Bank of the Philippine Islands v. Commissioner of Internal Revenue
REITERATIONFacts
The Antecedents: The Bureau of Internal Revenue (BIR) issued Assessment No. FAS-5-85-89-000988 to Bank of the Philippine Islands (BPI), as successor-in-interest of Citytrust Banking Corporation, for deficiency Documentary Stamp Tax (DST) for the taxable year 1985, amounting to P1,259,884.50. The assessment was based on BPI's sales of foreign bills of exchange to the Central Bank. Procedural History: BPI protested the assessment, arguing that DST should be for the buyer's account, that BIR Ruling No. 135-87 exempted tax-exempt entities and the other party from DST liability before January 1, 1986, and that the assessment was a double taxation. The Commissioner of Internal Revenue (CIR) denied the protest. BPI filed a petition for review with the Court of Tax Appeals (CTA), which ruled in favor of BPI, ordering the cancellation of the assessment. The CIR appealed to the Court of Appeals (CA), which reversed the CTA decision and reinstated the assessment. BPI then filed a petition for review with the Supreme Court. The Petition: BPI assailed the CA decision, arguing that the BIR had no right to collect the assessed DST due to prescription. The Supreme Court, in a resolution, noted that the statute of limitations on collection might have expired and required comments from both parties.
Issue(s)
Whether the BIR has a right to collect the assessed DST from BPI. Whether the protest letter filed by BPI suspended the prescriptive period for the collection of the assessed DST.
Ruling
The Supreme Court granted the petition, reversed the Court of Appeals decision, and ordered the cancellation of Assessment No. FAS-5-85-89-000988. The Court ruled that the BIR's right to collect the assessed DST had prescribed.
Ratio Decidendi
On whether the BIR has a right to collect the assessed DST from BPI: The Court held that the BIR's right to collect the assessed DST had prescribed. Under Section 319(c) [now, 222(c)] of the National Internal Revenue Code (NIRC) of 1977, as amended, internal revenue taxes assessed within the period of limitation may be collected by distraint, levy, or court proceeding within three years following the assessment. The three-year period begins to run from the date the assessment notice was released, mailed, or sent to the taxpayer. In this case, the assessment notice was received by BPI on June 16, 1989. Counting the three-year prescriptive period from this date, the BIR had until June 15, 1992, to collect the assessed DST. However, no warrant of distraint or levy was served, nor were any judicial proceedings initiated by the BIR within this period. The earliest attempt by the BIR to collect was its answer filed in the CTA on February 23, 1999, which was well beyond the three-year prescriptive period. Therefore, prescription had set in to bar the collection of the assessed DST. On whether the protest letter filed by BPI suspended the prescriptive period for the collection of the assessed DST: The Court ruled that BPI's protest letter did not suspend the prescriptive period. The Court distinguished between a request for reconsideration and a request for reinvestigation. A request for reconsideration, which involves a re-evaluation of an assessment based on existing records without new evidence, does not suspend the prescriptive period. A request for reinvestigation, which involves the presentation of newly discovered or additional evidence, can suspend the period, but only if granted by the Commissioner. The Court found that BPI's protest letter essentially raised questions of law and did not offer new evidence, thus constituting a request for reconsideration. Even if considered a request for reinvestigation, the records did not show that the BIR granted such request; in fact, the BIR itself referred to BPI's protest as a request for reconsideration. Consequently, the filing of the protest letter did not suspend the running of the statute of limitations on collection.
Main Doctrine
The filing of a protest letter that merely raises questions of law or requests a re-evaluation of the assessment based on existing records, without offering new evidence, constitutes a request for reconsideration and does not suspend the running of the prescriptive period for the collection of taxes. Furthermore, even if considered a request for reinvestigation, the prescriptive period is only suspended if the request is granted by the Commissioner of Internal Revenue.