G.R. No. 227049, September 16, 2020
Commissioner of Internal Revenue vs. Bank of the Philippine Islands

FACTS

The Commissioner of Internal Revenue (CIR) issued deficiency tax assessments against Citytrust Banking Corporation for 1986. After a merger where Bank of the Philippine Islands (BPI) emerged as the surviving entity, the CIR sought to collect a portion of these assessments, specifically for deficiency Expanded Withholding Tax (EWT), Withholding Tax on Deposit Substitutes (WTD), Real Estate Dealer’s Fixed Tax (DFT), and penalties for late remittance of Withholding Tax on Compensation (WTC). The CIR issued a Warrant of Distraint and/or Levy against BPI on October 27, 2011, for this portion amounting to P1,624,930.32.
BPI assailed this warrant before the Court of Tax Appeals (CTA), arguing the CIR’s right to assess and collect had prescribed. The CTA Division cancelled the warrant, a decision affirmed by the CTA En Banc. The CIR elevated the case to the Supreme Court, contending the CTA lacked jurisdiction as BPI’s petition was essentially a prohibited collateral attack on a final assessment, and that the prescriptive period for collection was suspended by BPI’s protest.

ISSUE

Whether the CTA correctly cancelled the Warrant of Distraint and/or Levy on the ground that the right to collect the deficiency taxes had prescribed.

RULING

Yes. The Supreme Court affirmed the CTA’s cancellation of the warrant, ruling that the CIR’s right to collect the taxes had prescribed. The legal logic proceeds from the applicable prescriptive periods under the 1977 Tax Code. For the EWT, WTD, and WTC, the CIR had only three years from the date the return was filed or from the last day prescribed by law for its filing to assess and collect. The assessment notices for these taxes were issued on May 6, 1991, which was beyond this three-year period from 1986. While the DFT assessment, for which no return is required, fell within the ten-year prescriptive period, the collection for all taxes had prescribed.
Critically, the prescriptive period for collection was not suspended. A request for reinvestigation, like Citytrust’s protest, only suspends the period to collect if the CIR grants it. Here, there was no proof the CIR granted the request. Consequently, the five-year period to collect via distraint or levy commenced from the May 6, 1991 assessment and expired in 1996. The CIR’s issuance of the warrant in 2011 was therefore void. The Court also upheld the CTA’s jurisdiction, as the petition directly assailed the warrant’s validity—a matter arising under the Tax Code within the CTA’s exclusive appellate jurisdiction.