.R. No.
155541, January 27, 2004)
38. What are the requirements for the validity
of a formal letter of demand and assessment notice ?
SUGGESTED ANSWER:
a. There must have been previously issued a pre-assessment notice until excepted;
b. It must have been issued prior to the prescriptive period; and
c. The letter of demand calling for payment of the taxpayer’ s deficiency tax or taxes shall state the facts, the law, rules and regulations, or jurisprudence on which the assessment is based, otherwise, the formal letter of demand and assessment notice shall be void. (Sec. 3.1.4, Rev. Regs. No. 12-99)
39. What is the presumption that flows from a taxpayer’ s failure to protest an assessment ?
SUGGESTED ANSWER: “ Tax assessments by tax
examiners are presumed correct and made in good faith. The taxpayer has the duty to prove otherwise. In the absence of proof of any irregularities in the performance of duties, an assessment duly made by a Bureau of Internal Revenue examiner and approved by his superior officers will not be disturbed. All presumptions are in favor of the correctness of tax assessments.” (Commissioner of Internal
Revenue v. Bank of Philippine Islands., G, R. No. 134062, April 17,
2007 citing Sy Po v. Court of Appeals, G. R. No. L-81446, 18 August 1988, 164 SCRA 524, 530, citations omitted)
40. What are the reasons for presumption of correctness of assessments ?
SUGGESTED ANSWER: a. Lifeblood theory
b. Presumption of regularity (Commissioner of Internal
Revenue v. Hantex Trading Co., Inc., G, R. No. 136975, March 31,
2005) in the performance of public functions. (Commissioner of
Internal Revenue v. Tuazon, Inc., 173 SCRA 397)
c. The likelihood that the taxpayer will have access to the relevant information [Commissioner of Internal Revenue, supra citing
United States v. Rexach, 482 F.2d 10 (1973). The certiorari was
denied by the United States Supreme Court on November 19, 1973) d. The desirability of bolstering the record-keeping requirements of the NIRC. (Ibid.)