CIR v. First Express Pawnshop Digest

CIR v. FIRST EXPRESS PAWNSHOP

G.R. Nos.  172054-46,  16 June 2009

Facts:  

In this case, respondent a pawnshop company received the tax assessment on 3 January 2002. On 1 February 2002, respondent submitted its protest and attached the GIS and Balance Sheet as of 31 December 1998. Since petitioner did not act on the protest during the 180-day period,respondent filed a petition before the CTA on 28 August 2002 and contended that petitioner did not consider the supporting documents on the interest expenses and donations which resulted in the deficiency income tax. 

         

Within 60 days from the filing of protest or until 2 April 2002, respondent should submit relevant supporting documents. Respondent, having submitted the supporting documents together with its protest, did not present additional documents anymore.

In a letter dated 12 March 2002, petitioner requested respondent to present proof of payment of DST on subscription. In a letter-reply, respondent stated that it could not produce any proof of DST payment because it was not required to pay DST under the law considering that the deposit on subscription was an advance made by its stockholders for future subscription, and no stock certificates were issued.

Since respondent has not allegedly submitted any relevant supporting documents, petitioner now claims that the assessment has become final, executory and demandable, hence, unappealable. 

Issue: WON assessment has become final

HELD: NO.  The assessment did not become final and unappealable. It cannot be said that respondent failed to submit relevant supporting documents that would render the assessment final because when respondent submitted its protest, respondent attached the GIS and Balance Sheet. Further, petitioner cannot insist on the submission of proof of DST payment because such document does not exist as respondent claims that it is not liable to pay, and has not paid, the DST on the deposit on subscription. After respondent submitted its letter-reply stating that it could not comply with the presentation of the proof of DST payment, no reply was received from petitioner.

The term “relevant supporting documents” should be understood as those documents necessary to support the legal basis in disputing a tax assessment as determined by the taxpayer. The BIR can only inform the taxpayer to submit additional documents. The BIR cannot demand what type of supporting documents should be submitted.  Otherwise, a taxpayer will be at the mercy of the BIR, which may require the production of documents that a taxpayer cannot submit.  Respondent has complied with the requisites in disputing an assessment pursuant to Section 228 of the Tax Code.

Section 228 states that if the protest is not acted upon within 180 days from submission of documents, the taxpayer adversely affected by the inaction may appeal to the CTA within 30 days from the lapse of the 180-day period. Respondent, having submitted its supporting documents on the same day the protest was filed, had until 31 July 2002 to wait for petitioner’s reply to its protest. On 28 August 2002 or within 30 days after the lapse of the 180-day period counted from the filing of the protest as the supporting documents were simultaneously filed, respondent filed a petition before the CTA.  


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Hi! I'm a law student from Manila, Philippines.  I did Political Science, then Industrial Relations major in H.R. (postgrad) studies from UP.  I vlog, weightlift, experiment with new makeup looks, try Bollywood and bellydance steps, and rant about my cray life in my YouTube channel.  Once in a blue moon, I create content for another YT channel,  10+ blogs,  20+ FB pages and in HubPages.  Check out my official site.  

Reyes v CIR Digest

REYES v CIR

GR No. 163581, 27 January 2006

Facts:  By virtue of a sworn affidavit for reward by one Abad, an investigation was conducted by BIR on the estate of the deceased Maria Tancinco who died in 1993 leaving a residential lot and old house in Dasma.  Without submitting a preliminary finding report, an LOA was issued and received by Reyes, one of the heirs on 14 March 1997. 

Then on 12 Feb 1998, a PAN was issued against the estate, and a FAN as well as demand letter was issued on 22 April 1998. For the assessment of P14.9M for estate tax of the estate of Maria Tancinco.    On March 11, 1999, the heirs proposed a compromise settlement of P1,000,000.00.

During those dates, RA 8424 Tax Reform Act was already in effect. RA 8424 stated that the taxpayer must be informed of both the law and facts on which the assessment was based.The notice required under the old law was no longer sufficient under the new law. First, RA 8424 has already amended the provision of Section 229 on protesting an assessment. The old requirement of merely notifying the taxpayer of the CIR’s findings was changed in 1998 to informing the taxpayer of not only the law, but also of the facts on which an assessment would be made; otherwise, the assessment itself would be invalid.

Due to failure to pay tax on the deadline BIR notified on June 6, 2000 that the subject property would be sold at public auction on August 8, 2000. Reyes filed a protest with the BIR.  Hence the petition for review filed by Reyes in CTA and a TRO to desist and refrain from proceeding with the auction sale of the subject property or from issuing a warrant pending determination of the case and/or unless a contrary order is issued.

CIR filed a motion saying CTA has no jurisdiction since the assessment against the estate is already final and executory; and (ii) that the petition was filed out of time

CTA – Ruled in favour of CIR ordering Reyes to pay the estate tax amounting to 19M. CTA ratiocinated that there can only be a perfected and consummated compromise of the estate’s tax liability[,] if the NEB has approved [Reyes’s] application for compromise in accordance with RR No. 6-2000, as implemented by RMO No. 42-2000.

CA – Partly granted petition. SC – Affirmed, petition w/o merit.

ISSUE:  WON whether the assessment against the estate is valid; and, second, whether the compromise entered into is also valid.

HELD: No. Under the present provisions of the Tax Code and pursuant to elementary due process, taxpayers must be informed in writing of the law and the facts upon which a tax assessment is based; otherwise, the assessment is void. Being invalid, the assessment cannot in turn be used as a basis for the perfection of a tax compromise. This was clear and mandatory under Section 228.

Reyes was not informed in writing of the law and the facts on which the assessment of estate taxes had been made. She was merely notified of the findings by the CIR, who had simply relied upon the provisions of former Section 229¹³ prior to its amendment by Republic Act (RA) No. 8424, otherwise known as the Tax Reform Act of 1997.

To be simply informed in writing of the investigation being conducted and of the recommendation for the assessment of the estate taxes due is nothing but a perfunctory discharge of the tax function of correctly assessing a taxpayer. The act cannot be taken to mean that Reyes already knew the law and the facts on which the assessment was based. It does not at all conform to the compulsory requirement under Section 228. Moreover, the Letter of Authority received by respondent on March 14, 1997 was for the sheer purpose of investigation and was not even the requisite notice under the law.

Validity of Compromise. It would be premature for this Court to declare that the compromise on the estate tax liability has been perfected and consummated, considering the earlier determination that the assessment against the estate was void. Nothing has been settled or finalized. Under Section 204(A) of the Tax Code, where the basic tax involved exceeds one million pesos or the settlement offered is less than the prescribed minimum rates, the compromise shall be subject to the approval of the NEB composed of the petitioner and four deputy commissioners.  Finally, as correctly held by the appellate court, this provision applies to all compromises, whether government-initiated or not. Ubi lex non distinguit, nec nos distinguere debemos. Where the law does not distinguish, we should not distinguish.

The Blogger


Hi! I'm a law student from Manila, Philippines.  I did Political Science, then Industrial Relations major in H.R. (postgrad) studies from UP.  I vlog, weightlift, experiment with new makeup looks, try Bollywood and bellydance steps, and rant about my cray life in my YouTube channel.  Once in a blue moon, I create content for another YT channel,  10+ blogs,  20+ FB pages and in HubPages.  Check out my official site.