HERBERT P. LIPANA v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES Court of Tax Appeals QUEZON CITY Special Second Division HERBERT P. LIPANA, CTA CASE N0.11199 Petitioner, Members: -versus- RINGPIS-LIBAN, Chairperson, PJ, MODESTO-SAN PEDRO, and FERRER-FLORES, JJ COMMISSIONER OF Promulgated: INTERNAL REVENUE, MAY 0 4 ZOZ6 Respondent. X ------------------------------------------------------------------------------------ --------------------------------- X ,~ y?-!. ~. MODESTO-SAN PEDRO, J.: The Case Before the Court is a Petition for Review, filed on June 21, 2023, seeking to void the deficiency tax assessment against Petition for Taxable Year ("TY") 2011 and to quash, cancel, and/or lift Warrant ofDistraint and/or Levy ("WDL") No. AMRD-WDL-2023-003, dated May 15,2023. The Parties 1 Petitioner is a Filipino of legal age. Respondent is the duly appointed Commissioner of Internal Revenue ("CIR") who is tasked to assess and collect all national internal revenue taxes, fees and charges, and enforce all forfeitures, penalties, and fines connected therewith. The Facts On January 8, 2016, petitioner received a Preliminary Assessment Notice, dated November 25, 2015y Pre-Trial Order, dated March 20, 2024, Rollo, p. I58. Petition for Review, p. 4., id. at 9.

DECISIOi\ CTA CASE NO. 11199 Page 2 of8 Then, on September 2, 2019, petitioner received a Formal Letter of Demand ("FLD"), dated August 20, 2019. Petitioner filed a protest against this on September 11, 2019.3 On October 7, 2022, petitioner received a Final Decision on Disputed Assessment ("FDDA"), dated October 3, 2022. Petitioner protested this via a Motion for Reconsideration ("MR") on November 3, 2022.4 Respondent later issued the assailed WDL, without acting on the MR, on May 15, 2023.5 The same was served to petitioner on May 22, 2023.6 Aggrieved, petitioner filed the instant Petition on June 21, 2023. Respondent filed his Answer7 thereto on September 11, 2023. Trial ensued, with petitioner presenting witness Jose Filomar R. Bas8 and respondent presenting witness Atty. Ronna S. Dimaano-Marasigan.9 The Court admitted all evidence offered by the parties. 10 Neither party submitted a Memorandum: petitioner simply failed to do so 11 while respondent adopted the arguments raised in his Answer in lieu of a Memorandum. 12 The Court consequently submitted this case for decision on June 18, 2025. 13 Hence, this Decision. The Issues The sole issue for this Court's resolution is whether petitioner is liable to pay the assessed deficiency income tax forTY 2011 Y !d. Note that despite claiming, in the Petition for Review, to have filed its prmest on September 2, 2019, the attached copy of the protest is dated September 9, 2019, and is stamped as having been received by the Bureau of Internal Revenue on September II, 2019. See Letter, dated September 9, 2019, Exhibit "P-4", BIR Records, pp. 197-198. 4 Petition for Review, p. 4, Ro!/o, p. 9. Note that while petitioner claims that the FDDA is dated October 13, 2019, the FDDA is actually dated October 3, 2019. The confusion seemingly stems from smudged ink that made the "0" in "03" look like a "I". Petition for Review, p. 4, Rollo, p. 9. 6 Warrant of Distraint and/or Levy, dated May 15, 2023, id. at 17-18. !d. at 67-86. Minutes ofthe Hearing, held on July 2, 2024, id. at 175. 9 Minutes of the Hearing, held on October 29, 2024, id. at 191. 10 Resolution, dated October II, 2024, p. I, id. at 189; Resolution, dated April 10, 2025, p. I, id. at 212. 11 Records Verification, dated June I0, 2025, id. at 214. 12 Manifestation, id. at 216. 13 Minute Resolution, dated June 18, 2025, id., unpaginated. 14 Pre-Trial Order, p. 2, id. at 159.

DECISIOI\ CTA CASE NO. 11199 Page 3 of8 Arguments ofthe Parties Petitioner's Arguments Petitioner argues that the assessment is void as ( 1) he never received a Letter ofAuthority ("LOA") authorizing the examination ofhis records; 15 and (2) the tenor of the FLD makes it a request, rather than a demand, for payment. 16 Respondent's Arguments Respondent counters the above by claiming that: (1) As petitioner's MR to the FDDA contains no actual plea for reconsideration, no valid protest was filed against the assessment, and this Court lacks jurisdiction over this case�' 17 (2) Petitioner himself acknowledged receipt of the LOA18 and never raised any alleged absence of the same at the administrative level; 19 (3) The FLD's tenor is irrelevant to its nature as a demand;20 and (4) Petition is liable for income tax.21 The Ruling ofthe Court The Petition must be partially dismissed for lack of jurisdiction and partially denied for lack of merit. The Court has jurisdiction over the WDL but not over the assessment. In filing his Petition for Review, petitioner assails both the assessment and the collection efforts against him. He filed his appeal after receiving the WDL, treating it as respondent's decision on his MR to the FDDA and as respondent's "decision" on an "other matter" arising from the Nationaz.r-- 15 Petition for Review, pp. 5-6, id. at 10-11. 16 Petition for Review, pp. 6-8, id. at 11-13. 17 Answer, pp. 2-6, id. at 68-72. 18 Answer, pp. 6-9, id. at 72-75. 19 Answer, pp. 9-13, id at 75-79. 20 Answer, pp. 13-16, id. at 79-82. 21 Answer, pp. 16-18, id. at 82-84.

DECISION CTA CASE NO. 11199 Page 4 of8 Internal Revenue Code of 1997, as amended ("NIRC'), i.e., respondent's collection efforts. Petitioner is only half correct. Under Section 7(a)(l) ofRepublic Act ("RA") No. 1125, as amended, this Court has jurisdiction over decisions of the CIR in cases involving disputed assessments and in cases involving "other matters" arising from the NIRC, among other controversies: SEC. 7. Jurisdiction.- The CTA shall exercise: (a) Exclusive appellate jurisdiction to review by appeal, as herein provided: (1) Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the National Internal Revenue Code or other laws administered by the Bureau of Internal Revenue; (Italics supplied.) Note that "disputed assessments" and "other matters" are listed separately, implying that these are two different and distinct kinds of case. In the past, such as in Commissioner of Internal Revenue v. Isabela Cultural Corporation22 ("Isabela"), the Supreme Court has endorsed treating issuances pertaining to collection efforts as the CIR's final decision on pending protests to assessments. In that case, a Final Notice Before Seizure ("FNBS") was considered a denial of the taxpayer's administrative protest, allowing the taxpayer to judicially assail the assessment through said FNBS. Under this jurisprudence, then, petitioner would be allowed to challenge the assessment through the WDL, treating the latter as respondent's decision on petitioner's MR. However, in Light Rail Transit Authority v. Commissioner ofInternal Revenue23 ("LRTA") the Supreme Court reasoned that Isabela was promulgated in an outdated legal milieu, before inactions of the CIR on administrative protests became appealable to this Court and before the promulgation of Rizal Commercial Banking Corporation v. Commissioner of Internal Revenue24 and Lascona Land Co., Inc. v. Commissioner ofInternab-- 22 G.R. No. 135210, July II, 2001. 23 G .R. No. 231238, June 20, 2022. 24 G.R. No. 168498, April24, 2007.

DECISIOi' CTA CASE NO. 11199 Revenue,25 which clarified that taxpayers could await the decision of the CIR if the same was not issued within the 180-day period for such. lsabela, then, allowed taxpayers to treat an issuance related to a collection effort as a decision on a disputed assessment because taxpayers at the time lacked crucial options to judicially assail assessments if the CIR failed to act on an administrative protest within the period to do so. Now that taxpayers have two options in such circumstances, lsabela's procedural lifeline is no longer necessary. In short, issuances related to collection efforts, such as FNBSs or WDLs, can no longer be treated as the CIR' s final decision on a pending protest to an assessment. Here, the assailed WDL cannot be considered respondent's decision on petitioner's MR to the FDDA. The administrative protest was still pending before the respondent when petitioner filed his Petition. His assailing of the assessment before this Court is thus premature, and We lack the requisite authority to act on the same. That said, this Court does have jurisdiction over the WDL itself. The case of Commissioner ofInternal Revenue v. Court of Tax Appeals, Second Division26 is instructive here: Based on the foregoing provision, the exclusive appellate jurisdiction of the CTA Division is not limited to cases involving decisions of the CIR or matters relating to assessments or refunds. In CIR v. Hambrecht & Quist Philippines, Inc., the Court held that the issue of prescription ofthe CIR's right to collect taxes is covered by the term "other matters" over which the CTA has appellate jurisdiction: 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 ol 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. This issue of prescription, being a matter provided for by the NIRC, is well within the jurisdiction of the CTA to decide. As stated, the issue of an assessment's validity is distinct from the issue of the concomitant collection's validity .27 Thus, the validity of an assessment that has become final and executory does not foreclose the possibility of..'.- 25 G.R. No. 171251, March 5, 2012. 26 G.R. No. 258947, March 29, 2022. 27 As an aside, this is another reason to bar petitioner from assailing the assessment by protesting the WDL.

DECISION CTA CASE NO. 11199 Page 6 of8 assailing the validity of the related collection effort, allowing Us to act on the assailed WDL. Furthermore, the instant Petition, treated as judicial remedy against the WDL, was filed on time. Petitioner received the WDL on May 22, 2023, to recall. Under Rule 8, Section 3(a) of the Revised Rules of the Court of Tax Appeals, as amended, this gave petitioner until June 21, 2023 within which to file a Petition against the WDL. He filed the instant Petition on that exact date, June 21, 2023, meaning he timely filed the instant Petition. In sum, while this Court cannot act on petitioner's prayer to void the assessment against him, We can act on his prayer to quash, cancel, and/or lift the WDL. The WDL is void as collection must be based on the existence of delinquent taxes. Under Sec 205(a) of the NIRC, respondent can resort to distraint to collect delinquent taxes. The status of delinquency is important, as emphasized in Mannasofl Technology Corp. v. Commissioner of Internal Revenue: 28 It should also be emphasized that availing ofthe summary collection remedies under the Tax Code, such as the issuance ofa WDL, are premised first and foremost on the existence of "delinquent taxes. " This premise is lacking when the matter ofthe taxpayer's civil liability is subject of a valid request for reinvestigation which is still pending resolution by the respondent and its authorized agents, as in the case at bench. (Citations omitted; italics supplied.) In that case, the Supreme Court observed that when a valid protest against an assessment is still pending before the CIR, the subject taxes are not yet delinquent. No "delinquent" taxes exist. However, the summary collection remedies under the NIRC, such as resort to distraint, are premised on the existence of such delinquent taxes. It follows, then, that the CIR cannot validly resort to distraint when the subject taxes are not yet delinquent, such as when a valid administrative protest is still pending. This conclusion is directly supported by LRTA, in which the WDL and other issuances related to collection were declared void for not being based on the existence of delinquent taxes, given the pendency oftherein taxpayer's administrative protest~ 28 G.R. No. 244202, July 10,2023.

DECISION CTA C/\SE NO. 11199 Page 7 of8 Neither can the 30-day period for filing a petition for review be reckoned from petitioner's receipt of any of the following issuances: the Preliminary Collection Letter, the Final Notice Before Seizure, the Warrant ofDistraint and/or Levy, the April4, 2013 Letter reconsidering the issuance of the Warrant of Distraint and/or Levy, and the June 9, 2014 Letter dropping the request for reconsideration ofthe Warrant of Distraint and/or Levy. Like the Final Decision on Disputed Assessment, all of these were notfinal decisions on the appeal by the Commissioner ofInternal Revenue. They remained tentative given the pendency ofthe petitioner's appeal with the Office ofthe Commissioner. More importantly, all ofthese were issued on the premise that "delinquent taxes" exist, an incorrect premise. To repeat, the assessment was still pending appeal with the Office of the Commissioner when these issuances were made. The Preliminary Collection Letter, the Final Notice Before Seizure, the Warrant of Distraint and/or Levy, the April 4, 2013 Letter reconsidering the issuance of the Warrant of Distraint and/or Levy, and the June 9, 2014 denying the request for reconsideration all emanated from a non-demandable assessment. As such, all were void and should be of no force and effect. (Citations omitted; italics supplied.) The WDL in that case, to recall, was not treated as the CIR's final decision on the assessment. Instead, the Supreme Court declared the WDL void as it was issued while a protest to the assessment was still pending, i.e., without the existence of delinquent taxes. The facts in the case at bar are similar. Respondent issued the assailed WDL while petitioner's protest to the FDDA was still pending. He thus issued the WDL without the existence of delinquent taxes. The WDL is thus void, having no final and executory assessment as basis. To reiterate and emphasize, this ruling on the WDL does not touch on the validity of the assessment, which is technically still pending before respondent and over which We have no jurisdiction. However, We do not need jurisdiction over the assessment to declare the WDL void as We have jurisdiction over the WDL itself under Our "other matters" jurisdiction. ACCORDINGLY, the instant Petition for Review, filed on June 21, 2023, is hereby PARTIALLY DISMISSED for lack of jurisdiction, insofar as it prays for the voiding of the assessment against petitioner for Taxable Year 2011. However, the Petition is PARTIALLY GRANTED, insofar as it prays for the quashal, cancellation, and/or lifting of Warrant of Distraint and/or Levy No. AMRD-WDL-2023-003, dated May 15, 2023. Said Warrant of Distraint and/or Levy is declared NULL and VOID. Respondent and his agents are ENJOINED and PROHIBITED from enforcing said Warrant of Distraint and/or Levy/

DECISIO'\ CTA CASE NO. I I 199 Page 8 of8 SO ORDERED. MARIAR/JWE A WE CONCUR: ~-~ ] -------- MA. BELEN M. RINGPIS-LIBAN Presiding Justice C~'-(;.~~DES Associate Ju~~~~�� / ' CERTIFICATION Pursuant to Article VIII, Section 13 ofthe Constitution and the Division Chairperson's Attestation, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court. '111-."f. ~~--~I MA. BELEN M. RINGPIS-LIBAN Presiding Justice