GR 169225; (November, 2010) (Digest)
G.R. No. 169225 ; November 17, 2010
COMMISSIONER OF INTERNAL REVENUE, Petitioner, vs. HAMBRECHT & QUIST PHILIPPINES, INC., Respondent.
FACTS
The Commissioner of Internal Revenue (CIR) issued a deficiency tax assessment for the year 1989 against Hambrecht & Quist Philippines, Inc. (respondent) on January 8, 1993, sent to the respondent’s former business address. The respondent formally notified the BIR of its change of address on February 18, 1993. On November 4, 1993, the respondent received a tracer letter demanding payment. It filed a protest on December 3, 1993. The CIR did not act on this protest until October 27, 2001, when it issued a final decision denying the protest as filed out of time. The respondent appealed this denial to the Court of Tax Appeals (CTA).
The CTA Original Division ruled that the assessment, sent prior to the formal notice of change of address, was valid and had become final due to the respondent’s failure to timely protest. However, the CTA also held that the government’s right to collect the assessed tax had prescribed. It canceled the assessment. The CTA En Banc affirmed this decision. The CIR elevated the case, arguing the CTA had no jurisdiction to rule on prescription after declaring the assessment final, and that the collection period had not lapsed.
ISSUE
1. Whether the CTA had jurisdiction to rule that the government’s right to collect the tax had prescribed.
2. Whether the prescriptive period for collection had indeed lapsed.
RULING
The Supreme Court denied the petition and affirmed the CTA En Banc. On the first issue, the Court held that the CTA correctly exercised its jurisdiction. Under Section 7 of Republic Act No. 1125 , the CTA has exclusive appellate jurisdiction over “other matters arising under the National Internal Revenue Code.” This broad grant includes the authority to resolve the issue of prescription of the right to collect, which is inherently linked to a disputed assessment. The CIR’s restrictive interpretation was unsupported by law.
On the second issue, the Court upheld the CTA’s finding that the right to collect had prescribed. The ordinary prescriptive period for collection is three years from the date the assessment becomes final. The CIR argued the period was suspended by the respondent’s December 3, 1993 protest, which constituted a request for reinvestigation. The Court rejected this. The CIR itself had declared that protest untimely in its 2001 final decision. It cannot simultaneously claim the assessment was final and unappealable for protest purposes, yet assert the same protest was a valid request for reinvestigation that suspended the collection period. The CIR’s inaction for nearly eight years barred collection. The CTA’s factual findings, supported by substantial evidence and its specialized expertise, are binding.