The auction sale of real property for the collection of delinquent taxes is in personam, not in rem. Publication of the auction sale does not suffice considering that tax sales are in personam. It is incumbent upon the city treasure tot sent notice directly to the owner in order to protect the interest of the latter. Although preceded by proper publication and advertisement, it is still void absent the actual notice to the taxpayer. CIR vs. Tulio Facts: On Feb. 28, 1991, the CIR assessed Mr. Tulio, who was engaged in the construction business, for the payment of deficiency percentage taxes in the amount of P188, 585.76 and P245, 669.53 for the taxable years of 1986 and 1987. Mr. Tulio failed to act on the said assessment notices making it final and excutory. On several occasions, notices were sent to Mr. Tulio to settle his deficiency tax liabilities. Sue tot eh lack of action by the respondent the case for collection was brought to the RTC with emphasis that the latter has jurisdiction not the CTA. The case was dismissed in favor of Mr. Tulio due to prescription of action. CIR appealed the case. Issue: Whether or not the civil case on money claims may be dismissed on the ground of prescription? Held: The lower court erroneously applied Sec 203 of the Code, the 3 years prescription from the date of filing the tax return with the BIR after assessment. The failure of Mr. Tulio to file the return is not covered by the Sec 203, but Sec 223 which provides for 10 year prescriptive period. Sec 223 specifies 3 instances wherein 3 year period does not apply. 1) filing false return, 2) filing fraudulent return with intent to evade tax and 3) failure to file return. The period within which to assess tax is 10 years from the discovery of the fraud, falsification, or omission. CIR vs. PNB Facts: PNB paid in advance the amount of Php 180 Million to BIR for the purpose of future tax obligation. The said act was pursuant to the Pres/ Cory’s call to generate revenue for national development. PNB wrote to BIR requesting the issuance of Tax Credit Certificate (TCC) based o the said amount. In 1991 inclusive of the advance payment PNB paid in additional income tax due for the 1 st and 2nd quarter of 1991. All in all the credits amounting Php 7 3.2 Million was never used due to the losses it suffered in the years 1992 to 1996. In 1997 the PNB again wrote to BIR for the issuance OF the TCC, the request was forwarded to the Office of the Deputy Comm. for Legal and Inspection Group. PNB sought reconsideration not to take jurisdiction because it is limited to hear tax cases involving illegal and erroneous taxes where there are questions of fact and does not claim for refund on advanced payments .
BIR denied the claim for refund due to prescription because it was field beyond 2 years from filing. CTA affirmed the ruling of the CIR. The CA annulled and set aside the decision of the CTA and remanded it back to CIR for further study. Issue: Whether or not the claim for tax credit is barred by the 2 years prescription? Held: The Court ruled that the advance payments made by PBN is not classified as illegally or erroneously paid taxes. The prescriptive period of 2 years applies only to illegally or erroneously paid taxes. Citing the case of CIR vs. PHILAM Life the absent any provision in the TAX Code and special Article 1444 of the Civi code would apply, specifically 10 years. It would thus indeed, be unfair, as the CA correctly observed, to leave respondent PNB to suffer losing millions of pesos advanced by it for future tax liabilities. The cut becomes all the more painful when it is considered that PNB’s failure to apply the balance of such advance income tax payment from 1992 to 1996 was, to repeat, due to business downturn experienced by the bank so that it incurred no tax liability for the period. Oceanic Wireless Network vs. CIR Facts: On March 17, 1988 BIR sent a deficiency tax assessment for the year 1984 for the amount of P8.645 Million. Petitioner filed a protest and requested reconsideration or cancellation of the same. In reply the BIR Accounts Receivable and Billing Division, acting in behalf of the BIR Comm., requested Oceanic to pay the amount within ten days from the receipt thereof otherwise the case would be referred to the Collection Enforcement Division. Upon failure to pay, the Assistant Comm. Issued a warrant of distrant and/or levy and garnishment served to petitioner on Oct. 1999. Nov. 1991 Oceanic filed a petition for Review with the CTA to contest the issuance of the warrant. The CTA dismissed the case for lack of jurisdiction in the Sept. 1994 decision, declaring that the said petition was filed beyond the 30 day period from the time the letter from the BIR Accounts Receivables and Billing Division was received by the petitioner. Further the issuance of the warrants was not barred by prescription. Due to the filing of the protest which was given due course by the BIR the running of prescription was suspended. Oceanic filed a motion for reconsideration arguing that the demand letter cannot be considered as final because it was signed by a subordinate officer. The motion was denied and the case as elevated to the CA. Issue: Whether or not the a demand letter for tax delinquency assessment issued and signed by a subordinate officer acting in behalf of the CIR is deemed final and executory. Held: A demand letter for payment of the delinquent tax may be considered a decision on a disputed assessment. The demand letter is deemed final basing on the tenor of the letter to
the taxpayer. The reiteration of the BIR’s former position which is to pay the tax liability after the request from the tax payer indicates that latter’s request was denied. The powers of the CIR may be delegated subject to a few exemptions, which are: •
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Power to recommend the promulgation of rules and regulation by the Sec of Finance Power to issue rulings of first impression or to reverse, revoke or modify any existing rulings of the BIR Power to compromise or abate Power to assign or re-assign internal revenue officers to establishment where articles subject to excise tax are produced or kept.
The act of the subordinate officer does not fall under the exemption. Thus the assessment had become final and executory. PHILAM Asset vs. CIR Facts: Petitioner is a domestic corporation duly organized and existing under the laws of the Philippines. It acts as the investment manager of Philippine Fund, Inc. (PFI) and PHILAM Bond Fund Inc. (PBFI), which are open-end investment companies in the sale of their shares of stocks and in the investment of the proceeds of the sale into diversified portfolio of debt and equity securities. Petitioner being an investment manager it provides a management and technical services to PFI and PBFI. Likewise it provides takes charge of the both companies sale of shares to prospective investors. It is agreed that between the companies and the petitioner that latter be pay by way of compensation and the former is allowed to withhold 5% of the management fee as equivalent creditable tax. Petitioner filed its annual income tax return for 1997 with a net loss of 2.6 Million pesos. It failed to utilize the tax credit withheld by the PBFI ad PFI. Petitioner filed an administrative claim for refund with the BIR on the unutilized excess tax credit for 1997. However the BIR did not act on the petitioner’s claim for refund. Case was filed with the CTA in 1999. On 1999 PHILAM Asset again filed its annual income tax return with the BIR for the taxable year 1998 declaring a loss of Php 1.5 Million. Another amount withheld by the companies for 1998 was claimed as unutilized creditable tax. The cases for refund were denied by the CTA. The CA’s decision reasoned out that the ITRs did not indicate its option whether to refund or to carry over the amount withheld to the succeeding year. Further saying that a corporation must indicate its option, if not indicated the amount would still remain in the account of the taxpayer until utilized in the succeeding year. Issue: Whether or not the petitioner is entitled for a refund of its creditable taxes withheld for the years 1997 and 1998? Held: Sec 76 of the NIRC provides that a corporation with excess quarterly income tax payments may apply for either tax refund or tax credit, but not both. Failure to indicate the choice will
not bar a valid request for a refund. The requirement for indicating the choice is merely for the purpose facilitating tax collection. A The Code requires that the choice to be made in writing and made know to the BIR two years from the payment of the taxes erroneously made. The Court declared that as regards the refund for 1997 must be allowed, but as to the 1998 refund should not be allowed. Subsequent acts of the petitioner indicate that it had chosen the carry-over option. The Code provides that once the option of carry-over was chosen it would be irrevocable .
