Commissioner of Internal Revenue vs. Chailease Finance Corporation

DECISION

BAUTISTA, I.:

The Case

Before Us is a Petition for Reviewl filed by the Commissioner of Internal Revenue pursuant to paragraph 2, Section 18 of Republic Act No. 1125, as amended

E. B. No. 440 (C.T.A. Case No. 7021) by Republic Act No. 9282 and Rule 8, Section 4(b) of the Revised Rules of the Court of Tax Appeals, praying for the reversal of:

1. the Resolution2 dated June 5, 2008 rendered by the Second Division of the Court ("Court in Division") in CTA Case No. 7021, which cancelled petitioner's assessments for deficiency income, percentage, withholding and documentary stamp taxes for taxable year 1999 for having been issued beyond the prescriptive period; and

2. the Resolution3 of the Court in Division promulgated on November 11, 2008, which denied petitioner's Motion for Reconsideration for lack of merit.

The Facts

Petitioner is the duly appointed Commissioner of Internal Revenue, with office address at the BIR National Office Building, Agham Road, Quezon City.4 Respondent is a finance corporation duly organized and existing under the laws of the Republic of the Philippines, with business address at Unit 1202, 12/F Antel2000, 121 Valero Street, Salcedo Village, Makati City.s On September 12, 2003, the Bureau of Internal Revenue ("BIR") Revenue Region No.8, Makati City, issued the following Final Assessment Notices ("FANs") for taxable year 1999 against respondent:

A

B

c

D

2 Rollo, pp. 12 - 20.

3 !d., at pp. 21 - 23.

4 !d., at p. 6.

5 !d., at p. 82.

WE-4760-99-03-384

DS-4760-99-03-384

407,220.69 4,503,099.03

I

E.B. No. 440 (C.T.A. Case No. 7021)

For the following internal revenue taxes, respondent filed the corresponding returns:

INCOME TAX

~Ill; -" '".

··~··"''·'"" . !2,~it ·:~ ~a7:r·~, ·J>er.i.od @9'v~!ed, ''gft,' ®?' Dtlte File(:{*' '~

J

Calendar Year 1999

April28, 2000

PERCENTAGE TAX

.ittm~? .,~ .eW!eXb.fpit .:¹.~11.:~: I! m1•£e,ri9d <;overed~""· ~ ~]:

JI;· Dllt~EilM.

K

1st Quarter 1999 April26, 1999

L

2nd Quarter 1999 July 20, 1999

M

3rd Quarter 1999 Octo her 25, 1999

N

4th Quarter 1999 January 14, 2000

WITHHOLDING TAX

1:4.&. ,;;,rt,. :'~Hxhibit;rjl1 , Sii ·~:>eeti,Gd Gtovetedlffii;;. l·'flfu1! ..... Date tfliledi .~t '~' 0

January 1999

Februal}' 10, 1999 p

February 1999

March 4, 1999

Q

March 1999

April12, 1999

R

April1999

May 7,1999 s

May 1999

June 3, 1999

T

June 1999

July 7, 1999 u

July 1999

August 6, 1999 v

August1999

September 9, 1999 w

SeQtember 1999

October 8, 1999

X

October 1999

November 8, 1999 y

November 1999

December 8,1999 z

December 1999

January 10, 2000

AA

January 25, 2000

DOCUMENTARYSTAMPTAX

···.~~tJL··;~::t::ti:E~tt.!lli':!iil•!ill;~ lfli.g,·PeiiOd <:;pve',[,ecl•;, '& i:tf 'i~ Date iiled .. 1-Jk •.

CC, DD,EE January 7, 1999 FF,GG,HH

January 1999

February 1, 1999

II

March 11, 1999 KK, LL February 1, 1999 MM,SS February 12, 1999 PP, QQ February 18, 1999

TT

February 1999

February 18, 1999

BBB

February 24, 1999 vv February 26, 1999 ww July15, 1999 YY, ZZ,AAA March 11, 1999 DDD, EEE, GGG, March 2, 1999

HHH

JJJ

March 25, 1999 MMM, NNN, 000

March 1999

March 17, 1999 PPP, UUU, VVV March 23, 1999 QQQ, WWW March 24, 1999 KKK, SSS, TTT March 25, 1999

RRR

May 5,1999

DDDD

April1999

April6, 1999 YYY, ZZZ April21, 1999

AAAA

April27, 1999 EEEE, FFFF, HHHH May 5, 1999

I

E.B. No. 440 (C.T.A. Case No. 7021)

GGGG

May 13,1999 !III May 25,1999

GGGGG

May 5,1999 KKKK, LLLL May 7,1999

NNNNN

May 13,1999 NNNN, 0000, JJJJJ May 14,1999 QQQQ,RRRR May 18,1999 ITIT, UUUU May 19,1999 wwww,xxxx

May 1999

May 21,1999 ZZZZ, AAAAA, May 25,1999 HHHHH, IIIII,

KKKKK

SDDDD

May 26,1999 FFFFF, MMMMM May 27,1999

LLLLL

June 3,1999 In addition to the foregoing exhibits, respondent also presented the following exhibits of the independent certified public accountant ("CPA") representing respondent's documentary stamp tax payments, as follows: a.

For Documentary Stamp Tax Returns and Payments covering June 1999 up to and including December 1999- Summaries on respondent's monthly loan releases for purposes of the documentary stamp taxes on loan releases:

CPA Exhibits Nos. "B"- "B-5"- January 1999 CPA Exhibits Nos. "C"- "C-8"- February 1999 CPA Exhibits Nos. "D" to "D-10"- March 1999 CPA Exhibits Nos. "E" to "E-7"- April1999 CPA Exhibits Nos. "F" to "F-15"- May 1999 CPA Exhibits Nos. "G" to "G-9"- June 1999 CPA Exhibits Nos. "H" to "H-17"- July 1999 CPA Exhibits Nos. "I" to "I-12"- August 1999 CPA Exhibits Nos. "J" to "J-15"- September 1999 CPA Exhibits Nos. "K" to "K-11"- October 1999 CPA Exhibits Nos. "L" to "L-5"- November 1999 CPA Exhibits Nos. "M" to "M-14"- December 1999 (as detailed out and specifically described in the List entitled "Loan Releases, Annex "A" of petitioner's "Motion to Adopt Certain Exhibits of the Independent CPA" dated 14 July 2006) Summaries on the respondent's monthly DST payments on its loan releases: CPA Exhibits Nos. "V"- "V-47" and "G-0-1"- June 1999 CPA Exhibits Nos. "W" to "W-79", "H-0-1" to "H-2-1" and "H-6-1" to "H-9-1"-

July 1999

CPA Exhibits Nos. "X" to "X-62" and "I-0-1" to "I-8-1"- August1999 CPA Exhibits Nos. "Y" to "Y-73", "J-9-1", "J-11-1" to "J-14-1"- September 1999 CPA Exhibits Nos. "Z" to "Z-56", "K-0-1" to "K-1-1", "K-3-1" to "K-6-1" -

October 1999

I

E.B. No. 440 (C.T.A. Case No. 7021)

CPA Exhibits Nos. "AA" to "AA-53", "AA-56" to "AA-74", "L-0-1", "L-2-2", and

"L-3-1"- November 1999

CPA Exhibits Nos. "BB" to "BB-94", "M-5-1" to "M-10-1" and "M-12-1" to "M-

14-1"- December 1999

(as detailed out and specifically described in the List entitled "Loan Releases, Annex "B" of respondent's "Motion to Adopt Certain Exhibits of the Independent CPA" dated 14 July 2006) b.

DST Returns and Payments regarding the respondent's Real and Other Personal

Property Owned and Acquired ("ROPOA") Accounts -

c.

For the period 1999 CPA Exhibits Nos. "TTT" to "TTT-1" and "XXX" to "XXX:-1"- BMG Trading CPA Exhibits Nos. "UUU" and "YYY" - Gene Urbano de Leon CPA Exhibits Nos.

"VVV"

and "ZZZ" to "ZZZ-2" -

Metro

Tours/Huang, Margaret Tee CPA Exhibits Nos. "WWW" and" AAAA" to "AAAA-4" -Federal Builders (as detailed out and specifically described in the List entitled Real and Other Personal Property Owned and Acquired ("ROPOA") for the period 1999, Annex "C" of respondent's "Motion to Adopt Certain Exhibits of the Independent CPA" dated 14July 2006) For the period prior to 1999 CPA Exhibits Nos. "ZZ" to "ZZ-1" and "JJJ" to "JJJ-1"- A. Paguio Junk Shop CPA Exhibits Nos. "AAA" to "AAA-1" and "KKK" to "KKK-1" - Citybook

Supply

CPA Exhibits Nos. "BBB" and "LLL" to "LLL-1" -Energym Fitness Club CPA Exhibits Nos. "CCC" to "CCC-4" and "MMM" to "MMM-3"- Jessan Metal

Works

CPA Exhibits Nos. "DOD" and "NNN"- Jorge Vistan CPA Exhibits Nos. "EEE" to "EEE-2" and "000" -Larew International Trade and Manufacturing, Inc.

CPA Exhibits Nos. "FFF" to "FFF-1" and "PPP" - Miracle Air-Sea International

Corporation

CPA Exhibits Nos. "GGG" to "GGG-1" and "QQQ"- R.U. Transport Forwarders CPA Exhibits Nos. "HHH" and "RRR" -AMY Enterprises CPA Exhibits Nos. "III" and "SSS" to "SSS-1"- Kaung Shaing Lin (as detailed out and specifically described in the List entitled Real and Other Personal Property Owned and Acquired ("ROPOA") for the period prior to 1999, Annex "D" of respondent's "Motion to Adopt Certain Exhibits of the Independent CPA" dated 14 July 2006) DST filing of returns and payment on respondent's original issuance of shares - Exhibit Nos. "VV", "WW", and "XX" (as detailed out and specifically described in the List entitled "DST on Original Issuance of Shares, Annex "E" of respondent's "Motion to Adopt Certain Exhibits of the Independent CPA" dated 14 July 2006)6

I

E.B. No. 440 (C.T.A. Case No. 7021)

On October 13, 2003, respondent, through its Assistant Vice-President, filed its protest letter dated October 9, 2003, together with supporting documents and requested the reconsideration and/ or reinvestigation of the subject assessment? On December 11, 2003, respondent submitted the rest of the documents in support of its protest.B The said protest was not acted upon by the BIR Revenue Region No.8, Makati City within one hundred eighty (180) days from December 11, 2003 pursuant to Section 228 of the National Internal Revenue Code ("NIRC') of 1997. Hence, respondent filed a Petition for Review with this Court on July 8, 2004.9 On September 24, 2004, petitioner filed his Answer after being granted by the Court in Division two (2) extensions for the filing thereo£.1° After the Pre-trial conference, the submission of the parties' Joint Stipulation of Facts and the initial presentation of respondent's (petitioner therein) evidence, respondent filed on July 14, 2006 a "Motion to Adopt Certain Exhibits of the Independent CPA" and a "Motion to Resolve Issue of Prescription."ll On October 23, 2006, respondent finished the testimony of its independent CPA. Thus, the Court in Division ordered respondent to submit its Formal Offer of Evidence.12 On December 28, 2006, respondent filed its "Formal Offer of Evidence" on its "Motion to Resolve Issue of Prescription."13 7 Records, C.T.A. Case No. 7021, pp. 26 - 39.

8 !d., at pp. 40 - 41.

9 !d., at pp. 1 - 290, with Annexes.

10 !d. , at pp. 300 - 304.

11 Id. , at pp. 1049 - 1155.

12 Jd. , at p. 1164.

13 Id. , at pp. 1182 - 1234.

I

E.B. No. 440 (C.T.A. Case No. 7021)

In a Resolution dated February 12, 2007, the Court in Division granted the "Motion to Adopt Certain Exhibits of the Independent CPA" and admitted most of respondent's Exhibits.14 Subsequently, petitioner (respondent therein) presented his evidence on the issue of prescription and submitted his Formal Offer of Evidence which was admitted by the Court in Division in its Resolution dated June 19, 2007.15 After several re-settings, respondent presented its rebuttal evidence on the issue of prescription. Its Formal Offer of Rebuttal Evidence was admitted by the Court in Division in its Resolution promulgated on January 3, 2008.16 Thereafter the parties were required to file their Memoranda. Only respondent filed its Memorandum. Hence, the "Motion to Resolve Issue of Prescription" was submitted for resolution.

The Ruling of the Court in Division

On June 5, 2008, the Court in Division rendered a Resolution in favor of respondent.

The Court in Division found that since respondent filed its Annual Income Tax Return for the year 1999 on April 28, 2000 and all its other returns were filed prior to the said date, the last day for petitioner's assessment for any deficiency income tax falls on April 28, 2003, while the last day for petitioner's assessment for any deficiency percentage, withholding and documentary stamp taxes is prior to the said date. As petitioner issued the disputed assessments on September 12, 2003, the same are barred by prescription.

E. B. No. 440 (C.T.A. Case No. 7021 )

The Court in Division also found defective respondent's copy of the "Waiver of the Defense of Prescription under the Statute of Limitations of the National Internal Revenue Code" ("waiver")17 due to the following reasons: a) The waiver did not contain the date when the period to assess is extended; and b) The waiver was not signed by the Commissioner of Internal Revenue considering that the assessed amount exceeds ~1,000,000.00.

Hence, the Court in Division ruled that since the said waiver is invalid, it failed to extend the prescriptive period to assess deficiency taxes. Thus, the subject Assessment Notices are already time-barred.

The fallo of the Resolution of the Court in Division reads:

WHEREFORE, premises considered, the petitioner's18 motion is hereby GRANTED. Accordingly, the instant Assessments for deficiency income, percentage, withholding and documentary stamp taxes for taxable year 1999 are hereby CANCELLED for having been issued beyond the prescriptive period.

I

E.B. No. 440 (C.T.A. Case No. 7021) petitioner's copy of the waiver marked as Exhibit "1" as valid since the same does not show that respondent received its copy of the waiver after the BIR' s acceptance thereof.

The Issues

Hence, the present recourse with petitioner raising the lone issue of whether his assessments against respondent are time-barred. Fundamentally, the controversy here deals with which copy of the waiver should be considered and whether such waiver is valid, thereby extending the original three-year prescriptive period so as to make the subject Assessment Notices valid. The critical questions to be resolved therefore are: (1) Which copy of the waiver should be considered, (2) Is the waiver valid? and (3) Had the three-year period to assess internal revenue taxes already prescribed?

The Ruling of the Court En Bane

The Petition for Review is without merit.

Under Section 20320 of the 1997 NIRC as amended, internal revenue taxes must be assessed within three years counted from the period fixed by law for the filing of the tax return or the actual date of filing, whichever is later. This rule governs the question. of prescription of the government's right to assess internal revenue taxes mainly to protect the interests of taxpayers from unreasonable investigation. For that reason, the government must assess internal revenue taxes on time so as not to extend ad infinitum the period of assessment and deny the 20 Section 203. Period of Limitation Upon Assessment and Collection. - Except as provided in Section 222, internal revenue taxes shall be assessed within three (3) years after the last day prescribed by law for the filing of the return, and no proceeding in court without assessment for the collection of such taxes shall be begun after the expiration of such period: Provided, That in a case where a return is filed beyond the period prescribed by law, the three (3)-year period shall be counted from the day the return was filed .... (Boldfacing/J supplied).

-f/

E.B. No. 440 (C.T.A. Case No. 7021) taxpayer of the assurance that it will no longer be subjected to further investigation for taxes after the expiration of a reasonable period of time.21 In order to provide even better protection to the taxpayer against unreasonable investigation, the 1997 NIRC as amended, identifies the circumstances when the prescriptive periods for assessing and collecting taxes could be suspended or interrupted.

Under paragraphs (b) and (d) of Section 222 of the 1997 NIRC as amended, the prescriptive periods for assessment and collection of national internal revenue taxes, respectively, could be waived by agreement, scilicet: SEC. 222. - Exceptions as to Period of Limitation of Assessment and Collection of Taxes. -

XXX

XXX

XXX

(b) If before the expiration of the time prescribed in Section 203 for the assessment of the tax, both the Commissioner and the taxpayer have agreed in writing to its assessment after such time, the tax may be assessed within the period agreed upon. The period so agreed upon may be extended by subsequent written agreement made before the expiration of the period previously agreed upon.

XXX

XXX

XXX

(d) Any internal revenue tax, which has been assessed within the period agreed upon as provided in paragraph (b) hereinabove, may be collected by distraint or levy or by a proceeding in court within the period agreed upon in writing before the expiration of the five (5)-year period. The period so agreed upon may be extended by subsequent written agreements made before the expiration of the period previously agreed upon.

The agreements mentioned in the afore-quoted provisions are referred to as waivers of the statute of limitations. It bears stressing that the waiver of the statute of limitations, whether on assessment or collection, should not be construed as a

E. B. No. 440 (C.T.A. Case No. 7021) waiver of the right to invoke the defense of prescription but, rather, an agreement between the taxpayer and the BIR to extend the period to a date certain, within which the latter could still assess or collect taxes due. The waiver does not mean that the taxpayer relinquishes the right to invoke prescription unequivocally.zz Thus, to be valid, a waiver of the statute of limitations under paragraphs (b) and (d) of Section 222 of the 1997 NIRC as amended, must be: (1) in writing; (2) agreed to by both the Commissioner and the taxpayer; (3) before the expiration of the ordinary prescriptive periods for assessment and collection; and ( 4) for a definite period beyond the ordinary prescriptive periods for assessment and collection. The period agreed upon can still be extended by subsequent written agreement, provided that it is executed prior to the expiration of the first period agreed upon. Corollary thereto, the BIR issued Revenue Memorandum Order ("RMO") No. 20-90 on April 4, 1990 to lay down an even more detailed procedure for the proper execution of such a waiver. RMO No. 20-90 mandates that the procedure for the execution of the waiver shall be strictly followed. The relevant provisions of RMO No. 20-90 are as follows:

In the execution of said waiver, the following procedures should be followed:

1.

The waiver must be in the form identified hereof. This form may be reproduced by the Office concerned but there should be no deviation from such form. The phrase 11but not after 19 11 should be filled up. This indicates the expiry date of the period agreed upon to assess/ collect the tax after the regular three-year period of prescription. The period agreed upon shall constitute the time within which to effect the assessment/ collection of the tax in addition to the ordinary prescriptive period.

E.B. No. 440 (C.TA Case No. 7021)

2.

The waiver shall be signed by the taxpayer himself or his duly authorized representative. In the case of a corporation, the waiver must be signed by any of its responsible officials.

Soon after the waiver is signed by the taxpayer, the Commissioner of Internal Revenue or the revenue official authorized by him, as hereinafter provided, shall sign the waiver indicating that the Bureau has accepted and agreed to the waiver. The date of such acceptance by the Bureau should be indicated. Both the date of execution by the taxpayer and date of acceptance by the Bureau should be before the expiration of the period of prescription or before the lapse of the period agreed upon in case a subsequent agreement is executed.

XXX

XXX

XXX

4.

The waiver must be executed in three (3) copies, the original copy to be attached to the docket of the case, the second copy for the taxpayer and the third copy for the Office accepting the waiver. The fact of receipt by the taxpayer of his/her file copy shall be indicated in the original copy.

5.

The foregoing procedures shall be strictly followed. Any revenue official found not to have complied with this Order resulting in prescription of the right to assess/ collect shall be administratively dealt with.

On December 16, 2004, the Supreme Court rendered a decision in the Philippine Journalists23 case which emphasized the mandatory nature of the provisions of RMO No. 20-90.

On February 2, 2005, the BIR issued Revenue Memorandum Circular ("RMC") No. 06-05 which identifies the salient features of the decision of the Supreme Court in the aforementioned Philippine Journalists case, to wit: 1.

A waiver of the statute of limitations under the Tax Code must conform strictly with the provisions of Revenue Memorandum Order No. 20-90 in order to be valid and binding.

23 Supra, note 22.

1.1.

The waiver must specify a definite agreed date between the BIR and the taxpayer within which the former may assess and collect revenue taxes.

I

E.B. No. 440 (C.T.A. Case No. 7021)

1.2.

The waiver must be accepted by the Commissioner of Internal Revenue or his duly authorized representative, and the date of acceptance must be indicated.

1.3.

The taxpayer must be furnished a copy of the waiver accepted by the BIR.

2.

A waiver of the statute of limitations under the Tax Code, to a certain extent, is a derogation of the taxpayer's right to security against prolonged and unscrupulous investigations and must therefore be carefully and strictly construed.

3.

A waiver of the statute of limitations is not a waiver of the rightto invoke the defense of prescription. It is an agreement between the taxpayer and the BIR that the period to issue an assessment and collect the taxes due is extended to a date certain.

4.

A waiver of the statute of limitations is not a unilateral act by the taxpayer or the BIR, but is a bilateral agreement between two parties. With the foregoing backdrop, We shall proceed to discuss the issues in the case at bench.

Which copy of the waiver should be considered?

Petitioner avers that the Court in Division erred in applying the Philippine Journalists case because the said case is inapplicable considering that respondent admitted that it has executed a waiver of the defense of prescription in the parties' Joint Stipulation of Facts. Hence, it no longer requires proof. Respondent on the other hand, admits that it executed a waiver on August 26, 2002 which was marked as Exhibit "PPPPP". However, it points out that the waiver marked as Exhibit "PPPPP" does not bear anything which shows that it was accepted by petitioner.

Respondent likewise maintains that while Exhibit "1" may show on its face that the waiver was duly accepted, the Notary Public, who is petitioner's lawyer';/

E.B. No. 440 (C.T.A. Case No. 7021) effectively attested and confirmed that only respondent's representative signed the waiver and that there was no acceptance by petitioner. Exhibit "1" also does not indicate that respondent received a copy thereof after it was accepted by petitioner. As such, the waiver is void for non-compliance with the mandatory provisions of RMO No. 20-90.

We find merit in the submissions of respondent.

Respondent indeed admitted the execution, for taxable year 1999, of a waiver in the parties' Joint Stipulation of Facts and Issues.24 However, the validity of such waiver was never admitted and is thus the crux of the controversy here, especially considering that the copies of such waiver do not match. Hence, We shall examine all three (3) copies of the waiver.

Section 4 of RMO No. 20-90 requires the waiver to be executed in three (3) copies, the original copy to be attached to the docket of the case, the second copy for the taxpayer and the third copy for the Office accepting the waiver. This presupposes that all three (3) copies are the same. In this case however, there are discrepancies in the three (3) copies of the waiver which were marked as follows:

Exhibit "PPPPP"

Exhibit "Y5"

Exhibit "1"

Executed and signed by Executed and signed by Executed and signed by Terence Liu on August 26, Terence Liu on August 26, Terence Liu on August 26, 2002.

2002.

2002, Has a period of limitation Has no period of limitation. of not later than September 30,2002.

Has no witness.

Has no witness.

24 Rollo, p. 77.

Has a period of limitation of not later than September 30, 2003.

Witnessed and signed by Teofilo J. Babaran, Jr.

E. B. No. 440 (C.T.A. Case No. 7021)

Not signed by the Revenue

District Officer of the East

Makati Office, Simplicia A.

Madulara.

Notarized on August 26, 2002 by Atty. Albert C.

Arpon.

All copies of the waiver are void Not signed by the Revenue

District Officer of the East

Makati Office, Simplicia A.

Madulara.

Notarized on August 26, 2002 by Atty. Albert C.

Arpon.

Accepted and signed by

Revenue District Officer of

the East Makati Office, Simplicia A. Madulara on August 26, 2002 Notarized on August 26, 2002 by Atty. Albert C.

Arpon.

Upon close scrutiny of the three (3) copies of the waiver, We find that all of them are defective.

Exhibit "PPPPP" is respondent's copy of the waiver. It is not signed by the Revenue District Officer of the East Makati Office, Simplicia A. Madulara, thereby violating the requirement under the afore-quoted Section 2 of RMO No. 20-90 in relation to Item 1.2 of RMC No. 06-05, that after the waiver is signed by the taxpayer, the Commissioner of Internal Revenue or the revenue official authorized by him, shall sign the waiver indicating that the Bureau has accepted and agreed to the waiver. It is well to note that the waiver in question is a bilateral agreement, thus necessitating the very signatures of both the Commissioner or his duly authorized representative and the taxpayer to give birth to a valid agreement.25 Exhibit "Y5" is the official certified true copy of the Notary Public, Atty. Albert C. Arpon, who notarized the same and which was submitted by him to the Notarial Section of the Regional Trial Court of Makati City - Office of the Clerk of Court (RTC-OCC). It is also not signed by the Revenue District Officer of the East Makati Office, Simplicia A. Madulara, thereby violating the requirement under the

E. B. No. 440 (C.T.A . Case No. 7021 ) said Section 2 of RMO No. 20-90 in relation to Item 1.2 of RMC No. 06-05. It also does not contain the date when the period to assess is extended in violation of Section 1 of RMO No. 20-90 that the phrase 11but not after ___ 19 _ 11 should be filled up, in relation to Item 1.1 of RMC No. 06-05. This indicates the expiry date of the period agreed upon to assess the tax after the regular three-year period of prescription. The period agreed upon shall constitute the time within which to effect the assessment of the tax in addition to the ordinary prescriptive period. Exhibit "1" is petitioner's copy of the waiver. It is likewise invalid since it does not show that respondent received its copy of the waiver after the BIR' s acceptance thereof. Section 4 of RMO No. 20-90 clearly mandates that the fact of receipt by the taxpayer of his/her file copy shall be indicated in the original copy. In addition, Item 1.3 of RMC No. 06-05 provides that the taxpayer must be furnished a copy of the waiver accepted by the BIR. Furthermore, in the Philippine Journalists case, the Supreme Court explicitly pointed out that "[t]here is compliance with the provision of RMO No. 20-90 only after the taxpayer received a copy of the waiver accepted by the BIR. The requirement to furnish the taxpayer with a copy of the waiver is not only to give notice of the existence of the document but of the acceptance by the BIR and the perfection of the agreement."26 Petitioner also submits that the only issue with regard to the waiver is to determine the valid date when it will expire and with regard to this, credence should be given to the date submitted by petitioner (September 30, 2003) as opposed to the date being alleged by respondent (September 30, 2002). In the case of Bank of the Philippine Islands v. Commissioner of Internal Revenue, G.R. No. 139736, October 26 Supra note 22 at pp. 230 - 231 .

I

E.B. No. 440 (C.T.A. Case No. 7021)

17,2005, the Supreme Court held that the waiver must have a definite period beyond the ordinary prescriptive period for assessment and collection. In this case, respondent's Income Tax Return was filed on April 28, 2000, thus, the last day to assess respondent falls on April 29, 2003. Hence, when respondent admitted that it had executed a waiver, it agreed to be assessed beyond April 29, 2003. Therefore, logic and reason dictates that the valid date is the one asserted by petitioner, which is September 30, 2003.

Petitioner's argument is untenable considering that his copy of the waiver marked as Exhibit "1" is as previously discussed, defective and void. The period to assess has prescribed In fine, since all three (3) copies of the waiver failed to comply strictly with the provisions of RMO No. 20-90 and RMC No. 06-05, they are not binding. Consequently, none of them validly extended the original three-year prescriptive period for the assessment of internal revenue taxes. Therefore, the subject Assessment Notices which are all dated September 12, 2003, are time-barred. The waivers were incomplete and defective and thus, the three-year prescriptive period was not tolled nor extended and continued to run until April29, 2003. As a final note, We must reiterate that the Supreme Court has consistently ruled that the statute of limitations on assessment and collection of taxes is for the protection of the taxpayer and, thus, shall be construed liberally in the latter's favor.27 Hence, the officers of the BIR are obliged to act swiftly "in the making of assessment so that taxpayers, after the lapse of the period of prescription, would 27 Bank of the Philippine Islands v. Commissioner of Internal Revenue, G.R. No. 139736, October 17, 2005, 473 SCRA 225.

. ... iJ

E. B. No. 440 (C.T.A. Case No. 7021) have a feeling of security against unscrupulous tax agents who will always try to find an excuse to inspect the books of taxpayers, not to determine the latter's real liability, but to take advantage of a possible opportunity to harass even law-abiding businessmen. Without such legal defense, taxpayers would be open season to harassment by unscrupulous tax agents."28

WHEREFORE, the petition is DISMISSED. Accordingly, the impugned Resolutions of the Court in Division dated June 5, 2008 and November 11, 2008 in C.T.A. Case No. 7021 are AFFIRMED.

WE CONCUR:

l-_:-1..0- G~ ERNESTO D. ACOSTA

Presiding Justice

~~G_ . c:2aP-~~ '5;4 • Jl%\NITO C. CASTANEID'A, JR.

Associate Justice

g_ CAESAR A. CASANOVA

Associate Justice

28 Supra note 21 at p. 710.

\ ER~.UY

Associate Justice

~~N~IQUEZ

Associate Justice

E.B. No. 440 (C.T.A. Case No. 7021 )

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the above Decision has been reached in consultation with the members of the Court En Bane before the case was assigned to the writer of the opinion of this Court. ct ._-:=-%)- ~ ERNESTO D. ACOSTA

Presiding Justice