G.R. No. 192173 , July 29, 2015.
COMMISSIONER OF INTERNAL REVENUE, Petitioner, vs. STANDARD CHARTERED BANK, Respondent.

FACTS

On July 14, 2004, respondent Standard Chartered Bank received from petitioner Commissioner of Internal Revenue a Formal Letter of Demand dated June 24, 2004, for alleged deficiency taxes for taxable year 1998 in the aggregate amount of ₱33,326,211.37. The assessment covered deficiency income tax, final income tax Foreign Currency Deposit Unit (FCDU), withholding tax compensation, expanded withholding tax, and final withholding tax. Respondent filed a protest on August 12, 2004. Due to petitioner’s inaction on the protest, respondent filed a Petition for Review before the Court of Tax Appeals (CTA) on March 9, 2005. Respondent later made partial payments for the deficiency withholding tax compensation and final withholding tax assessments, reducing the total amount in dispute to ₱33,076,944.18 for deficiency income tax, final income tax FCDU, and expanded withholding tax. Petitioner sought to justify the assessment, issued beyond the standard three-year prescriptive period, by presenting Waivers of the Statute of Limitations executed by the parties. The CTA in Division and the CTA En Banc found the waivers invalid for failure to comply strictly with the requirements of Revenue Memorandum Order (RMO) No. 20-90, particularly the First and Second Waivers dated July 20, 2001 and April 4, 2002. Consequently, the tax courts cancelled the assessment for being issued beyond the prescriptive period.

ISSUE

The primary issue is whether petitioner’s right to assess respondent for deficiency taxes for taxable year 1998 has prescribed. A subsequent issue is whether respondent is estopped from questioning the validity of the waivers due to the partial payments it made.

RULING

The Supreme Court denied the petition, affirming the CTA En Banc’s decision. The Court held that the right to assess had prescribed. The waivers intended to extend the three-year prescriptive period under Section 203 of the National Internal Revenue Code were invalid for non-compliance with RMO No. 20-90, which mandates that a waiver must be signed by the taxpayer or a duly authorized representative, specify the period and amount covered, and be signed by the Commissioner. The waivers in question were defective, rendering them void and ineffective to extend the period. The Court also ruled that respondent is not estopped from questioning the waivers’ validity. The partial payments for some tax liabilities were not a clear and unequivocal acknowledgment of the validity of the entire assessment nor an admission that the waivers were valid. Payment of a tax does not amount to an admission of liability if it is made under protest. Since the waivers were void from the beginning, the assessment was issued beyond the prescriptive period and is therefore void.