Commissioner of Internal Revenue vs. V.Y. Domingo Jewellers, Inc.

The Court of Tax Appeals lacks jurisdiction over a petition for review challenging assessment notices where the taxpayer failed to file an administrative protest and obtain a decision from the Commissioner of Internal Revenue, as Section 7 of Republic Act No. 1125 confines the CTA's appellate jurisdiction to decisions of the CIR in cases involving disputed assessments, refunds, or other matters arising under the National Internal Revenue Code, not to the assessments themselves.

V.Y. Domingo Jewellers, Inc., a corporation engaged in manufacturing and selling emblematic jewelry, received a Preliminary Assessment Notice from the Bureau of Internal Revenue on September 9, 2009, assessing deficiency income tax and value-added tax totaling P2,781,844.21 for taxable year 2006. The taxpayer filed a Request for Re-evaluation/Re-investigation and Reconsideration with the Regional Director. Subsequently, on August 10, 2011, the taxpayer received a Preliminary Collection Letter informing it of the existence of Assessment Notice Nos. 32-06-IT-0242 and 32-06-VT-0243 dated November 18, 2010, demanding payment of P3,164,617.43 and threatening enforcement through administrative summary remedies.

• The Assessment: On September 9, 2009, the Bureau of Internal Revenue issued a Preliminary Assessment Notice against V.Y. Domingo Jewellers, Inc., assessing deficiency income tax and value-added tax in the total amount of P2,781,844.21 for taxable year 2006.
• Administrative Request: On September 17, 2009, V.Y. Domingo filed a Request for Re-evaluation/Re-investigation and Reconsideration with the Regional Director of BIR Revenue Region No. 6, seeking verification of the computation and accounts included in the PAN.
• Preliminary Collection Letter: On August 10, 2011, the Revenue District Office No. 28 issued a Preliminary Collection Letter informing V.Y. Domingo of Assessment Notice Nos. 32-06-IT-0242 and 32-06-VT-0243 dated November 18, 2010, for the collection of tax liabilities totaling P3,164,617.43. The letter demanded payment within ten days and threatened enforcement through administrative summary remedies.
• Receipt of Assessment Notices: On September 12, 2011, V.Y. Domingo requested certified true copies of the Assessment Notices. Upon receipt of the copies on September 15, 2011, V.Y. Domingo filed a Petition for Review with the CTA First Division on September 16, 2011, without filing an administrative protest.
• Procedural Posture: The CIR moved to dismiss the petition for lack of jurisdiction, arguing that the CTA has no jurisdiction over assessment notices that have not been disputed administratively. The CTA First Division granted the motion, but the CTA En Banc reversed, leading to the present appeal.

• Jurisdictional Limitation: The CIR argued that assessment notices are not appealable to the CTA, as the power to decide disputed assessments is vested exclusively in the CIR, subject only to the appellate jurisdiction of the CTA under Section 7 of R.A. No. 1125.
• Premature Resort to Courts: The CIR maintained that V.Y. Domingo's petition was anchored on the Preliminary Collection Letter, which the taxpayer mistakenly treated as a denial of its motion for reinvestigation, constituting a violation of the doctrine of exhaustion of administrative remedies.
• Receipt of Assessment Notices: The CIR contended that V.Y. Domingo received copies of the Assessment Notices and the Formal Letter of Demand on September 15, 2011, yet failed to file the appropriate protest within thirty days, instead opting to immediately institute a petition for review.

• Scope of CTA Jurisdiction: V.Y. Domingo countered that the CTA's jurisdiction is not limited to review of decisions of the CIR in cases involving disputed assessments, but includes "other matters arising under the National Internal Revenue or other laws administered by the Bureau of Internal Revenue" pursuant to Section 7 of R.A. No. 1125.
• Non-Receipt of Formal Assessment Notice: V.Y. Domingo argued that there was no "disputed" assessment to speak of because it never received the Formal Assessment Notice, and the tenor of the Preliminary Collection Letter indicated that the CIR had already decided to deny any protest regarding the assessment.
• Exception to Exhaustion: V.Y. Domingo maintained that the case falls under the exception to the rule on exhaustion of administrative remedies, citing Allied Banking Corporation v. CIR, wherein the Court held that filing a petition for review without first contesting the Formal Assessment Notice was permissible where the demand letter constituted the final decision of the CIR.

• Jurisdiction of the CTA: Whether the Court of Tax Appeals has jurisdiction to entertain a petition for review challenging assessment notices where the taxpayer failed to file an administrative protest and obtain a decision from the Commissioner of Internal Revenue.
• Exhaustion of Administrative Remedies: Whether the taxpayer's failure to file an administrative protest against the assessment notices constitutes a failure to exhaust administrative remedies that deprives the CTA of jurisdiction.

• Jurisdictional Limitation: The CTA lacks jurisdiction over a petition for review directly challenging assessment notices. Section 7 of R.A. No. 1125, as amended by R.A. No. 9282, grants the CTA exclusive appellate jurisdiction to review decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, not the assessments themselves. An assessment becomes "disputed" only when the taxpayer questions it and asks the Commissioner to reconsider or cancel the same, triggering the Commissioner's duty to decide.
• Failure to Exhaust Administrative Remedies: V.Y. Domingo's immediate recourse to the CTA violated the doctrine of exhaustion of administrative remedies. Section 228 of the National Internal Revenue Code requires taxpayers to file a request for reconsideration or reinvestigation within thirty days from receipt of the assessment. The taxpayer received certified true copies of the Assessment Notices on September 15, 2011, but filed its petition for review on September 16, 2011, without filing the required protest.
• Inapplicability of Allied Banking Exception: The ruling in Allied Banking Corporation v. CIR, which recognized an exception to the exhaustion requirement where the demand letter constituted a final decision, does not apply. The Preliminary Collection Letter in this case did not contain the words "final decision" or "appeal" that characterized the demand letter in Allied Banking. The language used merely demanded payment and threatened collection remedies, without indicating a final denial of the taxpayer's pending request for re-evaluation.

• Doctrine of Exhaustion of Administrative Remedies in Tax Cases: Before seeking judicial intervention, a taxpayer must avail of all administrative processes afforded by law, specifically by filing a protest against an assessment within the period prescribed by Section 228 of the National Internal Revenue Code. This requirement gives the Commissioner the opportunity to re-examine findings and decide issues within her competence.
• Jurisdiction of the Court of Tax Appeals: The CTA is a court of special jurisdiction and may take cognizance only of matters clearly within its jurisdiction under Section 7 of R.A. No. 1125. Its appellate jurisdiction is limited to decisions of the Commissioner of Internal Revenue on disputed assessments, refunds, or other matters arising under the National Internal Revenue Code, and does not extend to the assessment notices themselves.
• Three Options to Dispute an Assessment: Under Section 228 of the NIRC and Section 3.1.5 of Revenue Regulations No. 12-99, a protesting taxpayer has three options: (1) if the protest is denied by the CIR or authorized representative, appeal to the CTA within 30 days from receipt of denial; (2) if denied by the authorized representative, appeal to the CIR within 30 days from receipt of denial; or (3) if the CIR or representative fails to act within 180 days from submission of documents, appeal to the CTA within 30 days from lapse of the 180-day period.

• "The CTA, being a court of special jurisdiction, can take cognizance only of matters that are clearly within its jurisdiction."
• "Where a taxpayer questions an assessment and asks the Collector to reconsider or cancel the same because he (the taxpayer) believes he is not liable therefor, the assessment becomes a 'disputed assessment' that the Collector must decide, and the taxpayer can appeal to the CTA only upon receipt of the decision of the Collector on the disputed assessment."
• "The word 'decisions' in the aforementioned provision of R.A. No. 9282 has been interpreted to mean the decisions of the CIR on the protest of the taxpayer against the assessments. Definitely, said word does not signify the assessment itself."
• "Under the doctrine of exhaustion of administrative remedies, before a party is allowed to seek the intervention of the court, he or she should have availed himself or herself of all the means of administrative processes afforded him or her."

• Allied Banking Corporation v. Commissioner of Internal Revenue, 625 Phil. 530 (2010) — Distinguished. The Court held that the exception to the exhaustion doctrine recognized in Allied Banking, where the demand letter constituted the CIR's final decision, does not apply where the Preliminary Collection Letter lacks the specific language ("final decision" and "appeal") that indicated finality in the Allied Banking case.
• Lascona Land Co., Inc. v. Commissioner of Internal Revenue, 683 Phil. 430 (2012) — Cited for the proposition that the word "decisions" in R.A. No. 9282 refers to decisions of the CIR on the protest of the taxpayer against assessments, not the assessments themselves.
• Philippine Amusement and Gaming Corp. v. Bureau of Internal Revenue, 119 Phil. 547 (2016) — Cited for the enumeration of the three options available to a taxpayer to dispute an assessment under Section 228 of the NIRC.

• Section 7, Republic Act No. 1125 (as amended by Republic Act No. 9282) — Defines the exclusive appellate jurisdiction of the Court of Tax Appeals to review decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds, or other matters arising under the National Internal Revenue Code.
• Section 228, National Internal Revenue Code of 1997 (Republic Act No. 8424) — Governs the procedure for protesting assessments, requiring taxpayers to file a request for reconsideration or reinvestigation within thirty days from receipt of the assessment, and providing the mechanism for administrative and judicial appeals.
• Section 3.1.5, Revenue Regulations No. 12-99 — Implements Section 228 of the NIRC, detailing the procedure for disputing assessments, including the thirty-day period to file a protest and the consequences of failure to protest.

A. Reyes, Jr., Hernando, and Carandang, JJ., concurred. Leonen, J., was on wellness leave.