Commissioner of Internal Revenue v. Bank of the Philippine Islands
REITERATIONFacts
The Antecedents: The underlying dispute concerns a deficiency income tax assessment for taxable year 1986 against Citytrust Banking Corporation (CBC). CBC filed its Annual Income Tax Returns on April 15, 1987. Subsequently, CBC executed waivers of the statute of limitations on August 11, 1989, July 12, 1990, and November 8, 1990. The Commissioner of Internal Revenue (CIR) issued a pre-assessment notice on March 7, 1991, followed by assessment notices on May 6, 1991, demanding payment of deficiency taxes. CBC protested these assessments. Negotiations for a compromise settlement under Revenue Memorandum Order (RMO) No. 45-93 ensued, with CBC offering various amounts, and the CIR initially approving a higher amount before ultimately disapproving the compromise. Procedural History: Following the merger of CBC with Bank of the Philippine Islands (BPI), with BPI as the surviving corporation, the CIR issued a Notice of Denial on May 26, 2011, and a subsequent letter on July 28, 2011, demanding payment of CBC's deficiency income tax for 1986, plus increments. This led to the issuance of a Warrant of Distraint and/or Levy on September 21, 2011, against BPI. BPI filed a Petition for Review with the Court of Tax Appeals (CTA) on October 7, 2011. The CTA Special Third Division granted BPI's petition, cancelling the warrant. The CIR's motion for reconsideration was denied, and the CTA En Banc affirmed the Special Third Division's decision, subsequently denying the CIR's motion for reconsideration. The Petition: The Commissioner of Internal Revenue filed a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Civil Procedure, assailing the decision and resolution of the CTA En Banc. The petitioner argues that the CTA En Banc erred in affirming the exercise of jurisdiction over the case, contending that BPI failed to contest the assessments within the prescribed period and is estopped from raising the defense of prescription. The petitioner also argues that the CTA En Banc erred in affirming the annulment of the warrant of distraint and/or levy, asserting the CIR's clear right to it. The respondent, BPI, counters that the assessment is not final and executory, the CTA has jurisdiction, and the right to assess and collect the tax has prescribed. BPI also asserts it is not liable for the deficiency tax.
Issue(s)
Whether the CTA erred in affirming its exercise of jurisdiction over the controversy. Whether the CTA erred in affirming the annulment of the warrant of distraint and/or levy against respondent.
Ruling
The petition is denied for lack of merit. The Decision dated September 16, 2015 and the Resolution dated April 21, 2016 of the Court of Tax Appeals En Banc in CTA EB No. 1173 (CTA CASE No. 8350) are affirmed.
Ratio Decidendi
On the CTA's Jurisdiction: The CTA did not err in ruling that it has jurisdiction over cases asking for the cancellation and withdrawal of a warrant of distraint and/or levy, as provided under Section 7 of Republic Act No. 9282. This section grants the CTA exclusive appellate jurisdiction to review various matters arising under the National Internal Revenue Code or other laws administered by the Bureau of Internal Revenue, including situations where inaction by the Commissioner is deemed a denial. The nature of the petition, which sought to nullify the warrant of distraint and/or levy, falls within the broad scope of "other matter arising under the National Internal Revenue Code or other laws administered by the Bureau of Internal Revenue." Therefore, the CTA properly exercised its jurisdiction over the instant controversy. On the Annulment of the Warrant of Distraint and/or Levy: The CTA correctly ruled that the assessment and collection of taxes were made beyond the prescriptive periods. The assessment notices were issued on May 6, 1991, which is beyond the three-year period from April 15, 1987, when CBC filed its income tax returns. The CIR failed to prove that a valid assessment notice was sent and received by CBC within the prescriptive period. The CIR's admission that there was no proof of mailing or receipt of the alleged Final Assessment Notice further weakens its claim. Moreover, the Waivers of the Statute of Limitations executed by CBC were found to be invalid for not complying with the prescribed form pursuant to RMO No. 20-90. The doctrine of estoppel cannot be invoked by the CIR to cure its failure to follow the proper procedure for executing waivers, as this would give validity to an act prohibited by law or against public policy. Consequently, the right of the CIR to assess and collect the deficiency tax had prescribed, rendering the Warrant of Distraint and/or Levy void.
Main Doctrine
The Court of Tax Appeals has jurisdiction over petitions for cancellation and withdrawal of a warrant of distraint and/or levy. Assessments and collections of taxes must be made in accordance with law, and failure to prove receipt of assessment notices or to comply with prescribed procedures for waivers renders the assessment void and unenforceable.