Commissioner of Internal Revenue v. Bank of the Philippine Islands
REITERATIONFacts
The Antecedents: The Commissioner of Internal Revenue (CIR) sent Assessment Notices to Citytrust Banking Corporation (Citytrust) for deficiency internal revenue taxes for 1986, amounting to P20,865,320.29. These assessments followed Citytrust's execution of three Waivers of the Statute of Limitations. Citytrust protested the assessments. Subsequently, Citytrust and Bank of the Philippine Islands (BPI) merged, with BPI as the surviving corporation. The CIR issued a Notice of Denial regarding Citytrust's application for compromise settlement of the deficiency income tax (IT) portion. The CIR then issued a Warrant of Distraint and/or Levy on September 21, 2011, against BPI to collect the deficiency IT. BPI questioned this warrant before the CTA, which cancelled it. The CIR appealed to the Supreme Court (G.R. No. 224327), which upheld the cancellation, finding that the CIR failed to prove receipt of a February 5, 1992 letter and that the waivers were flawed, leading to prescription of the CIR's right to assess. Separately, on November 4, 2011, BPI received another Warrant of Distraint and/or Levy (November 2011 Warrant) for deficiency Expanded Withholding Tax (EWT), Withholding Tax on Deposit Substitutes (WTD), Real Estate Dealer's Fixed Tax (DFT), and Withholding Tax on Compensation (WTC) assessments amounting to P1,624,930.32. BPI assailed this warrant before the CTA, seeking its suspension, cancellation, and enjoining of its implementation, and also prayed for the declaration of the assessments as prescribed. Procedural History: The Court of Tax Appeals (CTA) Third Division cancelled and set aside the November 2011 Warrant of Distraint and/or Levy. The CTA Division ruled that it had jurisdiction, that the assessment notices were issued beyond the three-year prescriptive period for EWT, WTD, and WTC, but within the 10-year period for DFT. It also found that the prescriptive periods were not suspended and that two of the three waivers were invalid for not conforming to RMO No. 20-90. Furthermore, it ruled that the CIR's right to collect the assessed taxes via distraint and/or levy had prescribed by 2011. The CTA En Banc affirmed the CTA Division's ruling. The CIR appealed to the Supreme Court. The Petition: The Commissioner of Internal Revenue (CIR) filed a Petition for Review on Certiorari assailing the CTA En Banc's Decision and Resolution, which affirmed the cancellation of the Warrant of Distraint and/or Levy dated October 27, 2011, issued against Bank of the Philippine Islands (BPI).
Issue(s)
Did the CTA have jurisdiction over BPI's Second CTA Petition? Did the CIR timely issue assessments against Citytrust for deficiency EWT, WTD, DFT, and WTC pertaining to the taxable year 1986? May the CIR still collect the unpaid taxes?
Ruling
The petition is DENIED. The Decision dated March 17, 2016 and the Resolution dated September 1, 2016 of the Court of Tax Appeals En Banc in CTA EB No. 1204 (CTA Case No. 8376) are AFFIRMED.
Ratio Decidendi
On the CTA's Jurisdiction: The Court held that the CTA properly exercised its jurisdiction over BPI's petition. The petition primarily questioned the CIR's right to assess and collect taxes through the issuance of a warrant of distraint and/or levy, which falls under the CTA's appellate jurisdiction to review "other matters" arising from tax laws administered by the Bureau of Internal Revenue (BIR). The CIR's argument that a February 5, 1992 letter was a "final decision" and that BPI's appeal was filed out of time was rejected, as there was no proof of Citytrust's receipt of the letter, and the letter was irrelevant to the issue of the warrant's propriety. The Court emphasized that the CTA's disposition was for the cancellation of the warrant, not the assessment itself. On the Timeliness of Assessments: The Court affirmed the findings of the CTA that the CIR's right to assess the subject taxes had prescribed. The Court reiterated that waivers of the statute of limitations must comply with prescribed forms and that the absence of the CIR's signature on one waiver rendered it invalid. The CTA En Banc found that the waiver dated August 11, 1989, was not valid as the CIR did not sign it. Consequently, the assessments for EWT, WTD, and WTC were issued beyond the three-year prescriptive period. While the assessment for DFT was issued within the 10-year period for which no return was filed, the subsequent collection efforts were found to be time-barred. On the Collectability of Taxes: The Court ruled that the BIR may no longer collect the alleged deficiency taxes due to prescription. The three-year prescriptive period to collect assessed taxes via summary administrative processes, such as distraint and/or levy, commences from the date the assessment notice is released, mailed, or sent to the taxpayer. In this case, the latest possible date the CIR could have released the assessment was May 30, 1991, when Citytrust protested. This gave the CIR until May 30, 1994, to collect. The issuance of the November 2011 Warrant was 20 years after the assessment, clearly beyond the prescriptive period. Even the filing of the CIR's answer in the CTA in 2011 was considered belated for judicial collection.
Main Doctrine
The Court of Tax Appeals (CTA) properly exercised its jurisdiction over a petition assailing a warrant of distraint and/or levy, as it falls under 'other matters' arising from tax laws. Furthermore, the Commissioner of Internal Revenue's right to assess and collect taxes may prescribe if not exercised within the statutory periods, even if waivers of the statute of limitations are involved, especially if such waivers are found to be invalid.