Source: http://lawlibrary.chanrobles.com/index.php?option=com_content&view=article&id=83951:58789&catid=1590&Itemid=566
Timestamp: 2019-04-19 22:14:35+00:00

Document:
G.R. No. 187589, December 03, 2014 - COMMISSIONER OF INTERNAL REVENUE, Petitioner, v. THE STANLEY WORKS SALES (PHILS.), INCORPORATED, Respondent.
COMMISSIONER OF INTERNAL REVENUE, Petitioner, v. THE STANLEY WORKS SALES (PHILS.), INCORPORATED, Respondent.
This is a Petition for Review on Certiorari1 filed by the Commissioner of Internal Revenue (petitioner) under Rule 45 of the 1997 Rules of Civil Procedure assailing the Court of Tax Appeals En Banc (CTA En Banc) Decision2 dated 27 February 2009 and Resolution3 dated 24 April 2009 in C.T.A. EB No. 406.
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 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.
IN VIEW WHEREOF, this Office resolves, as it hereby resolves, to DENY the request for reconsideration of STANLEY WORK SALES (Philippines), INC. dated May 19, 1993 of Assessment No. 002523-89-6014 dated April 12, 1993 issued by this Bureau demanding payment of the total amount of Php41,284,968.34 as deficiency income tax for taxable year 1989. Consequently, Stanley Works Sales (Philippines), Inc. is hereby ordered to pay the above-stated amount plus interest that may have accrued thereon to the Collection Service, within thirty (30) days from receipt hereof, otherwise, collection will be effected through the summary remedies provided by law.
This constitutes the final decision of this Office on the matter.
After trial on the merits, the CTA First Division found that although the assessment was made within the prescribed period, the period within which petitioner may collect deficiency income taxes had already lapsed. Accordingly, the court cancelled Assessment Notice No. 002523-89-6014 dated 12 April 1993.
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.
Whether or not petitioner’s right to collect the deficiency income tax of respondent for taxable year 1989 has prescribed.
Petitioner mainly argues that in view of respondent’s execution of the Waiver of the statute of limitations, the period to collect the assessed deficiency income taxes has not yet prescribed.
The statute of limitations on the right to assess and collect a tax means that once the period established by law for the assessment and collection of taxes has lapsed, the government’s corresponding right to enforce that action is barred by provision of law.
Soon after the waiver is signed by the taxpayer, the Commissioner of Internal Revenue or the revenue official authorized by him, as hereinafter provided, shall sign the waiver indicating that the Bureau has accepted and agreed to the waiver. The date of such acceptance by the Bureau should be indicated. x x x.
5. The foregoing procedures shall be strictly followed. Any revenue official found not to have complied with this Order resulting in prescription of the right to assess/collect shall be administratively dealt with.
1. The waiver must be in the proper form prescribed by RMO 20-90. 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. In the case of a corporation, the waiver must be signed by any of its responsible officials. In case the authority is delegated by the taxpayer to a representative, such delegation should be in writing and duly notarized.
3. The waiver should 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. The date of such acceptance by the BIR should be indicated. However, before signing the waiver, the CIR or the revenue official authorized by him must make sure that the waiver is in the prescribed form, duly notarized, and executed by the taxpayer or his duly authorized representative.
5. Both the date of execution by the taxpayer and date of acceptance by the Bureau should be before the expiration of the period of prescription or before the lapse of the period agreed upon in case a subsequent agreement is executed.
In Philippine Journalist, Inc. v. Commissioner of Internal Revenue,12 the Court categorically stated that a Waiver must strictly conform to RMO No. 20-90. The mandatory nature of the requirements set forth in RMO No. 20-90, as ruled upon by this Court, was recognized by the BIR itself in the latter’s subsequent issuances, namely, Revenue Memorandum Circular (RMC) Nos. 6-200513 and 29-2012.14 Thus, the BIR cannot claim the benefits of extending the period to collect the deficiency tax as a consequence of the Waiver when, in truth it was the BIR’s inaction which is the proximate cause of the defects of the Waiver. The BIR has the burden of ensuring compliance with the requirements of RMO No. 20-90, as they have the burden of securing the right of the government to assess and collect tax deficiencies. This right would prescribe absent any showing of a valid extension of the period set by the law.
Although we recognize that the power of taxation is deemed inherent in order to support the government, tax provisions are not all about raising revenue. Our legislature has provided safeguards and remedies beneficial to both the taxpayer, to protect against abuse; and the government, to promptly act for the availability and recovery of revenues. A statute of limitations on the assessment and collection of internal revenue taxes was adopted to serve a purpose that would benefit both the taxpayer and the government.
Anent the second issue, we do not agree with petitioner that respondent is now barred from setting up the defense of prescription by arguing that the repeated requests and positive acts of the latter constituted estoppels, as these were attempts to persuade the CIR to delay the collection of respondent’s deficiency income tax.
True, respondent filed a Protest and asked for a reconsideration and cancellation of the assessment on 19 May 1993; however, it is uncontested that petitioner failed to act on that Protest until 29 November 2001, when the latter required the submission of other supporting documents. In fact, the Protest was denied only on 22 March 2004.
Petitioner’s reliance on CIR v. Suyoc17 (Suyoc) is likewise misplaced. In Suyoc, the BIR was induced to extend the collection of tax through repeated requests for extension to pay and for reinvestigation, which were all denied by the Collector. Contrarily, herein respondent filed only one Protest over the assessment, and petitioner denied it 10 years after. The subsequent letters of respondent cannot be construed as inducements to extend the period of limitation, since the letters were intended to urge petitioner to act on the Protest, and not to persuade the latter to delay the actual collection.
Since the Waiver in this case is defective and therefore invalid, it produces no effect; thus, the prescriptive period for collecting deficiency income tax for taxable year 1989 was never suspended or tolled. Consequently, the right to enforce collection based on Assessment Notice No. 002523-89-6014 has already prescribed.
WHEREFORE, premises considered, the Petition is DENIED.
Leonardo-De Castro, Bersamin, Perez, and Perlas-Bernabe, JJ., concur.
2 Id. at 30-49; penned by Associate Justice Erlinda P. Uy and concurred in by then Presiding Justice Ernesto D. Acosta, Associate Justices Juanito C. Castañeda Jr., Lovell R. Bautista, Caesar A. Casanova, and Olga Palanca-Enriquez.
4 https://docs.google.com/viewer?url=http://cta.judiciary.gov.ph/home/download/b44b105b6015df0060c08414b6532e67 (visited 14 May 2014), penned by Associate Justice Lovell R. Bautista and concurred in by then Presiding Justice Ernesto D. Acosta and Associate Justice Caesar A. Casanova.
6Rollo, pp. 16-17; Petition for Review on Certiorari, pp. 9-10.
8 510 Phil. 1 (2005).
10 SUBJECT: Proper Execution of the Waiver of the Statute of Limitations under the National Internal Revenue Code.
11CIR v. Kudos Metal Corporation, G.R. No. 178087, 5 May 2010, 620 SCRA 232, 243-244, citing Philippine Journalists, Inc. v. Commissioner of Internal Revenue, 488 Phil. 218, 235 (2004).
12 488 Phil. 218 (2004).
13 SUBJECT: Salient Features of Supreme Court Decision on Waiver of the Statute of Limitations under the Tax Code, issued on 2 February 2005.
14 SUBJECT: Waiver of the Defense of Prescription under the Statute of Limitations, issued on 29 June 2012.
15BPI v. CIR, supra note 8.
16Republic of the Philippines v. Ablaza, 108 Phil. 1105,1108 (1960).
17 104 Phil 819 (1958).
20Philippine Journalist, Inc. v. Commissioner of Internal Revenue, supra note 12.

References: v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v.