Commissioner of Internal Revenue vs. Bank of the Philippine Islands

The three-year prescriptive period for the collection of assessed taxes through summary administrative remedies such as distraint and levy commences from the date of assessment and is not suspended by the mere filing of a protest unless the request for reinvestigation is granted; waivers of the statute of limitations for tax assessment must be executed in the form prescribed by tax regulations and signed by both the Commissioner of Internal Revenue and the taxpayer to constitute a valid bilateral agreement.

Citytrust Banking Corporation (Citytrust) incurred deficiency internal revenue taxes for taxable year 1986, comprising income tax, 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). To extend the prescriptive period for assessment, Citytrust executed three Waivers of the Statute of Limitations dated August 11, 1989, July 12, 1990, and November 8, 1990. On May 6, 1991, the Commissioner of Internal Revenue (CIR) issued Assessment Notices demanding payment of P20,865,320.29. Citytrust protested the assessments on May 30, 1991. On October 4, 1996, Citytrust merged with Bank of the Philippine Islands (BPI), with BPI emerging as the surviving corporation and assuming Citytrust's tax liabilities.

• The Assessments and Waivers: For taxable year 1986, Citytrust was assessed deficiency taxes totaling P20,865,320.29, broken down as income tax (P19,202,589.97), EWT (P1,582,815.03), WTD (P33,065.29), DFT (P7,175.00), and penalties for late WTC remittance (P39,675.00). Prior to the assessment, Citytrust executed three Waivers of the Statute of Limitations on August 11, 1989, July 12, 1990, and November 8, 1990, purporting to extend the period for the CIR to assess.
• Protest and Demand: Citytrust filed a protest against the assessments on May 30, 1991. The CIR, through a letter dated February 5, 1992, demanded payment of the deficiency taxes within ten days.
• Corporate Merger: On October 4, 1996, Citytrust and BPI entered into a merger agreement, with BPI as the surviving entity, thereby assuming Citytrust's tax liabilities.
• The Warrant of Distraint and/or Levy: On October 27, 2011, the CIR issued a Warrant of Distraint and/or Levy against BPI to collect the deficiency EWT, WTD, DFT, and WTC amounting to P1,624,930.32 (excluding the income tax portion which was the subject of separate proceedings in G.R. No. 224327).
• Proceedings Before the CTA: BPI filed a petition for review before the CTA Third Division seeking to suspend collection, cancel the October 27, 2011 Warrant, and enjoin the CIR from implementing it. In a Decision dated April 16, 2014, the CTA Division cancelled the warrant, ruling that the assessments were issued beyond the prescriptive period and that the waivers were invalid. The CTA En Banc affirmed this decision on March 17, 2016.

• Jurisdiction and Finality of Assessment: The CIR maintained that the letter dated February 5, 1992 constituted a final decision denying Citytrust's protest, which became final and executory when not appealed within 30 days. BPI's petition filed in 2011 was therefore out of time, depriving the CTA of jurisdiction.
• Validity of Waivers: The CIR argued that the waivers of the statute of limitations were valid and binding, and that BPI was estopped from assailing their validity for having failed to raise objections at the administrative level.
• Prescription of Right to Collect: The CIR contended that the right to assess and collect the deficiency taxes had not prescribed.

• Jurisdiction: BPI countered that the petition before the CTA questioned the propriety of the Warrant of Distraint and/or Levy—a collection measure—and not a final decision on the assessments. The CTA possessed jurisdiction over "other matters" arising under the National Internal Revenue Code, including collection actions.
• Invalidity of Waivers: BPI argued that the waivers were defective: the August 11, 1989 waiver lacked the CIR's signature, while the subsequent waivers failed to comply with the formal requirements of Revenue Memorandum Order No. 20-90.
• Prescription: BPI maintained that the assessments were issued beyond the three-year prescriptive period and that the right to collect had prescribed, the warrant having been issued twenty years after the assessment.

• Jurisdiction of the CTA: Whether the Court of Tax Appeals had jurisdiction over BPI's petition for review.
• Prescription of Right to Assess: Whether the CIR timely issued assessments against Citytrust for deficiency EWT, WTD, DFT, and WTC for taxable year 1986.
• Prescription of Right to Collect: Whether the CIR may still collect the unpaid taxes through summary administrative remedies.

• Jurisdiction of the CTA: The CTA properly exercised jurisdiction. BPI's petition primarily assailed the issuance and implementation of the October 27, 2011 Warrant of Distraint and/or Levy, not a final decision on the assessments. The authority of the CTA extends to "other matters" arising from tax laws, encompassing rules and measures on tax collection.
• Prescription of Right to Assess: The right to assess had prescribed. The waiver dated August 11, 1989 was invalid for lack of the CIR's signature, failing to constitute a bilateral agreement as required by Section 223 of the 1977 Tax Code and the Civil Code. The waivers dated July 12, 1990 and November 8, 1990 were similarly invalid for non-compliance with the formal requirements of Revenue Memorandum Order No. 20-90. Without valid waivers, the assessments issued on May 6, 1991 were beyond the three-year prescriptive period.
• Prescription of Right to Collect: The right to collect had prescribed. Under the 1977 Tax Code, taxes assessed within the limitation period may be collected by distraint or levy within three years following the assessment. The latest possible date of assessment was May 30, 1991, when Citytrust filed its protest. The CIR issued the warrant on October 27, 2011, twenty years later, well beyond the three-year period for collection. The filing of a protest does not suspend the prescriptive period for collection unless the request for reinvestigation is granted, which the CIR failed to prove.

• Validity of Waivers of Statute of Limitations — Waivers of the statute of limitations for tax assessment must be in the form prescribed by applicable tax regulations and constitute a bilateral agreement between the Commissioner of Internal Revenue and the taxpayer. The signature of the CIR is essential; a waiver signed only by the taxpayer is invalid and does not extend the prescriptive period. Moreover, estoppel does not lie against the taxpayer for defects in waivers caused by the tax authorities themselves.
• Prescriptive Period for Collection of Taxes — The three-year prescriptive period for the collection of assessed taxes through summary administrative remedies (distraint and levy) commences from the date the assessment notice is released, mailed, or sent to the taxpayer. The filing of a protest against an assessment does not suspend the running of the prescriptive period for collection unless the CIR grants a request for reinvestigation.
• Jurisdiction of the Court of Tax Appeals — The CTA exercises jurisdiction over "other matters" arising under the National Internal Revenue Code, which includes challenges to the propriety of tax collection measures such as warrants of distraint and/or levy, distinct from petitions assailing final decisions on disputed assessments.

• "While taxes are the lifeblood of the nation, the Court cannot allow tax authorities indefinite periods to assess and/or collect alleged unpaid taxes. Certainly, it is an injustice to leave any taxpayer in perpetual uncertainty whether he will be made liable for deficiency or delinquent taxes."
• "That both parties must signify their assent in extending the assessment period is not merely a formal requisite under tax rules, but one that is essential to the validity of a contract under the Civil Code."

• Commissioner of Internal Revenue v. Bank of the Philippine Islands, G.R. No. 224327, November 16, 2018 — Controlling precedent regarding the invalidity of waivers lacking the CIR's signature and the non-suspension of prescriptive periods where no reinvestigation was granted; followed in determining that the February 5, 1992 letter could not be considered a final decision without proof of receipt.
• Commissioner of Internal Revenue v. The Stanley Works Sales (Phils.), Inc., 749 Phil. 280 (2014) — Cited for the principle that waivers must conform to the form prescribed by tax regulations.
• Philippine Journalists, Inc. v. Commissioner of Internal Revenue, 488 Phil. 218 (2004) — Cited for the doctrine that the prescriptive period is not suspended unless a request for reinvestigation is granted.
• Bank of the Philippine Islands v. Commissioner of Internal Revenue, 738 Phil. 577 (2014) — Cited for the rule that the three-year period for collection commences from the date the assessment notice is released, mailed, or sent.

• Section 7(a)(1), Republic Act No. 1125 — Grants the Court of Tax Appeals jurisdiction over "other matters" arising under the National Internal Revenue Code or other laws administered by the Bureau of Internal Revenue.
• Section 223, National Internal Revenue Code of 1977 (Presidential Decree No. 1158) — Allows the Commissioner and the taxpayer to agree in writing to extend the period for assessing taxes.
• Section 318, Presidential Decree No. 1158 — Prescribes the three-year period for assessment of taxes and the ten-year period for assessment where no return is filed.
• Section 319(b), Presidential Decree No. 1158 — Provides that taxes assessed within the period of limitation may be collected by distraint or levy or by proceeding in court within three years following the assessment.
• Revenue Memorandum Order No. 20-90 — Prescribes the specific form and requirements for waivers of the statute of limitations.

Perlas-Bernabe (Chairperson), Hernando, and Delos Santos, JJ., concurred. Baltazar-Padilla, J., was on leave.