GR 224327; (June, 2018) (Digest)
G.R. No. 224327 . June 11, 2018.
COMMISSIONER OF INTERNAL REVENUE, PETITIONER, V. BANK OF THE PHILIPPINE ISLANDS, RESPONDENT.
FACTS
Citytrust Banking Corporation (CBC) filed its Annual Income Tax Returns for taxable year 1986 on April 15, 1987. The Commissioner of Internal Revenue (CIR) issued a Pre-Assessment Notice (PAN) on March 7, 1991, and formal Assessment Notices on May 6, 1991, for deficiency income tax. CBC protested and engaged in protracted compromise settlement negotiations with the CIR, which ultimately disapproved CBC’s application. Meanwhile, CBC merged with Bank of the Philippine Islands (BPI) in 1996, with BPI as the surviving entity. Years later, on May 26, 2011, the CIR issued a Notice of Denial to BPI for CBC’s 1986 tax liability, followed by a Warrant of Distraint and/or Levy on September 21, 2011. BPI filed a Petition for Review with the Court of Tax Appeals (CTA) to challenge the warrant.
ISSUE
Whether the CTA correctly cancelled the Warrant of Distraint and/or Levy on the ground that the right of the CIR to assess and collect the deficiency tax for 1986 had already prescribed.
RULING
Yes. The Supreme Court affirmed the CTA En Banc’s decision. The three-year prescriptive period to assess deficiency taxes under the National Internal Revenue Code commenced on April 15, 1987, the date CBC filed its 1986 return. The formal Assessment Notices were issued only on May 6, 1991, which was beyond this three-year period. The waivers of the statute of limitations executed by CBC were deemed invalid for non-compliance with the formal requisites under Revenue Memorandum Order No. 20-90, such as not being signed by the CIR or his authorized representative. Consequently, these waivers did not effectively extend the prescriptive period. Since the assessment itself was issued out of time, it is void. A void assessment cannot serve as a valid basis for the subsequent issuance of the Warrant of Distraint and/or Levy. The period for collection had also prescribed, as the warrant was issued in 2011, far beyond the allowable period reckoned from the void 1991 assessment. The Court emphasized that while taxes are the government’s lifeblood, their assessment and collection must strictly conform to the law.