TAX REMEDIES RE: Follow-up Letter reiterating demand for

payment considered Notice of Assessment

Assessment and Collection
REPUB LIC OF THE PHI LIPP INES v. COURTOF
Assessment precedes collection except
APPEALS, and NIELSON & COMPANY, INC
when the unpaid tax is a tax due per return as in the
case of a self-assessed income tax under the pay-  Under Section 7 of R.A. 1125, the assessment is
as-you file system in which case the collection may appealable to the Court of Tax Appeals within
be instituted without need of assessment. thirty (30) days from receipt of the letter. The
taxpayer's failure to appeal in due time, as in the
case at bar, makes the assessment in question
Payment of Tax – At the time you receive your tax final, executory and demandable. Thus, private
return respondent is now barred from disputing the
correctness of the assessment or from invoking
Payment by Installment – can only be payed twice
any defense that would reopen the question of
If it exceed 2000, you have the option to pay its liability on the merits.
in full or by installment.
Assessment Deemed Made
Content of Assessment  An assessment is deemed made only when the
a. Computation of tax liability/ies collector of internal revenue releases, mails or
b. Notice of demand for payment sends such notice to the taxpayer.

Note: Meaning of BEST EVIDENCE

- In the absence of 1 content of assessment, it
becomes VOID. - includes the corporate and accounting records
- In order for it to be valid, it should be addressed of the taxpayer who is the subject of the
to the taxpayer. It must be served and received assessment process,
by the taxpayer. - the accounting records of other taxpayers
engaged in the same line of business, including
their gross profit and net profit sales.
- Such evidence also includes data, record,
In cases where assessment is necessary, the
paper, document or any evidence gathered by
primordial consideration is its final and unappealable
internal revenue officers from other taxpayers
nature. Collectibility of the tax liability attaches only
who had personal transactions or from whom
when the assessment becomes final and
the subject taxpayer received any income; and
unappealable.
record, data, document and information
secured from
An assessment contains not only a
computation of tax liabilities but also a demand for
RE: Existing Revenue Procedures and
payment within a prescribed period. It also signals
Jurisprudence Governing Assessment Based on
the time when penalties and interests begin to
the Best Evidence Obtainable
accrue against the taxpayer. To enable the taxpayer
to determine his remedies thereon, due process
requires that it must be served on and received by  Even an assessment based on estimates prima
taxpayer .(CIR vs PASCOR 309 402) facie valid and lawful where it does not appear to
have been arrived at arbitrarily or capriciously.
The burden of proof is upon the complaining
ASSESSMENT, defined party to show clearly that the assessment is
erroneous.
- An assessment is a written notice and demand
made by the BIR on the taxpayer for the
However, the best evidence obtainable does not
settlement of a due tax liability that is there
include mere photocopies of records/documents.
definitely set and fixed.
The BIR, in making a preliminary and final tax
deficiency assessment against a taxpayer, cannot
anchor the assessment on mere machine copies of
ATLAS CONSOLIDATED MINING AND
records/documents.
DEVELOPMENT CORPORATION v. COURT OF
APPEALS, COMMISSIONER OF INTERNAL
REVENUE AND COURT OF TAX APPEALS
RE: Assessment Based on Estimate: 50% Rule,
RULING: It is an elementary rule that in the absence In the Absence of Receipts to Prove Actual
of proof of any irregularities in the performance of Amount of Expense Deduction
official duties, an assessment will not be disturbed.
Verily, failure to present proof of error in assessment  If there is showing that expenses have been
will justify judicial affirmance of said assessment. incurred but the exact amount thereof cannot be
ascertained due to absence of documentary
 evidence, it is the duty of the BIR to make an intact and unaltered and not to dispose of the same
estimate of deduction that may be allowable in in any manner whatever without the express
computing the taxpayer's taxable income authority of the Commissioner.
bearing heavily against the taxpayer whose
inexactitude is of his own making. That
disallowance of 50% of the taxpayer's claimed In case the taxpayer or the person having the
deduction is valid. possession and control of the property sought to be
placed under constructive distraint refuses or fails to
sign the receipt referred to, the revenue officer
REMEDIES FOR COLLECTION OF DELINQUENT effecting the constructive distraint shall proceed to
TAXES prepare a list of such property and, in the presence
 On the part of the Government of two (2) witnesses, leave a copy thereof in the
 On the part of the Taxpayers premises where the property distrained is located,
after which the said property shall be deemed to
have been placed under constructive distraint.
GOVERNMENT REMEDIES
Actual distraint, upon the other hand, is resorted to
1. Distraint of personal property and Levy upon upon the failure of the person owing any delinquent
real property tax or delinquent revenue to pay the same at the time
2. Civil or Criminal Action required.
3. Compromise
4. Tax Lien
5. Forfeiture PROCEDURE FOR ACTUAL DISTRAINT
6. Civil Penalties Sec. 208. Procedure for Distraint and
Garnishment. — The officer serving the warrant of
distraint: The officer serving the warrant of distraint
1. DISTRAINT AND LEVY shall make or cause to be made an account of the
goods, chattels, effects or other personal property
- DISTRAINT is a remedy whereby the collection distrained, a copy of which, signed by himself, shall
of the tax is enforced on the goods, chattels, or be left either with the owner or person from whose
effects of the taxpayer including other personal possession such goods, chattels, or effects or other
property of whatever character as well as personal property were taken, or at the dwelling or
stocks and other securities, debts, credits, bank place of business of such person and with someone
accounts, and interest in and rights to personal of suitable age and discretion, to which list shall be
property. On the other hand, LEVY refers to the added a statement of the sum demanded and note
seizure of real properties and interest in or of the time and place of sale.
rights to such properties for the satisfaction of
taxes due from the delinquent taxpayer. Levy Stocks and other securities shall be
can be made before, simultaneously, or after distrained by serving a copy of the warrant of
the distraint of personal property. distraint upon the taxpayer and upon the president,
manager, treasurer or other responsible officer of the
Actual and Constructive Distraint. corporation, company or association, which is sued
the said stocks or securities.
To safeguard the interest of the Government,
may place under constructive distraint the property Debts and credits shall be distrained by
of a delinquent taxpayer or any taxpayer who, in his leaving with the person owing the debts or having in
opinion, is: his possession or under his control such credits, or
with his agent, a copy of the warrant of distraint. The
1. retiring from any business subject to the tax; warrant of distraint shall be sufficient authority to the
2. intending to leave the Philippines or to remove person owning the debts or having in his possession
his property therefrom or to hide or conceal his or under his control any credits belonging to the
property; taxpayer to pay to the Commissioner the amount of
3. intending to perform any act tending to obstruct such debts or credits.
the proceedings for collecting the tax due or
which may be due from him. Bank accounts shall be garnished by
serving a warrant of garnishment upon the taxpayer
and upon the president, manager, treasurer or other
Constructive Distraint: How Effected
responsible officer of the bank. Upon receipt of the
The constructive distraint of personal warrant of garnishment, the bank shall turn over to
property shall be effected by requiring the taxpayer the Commissioner so much of the bank accounts as
or any person having possession or control of such may be sufficient to satisfy the claim of the
property to sign a receipt covering the property Government.
distrained and obligate himself to preserve the same
 Sec. 209. Sale of Property Distrained and Sec. 212. Purchase by Government at
Disposition of Proceeds. — The Revenue District Sale Upon Distraint. — When the amount bid for
Officer or his duly authorized representative, other the property under distraint is not equal to the
than the officer referred to in Section 208 of this amount of the tax or is very much less than the actual
Code shall, according to rules and regulations mark et value of the articles offered for sale, the
prescribed by the Secretary of Finance, upon Commissioner or his deputy may purchase the same
recommendation of the Commissioner, forthwith in behalf of the National Government for the amount
cause a notification to be exhibited in not less than of taxes, penalties and costs due thereon.
two (2) public places in the municipality or city where
the distraint is made specifying the time and place of Property so purchased may be resold by the
sale and the articles Commissioner or his deputy, subject to the rules and
distrained. The time sale shall not be less than regulations prescribed by the Secretary of Finance,
twenty (20) days after notice to the owner or the net proceeds therefrom shall be remitted to the
possessor of the property as above specified and the National Treasury and accounted for as internal
publication or posting of such notice. One place for revenue.
the posting of such notice shall be at the Office of the
Mayor of the city or municipality in which the property COLLECTOR OF INTERNAL REV ENUE v.
is distrained. ROBERTA FLORES VDA DE CODINERA
WENCESLAO CODINERA, PIO CODINERA AND
COURT OF TAX APPEALS
At the time and place fixed in such notice the
said revenue officer shall sell all the goods, chattels,
- Property levied upon by the order of a
or effects, or other personal property, including
competent court may, with the consent thereof,
stocks and other securities so distrained, at public
be subsequently distrained, subject to the prior
auction, to the highest bidder for cash, or with the
lien of the attachment creditor.
approval of the commissioner, through duly licensed
- It does not impair such rights as the
commodity or stock exchanges.
Government may have for the collection of
taxes.
In the case of stocks and other securities, the
officer making the sale shall execute a bill of sale
PROCEDURE ON LEVY OF REAL PROPERTY
which he shall deliver to the buyer, and the copy
thereof furnished the corporation, company or
Sec. 207(B). Levy on Real Property. —
association which issued the stocks or other
After the expiration of the time required to pay the
securities. Upon receipt of the copy of the bill of sale,
delinquent tax or delinquent revenue as prescribed
the corporation, company or association shall make
in this Section, real property may be levied upon,
the corresponding entry in its books, transfer the
before, simultaneously, or after the distraint of
stocks or other securities sold in the name of the
personal property belonging to the delinquent. To his
buyer, and issue, if required to do so, the
end, any internal revenue officer designated by the
corresponding certificates of stock or other
Commissioner or his duly authorized representative
securities.
shall prepare a duly authenticated certificate
showing the name of the taxpayer and the amounts
Any residue over and above what is required of the tax and penalty due from him. Said certificate
to pay the entire claim, including expenses, shall be shall operate with the force of a legal execution
returned to the owner of the property sold. The throughout the Philippines.
expenses chargeable upon each seizure and sale
shall embrace only of seizure and preservation of the Levy shall be effected by writing upon said
property pending the sale, and no charge shall be certificate
imposed for the services of the local internal revenue a description of the property upon which levy is
officer or his deputy. made. At the same time, written notice of the levy
shall be mailed to or served upon the Register of
Sec. 210. Release of Distrained Propety Deeds of the province or the city where the property
Upon Payment Prior to Sale. — If at any time prior is located and upon the delinquent taxpayer, or if he
to the consummation of the sale all proper charges be absent from the Philippines, to his agent or the
are paid to the officer conducting the sale, the goods manager of the business in respect to which the
or effects distrained shall be restored to the owner. liability arose, or if there be none, to the occupant of
the property in question.
Sec. 211. Report Sale to Bureau of Internal
Revenue. - Within two (2) days after the sale, the Sec. 213. Advertisement and Sale. —
officer making the same shall make a report of his Within twenty (20) days after the levy, the officer
proceedings in writing to the Commissioner and shall conducting the proceedings shall proceed to
himself preserve a copy of such report as an official advertise the property or a usable portion thereof as
record. may be necessary to satisfy the claim and cost of
sale; and such advertisement shall cover a period of
at least thirty (30) days. It shall be effectuated by 2. CIVIL ACTION
posting a notice at the main entrance of the
municipal building or city hall and in a public and A civil action is resorted to when a tax liability
conspicuous place in the barrio or district in which becomes collectible, that is, the assessment
the real estate lies and by publication once a week becomes final and unappealable, or the decision of
for three (3) consecutive weeks in a newspaper of the Commissioner has become final, executory, and
general circulation in the municipality or city where Demandable. This occurs when:
the property is located.
(1) A tax is assessed and the taxpayer fails to file
Within five (5) days after the sale, a return by an administrative protest by filing a request for
the distraining or levying officer shall be entered reconsideration or reinvestigation within thirty
upon the records of the Revenue Collection Officer, (30) from receipt of the assessment (Sec. 228,,
the Revenue District Officer and the Regional NIRC)
Director. (2) A protest against the assessment is filed by the
taxpayer but the Commissioner's decision
Sec. 214. Redemption of Property Sold. — denying in whole or in part the said protest, was
Within one (1) year from the date of sale, the not appealedt o the Court of Tax Appeals within
delinquent taxpayer, or any one for him, shall have thirty (30) days from receipt of such decision.
the right of paying to the Revenue District Officer the
amount of the public taxes, penalties and interest
thereon from the date of delinquency to the date of A proceeding in court after the collection of tax
sale, together with interest on said purchase price at may be begun without assessment
the rate fifteen percent (15%) per annum from the
date of purchase to the date of redemption, and such The law is clear. When fraudulent tax returns
payment shall entitle the person paying to the are involved a proceeding in court after the collection
delivery of the certificate issued to the purchaser and of such tax may be begun without assessment.
a certificate from the said Revenue District Officer
that he has thus redeemed the property, and the Arguably, the gross disparity in the taxes due
Revenue District Officer shall forthwith pay over to and the amounts actually declared by the private
the purchaser the amount by which such property respondents constitutes badges of fraud.
has thus been redeemed, and said property
thereafter shall be free from the lien of such taxes In this seminal case, this Court ruled that
and penalties. there was no need for precise computation and
formal assessment in order for criminal complaints
NOTE: No redemption in Distraint. to be filed against him.

An assessment of a deficiency is not

BASILIA CABRERA v. THE PROVINCIAL necessary to a criminal prosecution for willful
TREASURER OF TAYABAS AND PEDRO J. attempt to defeat and evade the income tax.
CATIGBAC
It should be noted that a civil action for tax
RE: Defect of Notice. Notice was sent on December collection filed with the regular courts cannot be
15, 1940 at 9 a.m. and every day thereafter… instituted without the approval of the Commissioner.
(Sec. 220, NIRC )But in one case, it was held that
HELD: We are of the opinion that this mandatory the approval by the Commissioner of Internal
equirement was not satisfied in the present case, Revenue of a civil action for the collection of taxes is
because the announcement that the sale would take not jurisdictional, but one relating to capacity to sue
place on December 15, 2940 and everyday or the cause of action only.
thereafter, is as general and indefinite as a notice for
the sale "within this or next year" or "sometime within As amended by R.A. 8424, the NIRC is now
the month of December." even more categorical. Section 7 of the present
Code authorizes the BIR Commissioner to delegate
ANTONIA VALENCIA y ORUS v. JU AN JIMENEZ the powers vested in him under the pertinent
y MIJARES AND GABRIEL FUSTER y FUSTER provisions of the Code to any subordinate official
with the rank equivalent to a division chief or higher,
RE: (1) error in the name of the owner in the except the following:
assessment; and (2) defect in the description of the
property. a. The power to recommend the promulgation of
rules and regulations by the Secretary of
HELD: The most vital requisite of an assessment Finance;
that the property shall be so described as to be easily b. The power to issue rulings of first impression
identified both by the owner and by the persons or to reverse, revoke or modify any existing
desiring to bid therefore. ruling of the Bureau;
 c. The power to compromise or abate under CRIMINAL ACTION
Section 204 (A) and (B) of this Code, any tax
deficiency: Provided, however ,that Like in the institution of civil action for
assessments issued by the Regional Offices collection, a criminal action cannot be instituted
involving basic deficiency taxes of 500,000 or without the approval of the Commissioner of Internal
less, and minor criminal violations as may be Revenue.
determined by rules and regulations to be
promulgated by the Secretary of Finance, The remedy of criminal action is resorted to
upon the recommendation of the not only for collection of taxes but also for
Commissioner, discovered by regional and enforcement of statutory penalties of all sorts.
district officials, may be compromised by a
regional evaluation board which shall be Hence, the extinction of one's criminal
composed of the Regional Director as liability does not necessarily result in the
Chairman, the Assistant Regional Director, extinguishment of his civil liability…
heads of the Legal, Assessment and
Collection Divisions and the Revenue District The situation under x x x the tax law is the
Officer having jurisdiction over the taxpayer, exact opposite. Civil liability to pay taxes arises from
as members; and the fact, for instance, that one has engaged himself
d. The power to assign or re-assign internal in business, and not because of any criminal act
revenue officers to establishments where committed by him. The criminal liability arises upon
articles subject to excise tax are produced or failure of the debtor to satisfy his civil obligation. The
kept. incongruity of the factual premises and foundation
principles of the two cases is one of the reasons for
Note: In letters a-d, only the commissioner can do not imposing civil indemnity on the criminal infraction
so. It cannot be delegated. of the tax law. (Republic v. Patanao, 20 SCRA 712)

PROCEDURE 3. COMPROMISE

The procedural steps in protesting an A compromise is an agreement between two or

assessment may be outlined as follows: more persons who, to avoid a lawsuit, amicably
settle their differences on such terms as they can
(1) Issuance of a pre-assessment notice by the agree on.
BIR informing the taxpayer that taxes ought to
be assessed against him, except under the Compromise penalties are paid in lieu of criminal
circumstans enumerated in paragraphs [a] to prosecution, and cannot be imposed in the absence
[e] of Section 228. The taxpayer is given fifteen of a showing that the taxpayer consented thereto.
(15) days from receipt of the pre-assessment
notice, extendible for not more than ten (10) Cases Which May Be Compromised. The
days, within which to respond to the pre- following cases upon taxpayer's
assessment notice.
(2) If the taxpayer fails to respond, or despite the 1. Delinquent accounts;
response, the BIR still opines that the taxpayer 2. Cases under administrative protest after
ought to be assessed for deficiency taxes, the issuance of the final assessment notice to the
BIR will issue the assessment notice. taxpayer which are still pending in the Regional
(3) The taxpayer may file an administrative protest Offices, Revenue District Offices, Legal
against the assessment within thirty (30) days Service, Large Taxpayer Service (LTS), etc.
from receipt of the assessment. Within sixty 3. Civil tax cases being disputed before the
(60) days from filing the protest, all the relevant courts, e.g., MTC, RTC, CTA, CA, SC;
documents should be submitted; otherwise, the 4. Collection cases filed in courts;
assessment shall become final and 5. Criminal violations other than those already
unappealable. filed in court or those involving criminal tax
(4) From the receipt of the adverse decision of the fraud; and
Commissioner, or from the lapse of the one 6. Cases covered by pre-assessment notices but
hundred eighty (180) days from the submission taxpayer is not agreeable to the findings of the
of the documents, the taxpayer may appeal to audit office as confirmed by the review office.
the Court of Tax Appeals within thirty (30) days;
otherwise, the decision or the assessment shall
become final. The Commissioner may compromise any
internal
revenue tax when:
1. A reasonable doubt as to the validity of the
claim against the taxpayer exists; or
 2. The financial position of the taxpayer this Code or rules and regulations on the date
demonstrates a clear inability to pay the prescribed; or
assessed tax. (2) Unless otherwise authorized by the
Commissioner, filing a return with an internal
NOTE: revenue officer other than those with whom
the return is required to be filed; or
The power to compromise is vested in the (3) Failure to pay the deficiency tax within the
Commissioner of Internal Revenue. This power is time prescribed for its payment in the notice
discretionary and once exercised by the of assessment; or
Commissioner cannot be reviewed or interfered with (4) Failure to pay the full or part of the amount of
by the courts. tax shown on any return required to be filed
under the provisions of this Code or rules and
When may violations tax laws/cases be regulations, or the full amount of tax due for
compromised. — In criminal violations, the which no return is required to be filed, on or
compromise must be made prior to the filing of the before the date prescribed for its payment.
information in court.
NO INJUNCTION TO RESTRAIN TAX
4. TAX LIENS COLLECTION

A tax lien is a legal claim or charge on property Reason: Lifeblood Doctrine

(whether real or personal) established by law as a
sort of security for the payment of tax obligations. GR: An injunction is not available to restrain
collection of tax. No court shall have the authority to
"Sec. 219. any person, corporation, partnership, grant an injunction to restrain the collection of any
joint account (cuentas en participation), association national internal revenue tax, fee, or charge imposed
or insurance company liable to pay any internal by the NIRC. (Sec. 218)
revenue tax, neglects or refuses to pay the same
after demand, the amount shall be a lien in favor of XPN: when the decision of the Commissioner is
the Government of the Philippines from the time pending appeal before the Court of Tax the said
when the assessment was made by the court may enjoin the collection of taxes if such
Commissioner until paid, with interests, penalties, collection will jeopardize the interest of the
and costs that may accrue in addition thereto upon government the taxpayer.
all property and rights to property belonging to the
taxpayer: Provided, That his lien shall not be valid
against any mortgagee, purchaser or judgment
creditor until notice of such lien shall be filed by the
Commissioner in the office of the Register of Deeds
of the province or city where the property of the
taxpayer is situated or located.

5. FORFEITURE

The forfeiture of chattels and removable fixtures

of any sort shall be enforced by the seizure and sale,
or destruction, of the specific forfeited property. The
forfeiture of real property shall be enforced by a
judgment of condemnation and sale in a legal action
or proceeding, civil or criminal, as the case may
require. (Sec. 224, NIRC)

6. CIVIL PENALTIES

"Sec. 248. Civil Penalties. -

(A) There shall he imposed, in addition to the
tax required to he paid, a penalty equivalent to
twenty-five percent (25%) the amount due in the
following cases:

(1) Failure to file any return and pay the tax due
thereon as required under the provisions of