GR 171251; (March, 2012) (Digest)
G.R. No. 171251 ; March 5, 2012
LASCONA LAND CO., INC., Petitioner, vs. COMMISSIONER OF INTERNAL REVENUE, Respondent.
FACTS
On March 27, 1998, the Commissioner of Internal Revenue (CIR) issued a deficiency income tax assessment for 1993 against Lascona Land Co., Inc. Lascona filed a letter protest on April 20, 1998. The CIR did not act on this protest. On March 3, 1999, a BIR Regional Director informed Lascona that while the protest’s arguments had merit, the assessment had become final and demandable because Lascona failed to appeal to the Court of Tax Appeals (CTA) within 30 days from the lapse of the 180-day period for the CIR to act, as purportedly mandated by Section 228 of the Tax Code.
Lascona appealed to the CTA, which nullified the assessment. The CTA ruled that under Section 228, a taxpayer has two options following CIR inaction: (1) appeal to the CTA within 30 days after the 180-day period, or (2) await the CIR’s final decision on the protest and appeal that decision later. The CIR appealed to the Court of Appeals, which reversed the CTA. The CA held the assessment became final because Lascona did not appeal within the 30-day period after the CIR’s inaction, citing Revenue Regulations No. 12-99.
ISSUE
Whether the subject assessment became final, executory, and demandable due to Lascona’s failure to appeal to the CTA within thirty days from the lapse of the 180-day period for the CIR to act on its protest.
RULING
No. The Supreme Court reversed the Court of Appeals and reinstated the CTA decision, ruling the assessment did not become final. The Court clarified the interpretation of Section 228 of the National Internal Revenue Code. It held that the provision’s last paragraph, stating a “decision” becomes final if not appealed, refers to an actual decision issued by the Commissioner on a protest, not to the mere lapse of the 180-day period without action. In cases of inaction, the law and the Revised Rules of the Court of Tax Appeals provide the taxpayer with an option.
The taxpayer may either treat the inaction as a denial and appeal to the CTA within 30 days after the 180-day period, or choose to await the Commissioner’s actual decision. If the taxpayer opts to wait, the period to appeal runs from receipt of that subsequent decision. Lascona validly exercised the second option by awaiting a final decision, which it never received. The CIR’s inaction did not automatically transform the assessment into a final, executory “decision.” Revenue Regulations No. 12-99, which mandated automatic finality, could not amend the substantive law in Section 228. Therefore, the assessment remained disputed and not final.