G.R. No. 115712 February 25, 1999.
COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. COURT OF APPEALS, COURT OF TAX APPEALS and CARNATION PHILIPPINES, INC. (now merged with Nestle Phils, Inc.), respondents.

FACTS

Carnation Philippines, Inc. filed its Corporation Annual Income Tax Return for the taxable year ending September 30, 1981, on January 15, 1982, and its Manufacturers/Producers Percentage Tax Return for the quarter ending September 30, 1981, on November 20, 1981. On October 13, 1986, March 16, 1987, and May 18, 1987, Carnation, through its Senior Vice President, signed three separate “waivers of the Statute of Limitations Under the National Internal Revenue Code.” These waivers consented to the assessment and collection of taxes found due after reinvestigation at any time before specified dates (April 13, 1987, June 14, 1987, and July 30, 1987, respectively) but stated that the taxpayer did not waive any prescription already accrued in its favor. The waivers were not signed by the BIR Commissioner or any of his agents. On August 5, 1987, Carnation received a BIR demand letter dated July 29, 1987, accompanied by assessment notices, demanding payment of deficiency income and sales taxes for 1981. Carnation protested the assessments. The BIR Commissioner denied the protests, leading Carnation to appeal to the Court of Tax Appeals (CTA). The CTA declared the assessments null and void for being issued beyond the five-year prescriptive period. The Court of Appeals affirmed the CTA decision in toto.

ISSUE

Whether the three waivers signed by Carnation are valid and binding to toll the running of the prescriptive period for assessment, thereby allowing the Government to issue the deficiency tax assessments.

RULING

No. The waivers are invalid and without binding effect. Under Section 319 (now Section 222) of the National Internal Revenue Code, for a waiver of the prescriptive period to be effective, it must be in writing and signed by both the Commissioner of Internal Revenue and the taxpayer. The three waivers executed by Carnation did not bear the written consent of the BIR Commissioner as required by law. Therefore, they could not suspend the running of the five-year prescriptive period for assessment. Consequently, the assessments issued on July 29, 1987, for the fiscal year ending September 30, 1981, were issued beyond the prescriptive period, which lapsed on January 14, 1987, for the income tax return (filed January 15, 1982) and on November 19, 1986, for the percentage tax return (filed November 20, 1981). The decision of the Court of Appeals affirming the CTA’s ruling is upheld.