Republic of the Philippines, represented by the Bureau of Internal Revenue vs. First Gas Power Corporation,
G.R. No. 214933, February 15, 2022
Facts:
1. On October 24, 2002, First Gas received a Letter of Authority from the petitioner authorizing the BIR representative to examine the book of accounts and other accounting records of First Gas for all revenue taxes for the taxable years 2000 and 2001.
2. On September 30, 2003, First Gas received a Notice to Taxpayer from petitioner requesting it to appear for an informal conference on October 15, 2003.
3. Thereafter, on March 11, 2004, First Gas received Preliminary Assessment Notices dated December 15, 2003 and January 28, 2004, wherein it was assessed for deficiency taxes and penalties for the taxable years 2000 and 2001.
4. On April 6, 2004, First Gas filed its Preliminary Reply to the PAN.
5. Then on September 6, 2004, it received Final Assessment Notices and Formal Letters of Demand all dated July 19, 2004, wherein it was assessed for deficiency taxes and penalties for the taxable years 2000 and 2001.
6. Meanwhile, the record shows that First Gas, represented by Nestor H. Vasay, and the BIR, represented by Celia C. King executed three (3) Waivers of the Defense of Prescription under the Statue of Limitations.
7. On October 5, 2004, First Gas filed a Letter of Protest before respondent which was not acted upon
8. Thus, on June 30, 2005, it filed a Petition for Review before the CTA to assail the FAN and Formal Letters of Demand, all dated July 19, 2004.
9. In a Decision the CTA Third Division granted the petition of First Gas and cancelled the FAN and Formal Letters of Demand.
Issues:
· Whether or not the issuance of FAN and the Formal Letter of Demand for taxable year 2000 has already prescribed
· Whether or not the waivers are valid
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Ruling:
FIRST ISSUE
Yes. The Supreme Court held that The period of limitation in the assessment and collection of taxes is governed by Section 203 of the National Internal Revenue Code (NIRC) which states that the internal revenue taxes shall be assessed within three (3) years after the last day prescribed by law for the filing of the return.
Meanwhile, Section 222(b) of the NIRC authorizes the extension of the original three-year prescriptive period upon the execution of a valid waiver between the taxpayer and the BIR, provided: (1) the agreement was made before the expiration of the three-year period, and (2) the guidelines in the proper execution of the waiver are strictly followed.
In this case, the records show that respondent filed two (2) Income Tax Returns (ITR) for taxable year 2000. The first ITR was filed on October 16, 2000 for the fiscal year ending on June 30, 2000, and the second ITR was filed on April 16, 2001 for the calendar year ending on December 31, 2000. According to respondent, this was due to the change in its accounting period from fiscal year to calendar year. Thus, in accordance with Section 203 of the NIRC, petitioner had until October 16, 2003 and April 16, 2004 within which to assess respondent for deficiency income tax for taxable year 2000.
SECOND ISSUE
As shown above, the Waivers appear to have extended the period to assess respondent for taxable year 2000 until October 15, 2004. However, the Waivers are defective because the date of acceptance by petitioner is not indicated therein.
RMO 20-90 and RDAO 05-01 clearly mandate that the date of acceptance by the BIR should be indicated in the waiver. In the case of Commissioner of Internal Revenue v. Standard Chartered Bank, this Court ruled that the provisions of the RMO and RDAO are mandatory and require strict compliance, hence, the failure to comply with any of the requisites renders a waiver defective and ineffectual.
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