Commissioner of Internal Revenue vs. Hambrecht & Quist Philippines, Inc.

The Court of Tax Appeals has jurisdiction to resolve the issue of prescription of the right to collect taxes even if the underlying assessment has become final and unappealable, as the validity of an assessment is separate and distinct from the issue of whether the right to collect the assessed tax has prescribed. Moreover, the prescriptive period for collection is not suspended by a mere request for reinvestigation; suspension requires that the request be granted by the Commissioner of Internal Revenue.

Respondent Hambrecht & Quist Philippines, Inc. received a tracer letter in November 1993 demanding payment of deficiency income and expanded withholding taxes for the taxable year 1989, stemming from the disallowance of certain expense items including management fees. Respondent filed a protest and request for reinvestigation in December 1993. The CIR took no action on the protest for nearly eight years, ultimately denying it in October 2001 on the ground that it was filed beyond the 30-day reglementary period.

• Change of Address: On February 15, 1993, respondent informed the BIR-West Makati District Office of its change of business address, which was received on February 18, 1993.
• Assessment and Protest: The BIR sent Assessment Notice No. 001543-89-5668 via registered mail on January 8, 1993, to respondent's former address. On November 4, 1993, respondent received a tracer letter demanding payment of deficiency income and expanded withholding taxes for 1989. On December 3, 1993, respondent filed a protest letter with a request for reinvestigation.
• CIR Inaction and Denial: The CIR did not act upon the protest. Nearly eight years later, on November 7, 2001, respondent's external auditors received a letter dated October 27, 2001, denying the protest on the ground that it was filed beyond the 30-day reglementary period prescribed by Section 229 of the NIRC.
• CTA Findings: The CTA Original Division held that the assessment was valid and had become final and unappealable because it was sent to the former address before the BIR was formally notified of the change. However, the CTA found that the CIR failed to collect the assessed taxes within the prescriptive period, noting that no action was taken on the protest and the request for reinvestigation was not granted.

• CTA Jurisdiction: Petitioner argued that the CTA had no jurisdiction to rule on the prescription of the right to collect because the assessment had already become final and unappealable. The term "other matters" in Section 7 of Republic Act No. 1125 presupposes that the tax assessment has not become final.
• Prescription: Petitioner insisted that the prescriptive period to collect the deficiency tax was suspended by respondent’s request for reinvestigation.

• CTA Jurisdiction: Respondent maintained that the CTA possessed jurisdiction over the issue of prescription as an "other matter" arising under the NIRC, separate from the validity of the assessment.
• Prescription: Respondent argued that the right to collect had prescribed because the three-year period under Section 223(c) of the 1986 NIRC had lapsed, and the prescriptive period was not suspended since the request for reinvestigation was never granted by the CIR.

• CTA Jurisdiction: Whether the Court of Tax Appeals has jurisdiction to rule that the government’s right to collect the tax has prescribed.
• Prescription of Collection: Whether the period to collect the assessment has prescribed.

• CTA Jurisdiction: The CTA possesses jurisdiction over the issue of prescription. Section 7 of Republic Act No. 1125 grants the CTA appellate jurisdiction over "other matters arising under the National Internal Revenue Code," a phrase limited only by its qualifying text and separate from jurisdiction over disputed assessments. The validity of an assessment is distinct from the issue of whether the right to collect the assessed tax has prescribed. A final and unappealable assessment merely precludes questioning the validity or correctness of the assessment; it does not foreclose a challenge to the collection on the ground of prescription.
• Prescription of Collection: The period to collect the assessment prescribed. Section 224 of the 1986 NIRC dictates that two requisites must concur to suspend the prescriptive period: (a) the taxpayer requests for reinvestigation, and (b) the Commissioner grants such request. Because the CIR dismissed the protest on the ground that the assessment had become final and executory, the request for reinvestigation was not granted. A mere ungranted request does not operate to suspend the running of the period to collect taxes.

• Jurisdiction of the CTA over "other matters" — The appellate jurisdiction of the CTA under Section 7 of Republic Act No. 1125 covers not only decisions of the CIR on disputed assessments or refunds but also other cases arising out of the NIRC or related laws administered by the BIR. The phrase "other matters" is independent of the status of an assessment and is limited only by the qualifying phrase "arising under the National Internal Revenue Code or other law administered by the Bureau of Internal Revenue."
• Suspension of the prescriptive period for collection — Under Section 224 of the 1986 NIRC, two requisites must concur before the period to enforce collection may be suspended: (1) the taxpayer requests for reinvestigation, and (2) the Commissioner of Internal Revenue grants such request. A mere protest or request for reinvestigation that is not granted does not suspend the prescriptive period.

• "To be sure, the fact that an assessment has become final for failure of the taxpayer to file a protest within the time allowed only means that the validity or correctness of the assessment may no longer be questioned on appeal. However, the validity of the assessment itself is a separate and distinct issue from the issue of whether the right of the CIR to collect the validly assessed tax has prescribed."
• "The plain and unambiguous wording of the said provision dictates that two requisites must concur before the period to enforce collection may be suspended: (a) that the taxpayer requests for reinvestigation, and (b) that petitioner grants such request."

• Protector’s Services, Inc. v. Court of Appeals, 386 Phil. 611 (2000) — Cited by the petitioner to argue that the CTA lacked jurisdiction over a final and unappealable assessment; distinguished and limited by the Court.
• Philippine Journalists, Inc. v. Commissioner of Internal Revenue, G.R. No. 162852, December 16, 2004, 447 SCRA 214 — Followed; established that the CTA's appellate jurisdiction is not limited to assessments or refunds but includes other cases arising under the NIRC.
• Bank of the Philippine Islands v. Commissioner of Internal Revenue, G.R. No. 174942, March 7, 2008, 548 SCRA 105 — Followed; ruled that a request for reinvestigation must be granted by the CIR to suspend the prescriptive period.
• Toshiba Information Equipment (Phils.) Inc. v. Commissioner of Internal Revenue, G.R. No. 157594, March 9, 2010 — Followed; the Court will not lightly set aside the factual conclusions of the CTA, which possesses specialized expertise on tax matters.

• Section 7, Republic Act No. 1125 (as amended) — Defines the appellate jurisdiction of the CTA, specifically covering "other matters arising under the National Internal Revenue Code or other law as part of law administered by the Bureau of Internal Revenue." Applied to confirm CTA jurisdiction over the issue of prescription of the right to collect.
• Section 11, Republic Act No. 1125 (as amended by Republic Act No. 9282) — Provides that any party adversely affected by a decision, ruling, or inaction of the CIR may appeal to the CTA within 30 days. Applied to demonstrate that timely filing an appeal validates the CTA's exercise of jurisdiction.
• Section 3, 1986 NIRC — Enumerates the powers and duties of the BIR, including the assessment and collection of national internal revenue taxes. Applied to classify the issue of prescription of collection as an "other matter" within the CTA's jurisdiction.
• Section 223(c), 1986 NIRC — Provides that any internal revenue tax assessed within the period of limitation may be collected by distraint, levy, or court proceeding within three years following the assessment. Applied as the prescriptive period governing the CIR's right to collect.
• Section 224, 1986 NIRC — Provides the rules for the suspension of the running of the statute of limitations on assessment and collection. Applied to rule that the prescriptive period was not suspended because the request for reinvestigation was not granted.

Chief Justice Renato C. Corona (Chairperson), Associate Justice Presbitero J. Velasco, Jr., Associate Justice Diosdado M. Peralta, and Associate Justice Jose Portugal Perez.