Coverage emphasis supplied).

1. Letter of Authority NOTE: Prior to the issuance of the PAN, the taxpayer
A. LETTER OF AUTHORITY (LA) may be allowed to make voluntary payments of probable
deficiency taxes and penalties (RMO 11-2014).
It is an official document that authorizes a revenue
officer to examine and scrutinize a taxpayer’s books of Requirements of a valid PAN
accounts and other accounting records, in order to 1. In writing; and
2. Should inform the taxpayer of the law and the facts on
determine the taxpayer’s correct internal revenue tax
which the assessment is made (Sec. 228, NIRC)
liabilities (Sec. 13, NIRC).
The sending of PAN to taxpayer to inform him of the
There must be a grant of authority before any revenue assessment made is but part of the “due process
officer can conduct an examination or assessment and requirement in the issuance of a deficiency tax
the revenue officer must not go beyond authority. assessment,” the absence of which renders nugatory any
Otherwise, the assessment or examination is a nullity. assessment made by the tax authorities. Therefore, for
its failure to send the PAN stating the facts and the law
A Letter of Authority should cover a taxable period not on which the assessment was made as required by the
exceeding one taxable year. The practice of issuing LAs law, the assessment made by CIR is void (CIR v. Metro
covering audit of “unverified prior years” is therefore Star Suprema, Inc., G.R. No. 185371, December 8, 2010).
prohibited (CIR v. Sony Philippines, Inc., G.R. No. 178697,
November 17, 2010). Exceptions to issuance of PAN
GR: There must be a PAN issued by the BIR before
Cases which need not be covered by a valid LA: issuing a Formal Letter of Demand (FLD)/ Final
1. Cases involving civil or criminal tax fraud which fall Assessment Notice (FAN).
under the jurisdiction of the tax fraud division of the XPN: PAN is not required in the following instances:
Enforcement Services; and [MEDEC]
2. Policy cases under audit by the Special Teams in the
National Office (RMO 36-99). 1. When the finding for any deficiency tax is the result of
Mathematical error in the computation of the tax
Service of Letter of Authority appearing on the face of the tax return filed by the
It must be served to the taxpayer within 30 days from its taxpayer; or
date of issuance; otherwise, it shall become null and 2. When the Excise tax due on excisable articles has not
void. The taxpayer shall then have the right to refuse the been paid; or
3. When a Discrepancy has been determined between
service of this LA, unless the LA is revalidated.
the tax withheld and the amount actually remitted by the
withholding agent; or
a. Who issues the same- national or 4. When an article locally purchased or imported by an
regional Exempt person, such as, but not limited to, vehicles,
capital equipment, machineries and spare parts, has
b. If it can be revalidated been sold, traded or transferred to non-exempt persons
(Sec. 228, NIRC); or
Q: How is LA revalidated? How often can it be 5. When a taxpayer who opted to claim a refund or tax
revalidated? credit of excess creditable withholding tax for a taxable
A: Revalidated through the issuance of a new LA. It can period was determined to have Carried over and
be revalidated: automatically applied the same amount claimed against
- only once, if issued by the Regional Director; the estimated tax liabilities for the taxable quarter or
- twice, if issued by the CIR. quarters of the succeeding taxable year (Sec. 3.1.2, R.R.
No. 18-2013).
The suspended LA(s) must be attached to the new issued
LA (RMO 38-88). In the above-cited cases, a FLD/FAN shall be issued
outright. (2002 BAR)
2. Diff. Between Fund for final notice and Q: In the investigation of the withholding tax returns
pre- assessment notice. of AZ Medina Security Agency (AZ) for the taxable
years 1997 and 1998, a discrepancy between the
(B) PRELIMINARY ASSESSMENT NOTICE(PAN) taxes withheld from its employees and the amounts
If after review and evaluation by the Commissioner or actually remitted to the government was found.
his duly authorized representative, as the case may be, it Accordingly, before the period of prescription
is determined that there exists sufficient basis to assess
commenced to run, the BIR issued an assessment
the taxpayer for any deficiency tax or taxes, the said
Office shall issue to the taxpayer a PAN for the proposed and a demand letter calling for the immediate
assessment. It shall show in detail the facts and the law, payment of the deficiency withholding taxes in the
rules and regulations, or jurisprudence on which the total amount of P250,000.00. Counsel for AZ
proposed assessment is based (R.R. No. 18-2013, protested the assessment for being null and void on
the ground that no pre-assessment notice had been The CIR or his duly authorized representative may issue
issued. Is the contention of the counsel tenable? FLD/FAN:
(2002 Bar)
1. If there is no need to issue a PAN, because the
A: NO. The contention of the counsel is untenable. Sec. circumstances show that it fall within the exceptions for
228, NIRC expressly provides that no pre-assessment the issuance of PAN;
notice is required when a discrepancy has been 2. If the taxpayer is in default for failure to respond to a
determined between the tax withheld and the amount PAN within a period of 15 days from the receipt of PAN;
actually remitted by the withholding agent. Since the or
amount assessed relates to deficiency withholding taxes, 3. If the CIR or his duly authorized representative does
the BIR is correct in issuing the assessment and demand not agree with the justifications stated by the taxpayer in
letter calling for the immediate payment of the his reply to the PAN (Domondon, 2014).
deficiency withholding taxes.
Q: Mr. Tiaga has been a law-abiding citizen diligently The FLD/FAN calling for payment of the taxpayer's
paying his income taxes. On May 5, 2014, he was deficiency tax or taxes shall state the facts, the law, rules
surprised to receive an assessment notice from the and regulations, or jurisprudence on which the
BIR informing him of a deficiency tax assessment as a assessment is based; otherwise, the assessment shall be
void (R.R. No. 18-2013).
result of a mathematical error in the computation of his
income tax, as appearing on the face of his income tax The FAN and FLD should always go together. The law
return for the year 2011, which he filed on April 15, 2012. requires that the factual and/or legal bases of the
Mr. Tiaga believes that there was no such error in the assessment must be stated, and this requirement is not
computation of his income tax for the year 2011. Based on satisfied by the issuance of FAN alone, a letter of demand
the assessment received by Mr. Tiaga, may he already file fills up the void and explains to the taxpayer how the
a protest thereon? (2014 Bar) deficiency assessment was arrived at, including the
reasons and legal bases for the assessment (Mamalateo,
A: YES. Mr. Tiaga may consider the assessment notice as 2014).
a final assessment notice and his right to protest within
30 days from receipt may now be exercised by him. Period to issue FLD/FAN
When the finding of a deficiency tax is the result of If the taxpayer, within 15 days from date of receipt of the
mathematical error in the computation of the tax PAN, responds that he/it disagrees with the findings of
appearing on the face of the return, a pre-assessment deficiency tax or taxes, an FLD/FAN shall be issued
notice shall not be required, hence, the assessment within 15 days from filing/submission of the taxpayer’s
notice is a final assessment notice (Sec. 228, NIRC; RR No. response, calling for payment of the taxpayer's
18-2013). deficiency tax liability, inclusive of the applicable
penalties (R.R. No. 18-2013, emphasis supplied)
(C) REPLY TO PAN
NOTE: An FLD/FAN issued beyond 15 days from
Period for the taxpayer to respond to PAN via
“Reply” filing/submission of the taxpayer’s response to the PAN
The taxpayer has 15 days from receipt of PAN to file a shall be valid, provided that, it is issued within the period of
written reply contesting the proposed assessment. limitation to assess internal revenue taxes. The non-
Effect of taxpayer’s failure to respond to PAN observance of the 15-day period, however, shall constitute
The taxpayer shall be considered in default, in which
an administrative infraction and the revenue officers who
case, a FLD/FAN shall be issued calling for payment of
caused the delay shall be subject to administrative
the taxpayer's deficiency tax liability, inclusive of the
sanctions as provided for by law and pertinent revenue
applicable penalties (Par. 2, Sec. 3.1.1, R.R. No. 18-2013).
issuances (RMO 11-2014).
For the purpose of contesting in writing the findings
contained in a PAN, the regulations use the term “reply” NOTE: Upon receipt of the PAN, taxpayer has 15 days to
to distinguish the written objections against a FAN reply. Failure to do so, shall cause the issuance of the
issued by the BIR, where the generic term “protest” or FLD/FAN. Issuance of FAN/FLD without waiting for the 15-
the specific term “request for reconsideration” or day period to reply to PAN is a violation of due process.
“request for reinvestigation” is utilized. (CIR vs. Next Mobile, Inc., CTA EB Case No. 1419,
The failure to file a reply to PAN will not bar the taxpayer
November 21, 2016)
from protesting the FAN because PAN is not the final
assessment which can be protested as contemplated Q: Who issues the FAN?
under the NIRC.
A: It shall be issued by the Commissioner or his duly
(D) FORMAL LETTER OF DEMAND AND FINAL
authorized representative.
ASSESSMENT NOTICE (FLD/FAN)
Issuance of FLD/FAN
Q: In what form shall the FAN be and what should it with the CTA. The BIR filed a motion to dismiss on the
contain? ground that the taxpayer failed to exhaust administrative
remedies by filing a protest on the assessment. Should the
A: motion be granted?
1. In writing; and
2. Shall state the facts, the law, rules and regulations, or A: NO. This case is an exception to the rule on exhaustion
jurisprudence on which the assessment is based,
of administrative remedies, i.e., estoppel on the part of BIR.
otherwise, the FAN shall be void (Sec. 228, NIRC; Sec.
3.1.3, R.R. No. 18-2013) The taxpayer cannot be blamed for not filing a protest
against the FAN since the language used and the tenor of
NOTE: If the FAN is deemed insufficient insofar as the demand letter indicate that it is the final decision of the
compliance with Section 228 of the NIRC is concerned, such CIR on the matter. The CIR must indicate, in a clear and
insufficiency can be cured, if the FLD can show the legal and unequivocal language, whether its action on a disputed
factual bases relied upon in the issuance of the assessment assessment constitutes its final determination thereon in
which the FAN failed to detail. order for the taxpayer concerned to determine when his or
her right to appeal to the tax court accrues. Thus, the CIR is
Q: What does the phrase “in writing” under Sec. 228
now estopped from claiming that it did not intend the FAN
mean?
A: It does not exclusively mean written words. “Writing” to be a final decision (Allied Banking Corp. v. CIR, G.R. No.
consists of letters, word, numbers, or their equivalent, 175097, February 5, 2010).
set down by handwriting, typewriting, printing,
photostating, photographing, magnetic impulse, NOTE: An FLD/FAN issued reiterating the immediate
mechanical or electronic recording, or other form of data payment of deficiency taxes and penalties previously made
compilation. Indubitably, figures are also “writings” and in the PAN is a denial of the response to the PAN. A final
if the numerical presentation is understandable enough,
demand letter for payment of delinquent taxes may be
then there is no reason why it should be automatically
rejected as inadequate compliance with the law (Sevilla, considered a decision on a disputed assess ment. This
v. CIR, CTA Case 6211, October 4, 2004). includes a disputed PAN. So long as the parties are given
Q: Is substantial compliance of the notice the opportunity to explain their side, the requirements of
requirement under Section 228 of the NIRC allowed? due process are satisfactorily complied with (RMO 11-
2014).
A: YES. The notice requirement under Section 228 of the
NIRC is substantially complied with whenever the
taxpayer had been fully informed in writing of the factual
3. Effectivity of letter of authority
and legal bases of the deficiency taxes assessment, which 4. Period within which revenue officer will
enabled the latter to file an effective protest. conduct the audit and submit the
In the case of Samar I Electric Cooperative v. CIR, the
Court held that although the FAN and demand letter required investigation
were not accompanied by a written explanation of the
legal and factual bases of the assessed deficiency taxes, Tax audit
the records showed that CIR responded to taxpayer’s This includes the examination of books of accounts and
letter-protest, explaining at length the factual and legal other accounting records of the taxpayers by revenue
bases of the deficiency tax assessments and denying the officers to determine the correct tax liability
protest. (Mamalateo, 2014).
Considering the foregoing exchange of correspondence
and documents between the parties, the requirement of Period within which an RO should conduct an audit
A revenue officer is allowed only 120 days to conduct the
Section 228 was substantially complied with. Respondent
audit and submit the required report of
had fully informed petitioner in writing of the factual and
legal bases of the deficiency taxes assessment, which investigation from the date of receipt of a LA by the
enabled the latter to file an “effective” protest. Taxpayer’s taxpayer. If the RO is unable to submit his final report of
right to due process was thus not violated (Samar Electric investigation within the 120-day period, he must then
Corp v. CIR, G.R. No. 193100, December 10, 2014). submit a Progress Report to his Head of Office, and
surrender the LA for revalidation.
Q: Taxpayer duly protested a PAN it received from the
Q: How many times can a taxpayer be subjected to
BIR. Subsequently, the BIR issued a FAN to the taxpayer.
examination and inspection for the same taxable
The demand letter states: “This is our final decision based year?
on investigation. If you disagree, you may appeal the final A: GR: Only once per taxable year
decision within 30 days from receipt hereof, otherwise
said deficiency tax assessment shall become final, XPN: [FRC3]
1. When the CIR determines that Fraud, irregularities, or
executory and demandable.” Instead of filing a protest on
mistakes were committed by the taxpayer
the assessment, the taxpayer filed a petition for review
2. When the taxpayer himself requests for the Re-
investigation or re-examination of his books of accounts The legislature may adopt any reasonable method for the
and it was granted by the commissioner effective enforcement of the collection of taxes, subject
3. When there is a need to verify the taxpayer’s to:
Compliance with withholding and other internal revenue 1. The right of the person to notice; and
taxes as prescribed in a Revenue Memorandum Order 2. The opportunity to be heard.
issued by the Commissioner
4. When the taxpayer’s Capital gains tax liabilities must Requisites
be verified GR: Collection is only allowed when there is already a
5. When the Commissioner chooses to exercise his final assessment made for the determination of the tax
power to obtain information relative to the examination due.
of other taxpayers (Secs. 5 and 235, NIRC). XPN: Judicial action to collect the tax liability is
permitted even without an assessment when the
taxpayer:
1. Files a false or fraudulent return with intent to evade
Q: In 2010, pursuant to a LA issued by the Regional the tax, or
Director, Mr. Abcede was assessed deficiency income 2. Fails to file a return.
taxes by the BIR for the year 2009. He paid the
deficiency. In 2011, Mr. Abcede received another LA In the above cases, collection must be done within 10
for the same year 2009, this time from the National years after the discovery of falsity, fraud, or omission.
Investigation Division, on the ground that Mr. However, once an assessment is made against the
Abcede's 2009 return was fraudulent. Mr. Abcede taxpayer, the government cannot avail of the 10-year
contested the LA on the ground that he can only be period in Section 222(A). If the assessment is made, then
investigated once in a taxable year. Decide. (2013 the period to collect is five years from the assessment
Bar) and not 10 years (Ingles, 2015).
A: Mr. Abcede’s contention is not correct. While the The power to impose taxes is clothed with the implied
general rule is to the effect that for income tax purposes, authority to devise ways and means to accomplish
a taxpayer must be subject to examination and collection in the most effective manner. Without this
inspection by the internal revenue officers only once in a implied power, the ends of government may fail (CIR v.
taxable year, this will not apply if there is fraud, Pineda, G.R. No. L-22734, September 15, 1967).
irregularity or mistakes as determined by the
Commissioner. In the instant case, what triggered the In sum, as a rule, the government can only file a
second examination is the findings by the BIR that Mr. proceeding in court to collect once the assessment has
Abcede’s 2009 return was fraudulent, accordingly, the become final and unappealable.
examination is legally justified (Sec. 235, NIRC).
Assessments are deemed final when:
Principle of estoppel 1. The taxpayer failed to file a protest 30 days from
receipt of the assessment
The error made by a tax official in the assessment of his tax 2. After the 180-day period and the CIR has not yet acted
liabilities does not have the effect of relieving the taxpayer on the protest, the taxpayer fails to appeal it
from the obligation to pay the full amount of his tax 3. After 30 days from the receipt of the decision of the
liability, for taxes are fixed by law and the government is CIR the taxpayer fails to appeal
never estopped to collect the legitimate taxes because of
Collectibility of tax liability arises in the following
errors committed by its agents (Commissioner v. Atlas instances:
Consolidated Mining Co., 102 SCRA 246). 1. Self-assessed tax shown in the return was not paid
within the date prescribed by law
5. Notice of informal conference
- Internal revenue taxes are self-assessing and no further
Notice of Informal Conference assessment by the government is required to create the
Presently, there is no requirement for the issuance of a tax liability. The taxpayer is immediately considered as
Notice for Informal Conference. R.R. 18-2013 deleted delinquent with respect to the unpaid amount of tax;
such requirement. 2. When final assessment is not protested
administratively within 30 days from the date of receipt;
6. Assessment period-period to assess a 3. Failure to question assessment served upon the
decedent’s heirs (Marcos II v. Court of Appeals, 273 SCRA
tax payer by any revenue officer 47);
7. If there is fraud, period assessment 4. Non-compliance with the condition laid in the
8. COLLECTION approval of protest - construed as if no protest was filed;
The government is given two ways to collect: 5. Failure to file a timely appeal to the CTA on the final
1. Summary or administrative remedies, and decision of the Commissioner or his authorized
2. Judicial remedies representative on the disputed assessment.
 a. Comply with audit and investigation requirements to
NOTE: Refer to “Protesting an assessment” under present his books of accounts and/or pertinent records,
Taxpayer’s Remedies for complete discussion on finality or
of assessment. b. Substantiate all or any of the deductions, exemptions
or credits claimed in his return (Sec. 3 (1)(a), R.R. 30-
Prescriptive periods 2002).
GR: The prescriptive period to collect taxes due is five
years from the date of assessment. NOTE: This is issued when the revenue officer
XPNs: finds himself without enough time to conduct an
1. False or fraudulent return with with intent to evade appropriate or thorough examination in view of
the tax: within 10 years from discovery without need of
the impending expiration of the prescriptive
assessment
2. Failure or omission to file return: within 10 years from period for assessment. To prevent the issuance
discovery without need of assessment of a jeopardy assessment, the taxpayer may be
3. Waiver in writing executed before the the five-year required to execute a waiver of the statute of
period expires: period agreed upon limitations.

NIRC v. Civil Code v. Rules of Court PRESCRIPTIVE PERIOD FOR ASSESSMENT

The prescriptive period to assess or collect deficiency tax Basic rules on prescription
is governed by NIRC (a special law) and not the Civil 1. When the tax law itself is silent on prescription, the tax
Code (a general law). The same can be said between is imprescriptible;
NIRC and the Rules of Court. Hence, claims for taxes may 2. When no return is required, tax is imprescriptible and
be collected even after the distribution of the decedent’s tax may be assessed at any time as the prescriptive
estatae. Claims for estate taxes are exempted from the periods provided in Sec. 203 and 222, NIRC are not
application of the statute of non-claims (Ingles, 2015, applicable. Remedy of the taxpayer is to file a return for
citing several cases). the prescriptive period to commence.

9. Diff. Between false return, fraudulent NOTE: Limitation on the right of the government to
assess and collect taxes will not be presumed in the
return and non-filing of return absence of a clear legislation to the contrary.
3. Prescription is a matter of defense, and it must be
REGULAR RETURN FALSE, proved or established by the taxpayer relying upon it.
WAS MADE FRAUDULENT, OR It is incumbent upon a taxpayer who wants to avail of
FAILURE TO FILE A the defense of prescription to prove that he indeed
RETURN submitted a return. If he fails to do so, the conclusion
Collection with prior assessment should be that no such return was filed, in which the
Collection should be Same Government has 10 years within which to make the
made within 5 years corresponding assessments (Taligaman Lumber Co., Inc.,
from the date of v. CIR, G.R. No. L-15716, March 31, 1962).
assessment, either 4. Defense of prescription is waivable, such defense is
by: not jurisdictional and must be raised seasonably,
1. Summary otherwise it is deemed waived.
proceedings; or 5. Being a remedial measure, it should be interpreted
2. Judicial liberally in order to protect the taxpayer.
proceedings (Sec.222 6. If the last day of the period falls on a Saturday, a
[c], NIRC) Sunday or a legal holiday in the place where the Court
sits, the time shall not run until the next working day
Collection without prior assessment (Sec. 1, Rule 22, ROC).
Collection is within 10 years from discovery,
of the falsity, fraud or omission to file a 3 important prescriptive periods:
return. 1. Period to assess tax
Limited to purely judicial remedies (Section 2. Period to collect tax
222[A]). 3. Period to file a criminal action (Mamalateo, 2014).
10. Jeopardy assessment and network
method of assessment 11. Customs code:
JEOPARDY ASSESSMENT a. Seizure cases-When is it deemed
A delinquency tax assessment made without the benefit prima facie frAud in customs?
of a complete or partial investigation by an authorized
i. Underdeclaration
revenue officer who has a reason to believe that the
assessment and collection of a deficiency tax will be ii. Undervaluation
jeopardized by delay caused by the taxpayer’s failure to: iii. Misdeclaration
iv. Misclassification
MISDECLARATION, MISCLASSIFICATION AND who willfully participated in the fraudulent act (Sec.
UNDERVALUATION 1400, CMTA).
Misdeclaration
Wrong declaration as to quantity, quality, description, Q: A shipment from Thailand arrived in Manila. The
weight, or measurement of the goods (Sec. 120, CMTA). shipment was consigned to Al-Mer Cargo
Management. Al-Mer Cargo filed an Informal Import
Misclassification
Declaration and Entry (IIDE) and Permit to Deliver
Insufficient or wrong description of the goods or use of
through its broker, Consular Cargo Services owned
wrong tariff heading resulting to a discrepancy in duty
by Sefia, describing the items in the shipment as
and tax to be paid between what is legally determined
''personal effects, assorted men’s and ladies’ wearing
upon assessment and what is declared (Ibid.).
apparel, textile and accessories." However, customs
Undervaluation agents found the shipment to contain general
There is undervaluation when: merchandise in commercial quantities instead of
1. Declared value fails to disclose in full the price actually personal effects of no commercial value. The
paid or payable or any dutiable adjustment to the price shipment was seized. Is Al-Mer Cargo criminally
actually paid or payable; or liable for declaring the items as “personal effects,
assorted men’s and ladies’ wearing apparel, textile
2. When an incorrect valuation method is used or the
valuation rules are not properly observed, resulting in a and accessories”, and not as a general merchandise”
discrepancy in duty and tax to be paid between what is
legally determined as the correct value against the A: NO. Under the TCCPP, the false and fraudulent invoice
declared value (Ibid.). and declaration must be made so as to pay less than the
amount legally due to the Government, to its damage and
Imposition of Surcharges: prejudice. Unless there is a clear showing, and it is proven
1. Misdeclaration and Misclassification: beyond reasonable doubt that underdeclaration or
a. Subject to a surcharge equivalent to 250% of the duty
misdeclaration made by the broker was made either in
and tax due
b. No surcharge shall be imposed when: conspiracy between them or the Prosecution sufficiently
established that the importer had knowledge of and
i. the discrepancy in duty is less than 10%, or actively participated in the underdeclaration or
ii. the declared tariff heading is rejected in a formal misdeclaration, Al-Cargo cannot be held criminally liable for
customs dispute settlement process involving difficult or the misdeclaration since it cannot be proven that there was
highly technical question of tariff classification,
intent to pay less than what is legally due to the
iii. or when the tariff classification declaration relied on
an official government ruling Government (Mercado v. People, G.R. No. 167510, July 8,
2015).
2. Undervaluation:
a. A surcharge shall be imposed equivalent to 250% of 12. Acquittal of payer of criminal action is
the duty and tax due shall be imposed when the
undervaluation is established without the need to go
not exoneration to civil liability to pay
through the formal dispute settlement process; taxes
b. No surcharge shall be imposed when:
Q: Does the acquittal in criminal charge in
i. the discrepancy in duly is less than 10%, or seizure or forfeiture proceedings operate as res
ii. the declared value is rejected as a result of an official judicata?
ruling or decision under the customs dispute settlement A: NO, for the following reasons:
process involving difficult or highly technical question 1. Criminal proceedings are actions in personam
relating to the application of customs valuation rules. while seizure or forfeiture proceedings are
A discrepancy in duty and tax to be paid between what is actions in rem.
legally determined and what is declared amounting to 2. Customs compromise does not extinguish
more than 30% shall constitute a prima facie evidence of criminal liability (People v. Desiderio, G.R. No. L-
fraud. 208005, Nov. 26, 1965).

When the misdeclaration, misclassification or 13. Levy, Distraint, Lien, Remedies of Tax
undervaluation is intentional or fraudulent, such as
when a false or altered document is submitted or when
Collector
false statements or information are knowingly made, a Government Remedies
surcharge shall be imposed equivalent to 500% of the A. Administrative
duty and tax due and that the goods shall be subject 1. Enforcement of Tax lien (Sec. 405, CMTA)
to seizure regardless of the amount of the 2. Compromise/reduction of customs duties (Sec. 1131,
discrepancy without prejudice to the application of CMTA)
fines or penalties provided under Section 1401 of this 3. Seizure and forfeiture (Sec. 1113, CMTA)
Act against the importer and other person or persons
4. Distraint of goods, chattels, or effects, and other 1. The policy of placing no unnecessary hindrance on the
personal property of whatever character, including government’s drive, not only to prevent smuggling and
stocks and other securities, debts, credits, bank accounts, other frauds upon Customs; but more importantly,
and interest in and rights to personal property, and by 2. To render effective and efficient the collection of import
levy upon real property and interest in rights to real and export duties due the State, which enables the
property (Sec. 1132(a), CMTA) government to carry out the functions it has been
5. Constructive distraint (Sec. 1133, CMTA) instituted to perform.
6. Summary Remedies (Sec. 1134, CMTA) NOTE: Warehouse does not become a dwelling house
a. Distraint of personal property merely by reason of the fact that a person employed as a
b. Levy of real property watchman lives in the place.

B. Judicial Q: Sometime in January 2015, a shipment of 150 packages

1. Civil action of imported goods and personal effects arrived and was
2. Criminal action (Sec. 1132(b), CMTA)
unloaded at the Port of Manila. After the amount of
P15,887.00 was paid by the consignee as custom duties,
Administrative/Extrajudicial Remedies
international revenue taxes, fees and other charges, the
Enforcement of Tax Lien packages were released from Manila Customs House. As
Tax lien attaches on the goods regardless of ownership the packages were being transported from the customs
while still in the custody of the Government and it is area to their destination, the truck carrying them was
availed of when the importation is neither prohibited
intercepted at TM Kalaw St, Ermita, Manila by WPD-PNP
nor improperly made.
The liability for duties, taxes, fees, and other charges personnel. In the formal communication, WPD-PNP
attached to importation constitutes a personal debt due informed the Collector of Customs that the packages were
and demandable against the importer in favor of the released from the customs zone without proper appraisal
government and shall be discharged only upon payment to the damage of the government and requested for the
of duties, taxes, fees and other charges. It also constitutes issuance of the necessary warrant of seizure. Seizure
a lien on the imported goods which may be enforced proceeding was then instituted and the Collector of
while such goods are under customs' custody. (Sec. 405, Customs issued a warrant of seizure and detention. During
CMTA) the process and while the goods were being removed by
the customs agents from the bodega where they were
Reduction of Customs Duties stored, the consignee filed a petition with the RTC of
Subject to the approval of the Secretary of Finance, the
Manila asking that the Collector of Customs and all his
COC may compromise any case arising under the CMTA
involving the imposition of fines and surcharges, agents be restrained from enforcing the warrant aforesaid
including those arising from the conduct of a post and from proceeding with the trial of seizure proceeding
clearance audit, unless otherwise specified by law. (Sec. and the said warrant be declared void since the Collector
1131, CMTA). no longer has jurisdiction to issue the same considering
Cases involving forfeiture proceedings shall however not
that the customs duties and the taxes had already been
be subject to any compromise.
paid and the goods had left the control and jurisdiction of
Administrative Fine and forfeitures the BOC.
Administrative fine and forfeiture available only when
the importation is unlawful and may be exercised when a. Did the Collector of Customs have jurisdiction to
the articles are no longer under the custody of BOC issue the warrant of seizure and detention?
b. Did the payment of customs duties, taxes, etc.
unless the importation is merely attempted in which
render illegal and improper the issuance of said
case it may be effected only while the goods are still warrant?
within the jurisdiction of the BOC or in the hands of the c. Has the Regional Trial Court jurisdiction to hear
person who is aware thereof. and decide the civil case? (1991 Bar)

Doctrine of Primary Jurisdiction of the BOC a. YES, because the importation has not yet ended. This
The BOC has exclusive administrative jurisdiction to is so because the importation ends upon the issuance of
conduct searches, seizures and forfeitures of contraband a valid permit withdrawal. The fact that the goods were
without the interference from the courts. The BOC could not properly appraised negates the issuance of a proper
conduct searches and seizures without need of judicial permit for withdrawal.
warrant except if search is to be conducted in a dwelling
place. b. NO. Until the correct duties and taxes have been paid
Also referred to as the Doctrine of Exclusive Customs and the proper permits then customs authorities have
Jurisdiction over Customs Cases. the authority to issue warrants for seizure and
Rationale: detention.
The rule that the RTC has no power of review over such
proceedings is anchored upon: c. NO, for the following reasons:
i. There should be no unnecessary hindrance on the
government’s drive to prevent smuggling and other Compromise vs. ABATEMENT
frauds upon the Customs. Abatement
ii. To render effective and efficient the collection of COMPROMISE
import and export duties due to the State which enables Nature Involves a Involves the
the government to carry out the functions it has been reduction of cancellation
instituted to perform. the of the entire
iii. The doctrine of primary jurisdiction. taxpayer’s tax liability of
liability a taxpayer.
Q: Can owner or agent of vessel object on the ground through a
that he has no knowledge that the cargo consists of mutual
contraband or is good faith a defense? agreement.
A: The answer must be qualified. If the cargo is a Authorized CIR, REB, CIR
common carrier, such that it is engaged in coastwise Officer NEB
shipping, good faith is not a defense. Forfeiture Grounds
proceedings are in rem and are directed against the res. 1. Reasonable 1. The tax or
The rule is otherwise if the vessel is used as a private doubt as to any portion
carrier. In such case, forfeiture cannot be effected if the the validity of thereof
owner or his agent has no knowledge of, or participation appears to be
in the unlawful act (COC vs. CTA & Pascual, G.R. No. L-
31733, September 20, 1985).
Q: On January 7, 2015, the vessel M/V ”Star Ace” assessment; unjustly or
coming from Singapore loaded with cargo, entered 2. Financial excessively
the Port of San Fernando, La Union for needed incapacity of assessed; or
repairs. When the BOC later became suspicious that the taxpayer 2. The
the vessel’s real purpose in docking was to smuggle administratio
cargo into the country, seizure proceedings were n and
instituted and subsequently two Warrants of Seizure collection
and Detention were issued for the vessel and its costs involved
cargo. do not justify
Mr. X does not own the vessel or any of its cargo but the collection
claimed a preferred maritime lien. He then brought of the amount
several cases in the RTC to enforce his lien. Would due.
these suits prosper?
Compromise
A: NO. The BOC having first obtained possession of the In case of tax assessment, compromise is the contract
vessel and its goods has obtained jurisdiction to the between the government and the taxpayer to setlle the
exclusion of the trial courts. liability.
When Mr. X has impleaded the vessel as a defendant to Court cannot compel the CIR to compromise in cases
enforce his alleged maritime lien, in the RTC, he brought when such is allowed, in order to assure that no
an action in rem under the Code of Commerce under improper compromise is made to the prejudice of the
which the vessel may be attached and sold. Government.
However, the basic operative fact is the actual or NOTE: Compromise as amount of paid by the taxpayer to
constructive possession of the res by the tribunal settle his tax liability is different from compromise
empowered by law to conduct the proceedings. This penalty which is the amount paid by the taxpayer to
means that to acquire jurisdiction over the vessel, the compromise tax violation and paid in lieu of criminal
trial court must have obtained either actual or prosecution. (Refer to Additions to Tax.)
constructive possession over it. Neither was Requisites for Compromise
accomplished by the RTC as the vessel was already in the 1. Tax liability of the taxpayer;
possession of the BOC (COC v. CA, et al., G. R. Nos. 111202- 2. An offer of the taxpayer of an amount to be paid by
05, Jan. 31, 2006). him; and
Q: Is a judicial search warrant necessary in case of 3. The acceptance (the CIR or the taxpayer) of the offer in
customs search and seizures? the settlement of the claim
A: NO. It is one of the exceptions to the judicial warrant Authority of the CIR to compromise taxes
requirement under the Constitution. Under the CMTA, a The CIR may compromise the payment of any internal
search, seizure and arrest may be made even without a revenue tax, when:
warrant for purposes of enforcing customs and tariff a. A reasonable doubt as to the validity of the claim
against the taxpayer exists provided that the minimum
laws (Rieta v. People, G.R. No. 147817, August 12, 2004).
compromise entered into is equivalent to 40% of the
basic tax (Doubtful Validity);
14. NIRC-Difference between compromise, b. The financial position of the taxpayer demonstrates a
abatement (Kailan maka avail) clear inability to pay the assessed tax provided that the
minimum compromise entered into is equivalent to 10%
COMPROMISE AND ABATEMENT OF TAXES of the basic assessed tax (Financial Incapacity),
 Q:Does the CTA have jurisdiction over a special civil
MINIMUM COMPROMISE RATES action for certiorari assailing an interlocutory order
Based on doubtful 40% of the basic issued by the RTC in a local tax case?
validity assessed tax A: YES. Although there is no categorical statement under
Based on 10% of the basic RA 1125 as well as the amendatory RA 9282, which
financialincapacity assessed tax provides that the CTA has jurisdiction over petitions for
certiorari assailing interlocutory orders issued by the
Where the basic tax involved exceeds P1M or where the
RTC in local tax cases filed before it, the prevailing
settlement offered is less than the prescribed minimum
doctrine is that a court may issue a writ of certiorari in
rates, the compromise shall be subject to the approval of
aid of its appellate jurisdiction if said court has
the National Evaluation Board (NEB). In other words,
jurisdiction to review, by appeal or writ of error, the final
compromise settlement lower than the minimum
orders or decisions of the lower court (The City Of
amount prescribed above may be entered subject to the
Manila v. Hon. Grecia-Cuerdo, G.R. No. 175723, February
approval of NEB.
4, 2014).
Exclusive Appellate Jurisdiction over Civil Tax Cases
Offers of compromise of assessments issued by the
Regional Offices involving basic deficiency taxes of Cases within the jurisdiction of the Court en banc (Sec. 2,
P500,000 or less and for minor criminal violations Rule 4, Revised Rules of CTA)
discovered by the Regional and District Offices, shall be
subject to the approval by the Regional Evaluation Board The Court en banc shall exercise exclusive appellate
(REB). However, if the offer of compromise is less than jurisdiction to review by appeal the following: [ARMoR]
the prescribed rates, the same shall always be subject to 1. Decisions or resolutions on motions for
the approval of the NEB (RR No. 30-2002). reconsideration or new trial of the Court in Divisions in
the exercise of its exclusive appellate jurisdiction over:
[ALT]
15. Jurisdiction of Court of Tax Appeals a. Cases arising from administrative agencies – BIR, BOC,
DoF, DTI, and DA;
JURISDICTION OF THE COURT OF TAX APPEALS b. Local tax cases decided by the RTC in the exercise of
The CTA has jurisdiction over both civil and criminal their original jurisdiction; and
aspects of a tax case. The concentration of tax cases in c. Tax collection cases decided by the RTC in the exercise
one court will enhance the disposition of these cases of their original jurisdiction involving final and
since it will take them out of the jurisdiction of regular executory assessments for taxes, fees, charges and
courts which, admittedly, do not have expertise in the penalties, where the principal amount of taxes and
field of taxation (J. Dimaampao, 2015). penalties claimed is less than P1 million pesos;

Expanded Jurisdiction of the CTA under RA 9282 2. Decisions, resolutions or orders of the RTC in cases
[CTRL] decided or resolved by them in the exercise of their
1. Exclusive original jurisdiction over criminal cases appellate jurisdiction over:
arising from violations of the NIRC or the TCCP and other a. Local tax cases
laws administered by the BIR and the BOC where the b. Tax collecton cases;
principal amount of taxes and fees, exclusive of charges
and penalties, is P1 million or more and exclusive 3. Decisions, resolutions or orders on motions for
appellate jurisdiction in lieu of the CA over decisions of reconsideration or new trial of the Court in Division in
the RTC where the amount is less than P1 million or no the exercise of its exclusive original jurisdiction over tax
specified amount is claimed; collection cases; and
2. Exclusive original jurisdiction over tax collection cases 4. Decisions of the CBAAin the exercise of its appellate
where principal amount of taxes and fees, exclusive of jurisdiction over cases involving the assessment and
charges and penalties, is P1 million or more and taxation of real property originally decided by the
exclusive appellate jurisdiction over decisions of the RTC provincial or city board of assessment appeals (Sec. 2,
where the amount is less than P1 million. Rule 4, RRCTA).
3. Appellate jurisdiction over decisions of CBAA in the NOTE: Decisions, orders, and resolutions of the RTC in
exercise of their appellate jurisdiction over cases local tax cases do not include real property taxwhich is
involving the assessment of taxation of real property; an ad valorem tax. The jurisdiction of the CTA en banc
and involves only those real property tax cases originally
4. Exclusive appellate jurisdiction over decisions of the decided by the CBAA in the exercise of its appellate
RTC in local taxes originally decided by them jurisdiction under Sec. 7[a][5] of R.A. 9282 and under
R.A. 7160 (Habawel v. CTA, G.R. No. 174759, September 7,
Salient features of RA 9282 regarding appeals
2011).
The decisions of the CTA are no longer appealable to the
CA. The decision of a division of the CTA may be
Q: A Co., a Philippine corporation, is the owner of
appealed to the CTA en banc, which in turn may be
appealed directly to the SC only on questions of law. machinery, equipment and fixtures located at its plant in
Muntinlupa City. The City Assessor characterized all these
properties as real properties subject to the real property
tax. A Co. appealed the matter to the Muntinlupa Board of therewith, the NIRC also states that the collection of
Assessment Appeals. The Board ruled in favor of the City. taxes is one of the duties of the BIR. Thus, from the
In accordance with RA 1125, A Co. brought a petition for foregoing, the issue of prescription of the BIR’s right to
collect taxes may be considered as covered by the term
review before the CTA to appeal the decision of the Board. “other matters” over which the CTA has appellate
Is the Petition for Review proper? Explain. (1999 Bar)\ jurisdiction.
Q: BDO questions a BIR ruling subjecting interest
Cases within the jurisdiction of the Court in divisions income from zero-coupon bonds issued by the
(Sec. 3, Rule 4, RRCTA)
government to the 20% final withholding tax as they
I. Exclusive Original Jurisdiction
are deemed to be deposit substitutes. BDO filed it to
Tax collection cases involving final and executory the CTA, not with the Secretary of Finance. CIR
assessments for taxes, fees, charges and penalties, where contends that it violates the principle of exhaustion
the principal amount of taxes and fees, exclusive of of administrative remedies. Is BDO correct?
charges and penalties, claimed is P1 million pesos or
more. A: YES. The jurisdiction to review the rulings of the CIR
NOTE: Collection cases where the principal amount of pertains to the CTA. The questioned BIR Rulings were
taxes and fees, exclusive of charges and penalties issued in connection with the implementation of the
claimed is less than P1 million shall be tried by the NIRC. Under Sec. 7 of RA No. 1125 as amended by RA No.
proper MTC, MeTC, or RTC, depending on their 9282, the CTA shall exercise exclusive appellate
respective jurisdiction. The jurisdiction of the CTA in jurisdiction to review by appeal on the Decisions of the
these cases shall be appellate (R.A. 1125, Sec. 7[b][1]). CIR in cases involving disputed assessments, refunds of
II. Exclusive Appellate Jurisdiction [DIReCTORS2] internal revenue taxes, fees or other charges, penalties in
relation thereto or other matters arising under the NIRC
1. Decisions of the CIR in cases involving: [DRO] or other laws administered by the BIR. Section 11 is
likewise worded as follows: Any party adversely affected
a. Disputed assessments; by a decision, ruling or inaction of the CIR, the
Commissioner of Customs, the Secretary of Finance, the
Q: Which court has jurisdiction over undisputed Secretary of Trade and Industry or the Secretary of
assessments? Agriculture or the Central Board of Assessment Appeals
A: Being an action for the collection of sum of money, the or the Regional Trial Courts may file an appeal with the
CTA has exclusive original jurisdiction over undisputed CTA within 30 days after the receipt of such decision or
assessments when the amount involved is P1 million or ruling. (Banco de Oro v. Republic, G.R. No. 198756,
more. January 13, 2015)
2. Inaction by the CIR in cases involving: [DROw]
However, where the amount is less than P1 million, it is a. Disputed assessments;
the RTC or the MTC that has jurisdiction, as the case may b. Refunds of internal revenue taxes, fees or other
be, depending on the jurisdictional amount. charges and penalties imposed thereto;
NOTE: Undisputed assessments are already final and c. Other matters arising under NIRC or other laws
collectible. The taxpayer failed to seasonably protest the administered by the BIR, where the NIRC provides a
assessment within a period of 30 days from receipt of specific period for action.
the notice of assessment.
b. Refunds of internal revenue taxes, fees or other NOTE: The inaction by the CIR within the 180-day
charges and penalties imposed thereto; period under Sec. 228 of the NIRC is deemed a denial.
c. Other matters arising under NIRC or other laws
administered by the BIR. Decisions, Orders or Resolutions of the RTC in the
exercise of their original jurisdiction over local tax cases
Q: What does “other matters” under the NIRC or the and tax collection cases.
TCCP mean? 4. Decisions of the COC in cases involving: [DSFO]
A: The term “other matters” includes cases which can be a. Liability for customs duties, fees or other money
considered within the scope of the function of the BIR charges;
b. Seizure, detention or release of property affected;
and BOC by applying the ejusdem generis rule (that is,
c. Fines, forfeitures or other penalties in relation thereto;
such cases should be of the same nature as those that or
have preceded them). d. Other matters arising under Customs Law or other
laws administered by the BOC.
(G.R. No. 169225, November 17, 2010), the term “other
matters” is limited only by the qualifying phrase that 5. Decisions of the Secretary of Finance on customs cases
follows it. The appellate jurisdiction of the CTA is not elevated for automatic review from decisions of the COC
limited to cases which involve the decisions of the CIR on which are adverse to the Government under Section
matters relating to assessments or refunds. It covers 2315 of the TCCP (now Sec. 1128 of the CMTA); and
other cases that arise out of the NIRC or related laws NOTE: The purpose and rationale of the automatic
administered by the BIR. The issue of whether or not the review in customs cases- the provision for automatic
BIR’s right to collect taxes had already prescribed is a
review by the COC and the Secretary of Finance of
subject matter falling under the NIRC. In connection
unappealed seizure and protest cases was conceived to questioning the constitutionality or validity of tax laws
protect the government against corrupt and conniving or regulations. Except for local tax cases, actions directly
customs collectors (Yaokasin v. COC, G.R. No. 84111, challenging the constitutionality or validity of a tax law
or regulation or administrative issuance may be filed
December 22, 1989).
directly before the Court of Tax Appeals. issuances
Decisions of the Secretary of Trade and Industry, in the (revenue orders, revenue memorandum circulars, or
case of non-agricultural product, commodity or article, rulings), these are issued by the Commissioner under its
and the Secretary of Agriculture in the case of power to make rulings or opinions in connection with the
agricultural product, commodity or article, involving implementation of the provisions of internal revenue laws.
dumping and countervailing duties under Sections 301 Tax rulings, on the other hand, are official positions of the
and 302, respectively of the TCCP, and safeguard Bureau on inquiries of taxpayers who request clarification
measures under RA 8800, where either party may appeal on certain provisions of the National Internal Revenue
the decision to impose or not to impose said duties. Code, other tax laws, or their implementing regulations.
NOTE: The SC held that the lower courts can acquire Hence, the determination of the validity of these issuances
jurisdiction over a claim for collection of deficiency taxes clearly falls within the exclusive appellate jurisdiction of the
only after the assessment made by the CIR has become Court of Tax Appeals under Section 7(1) of Republic Act No.
final and appealable, not where there is still a pending 1125, as amended, subject to prior review by the Secretary
CTA case(Yabes v. Flojo, G.R. No. L-46954, July 20, 1982). of Finance, as required under Republic Act No. 8424.
Q: Does the CTA have the power to review tax cases (Banco de Oro vs. Republic of the Philippines, G.R. No.
motu proprio? (1977 Bar) 198756, August 16, 2016).
A: NO. The CTA has no power motu proprio to review tax
cases. It can resolve cases only if a civil action for Q: Disputing the assessment, PAGCOR appealed to the
collection of sum of money is filed before it in the Secretary of Justice, on the basis of Sections 66 and 67 of
exercise of its exclusive original jurisdiction, or a petition the Revised Administrative Code, which provides that “all
for review is filed in the exercise of its exclusive disputes/claims and controversies, solely between or
appellate jurisdiction. An information may be filed with among the departments, bureaus, offices, agencies and
the CTA directly where the principal amount of taxes and instrumentalities of the National Government, including
fees, exclusive of charges and penalties, is P1 million or
government -owned and -controlled corporations, such as
more.
those arising from the interpretation and application of
Q: Does the CTA have jurisdiction to rule on validity
statues, contracts or agreements shall be administratively
of a Rule or Regulation issued by an administrative
settled or adjudicated by the Secretary of Justice as
agency?
A: NO. While the law confers on the CTA jurisdiction to Attorney-General of the National Government and as ex
resolve tax disputes in general, this does not include officio legal adviser of all government- owned or
cases where the constitutionality of a law or rule is -controlled corporations if involving only questions of
challenged. Where what is assailed is the validity or law.”
constitutionality of a law, or a rule or regulation issued The CIR contends that the CTA has jurisdiction
by the administrative agency in the performance of its pursuant to Section 7(1) of R.A. No. 1125, which
quasi-legislative function, the regular courts have grants the CTA the exclusive appellate jurisdiction to
jurisdiction to pass upon the same (British American review, among others, the decisions of the
Tobacco v. Camacho, G.R. No. 163583, August 20, 2008). Commissioner of Internal Revenue “in cases
NOTE: However, in 2016, the Supreme Court ruled that involving disputed assessments, refunds of internal
the Court of Tax Appeals has undoubted jurisdiction to revenue taxes, fees or other charges, penalties
pass upon the constitutionality or validity of a tax law or imposed in relation thereto, or other matters arising
regulation when raised by the taxpayer as a defense in under the NIRC or other law or part of law
disputing or contesting an assessment or claiming a administered by the Bureau of Internal Revenue.
refund. It is only in the lawful exercise of its power to Is PAGCOR correct?
pass upon all maters brought before it, as sanctioned by
Section 7 of Republic Act No. 1125, as amended. A: NO. Following the rule on statutory construction
involving a general and a special law, then P.D. No. 242
This Court, however, declares that the Court of Tax should not affect R.A. No. 1125. R.A. No. 1125,
Appeals may likewise take cognizance of cases directly specifically Section 7 thereof on the jurisdiction of the
challenging the constitutionality or validity of a tax law CTA, constitutes an exception to P.D. No. 242. Disputes,
or regulation or administrative issuance (revenue claims and controversies, falling under Section 7 of R.A.
orders, revenue memorandum circulars, rulings). No. 1125, even though solely among government offices,
In other words, within the judicial system, the law agencies, and instrumentalities, including GOCCs, remain
intends the Court of Tax Appeals to have exclusive in the exclusive appellate jurisdiction of the CTA. Such a
jurisdiction to resolve all tax problems. Petitions for construction resolves the alleged inconsistency or
writs of certiorari against the acts and omissions of the conflict between the two statutes. (CIR v. Secretary of
said quasi-judicial agencies should, thus, be filed before Justice, G.R. No. 177387, November 9, 2016, citing
the Court of Tax Appeals. Philippine National Oil Company v. Court of Appeals, G.R.
Nos. 109976 and 112800, April 26, 2005)
Republic Act No. 9282, a special and later law than Batas
Pambansa Blg. 129 provides an exception to the original In CIR v. Secretary of Justice, to restate, as a general rule,
jurisdiction of the Regional Trial Courts over actions all disputes/claims and controversies, solely between or
among the departments, bureaus, offices, agencies and jurisdiction over criminal offenses arising from
instrumentalities of the National Government, including violations of the NIRC or TCCP and other laws
GOCCs, such as those arising from the interpretation and administered by the BIR or BOC where the principal
application of statues, contracts or agreements shall be amount of taxes and fees, exclusive of charges and
administratively settled or adjudicated by the Secretary penalties is P1 million or more;
of Justice or the Solicitor General. (Secs. 66-68, Revised
Administrative Code) 2. Decisions, Resolutions or Orders on Motions for
Reconsideration or New Trial of the Court in division in
As an exception, when the disputes/claims and the exercise of its exclusive appellate jurisdiction over
controversies involves a tax assessment, even when the criminal offenses arising from violations of the NIRC or
parties to the dispute are departments, bureaus, offices, TCCP and other laws administered by the BIR or BOC;
agencies and instrumentalities of the National Government, and
including GOCCs, the exclusive appellate jurisdiction
remains with the CTA. (Sec. 7, RA 1125) 3. Decisions, Resolutions or Orders of the RTC decided or
resolved by them in the exercise of their appellate
Jurisdiction over criminal cases jurisdiction over criminal offenses arising from
violations of the NIRC or TCCP and other laws
Exclusive original jurisdiction administered by the BIR or BOC where the principal
The CTA in Division have exclusive original jurisdiction amount of taxes and fees, exclusive of charges and
over all criminal offenses arising from violations of the penalties claimed is less than P1 million.
NIRC or TCCP and other laws administered by the BIR or
the BOC, where the principal amount of taxes and fees, 16. Jurisdiction of Commissioner of Internal
exclusive of charges and penalties, claimed is P1 million Revenue in administrative cases
or more.
Regular courts shall have jurisdiction in offenses or
JURISDICTION, POWER AND FUNCTIONS OF THE
felonies where:
COMMISSIONER OF INTERNAL REVENUE
a) The principal amount of taxes and fees, exclusive of
Powers and duties of the BIR [JEnAReS]
charges and penalties claimed is less than P1 million; or
1. Assessment and collection of all national internal
b) No specified amount is claimed.
revenue taxes, fees and charges;
2. Enforcement of all forfeitures, penalties and fines;
The jurisdiction of the CTA in these cases shall be
3. Execution of judgments in all cases decided in its favor
appellate (Sec. 7[b][1], RA 1125, as amended).
(by the CTA and regular courts);
Inclusion of civil action in criminal action
4. Give effect and administer the supervisory and police
Despite any provision of law or the Rules of Court, the
powers conferred to it by the NIRC and other laws;
criminal action and the corresponding civil action for the
5. Recommend to the Secretary of Finance all needful
recovery of the civil liability for taxes and penalties, shall
rules and regulations for the effective enforcement of the
at all times be simultaneously instituted with, and jointly
provision of the NIRC.
determined in the proceeding before the CTA. The filing
of the criminal action is deemed to necessarily carry with
Chief Officials of the BIR
it the filing of civil action, and no right to reserve the
The BIR is headed by the CIR and 6 Deputy
filing of such civil action separately from the
Commissioners, who lead the following divisions:
criminal action will be recognized (Sec. 7, RA 1125, as
1. Operations group
amended).
2. Legal Inspection Group
Exclusive appellate jurisdiction in criminal cases
CTA in Divisions 3. Resource and Management Group
Exclusive appellate jurisdiction over: 4. Information Systems Group
1. Appeals from the Judgments, Resolutions or Orders of 5. Prosecution Group
the RTC in their original jurisdiction in criminal offenses 6. Special Concerns Group
arising from violations of the NIRC or TCCP and other
laws administered by the BIR or BOC, where the Q: Is the BIR authorized to collect estate tax
principal amount of taxes and fees, exclusive of charges deficiencies by the summary remedy of levy upon
and penalties, claimed is less than P1 million or where and sale of real properties of the decedent without
there is no specified amount claimed; and first securing the authority of the court sitting in
probate over the supposed will of the decedent?
(1998 Bar)
2. Criminal offenses over Petitions for Review of the A: YES, the BIR is authorized to collect estate tax
Judgments, Resolutions or Orders of the RTC in the deficiency through the summary remedy of levying upon
exercise of their appellate jurisdiction on cases originally and sale of real properties of a decedent without the
decided by the MeTC, MTC and MCTC. cognition and authority of the court sitting in probate
CTA en banc over the supposed will of the deceased because of the
collection of estate tax is executive in character. As such
Exclusive appellate jurisdiction to review by appeal the the estate tax is exempted from the application of the
following: statute of non-claims, and this is justified by the
1. Decisions, Resolutions or Orders on Motions for
Reconsideration or New Trial of the Court in division in
the exercise of its exclusive original
necessity of government funding, immortalized in the 1. To terminate taxable period for reasons provided in
maxim that taxes are the lifeblood of the government the NIRC;
(Marcos v. CIR, G.R. No. 120880, June 5, 1997). 2. To make or amend return in case taxpayer fails to file
Powers of the Commissioner a return or files a false or fraudulent return;
1. Power to interpret tax laws and to decide cases (Sec. 4, 3. 3.To examine returns and determine tax due;
NIRC); 4. To prescribe any additional requirements for the
2. Power to obtain information and to summon/examine submission or preparation of financial statements
and take testimony of persons (Sec. 5, NIRC); accompanying tax returns;
5. To inquire into bank deposits of
Q: What are the purposes of these powers? a. Decedent to determine his gross income;
A: b. A taxpayer who filed application to compromise
1. To ascertain correctness of the return; payment of tax liability by reason of financial incapacity;
2. To make a return when none has been made; c. A specific taxpayer or taxpayers subject of a request
3. To determine liability of any person for any internal for the supply of tax information from a foreign tax
revenue tax; authority pursuant to an international convention or
4. To collect such liability; agreement on tax matters to which the Philippines is a
5. To evaluate tax compliance. signatory or a party of. Provided, that the information
obtained from the banks and other financial institutions
Q: What is the scope of such powers? [SO-Ass2-Sex] may be used by the BIR for tax assessment, verification,
A: audit and enforcement purposes;
1. To examine any book, paper, record, or other data
which may be relevant or material to such inquiry; 6. To delegate powers vested upon him to subordinate
2. To obtain any information (costs, volume of officials with rank equivalent to Division Chief or higher,
production, receipts, sales, gross income) on a regular subject to limitations and restrictions imposed under the
basis, from any person other than the person under rules and regulations.
investigation and any office or officer of the 7. To prescribe real property values;
national/local government; 8. To take inventory of goods of any taxpayer, and place
3. To summon the following to produce records and to any business under observation or surveillance IF there
give testimony: is reason to believe that such is not declaring his correct
a. The person liable for tax or required to file a return; income, sales or receipts for tax purposes;
b. Any officer or employee of such person; 9. To register tax agents.
c. Any person having in his possession, custody and care Q: What are the powers of the BIR which cannot be
the books of accounts, accounting records of entries delegated?
related to the business of such taxpayer.
A: [RICA]
4. Power to make assessments and prescribe additional 1. To Recommend promulgation of rules and regulations
requirements for tax administration and enforcement by the Secretary of Finance;
(Sec. 6, NIRC); 2. To Issue rulings of first impression or to reverse,
5. Power to assign internal revenue officers and other revoke or modify any existing rule of the BIR;
employees (Secs. 16 and 17, NIRC); 3. GR: To Compromise or abate any tax liability;
6. Power to suspend the business operations of a
taxpayer for vialations of VAT rules (Sec. 115, NIRC) XPN: The Regional Evaluation Board may compromise
assessments involving deficiency taxes of P500,000 or
Q: When can the CIR suspend the business operation less and minor crime violations.
of a taxpayer? 4. To Assign or reassign internal revenue officers to
A: establishments where articles subject to excise tax are
1. In the case of VAT-registered person: kept.
a. Failure to issue receipts or invoices;
Q: Will errors or mistakes of administrative officials
a. Failure to file a VAT return as required under Sec. 114; bind the government as to the collection of taxes?
or A: GR: Errors or mistakes of administrative officials
b. Understatement of taxable sales or receipts by 30% or (including the BIR) should never be allowed to
more of his correct taxable sales or receipts for the jeopardize the financial position of the government.
taxable quarter. Reason: Taxes are the lifeblood of the nation through
which the government agencies continue to operate and
2. Failure of any person to register as required under Sec. with which the State effects its functions for the welfare
236: of its constituents (CIR v. Citytrust and CTA, G.R. No.
The temporary closure of the establishment shall be for 106611, July 21, 1994).
the duration of not less than 5 days and shall be lifted XPN: For the purpose of safeguarding taxpayers from
only upon compliance with whatever requirements any unreasonable examination, investigation or
prescribed by the CIR in the closure order (Sec. 115 assessment, our tax law provides a statute of limitations
NIRC). in the collection of taxes. Thus, the law on prescription,
being a remedial measure, should be liberally construed
The CIR is also authorized: (TInDER PRIM) in order to afford such protection. As a corollary, the
exceptions to the law on prescription should perforce be
strictly construed (CIR v. Goodrich Philippines Inc., G.R Has the right of the Government to assess and collect
No. 104171, February 24, 1999). deficiency taxes from Vantage Point, Inc. for the year
2012 prescribed? Explain your answer. (2017 Bar)
NOTE: In the Citytrust case, which involves a claim for A:
refund, the error or neglect was the failure of the a. Generally, a valid waiver of the statute of limitations
Solicitor General to present its evidence, as counsel for for the assessment and collection of taxes must be
the CIR, due to the unavailability of the necessary executed by the taxpayer and accepted by the BIR prior
records from BIR, prompting the Solicitor to submit the to the expiration of the period which it seeks to extend.
case for decision without presenting any evidence. While The same must also be executed by the taxpayer or his
in Goodrich, the error committed refers to the neglect of duly authorized representative, or in the case of a
the BIR to make assessment within the 3-year period as corporation, it must be signed by any of its responsible
required in Sec. 203, NIRC. officers (CIR v. Kudos Metal Corporation, G.R. No. 178087,
May 5, 2010).
a. Interpretation of tax laws
Such requirements must be met considering that a
The power to interpret the provisions of NIRC and waiver of the statute of limitations under the NIRC, to a
other tax laws shall be under the exclusive and original certain extent, is a derogation of the taxpayers right to
jurisdiction of the Commissioner, subject to review by security against prolonged and unscrupulous
the Secretary of Finance. investigations and must therefore be carefully and
The power to decide disputed assessments, refunds of strictly construed. (Philippine Journalists, Inc. v. CIR, G.R.
internal revenue taxes, fees or other charges, penalties No. 162852, December 16, 2004).
imposed in relation thereto, or other matters arising b. YES, the final assessment was issued beyond the
under the NIRC or other laws or portions thereof three-year prescriptive period to make an assessment.
administered by the BIR is vested in the Commissioner, (Section 203, NIRC). The Waiver did not extend the three-
subject to the exclusive appellate jurisdiction of the year prescriptive period since it was executed after the
Court of Tax Appeals (Sec. 4, NIRC). expiration of such period.
Power to interpret
a) The NIRC, and 17. Requisites of a valid assessment
b) Other tax laws.
Requisites of a valid assessment (BaD SAWS)
Power to decide on 1. In writing and signed by the BIR;
a) Disputed assessments, 2. Contains the law and the facts on which the
b) Refunds of internal revenue taxes, assessment is based (basis must be provided);
c) Fees or other charges, and penalties imposed in 3. Contains a demand for payment within the prescribed
relation thereto, period;
d) Other matters arising under the nirc or other laws or 4. Must be served on and received by the taxpayer.
portions thereof administered by the BIR.
The taxpayers shall be informed in writing of the law and
Q: On January 27, 2017, Ramon, the comptroller of the facts on which the assessment is made; otherwise,
Vantage Point, Inc., executed a document entitled the assessment shall be void.
“Waiver of the Statute of Limitations” in connection Moreover, the regulations provide that the Formal Letter of
with the BIR’s investigation of the tax liabilities of Demand and Final Assessment Notice (FLD/FAN) shall be
the company for 2012.
issued by the Commissioner or his duly authorized
However, the Board of Directors of Vantage Point,
Inc., did not adopt a board resolution authorizing representative. The FLD/FAN calling for payment of the
Ramon to execute the waiver. taxpayer's deficiency tax or taxes shall state the facts, the
On October 14, 2017, Vantage Point, Inc., received a law, rules and regulations, or jurisprudence on which the
preliminary assessment notice from the BIR assessment is based; otherwise, the assessment shall be
indicating its deficiency withholding taxes for the
void (RR 18-13).
year 2012. Vantage Point, Inc., filed its protest. On
October 30, 2017, the BIR issued a formal letter of
What Does Not Constitute an Assessment
demand and final assessment notice. Vantage Point,
1. the advice of tax deficiency and preliminary five-day
Inc., again filed a protest. The CIR denied the
letter given by the CIR to an employee of taxpayer are
protests and directed the collection of the assessed
not valid substitutes for the mandatory notice in writing
deficiency taxes.
of the legal and factual bases of the assessment
Accordingly, Vantage Point, Inc., filed a petition for
review in the CTA to seek the cancellation and
2. the revenue officers’ Affidavit-Report, which was
withdrawal of the assessment on the ground of
attached to the criminal Complaint filed with the
prescription.
Department of Justice, does not constitute an
a. What constitutes a valid waiver of the statute of
assessment. (CIR vs. PASCOR).
limitations for the assessment and collection of
taxes? Explain your answer.
3. A written communication by a revenue officer of tax
liability of the taxpayer, giving him an opportunity to
contest or disprove the BIR examiner’s findings is not an
assessment since it is yet indefinite. The said NOTE: The final adjustment return shall be filed on or
recommendation letter served merely as the prima facie before the fifteenth (15th) day of the fourth (4th) month
basis for filing criminal informations for the violation of following the close of the fiscal year.
the NIRC (Adamson v. CA 588 SCRA 27).
Short period
Q: After examining the books and records of EDS GR: The taxable period, whether it is a calendar year or
Corporation, the 2004 final assessment notice, fiscal year always consists of 12 months.
showing basic tax of P1,000,000 deficiency interest XPN: Instances when the taxpayer may have a taxable
of P400,000 and due date for payment of April 30,
period of less than 12 months:
2007, but without the demand letter, was mailed and
released by the BIR on April 15, 2007. The registered
When the corporation is newly organized and
letter, containing the tax assessment, was received
commenced operations on any day within the year
by the EDS Corporation on April 25, 2007
2. When the corporation changes its accounting period
a. What is an assessment notice? What are the
3. When a corporation is dissolved
requisites of a valid assessment? Explain
4. When the Commissioner of Internal Revenue, by
b. As tax lawyer of EDS Corporation, what legal
authority, terminates the taxable period of a taxpayer
defense(s) would you raised against the assessment? (NIRC, Sec. 6[D]).
Explain. (2008 Bar) 5. In case of final return of the decedent and such period
ends at the time of his death
A: Kinds of Taxpayers:
a. An assessment notice is formal notice to the taxpayer 1. Individuals
stating that the amount thereon is due as a tax and a. Citizen
containing a demand for the payment thereof (Alhambra i. Resident Citizen (RC)
Cigar and Cigarette Mfg. Co. v Collector, 105 PR 1337, ii. Non-Resident Citizen (NRC)
1959; CIR v. Pascor Realty and Development Corp., 309 b. Aliens
SCRA 402, 1999). To be valid, the taxpayer must be i. Resident Alien (RA)
informed in writing of the law and the facts on which ii. Non-Resident Alien (NRA)
assessment is made (Sec. 228 NIRC). (1) Engaged in Trade or Business (NRA-ETB)
b. I will question the validity of the assessment because (2) Not Engaged in Trade or Business (NRA-NETB)
of the failure to send the demand letter which contains a iii. Special Alien
statement of the law and the facts upon which the c. Special class of individual employees
assessment is based. If an assessment notice is sent i. Minimum wage earner
without informing the taxpayer in writing about the law
2. Corporations
and facts on which the assessment is made, the
a. Domestic
assessment is void (Sec. 228, NIRC; Azucena T Reyes v.
b. Foreign
CIR, 480 SCRA 382, 2005). i. Resident foreign corporation (RFC)
ii. Non-resident foreign corporation (NRFC)
18. Diff between calendar year and fiscal c. Joint venture and consortium
year d. Partnership

Kinds of taxable periods 3. Estates

1. Calendar period 4. Trusts

The 12 consecutive months starting from January 1 and Importance of knowing the classification of
ending December 31. taxpayers
Instances when calendar year shall be the basis for In order to determine the applicable [GREED]
computing net income 1. Gross income
1. When the taxpayer is an individual 2. Income tax Rates
2. When the taxpayer does not keep books of account 3. Exclusions from gross income
3. When the taxpayer has no annual accounting period 4. Exemptions
4. When the taxpayer is an estate or a trust 5. Deductions
19. Informers reward
NOTE: Taxpayers other than a corporation are required
to use only the calendar year. 20.Last part ng NIRC- Remedies
The final adjustment return shall be filed on or before 21. First Part – Sections 1-20
the fifteenth (15th) day of April.
2. Fiscal period

It is a period of 12 months ending on the last day of any

month other than December (NIRC, Sec. 22 [Q]).