THE RIGHT TO PROSECUTE A CRIMINAL TAX CASE PRESCRIBES FIVE (5) YEARS FROM THE DATE THE TAX ASSESSMENT BECOMES FINAL & EXECUTORY UNLESS TOLLED BY THE ACTUAL FILING OF THE INFORMATION IN COURT

Petitioner People of the Philippines filed an Information against the Respondent Faivo Pascual Bartolome on December 5, 2022, for willful failure to pay taxes under Section 255 of the Tax Code. Despite multiple BIR notices, the Respondent allegedly failed to pay the deficiency Value-Added Tax (VAT) liability for the Taxable Year (TY) 2012. The Formal Letter of Demand (FLD) and Final Assessment Notice (FAN) were received on January 5, 2016, and the assessment became final and executory on February 5, 2016, due to his failure to file a valid protest. A subsequent protest was denied as late, and collection letters issued in 2016 remained unpaid. On August 9, 2023, the Court of Tax Appeals (CTA) First (1^st) Division dismissed the case on the ground of prescription, ruling that the five-year period within which to file a criminal case had already lapsed. The core issue before the Court En Banc was whether the criminal complaint against the Respondent was instituted within the five-year prescriptive period prescribed under Section 281 of the Tax Code. The Petitioner contended that the prescriptive period should be counted from the date the Complaint was filed with the Department of Justice (DOJ) (i.e., October 23, 2020) for Preliminary Investigation, rather than from the date the Information was filed in Court. Citing Section 1, Rule 110 of the Revised Rules of Criminal Procedure, the Petitioner argued that a criminal action is deemed instituted when a Complaint is filed before the proper investigating officer, such as the DOJ. Based on this interpretation, the Petitioner maintained that the case was filed within a five-year period since the DOJ complaint was filed before February 5, 2021. In ruling, the CTA En Banc rejected this argument and upheld the dismissal of the case. Under Section 281 of the Tax Code, the period of prescription is interrupted only upon the filing of the Information in court, not upon the filing of a Complaint for Preliminary Investigation with the DOJ. Citing Lim v. Court of Appeals (1990) and Tupaz v. Ulep (1999), the Court emphasized that the right to prosecute a criminal tax case prescribes five (5) years from the date the tax assessment becomes final and executory unless tolled by the actual filing of the Information in court. Since the Information was filed only on December 5, 2022, well beyond the five-year prescriptive period, the case was correctly DISMISSED due to prescription. [PEOPLE OF THE PHILIPPINES VS. FAlVO PASCUAL BARTOLOME, CTA EN BANC CRIMINAL CASE NO. 140, MARCH 11, 2025]

A LETTER-REQUEST ADDRESSED TO THE REGIONAL DIRECTOR OF THE BUREAU OF INTERNAL REVENUE NEITHER INTERRUPTS NOR EXTENDS THE 30-DAY PERIOD TO APPEAL

Petitioner Danilo Matias filed a Petition for Review assailing the CTA Second (2^nd) Division Decision dismissing his earlier Petition for Review for lack of jurisdiction. This stems from the Petitioner’s receipt of a letter from the branch manager of the BPI Vigan Branch with a copy of the Warrant of Garnishment (WOG) sometime in March or April 2022. On May 2, 2022, the Petitioner sent a letter to the Bureau of Internal Revenue (BIR) requesting to lift the Warrant of Distraint and/or Levy (WDL) and WOG, which was denied by the BIR Regional Director (RD) on July 7, 2022. He sent another letter on August 30, 2022 reiterating his request to lift the WDL and WOG, which the BIR again denied on September 26, 2022. On October 26, 2022, the Petitioner filed a Petition for Review with the CTA. The CTA 2^nd Division dismissed the case for lack of jurisdiction on the ground that the Petition was belatedly filed. In ruling, the Court held that the WOG and WDL issued against the Petitioner fall within the “other matters” as provided under the Tax Code. However, it is not enough that a collection measure was issued by the BIR. To assail the WOG and WDL, an appeal with the CTA must be filed within 30 days from receipt thereof. Here, the Petitioner failed to challenge the BIR’s collection measures within the 30-day reglementary period to appeal. The letters he sent to the BIR RD requesting the lifting of the warrants neither interrupts the running of the reglementary period nor extends the 30-day period to appeal. It was only when the RD denied his request that the Petition for Review was filed, which at that time, the 30-day period to appeal had already lapsed. Thus, the Petition was DENIED for lack of merit. [DANILO N. MATIAS VS. COMMISSIONER OF INTERNAL REVENUE, MARCH 4, 2025]

[NEA-REGISTERED ELECTRIC COOPERATIVES ARE TAX-EXEMPT UNDER P.D. NO. 269 & SUBSEQUENT AMENDATORY LAWS] [LEGISLATIVE ENACTMENTS ON TAX EXEMPTIONS ARE SUPREME OVER EXECUTIVE ISSUANCES]

Petitioner Commissioner of Internal Revenue (CIR) filed a Petition for Review seeking the reversal of the earlier Decision of the CTA in Division canceling the assessment issued to the Respondent Misamis Oriental II Rural Electric Service Cooperative, Inc. (MORESCO-II), a non-stock, non-profit electric cooperative registered under the National Electrification Administration (NEA). Petitioner argued that the Respondent’s tax exemption under Presidential Decree (P.D.) No. 269 (National Electrification Administration Decree) was withdrawn by Executive Order (E.O.) No. 93, which eliminated tax incentives unless restored by the Fiscal Incentives Review Board (FIRB). It maintained that FIRB Resolution No. 24-87 restored some tax exemptions but subjected income from electric service operations and other sources, such as interest income, to taxation; thus, it remained valid and effectively limited the tax exemption of electric cooperatives. Furthermore, the Respondent was not registered with the Cooperative Development Authority (CDA), a requirement under the Republic Act (R.A.) No. 6938 (Cooperative Code of the Philippines) and R.A. No. 9520 (Philippine Cooperative Code of 2008) to avail of tax exemptions for cooperatives. Additionally, the R.A. No. 10531 (National Electrification Administration Reform Act of 2013), which amended P.D. No. 269, did not expressly reinstate full income tax exemption for NEA-registered electric cooperatives. In response, the Respondent argued that it was permanently exempt from income tax under Section 39 of P.D. No. 269. EO No. 93’s withdrawal of tax exemptions was repealed by R.A. No. 6938, which explicitly stated that PD No. 269 remained unaffected. FIRB Resolution No. 24-87 was inconsistent with subsequent laws and should not override the permanent exemption provided under P.D. No. 269. R.A. No. 10531 retained P.D. No. 269’s provisions, including tax exemption for NEA-registered cooperatives. Moreover, the Petitioner violated its right to due process by failing to consider its protest arguments before issuing the final assessment. In ruling, the Court held that the High Court, in prior cases, had already ruled that R.A. No. 6938 repealed E.O. No. 93’s withdrawal of tax exemptions, thereby effectively reinstating the tax exemption of NEA-registered cooperatives. The Court also noted that the Petitioner failed to properly consider the Respondent’s arguments in its protest, violating its right to due process. Thus, the Court AFFIRMED the earlier decision resulting in the CANCELLATION of the assessment. [COMMISSIONER OF INTERNAL REVENUE VS. MISAMIS ORIENTAL II RURAL ELECTRIC SERVICE COOPERATIVE, INC., CTA EN BANC CASE NO. 2796, FEBRUARY 28, 2025]

[WHILE THE BIR IS NOT OBLIGED TO ACCEPT THE TAXPAYER’S EXPLANATIONS, ANY REJECTION MUST BE ACCOMPANIED BY EXPLANATIONS. BIR MUST GIVE THE PARTICULAR FACTS SUPPORTING THE CONCLUSION & THOSE FACTS MUST APPEAR IN THE RECORD] [WHILE SECTION 228 OF THE TAX CODE DOES NOT REQUIRE TAXPAYERS TO RESPOND TO A PAN, THE BIR NONETHELESS IS REQUIRED TO CONSIDER ANY REPLY RECEIVED WITHIN 15 DAY PERIOD ALLOTTED TO TAXPAYERS. THIS CONSIDERATION IS NOT MERELY PROCEDURAL; RATHER, IT SERVES TO UPHOLD DUE PROCESS RIGHTS & TO PROMOTE A MORE EFFICIENT RESOLUTION OF TAX DISPUTES BY SHORTENING THE ASSESSMENT PROCEDURE]

Petitioner Mitsubishi Motors Philippines Corporation filed a Petition for Review seeking the withdrawal and cancellation of the Warrant of Distraint and/or Levy (WDL) issued by the Respondent Commissioner of Internal Revenue (CIR) in relation to the assessment covering Taxable Year 2015. The Petitioner claims the WDL was premature since the Formal Letter of Demand (FLD)/Final Assessment Notice (FAN) was still under protest and not yet final, citing CIR v. Algue, Inc. and CIR v. Pacific Hub Corporation. On the other hand, the Respondent asserts that the Petitioner’s protest should have been filed with the DCIR-OG, as the FLD was signed by the DCIR-OG under RDAO No. 04-2018. Since the protest was incorrectly submitted, the Respondent deems it unfiled; thus, the WDL was lawfully issued, and because the protest was not properly filed, the FLD remains final, leaving no legal obstacle to summary remedies. In ruling, the Court held that the Petitioner properly filed its protest against the FLD/FAN with the ACIR-LTS. Furthermore, a comparison of the Preliminary Assessment Notice (PAN) and FLD/FAN, including their respective Details of Discrepancies, reveals identical computations of the assessment, without any acknowledgment of the Petitioner’s submitted explanations and evidence in the reply to the PAN. The Respondent’s total disregard of these submissions constitutes a violation of the Petitioner’s right to administrative due process, rendering the FLD/FAN as void, and by extension, the WDL. Citing CIR v. Avon Products Manufacturing, Inc., tax assessments must follow due process, requiring the CIR to consider the taxpayer’s evidence and justify any rejection with specific facts. Given that the assessment against the Petitioner is VOID, the Court finds no need to discuss its merits further, and the WDL cannot be given any effect. Consequently, the Petition is GRANTED. The FLD/FAN and WLD issued against the Petitioner are CANCELLED and SET ASIDE. [MITSUBISHI MOTORS PHILIPPINES CORPORATION VS. COMMISSIONER OF INTERNAL REVENUE, CTA CASE NO. 10945, FEBRUARY 27, 2025]

THE THREE-YEAR PERIOD FOR COLLECTION OF DEFICIENCY TAXES IS INTERRUPTED BY A PROPERLY INITIATED COLLECTION EFFORTS

The Petitioner Commissioner of Internal Revenue (CIR) filed a Petition for Review seeking the reversal of the earlier Decision of the CTA in Division holding that its right to collect the alleged deficiency taxes issued to the Respondent Canlubang Waterworks Corporation has prescribed. A closer look of the case revealed that the Respondent requested a settlement to compromise and paid the downpayment. Subsequently, the Petitioner issued a Final Notice Before Seizure, and on March 18, 2008, issued a Warrant of Garnishment (WOG), which was lifted upon the Respondent’s payment of the amount sought. The Petitioner further issued an undated Warrant of Distraint and/or Levy (WDL) which was received by the Respondent on March 29, 2010. Almost a decade later, the Petitioner invited the Respondent to avail of the Tax Amnesty Program for its delinquent account, which the Respondent insisted on being settled already in 2008. The Petitioner denied the Respondent’s application for a compromise settlement and issued a WDL on October 21, 2021. The CTA in Division rendered the assailed decision stating that the Petitioner’s right to collect has prescribed. The Petitioner argues that it had been issuing collection notices over several dates which the Respondent did not refute. In addition, the Petitioner contends that the collection remedies will only be barred by prescription if he fails to proceed with collection efforts within five (5) years from assessment. Thus, the Collection Notices sent to the Respondent should have suspended the running of the prescriptive period. The Respondent on the other hand counters that the prescriptive period for collection is three (3) years, not five (5) years, and that the issuance of collection letters does not suspend the 3-year prescriptive period. Rather, it is the service of a WDL which suspends the prescriptive period. In ruling, the Court held that the Petitioner’s right to collect had already prescribed. Citing the case of QL Development, the Court reiterated that the High Court consistently applied the 3-year period under Section 203 of the NIRC to the collection of taxes not just to assessments. One of the instances where the 3-year prescriptive period can be interrupted is by the issuance of Warrant of Distraint or Levy. Thus, a collection effort must be initiated by court proceedings or by Distraint or Levy before the prescriptive period is interrupted. Consequently, the letters addressed to the Respondent is a mere demand for payment, and that the service of WDL interrupts the 3-year prescriptive period to collect. Since the earliest effort of the Petitioner to institute collection proceedings is through the issuance of WOG made on March 18, 2008, or more than five (5) years after the issuance of the FLD, the Petitioner’s right to collect has indeed prescribed. Thus, the Petition was DENIED for lack of merit. [COMMISSIONER OF INTERNAL REVENUE VS. CANLUBANG WATERWORKS CORPORATION, FEBRUARY 27, 2025]