G.R. No. 213943 March 22, 2017
COMMISSIONER OF INTERNAL REVENUE, Petitioner, vs. PHILIPPINE DAILY INQUIRER, INC., Respondent.

FACTS

The Bureau of Internal Revenue (BIR) issued a Letter Notice to Philippine Daily Inquirer, Inc. (PDI) in 2006, alleging underdeclaration of domestic purchases for taxable year 2004 based on third-party information. PDI submitted reconciliation reports and executed three separate Waivers of the Statute of Limitations, the last extending the assessment period until April 30, 2008. The BIR issued a Preliminary Assessment Notice (PAN) in October 2007 and a Formal Letter of Demand with Assessment Notice dated March 11, 2008, which PDI received on April 17, 2008. PDI protested and subsequently filed a Petition for Review before the Court of Tax Appeals (CTA), arguing the assessment was issued beyond the prescriptive period.

ISSUE

Whether the assessment for deficiency taxes for the year 2004 was issued within the prescriptive period.

RULING

The Supreme Court denied the petition and affirmed the CTA’s cancellation of the assessment. The legal logic centers on the proper reckoning point for the three-year prescriptive period to assess under Section 203 of the National Internal Revenue Code (NIRC). For PDI’s quarterly Value-Added Tax (VAT) returns, the period begins from the date the return was filed or due, whichever is later. PDI filed its fourth quarter VAT return for 2004 on January 21, 2005. Therefore, the BIR had until January 21, 2008, to issue a valid assessment. The Formal Letter of Demand, though dated March 11, 2008, was received by PDI only on April 17, 2008, which is indisputably beyond the three-year period. The Waivers executed by PDI were deemed ineffective to extend this period because the assessment was issued after the original prescription date had already lapsed. An assessment issued after the prescriptive period is void. Consequently, the BIR’s right to assess had prescribed, rendering the deficiency tax assessment invalid and unenforceable.