PHILAM PLANS, INC. v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY THIRD 0/V/S/dN I PHILAM PLANS, INC., ) Petition er, CTA CASE NO . 6992. \ - versus- Members: BAUTISTA, Chairperson PALANCA-ENRIQUEZ, and COTANGCO- MANALASTAS, JJ. COMMISSIONER OF INTERNAL Promulgated : REVENUE, APR 17 2012 Res p o n d e n t. x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x DECISION COTANGCO- MANALASTAS, .f.:.: STATEMENT OF THE CASE Thi s case involves a Pet it ion for Re vie w and a Suppl em ent (To Petition for Revi ew) prayin g for th e canc ell ation and w ithdraw al of th e Fi nal Assess ment Notice (FAN) with attach ed Assess ment Noti ces Nos. TF D-97 -INC-068-03, TF D-97 -VAT- 069- 03, and TFD -97 -W / T-070-031 iss ued again st petition er and th e Fin al Deci sion on Di sputed Ass ess m ent (FDD A) dated Ju ne 14, 2004 ho lding petition er liabl e for V defici ency incom e t ax, valu e-ad ded t ax (VAT) and withholdin g t ax, inclu si ve of 1 Ann ex ''F'', Petition for Revi ew , docket, pp . 50 to 54.

DECISION CTA CASE No. 6992 Pa ge 2 of 36 surcharge and interest, in the total amount of P667,542,122. 58, for calendar year ending December 31, 1997. STATEMENT OF FACTS Philam Plans, Inc. (petitioner) is a pre-need corporation duly organi ze d and existing under and by virtue of Philippines laws, with office address at the 6th Floor, Philamlife Building, United Nation s Avenue, Ermita, Manila.2 Re spondent is the Commissioner of the Bureau of Interna l Revenue (BIR), charged with the duty of assessing and collecting internal revenue taxes . She hold s office at the BIR Nat ion al Office Bldg. , Agham Road , Diliman , Que zon City. Petitioner filed its Monthly Remittance Returns of Income Taxes Withheld (BIR Form 1601) and remitted the withholding tax due therein for the taxable year ending Dece mber 31, 1997 on the followin g dates: Month (1997} Date of Filing of Return and Remittance of -� -- �- --- Withholding Tax ---Febr~ary 25, 19973 1--- January - - - M-a-rch 25-, 1-99s7~ -- -- --- ~ebruar'{ April 25, 1997 M arch - -� May 25, 19976 June 25, 19977 April July 25, 19978 May Au gust 25, 19979 - - June - -- -- S e pte~b e r2s, 199l 10 f-- -- July - - October24, 199711 - Augu ~-- -� - ---- - September The Parti es, Petition for Revi ew, docket, p. 1; The Parties, Petition er's M emorandum , docket, p. 1822. 3 Exhibits "J" , "J-1", "K", " K-1", " L", and " L-1", do cket, pp. 1610 to 1612. 4 Exhibits " M", "M -1", " N", "N -1", " 0 ", and "0 -1", dock et, pp . 1613 to 1615. 5 Exh ibits " P" , " P-1", "Q" , "Q-1", " R", and " R-1", docket, pp . 1616 to 1619. 6 Exhibits "S", 'T', and " U", docket, pp. 16 20 to 1624. 7 Exhibits " V", " V-1", " W ", " W -1", " X" and "X-1", docket, pp . 1625 to 1629. 8 Exhibits "Y" and "Y-1", docket, pp . 1630 to 1632 . 9 Exhib its "Z" and " Z-1", docket, pp . 1633 to 1634. 10 Exhibits "AA" and " AA-1", docket, pp . 1635 to 1637. 11 Exhibits " BB" and "BB-1", docket, pp . 1638 to 1640.

DEC ISIO N November 25, 199Jl2 l CTA CASE No. 6992 Decemb er 29, 199713 Pa ge 3 of 36 January 26, 199814 October November December On April 17, 2000, petitioner received a copy of the BIR Letter of Authority (LOA) No. 00059015 dated April 12, 2000 in connection with the examination of petitioner's books of accounts and other accounting records for the taxable year ending Decemb er 31, 1997. lr-' On April 18, 2000, Mr. Lorenzo L. Blanco , petitioner's then Assistant Vice - President (AVPL executed a Waiver of the Statute of Limitation s extending the period of assessment of taxe s for taxable year ending December 31, 1997 until Jun e 30, 2001 (Fir st W ai ve r). 1 (, On July 18, 2001, Mr. Blanco executed another Waiver of the Statute of Limitation s extending the period of as sess ment of taxes for taxable year ending December 31, 1997 until December 31, 2002 (Second Waiver) .17 On May 13, 2002, Mr. Blanco executed another Waiver of the Statute of Limitation s extending the period of assessment of taxes for taxable year ending December 31, 1997 until September 30, 2003 (Third Waiver) .18 On November 19, 2002, Mr. Blanco executed a Waiver of the Statute of Limitations extending the period of assess ment of taxe s for taxable year ending December 31, 1997 until May 30, 2003 (Fourth Waiver). 19~ 17 Ex hibits "CC'' and "CC-1", dock et, pp . 1641 to 1643. 13 Ex hibits "D O" and "DD-1", docket, pp . 1644 to 1646. 1 ~ Exhibits "EE" and "EE -l", dock et, pp . 1647 to 1649. 1 Par. 2.11, Statement of th e Facts, Pe t i t i o n for Review, dock et , p. 7; Par . 2.13, Supplement to the !' Statement of Facts, Su ppl em ent (To Petition for Revi ew}, dock et, p. 284. 16 Exh ibit "A"; Ex hibi t "5" , do cket, p. 1605. 11 Ex hibit "B"; Exhibit "18", docket, p. 1606. 18 Exhibits"(" and Ex hibit " 16", do cke t, p. 1607.

DECISION CTA CASE No. 6992 On August 8, 2003, p etitioner received the undated FAN with attached Assessment Notice s No s. TFD -97-INC-068-03, TFD -97 -VAT-069-03, and TFD-97 -W/T- 070-03 (Assessment Notices) from the BIR for alleged deficiency taxes for the taxable year ending December 31, 1997. 20 Petitioner filed a protest to the FAN on September 3, 2003 and submitted the required supporting documents to the protest on November 3, 2003 .21 As of May 1, 2004, the BIR had not decided on the Protest .22 On May 25, 2004, petitioner filed with this Court the instant Petition for Review docketed as CTA Case No . 6992 . On August 4, 2004, respondent filed her Answer23 to the Petition for Review and raised the following Special and Affirmative Defenses: "5. The instant Petition for Review is devoid of cause of action. Among the allegations of the petitioner in paragraphs 1.4 and 1.5 of the petition is that 'as of May 1, 2004, the BIR had not decided on the Protest', and that based on this circumstance, 'the protest is deemed denied' , entitling them 30 days from 01 May 2004 within which to appeal to this Honorable Court . However, the records of the case reveal that on 03 September 2003, petitioner timely filed a protest to the Final Assessment Notice of the Bureau . On the basis of this protest, re- investigation of the case was granted, and the taxpayer was informed of this development, in a letter dated 19 January 2004 . Investigation ensued, and in a letter dated 01 March 2004, acknowledged as received by Lorenzo Blanco, a representative of the petitioner, the Bureau advised petitioner of the report of the re -investigation, with supporting working papers, of the tax case . This letter likewise gave petitioner 10 days within which to submit documents in controversion of the findings . Though representatives of the pet1t1oners attended several preliminary conferences, they failed to put forward arguments/documents to overturn the findings of the investigator. Consequently, on 14 June 2004, after the filing of the instant petition, petitioner received the final decision on the 1997 disputed tax assessment . ~ 19 Exhibit " D" and Exhibit " 17", docket, p. 1608. 20 Ann ex " F", Petition for Revi ew, docket, pp. 50 to 54 ; Par . 1, Statement of Admitt ed or Undi sputed Facts, Joint Stipulation of Facts and Stat em ent of Issu es (JSFSI}, docket, p. 1497. 21 Pars. 2 and 3, Statem ent of Admitted or Undi sputed Facts, JSFSI, docket, pp . 1497-1498. 72 Par. 4, Statem ent of Admitt ed or Undi sputed Facts, JSFSI, docket, p. 1498. 13 Docket, pp . 88 to 94 .

DECISION CTA CASE No . 6992 Pa ge 5 of 36 It is clear from th e foregoin g that as early as 01 March 2004, the petitioner wa s aware of the re-investiga tion being conducted by respondent. In fact, petitioner knew that a revised Final Assessment was forthcoming as a result of the re -investigation , and petitioner attended several Preliminary Conferences . Clearly, these circumstances cannot be taken as inaction on the part of the Commission er, which will trigger the 'deemed denial' situation envi sioned und er Section 7 (a) (2) of RA 1125, as amended by RA 9282. On this basis, the decision of the Commissioner on the re - investigation, duly received by petitioner on 14 June 2004, is the decision which can be the subject of an appeal to this Honorable Court. Since the assessment assailed in this instant petition is not the final decision of the respondent, the present petition is without cause of action and ought to be dismissed outright. 6. Th e 14 June 2004 decision of th e respondent found the petition er to have grossly und erstated its gross profit subject to income tax by more than 30%. The rea li ze d gross profit per re -investigation amounts to Php849,329,997 .11, while th e realized gross profit appearing per income tax return of petitioner is Php454,797,342.00. There clearly was underdeclaration in the amount of Php394,532,655 .11, or 86 .75% of its gross profit. 7. Thi s falsity in the return is sufficient indica tion of petitioner's intent to evade the payment of taxes . On this basis, the respondent imposed the surcharge of 50%. Accordingly, Section 222 (a) of the NIRC is the prescriptive period applicable in the instant case . Clearly then, the assessment has not yet prescribed. 8. Moreover, the records of the BIR show that on 06 April 2001, a represe ntative of the petitioner, Lorenzo L. Blanco, executed a Waiver of the Statute of Limitation , until 31 Decemb er 2001. Contrary to the allegations of the petitioner, the waiver states that petitioner 'consents to the Assessment and/or Collection of the tax/taxes which may be found due after examination/re-inves tiga tion ' (emphasis ours). Cl ea rly the import of said statement is to allow the respondent to examine the books of petitioner for all kinds of tax es for taxabl e year 1997. 9. In another document dated 18 July 2001, Loren zo L. Blanco likewise executed for petitioner a Waiver of the Statute of Limitation until 31 Dec ember 2002 . In this waiver, petitioner likewise consented to the assessment of taxes whi ch may be found du e after investiga tion . 10. On 19 November 2002, another waiver wa s executed by V Loren zo L. Blanco consenting to the assessment/payment of taxes which may be found due after investigation until 30 May 2003 .

DECISION CTA CASE No. 6992 11. In a notari ze d document dated 20 May 2003, Lorenzo L. Blanco executed another waiver consenting to the assessment /payment of taxes which may be found due after investigation until 30 September 2003. 12 . To say the least, the recital of the petitioner as to the waivers executed is 'inaccurate' and tends to misreprese nt upon this Honorable Court that the waivers were executed after th e lapse of the extensions stipulated in the previous waivers . 13. Th e other objection raised against the waivers, i.e., they did not indicate the date of acceptance by the BIR, lacks merit. The dates of the waivers are presumed to be the dates of acceptance thereof pursuant to Section 3 (u}, Rule 131 of the Rules of Court. 14. The contention that the assessment does not state the facts and the law upon which th e assessment is based is without merit . Mere al legations of vaguen ess and confusion in the mind of petitioner will not invalidate an assessment for failure to substantia lly comply with Section 228 of NIRC. 15. This case has been thoroughly examined by no less than two (2} examiners. The request for re -investigation and the subsequent investigation conducted threw open the whole case and yielded more discovery of irregularities in petitioner's tax declaration s and account ke eping . This was uncovered when the investigating examiner discovered from original copies of 1997 Daily Collection Reports company receipts of Phpl.016 Billion as against declared 'Rea li zed Gross Profit' per income tax return of only Php454,797,342.00 . Some disallowed items were due to petitioner's charg ing of prior year's expense to current operations . The other disallowed expenses were for failure to withhold the appropriate tax on its income payment at so urce in accordance with Sec tions 58 and 81 of the NIRC. 16. Moreover, it is presumed that tax assessments are correctly and lega lly made. The burden of assailing the same rests on the party alleging irregularity . In the instant case, the burden is made more onerous by the fact that re -investigation has already been conducted, and more deficiency taxes were uncovered ." On September 8, 2004, petitioner filed a Reply (To Respondent's Answer dated 30 July 2004} 24 . Meanwhile, on June 15, 2004, petitioner received from respondent the FDDA V dated Jun e 14, 2004, finding petitioner liable for deficiency incom e tax, deficiency 2~ Docket, pp . 106 to 112 .

DECISION CTA CASE No . 6992 VAT and deficiency withholding tax, inclusive of interest and surcharge, in the total amount P667,542,122.58. 25 On July 15, 2004, petitioner filed with this Court a "Petition for Review Ex Abundante Ad Cautelam" docketed as CTA Case No. 7025, appealing the FDDA dated June 14, 2004. 26 On November 17, 2004, respondent filed a "Motion for Consolidation" of CTA Case Nos. 6992 and 7025" 27 , while petitioner submitted an "Opposition (To Respondent's Motion for Consolidation dated 15 November 2004)" 28. In a Resolution 29 dated February 11, 2005, this Court ruled as follows: "WHEREFORE , considering that there is already a pending Petition for Review docketed as CTA Case No . 6992, the subsequent Petition for Review docketed as CTA Case No. 7025 is hereby DISMISS ED and, consequently, the Motion for Consolidation is now rendered moot." On March 7, 2005, petitioner filed a "Motion for Reconsideration (Of the Resolution dated 11 February 2005)'a 0 . In a Resolution 31 dated August 16, 2005, this Court ruled on petitioner's Motion for Reconsideration as follows : "WHEREFORE, premises considered, the Motion for Reconsideration is PARTIALLY GRANTED in so far as the dismissal of CTA Case No. 7025 by the First Division of the Court. The matter is referred to the Second Division for appropriate action. However, the Motion to V Consolidate the second case, CTA Case No. 7025, with the above-entitled case is hereby DENI ED ." 25 Ex hibit " 15", BIR Record s, pp . 154 3 to 1549; Par. 6, Statement o f Admitt ed or Undi sputed Fac ts, JSFSI, docket, p. 1498. 26 Par. 1.3, Supplem ent (To Petition fo r Revi ew), docket, p. 278. 27 Docket, pp . 172 to 176. 28 Posted on Decemb er 20, 2004, dock et, pp . 191 to 196. 29 Docket, pp . 199 to 203 . 30 Docket, pp. 205 to 222. 31 Docket, pp . 22 6 to 228.

DECISION CTA CASE No . 6992 On October 11, 2005, respondent filed an " Omnibus Motion to Dismiss the In stant Petition for Review and to Cite Petitioner for Direct Contempt", praying for thi s Court to issue an order di smissing the in stant Petition for Review with prejudice, and citing petitioner and counsel for direct contempt for willful violation of the rule against forum -shopping.32 Petitioner filed an Oppo sition (To Re spond ent's Omnibu s Motion to Di smiss and to Cite Petitioner for Direct Contempt)33 on November 9, 2005. Meanwhile, on November 22, 2005, petitioner filed a " Motion for Leave to File and to Admit Attached Suppl ement to th e Petition for Review." 34 In the Supplement (To Petition for Review) 35, petitioner prays for the following: " WH EREFOR E, it is respectfully prayed to this Honorable Court that: 1. It sho uld first determin e wh et her or not Respondent has jurisdiction to issue th e Final Decision dated 14 June 2004; 2. After due notice and hearing, judgment be rendered settin g as id e and declaring void the Final Assessment Notice and/or the Final Decision dated 14 Jun e 2004, both issued by the Respondent Commissio ner of Internal Revenue; 3. In the event that the Final Decision is declared as having been validly issued, after due hearing, that judgment be rendered decl aring Petitioner as not liable to the deficiency income, VAT and expa nd ed withholding taxes, including interests and su rcharges, and that the aforementioned defici ency tax assessments be considered as cancelled and withdrawn ." In a Resolution dated January 23, 2006, thi s Court confirmed the ord er given on January 13, 2006, whereby re spondent's " Omnibu s Motion to Dismiss the Instant V Petition for Review and to Cite Petitioner for Direct Contempt" was denied . In said 32 Docket, pp . 232 to 237. 3�"l Docket, pp . 250 to 267. 34 Docket, pp . 269 to 309 . 35 Docket, pp. 276 to 309 .

DECISION CTA CASE No . 699 2 Pa ge 9 of 36 Resolution, the Court also granted petitioner's "Motion for Leave to File and to Admit Attached Supplement to the Petition for Review." The dispositive portion of said Resolution states : "WH EREF OR E, Petitioner's 'Supplement (To Petition for Review) ' filed on November 22, 2005 is hereby ADMITIED . Respondent is hereby OR DERED to file an Amended Answer within fifteen (15) days from receipt of this Resolution ." :!G On March 10, 2006, respondent filed an "Answer to the Supplement to the Petition for Review." 37 In said Answer, respondent reiterated the Special and Affirmative Defenses raised in her " Answer" to the Petition for Review filed on August 4, 2004, and in addition thereto, raised the following Special and Affirmative Defenses: " 9. Granting arguendo that the four waivers are defective, still the assessments were issued within the reglementary period because the request of the petitioner for the re -investigation of the case was given due course . The period spent for the re -investigation of the case, is not included in the counting of the period granted to the respondent to issue the assessments." On March 31, 2006, petitioner filed its "Reply (To Respondent's Answer to the Supplement to the Petition for Review)"38. On May 11, 2006, petitioner filed a "Motion to Resolve Issue of Jurisdiction", praying that the FDDA dated June 14, 2004 be declared as null and void for having been issued by respondent without jurisdiction .39 On June 9, 2006, respondent filed her "Comment on Petitioner's Motion to Resolve Issue of Jurisdiction."40 On July 18, ~ 36 Docket, p . 34 3 �37 Docket, pp . 356 to 37 1 38 Docket, pp . 38 2 to 393 39 Docket, pp . 420 to 431 40 Dock et, pp. 437 to 44 2

DECISION CTA CASE No . 6992 2006, this Court issued a Resolution41 denying petitioner's motion. Pertinent portions of said Resolution are quoted below : "This Court resolves to rul e in favor of the respondent . First and foremost, there is nothing in the law which specifically provides that once an appeal of the decision of the respondent is taken to this Court, the office of th e respondent loses its jurisdiction to issue a final decision on the disputed assessment . In fact, even if a petition for review has already been filed with this Court, the respondent is still not precluded from issuing a final decision on th e disputed assessment xxx. However, this does not necessari ly mea n that the final decision on the disputed assessment issued by the respondent after an appeal for his inaction has already been filed will prevail ov er the findings of the Court. XXX xxx the inaction of the respondent on the protest of the petitioner sha ll be dee med a denial for purpo ses only of allowing the petitioner to elevate its app ea l to thi s Court and does not necessari ly constitute th e final decision of the respondent . In other words, a final decision may still yet to be issued by the respondent, subject to this Court's review ." On August 16, 2006, petitioner filed a " Motion for Reconsideration" of this Court' s Resolution dated July 18, 2006 .42 In a Resolution 43 dated October 23, 2006, this Court denied petitioner's Motion for Reconsideration and ruled that the basic issues raised therein have been previously considered and passed upon by this Court in the assailed Resolution; thus, there is no cogent or valid reason to reverse or modify Re solution dated July 18, 2006. On November 15, 2006, petitioner filed with this Court En Bane a Petition for Review, which was docketed as CTA EB No. 222; praying that the First Division 's Resolutions dated July 18, 2006 and October 23, 2006 be reconsidered and set aside and another one be issued declaring as null and void the FDDA dated June 14, 2004V 41 Docket, pp . 445 to 44 7 42 Docket, pp. 463 to 473 . 43 Docket, pp. 479 to 481.

DECISION CTA CASE No . 6992 for having been issued by respondent without jurisdiction .44 On January 16, 2007, respondent filed a "Comment" praying that the Petition for Review be dismissed for being pro forma and for lack of merit .45 On July 3, 2007, this Court En Bane rendered a Decision46 ho ldi ng that respondent still has the authority to issue the FDDA despite petitioner's fi ling of its Petition for Review before this Court . The dispositive portion of the Court En Bane's decision is quoted below: "WHEREFORE , in the light of all the foregoing, the instant Petition for Review is hereby DENIED DU E COURSE and DISMISSED for lack of merit . The Resolutions dated July 18, 2006 and October 23 , 2006 both promulgated by the First Division of this Court are hereby AFFIRM ED ." Subsequently, petitioner filed with the Supreme Court a "Petition for Review on Certiorari" assailing the Decision dated July 3, 2007 of this Court En Bane in CTA EB No. 222 (CTA Case No. 6992), which was docketed as G.R. No. 178690.47 On June 3, 2008, respondent filed a "Comment" thereto. 48 On September 8, 2008, the Supreme Court issued a Resolution 49 denying the Petition for Review, to wit: " Considering the allegations, issues and arguments adduced in the petition for review on certiorari and the comment thereon, the Court resolves to DENY the petition for failure to sufficiently show any reversible error in the assailed decision to warrant the exercise of this Court's discretionary appellate jurisdiction ." On October 30, 2008, petitioner filed a Motion for Reconsideration 50 of the V Supreme Court's Resolution dated September 8, 2008, which the Supreme Court 44 Docket, pp . 499 to 522. 45 Docket, pp. 757 to 75 8. 46 Docket, pp . 76 5 to 77 3. 4 7 Dock et, pp . 802 to 824. 48 Dock et, pp . 1152 to 1155. 49 Dock et, p. 1174 . 50 Do cket, pp. 1176 to 1188 .

DECISION CTA CASE No. 699 2 denied with finality in a Resolution 51 dated November 17, 2008. Consequently, the Supreme Court Resolution dated September 8, 2008 became final and executory on January 13, 2009. c~2 On April 20, 2009, petitioner filed an " Omnibus Motion " with attached "A mended and Supplemental Pre-trial Brief" before this Court, manifesting that on December 26, 2007, petitioner filed its application for tax amnesty under Republic Act (RA) No. 9480, or the "Tax Amnesty Program " and submitting the pertinent documents in connection with its availment of th e benefits of the Tax Amnesty Program, for the consideration of this Court . Petitioner likewise prayed that an order be issued : (a) finding that, only insofar as petitioner's alleged deficiency VAT and income tax liabilities are concerned, the case is considered withdrawn , closed and terminated, subject to the provisions of RA No. 9480; and, (b) admitting the attached Amended and Supplemental Pre-Trial Bri ef of petitioner and setti ng the case for pre-t rial. 53 On April 24, 2009, petitioner presented as witnes s, M s. Ma . Merlinda C. Bustamante, to prove that petitioner legally availed of th e Tax Amne sty Program, paid the amnesty tax, and that it fully complied with the requirements of the law. Ms. Bustamante also identified the documents marked as Exhibits " A" to " H", V inclu si ve of sub-markings.54 51 Docket, pp . 1190 to 1191. 52 Docket, p. 1198. 53 Docket, pp . 1222 to 1226, 1293 to 1299 . 54 Minut es of th e Hea ring dated April 24, 2009 , docket, p. 1300.

DECISION CTA CASE No . 6992 On April 29, 2009, petitioner filed a "Formal Offer of Evidence (of full compliance with the requirements of R.A. 9480) ." 55 On May 6, 2009, respondent filed her "Comment (Re: Petitioner's Formal Offer of Evidence) ." 56 In a Resolution 57 dated August 3, 2009, this Court admitted petitioner's Exhibits "A" to " H", inclusive of sub-markings; and consequently, granted petitioner's "Omnibus Motion" filed on April 20, 2009. The dispositive portion of said Resolution is quoted below : "WHEREFORE , the assessments for deficiency In come Tax and Value -Add ed Tax for the taxable year 1997 are hereby CANCELLED and SET ASIDE solely in view of petitioner's availment of the Tax Amnesty under R.A. 9480. As regards the assessment for deficiency withholding tax for the taxable year 1997 issued against petitioner, let this case be set for a pre- trial conference on August 14, 2009, at 9:00a .m. in th e session hall of this Court. Petitioner's Amended Pre-trial Brief is hereby ADMITIED . SO ORDERED ." During trial, the parties presented and formally offered their respective witnesse s and documentary evidence insofar as the deficiency withholding tax for the taxable year ending December 31, 1997 is concerned . The case was submitted for decision on November 18, 2011, taking into consideration petition er's "Memorandum" filed on October 13, 2011 and the " Memorandum (For Respondent)" filed on November 8, 2011.58 STATEMENT OF ISSUES V The parties submitted the following issues59 for thi s Court's resolution: 55 Docket, pp. 1302 to 1306. 56 Docket, pp. 1308 to 1310. 57 Docket, pp . 1391 to 1392. 58 Docket, p. 1873.

DECISION CTA CASE No . 699 2 Page 14 of 3 6 "1. Whether the FAN was issued within the 3-year period prescribed by the Tax Code . 2. Whether PPI 60 is liable for deficiency CWT. 3. Whether PPI is liable to pay twenty five percent (25%) surcharge and twenty percent (20%) annual interest for its alleged late payment of CWT from 15 June 2004 until full payment, pursuant to Sections 248 and 249 of the Tax Code ." DISCUSSION/RULING This Court shall resolve first the issue of whether the FAN was issued within the three-year prescriptive period prescribed by the 1977 Tax Code, as amended, as the resolution thereof wi ll determine the necessity of addressing the other legal and factual issues stipulated in the instant case . Section 203 of the 1977 Tax Code, as amended (Section 203 of the NIRC of 1997), provides that respondent has three (3) years to assess and collect an internal revenue tax, to wit: "SECTION 203 . Period of limitation upon assessment and collection . - Except as provided in the succeeding section, internal revenue taxes shall be assessed within three 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-year period shall be counted from th e day the return was filed . For the purposes of this section, a return filed before the last day prescribed by law for the filing thereof shall be considered as filed on such last day." It is already settled that the three-year prescriptive period for expanded withholding tax shall commence to run from the last day for filing of the Monthly~ s<J Stat em ent of Iss u es to b e Tri ed or Resolved, JSFSI, docket, p. 1498. 60 Petition er .

DECISION CTA CASE No . 699 2 Remittance Return of Income Taxes Withheld .61 Thus, in determining the last day for respondent to assess petitioner of deficiency CWT for the taxable year ending December 31, 1997, we shou ld examine the applicable provisions of the 1977 Tax Code, as amended , as well as the implementing rules and regulations issued by the BIR to ascertain the reckoning of the three -year prescriptive period . The applicable provision is Section Sl(a) of the 1977 Tax Code, as amended, which was implemented by Section 1 of Revenue Regulations (RR) No. 05-85, as amended by RR No. 03-93, and further amended by RR No. 18-9362, specifying the period for the filing of monthly return and remittance of taxes withheld . Section 51 of the 1977 Tax Code, as amended, provides: "SECTION 51 . Returns and payment of taxes withheld at source . - (a) Quarterly returns and payment of taxes withheld. - Taxes deducted and withheld under Section fifty-thre e (now 50) shall be covered by a return and paid to the Revenue District Officer, Coll ection Agent, or duly authori zed Treasurer of the city, or municipality where th e withholding agent has his legal residence or principal place of business, or where the withholding agent is a corporation, where the principal office is located . Th e taxes deducted and withheld by the withholding agent shall be held as a special fund in trust for the Government until paid to the collecting officers . The Commissioner of Internal Revenue may, with the approval of the Secretary of Finance, require these withholding agents to pay or deposit the taxes deducted or withheld at more frequent intervals when necessary to protect the interest of the Government. The return for final withholding tax shall be filed and the payment made within 25 days from the close of each calendar quarter, while the return for creditable withholding taxes shall be filed and the payment made not later than the last day of the month following the close of the quarter during which the withholding was made. " V Section 1 of Revenue Regulations No. 18-93 states : 61 Avon Produ cts Mfg ., Inc. vs. Th e Commiss ion er of Internal Revenue, CTA Case No. 5908, Janu ary 20, 2005 ; Corporate Inf ormation Solutions, Inc. vs. Commission er of Internal Revenue, CTA Case No. 5919, Decemb er 1, 200 3; HPCO Agridev Corporation vs. Commission er of Internal Revenue, CTA Case No . 635 5, July 18, 200 2. 62 Provid es for th e tim e and mann er of filin g withholdin g ta x return s and r emittances of cr editabl e and fin al in com e taxes withh eld by Large Taxp ayers.

DECISION CTA CASE No . 6992 " SECTION 1. Section 2 of Revenue Regulations No . 5-85, as amended by Revenue Regulations No . 3-93, is hereby further amended to read as follows : 'Sec. 2. Monthly Return and Remittance of Taxes Withheld . - Taxes deducted and withheld on : (i) compensation income; (ii) income payments subject to the creditable (expanded) withholding taxes; and (iii) income subject to final withholding taxes . shall be remitted within ten (10) days after the end of each calendar month with the filing of appropriate return (B IR Form 1743-W) . However, taxes withheld from the last compensation/income payment for the calendar year (December) shall be remitted on or before the 25th of January of the succeeding year. Provided, further, that taxes withh eld by Large Taxpayers, as identified and notified by the Bureau of Internal Revenue pursuant to Republic Act No . 7646, as implemented by Revenue Regulations No . 12-93, shall be remitted within twenty- five (25) days after the end of each calendar month with the filing of appropriate return (BIR Form 1743-W) ." Based on the dates of f il ing of petitioner's Monthly Remittance Returns of Income Taxes Withh eld for t he taxable year ending December 31, 1997 and the remittance of the corresponding CWT to the BIR, re spondent has the following dates within which to issue her assessment against petitioner for any deficiency taxes: ,- - - - - - - - - - Month (1997) Date of Fil ing of Return Last Day to Assess and Remittance of With~oldin~Ta x -- _!_ebru~_ry 25, 2000 - --- -J-a� n-u-a-ry F e bruary 25, 1 9-9- 7 February March 24, 2000 --------- - March 25, 1997 _ _ _ _ _M_ar~~ ____ _____ _ A_pril~ 5~~~ ______ _ April 24, 2000 1 ____ Apri ~-- _ -----~~'L_?5, .!_~~7 - May 24, 2000 ____ May_ ______ June 26, 200063 J_':!n~~ ~-~9-~7____ _ - f - - - - -Ju_n_e_________ ---~J.Y_25,_}. 997 ____ -~y 24,2000 Ju ly August 25, 1997 August 24, 2000 August --- --- S~pte_r:T2_b_e~ ?~!997_ _ September 25, 200064 - '-------'~- 63 June 24, 2000 fell on a Saturday. 64 Septemb er 24, 2000 fell on a Sunday.

DECISION --- CTA CASE No . 6992 Page 17 of 36 October 24, 1997 October 24, 2000 September November 25, 1997 November 24, 2000 October - -- Decem-be-r 29, 1997 - December 28, 2000 November -- - - Ja_~uary 25, 2001 December January 26, 1998 - - - Respondent does not dispute that the FAN and the Assessment Notices for alleged deficiency income tax, VAT and withholding tax/CWT were received by petitioner only on August 8, 2003. 65 This Court notes that the FAN and the Assessment Notices were not dated, though there are rubber stamp imprints on the copy of the FAN offered by respondent as evidence (Exhibit " 14" }66, which show the following information: (a) Received, Enforcement Service, Bureau of Internal Revenue, July 31, 2003; and (b) Received, Tax Fraud Division, Bureau of Internal Revenue, August 4, 2003. Based on the dates of filing of the Monthly Remittance Returns of Income Taxes Withheld for the taxable year ending December 31, 1997, and considering the dates that appear on the face of the FAN offered by respondent as evidence as well as the date when petitioner received its copy of the FAN and the Assess ment Notices, it is clear that the FAN and the Assessment Notices were issued beyond the prescriptive period allowed under Section 203 of th e 1977 Tax Code, as amended . However, it should be pointed out that the sa me Section 203 of the 1977 Tax Code, as amended, provides that an assessment notice may be issued after the lapse of the three -year prescriptive period as long as the instances under Section 223 of the 1997 Tax Code, as amended (now Section 222 of the NIRC of 1997, as amended), are present . Under Section 223(b) of the 1977 Tax Code, as amended, the taxpay er~ 65 Par . 1, Statement of Admitted or Undi sputed Facts, JSFSI, docket, p. 1497. 66 BIR Records, p . 915.

DECISION CTA CASE No . 6992 and the Revenue Commissioner may stipulate in writing to extend the period of assessment by a written agreement executed prior to the lapse of the period prescribed by law, and by subsequent written agreements before the expiration of the period previously agreed upon. Section 223(b) of the 1977 Tax Code, as amended, is quoted as follows: " SECTION 223 . 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 the preceding section 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 ." During trial, petitioner and respondent both presented and offered as evidence four (4) Waivers of Statute of Limitations, which were executed by Mr. Lorenzo L. Blanco, to wit: Waiver of Statute of Limitations Petitioner's Respondent's Exhibit --- -- -- - - Exh-ib-it- - - - "51/ 1. Dated April 18, 2000, extending the "A" "18" original three-year prescriptive period to "16" assess until June 30, 2001 1-- - - "17" 2. Dated July 18, 2001, extending the 11811 prescriptive period to assess until December 31, 2002 ---- - -- -- -- 3. Dated May 13, 2002 (notarized on "C" May 20, 2003), extendin g the prescriptive period to assess until September 30, 2003 - 4. Dated November 19, 2002, extending "D" the prescriptive period to assess until May 30, 2003 -- ---- ---

DECISION CTA CASE No. 6992 In support of its defense of prescription , petitioner submits that the four Waivers of the Statute of Limitations executed by the parties are invalid since said waivers were not executed in accordance with Section 223(b) of the 1977 Tax Code, as amended, as well as, Revenue Memorandum Order (RMO) No . 20-90. On the other hand, respondent alleges in her Memorandum that the Waivers of the Statute of Limitations executed by petitioner are valid and binding as they fully met the essential requirements for validity under Articles 1305, 1306 and 1315 of the Civil Code of the Philippines. Respondent also argues that if there were indeed flaws and defects in the Waivers of the Statute of Limitations as claimed by petitioner, petitioner should have invoked the same before the BIR or at the time when the case is still within the administrative level. Respondent claims that petitioner is estopped from raising the issue of prescription for the first time on appeal. Similarly, respondent states in her Answer to the Supplement to Petition for Review that on the assumption that the four waivers are defective, still the assessments were issued within the reglementary period because the request of petitioner for the reinvestigation of the case was given due course and as such, the period spent for the reinvestigation of the case should not be included in the counting of the three-year period for respondent to issue the assessments. Respondent further avers that when petitioner availed of the Tax Amnesty Program, petitioner in effect binds itself to the assessment . Assuming that the First Waiver is valid, since it was issued only on April 18, 2000, it did not have the effect of extending the original prescriptive period to assess petitioner for deficiency CWT for the months ending January 31, 1997 and February~

DECISION CTA CASE No. 6992 28, 1997. The right of the BIR to assess petitioner for deficiency CWT for the months ending January 31, 1997 and February 28, 1997 had already prescribed prior to the execution of the First Waiver on April 18, 2000 as shown below: Month (1997) Date of Filing of Return and Last Day to Assess January Remittance of Withholding February Tax Feb_rua ~y__25, ~97 February 25, 2000 March 25, 1997 --- March 24, 2000 Thus, this Court can rule outright that the FAN and Asses sment Notices, in so far as they assess petitioner for deficiency withholding tax for the month s ending January 31, 1997 and February 28, 1997, are void . This Court shall now determine the validity of the four Waivers of the Statute of Limitations to determine whether they validly extended the three-year prescriptive period to assess petitioner for deficiency CWT for the months of March 1997 to December 1997. A careful peru sa l of the protest letter filed by petitioner with the BIR would reveal that the issues on the validity of the Waiver as well as the prescription of the BIR's right to assess petitioner were not rai sed therein . Petitioner, however, explicitly raised the issue of prescription in the Petition for Review and the Supplement to the Petition for Review based on the invalidity of the four Waivers of the Statutes of Limitation s. Re spondent, in her An swer to the Petition for Review and her Answer to the Supplement to the Petition for Review, did not object to petitioner's all egation of prescription . In fact, in her Answers, respondent raised spec ial and affirmative defen ses to establish that th e Waiver s of the Statute of V Limitation s validly extended the three -year prescriptive period to assess . Also, a

DECISION CTA CASE No . 6992 review of the Joint Stipulation of Facts and Statement of Issues would indicate that one of the issues agreed upon by the parties is whether the FAN was issued within the three-year prescriptive period to assess . With its inclusion in the Statement of Iss ues in the parties' Joint Stipulation of Facts and Statement of Issues, respondent evidently agreed to include the issue of prescription as part of the issues to be resolved in this case . In addition, respondent did not object to the admissibility of the four Waivers of the Statute of Limitations when petitioner presented and offered them in evidence . Section 36 of Rule 132 of the Rules of Court on Evidence provides when objections to evidence may be made, to wit : "SE C. 36. Objection . - Obj ection to evi dence offered orally must be made immediately after the offer is mad e. Objection to a question propounded in the course of the oral exa mination of a witness shall be mad e as soon as th e grounds th erefor shall become reaso nably apparent. An offer of evidence in writing shall be objected to within three (3) days after notice of th e offer unless a different period is allowed by the court. In any case, the grounds for th e objections must be specifie d. (36a)" The right to object to the admissibility of evidence is a mere privilege . As such the parties may waive such right, expressly or impliedly. Evidence introduced without objection, whether or not such evidence is testimonial , documentary, real or circumstantial, becomes part of the record of the case and the parties are amenable to any favorable and unfavorable effects re sulting therefrom .67 Respondent, by hi s failure to timely object on the admissibility of the four Waivers of the Statute of ~ 67 Commissioner of In terna l Revenue vs. Bovis Lend Lease Projects Pte Ltd, CTA EB No. 374, June 22, 2009.

DECISION CTA CASE No . 6992 Pa ge 22 of 36 Limitations, cannot now question the right of petitioner to raise issue of prescription on the ground that the Waivers are void. Anent respondent's position that even assuming arguendo that the four waivers are defective, the assessments were still issued within the reglementary period because the request of petitioner for the reinvestigation of the case was given due course and the period spent for the reinvestigation of the case should not be included in the counting of the three-year period for respondent to issue the assessments. Respondent is mistaken. As admitted by respondent in her Answer68, petitioner filed its protest on September 3, 2003 against the FA N and on the basis of said Protest, the BIR conducted a reinvestigation of the case. Clearly, when the reinvestigation was conducted , the three-ye,ar prescriptive period to issue the assessment had already lapsed . Consequently, there was no more three-year prescriptive period to assess that could have been tolled or suspended by the period during which the BIR was conducting a reinvestigation . At most, what would be suspended was the three-year prescriptive period for the BIR to collect the taxes assessed . Respondent further contends that petitioner' s availment of the Tax Amnesty Program in effect binds petitioner to the assessment pursuant to the ruling of this Court En Bane in Rizal Commercial Banking Corporation vs . Commissioner of Internal Revenue69, where this Court En Bane held : "Petitioner cannot question the validity of the waivers with respect to the deficiency onshore and documentary stamp taxes when it V paid the deficiency taxes assessed for income tax, gross receipts tax, final withholding tax, expanded withholding tax and documentary stamp tax 68 Docket, pp . 88 to 94. 69 CTA EB No . 8 3 (CTA Ca se No. 6 201), July 27 , 2005.

DECISION CTA CASE No. 699 2 all of which were covered by the same waivers if petitioner really believes that the waivers were not valid and the subject assessments were issued by the respondent out of time , then it should not have made any payments. In one case, the Supreme Court ruled that a party is estopped from raising the issue of payment of the 25 % ad valorem tax by claiming that there was no removal of pyrite from the mine site where it paid the same for the tax year. In the same way, We cannot allow petitioner to question the waivers covering the same recomputed assessed taxes and it paying the same whi le at the same time to assail the other assessed taxes it refused to pay." This Court does not agree with respondent . In the case of Commissioner of Internal Revenue vs. Phi/ex Mining Corporatian 70, this Court En Bane has already resolved the issue on whether or not a taxpayer's availment of the tax amnesty automatically means that a taxpayer admits the validity of any prior assessments or waivers. Relevant portions of the decision are quoted below: " The Court En Bane quotes with approval the disquisition made by the Court in Division in the Resolution dated December 19, 2009, to wit: Section 1 of R.A. No. 9480 provides that the tax amnesty covers all nationa l internal revenue taxes for taxable year 2005 and prior years, with or without assessments, that have remained unpaid as of December 31, 2005 . Clearly, th e avai lment of t he sa id tax amnesty does not necessarily m ea n th at a t axpayer adm it s th e validity of any prior asse ssm ents an d w aivers, as argued by res pond ent; since th e tax amnesty covers even t hose w ithou t any assessm ent . The law does not impose such conditions, save for the taxpayer to satisfy all the qualification requirements. (Boldfacing supplied) In addition, with the findings that the waivers were null and void which consequently fai led to extend the period within which the CIR may assess PMC for any deficiency taxes, the assessment issued therefor was made outside of the prescribed period and is thus, void . Therefore, PM C's V availment of th e t ax amn esty program would f all und er t hose w ithou t any assess ments required ." (Emphasis supplied) 70 CTA EB No. 578, Jun e 28, 2010.

DECIS ION CTA CASE N o . 6992 Ba sed on the above-cited case, respondent erred in concluding that petitioner's availment of the Tax Amne sty Program automatically meant that petitioner ha s acquiesced to the validity of the FAN and th e Assess ment Notices. This Court carefully scrutini ze d the four Waivers of the Statute of Limitations which were presented and offered in evidence by both petitioner and re spondent to determine their compliance with the strict requirements laid down in RMO No . 20- 90. The Court noted the followin g: Requirements First Waiver Second Third Waiver Fourth Waiver for a Valid Waiver Exhibit "A" I Waiver Exhibit "C"I Exhibit "D"I 1. Date of Exhibit "5" Exhibit "B"I Exhibit 16 Exhibit 17 execution April 18, 2000 Exhibit "18" November 19, 2. Period of 2002 limitation ----- - July 18, 2001 May 13, 2002 3. Signed and June 30, 2001 May 30, 2003 accepted by (notari ze d on Ms. Virginia L. Mr. Percival T. 4. Date of Trinidad, May 20, 2003) Salazar, acceptance by A ss i s t a n t As sista nt the BIR is - ----- indicated in the Commissioner, Commissioner, waiver Large Decemb er 31, September 30, Enforcement 5. Fact of receipt by Taxpayers 2002 - 2003 Service petitioner of the Service accepted copy Ms. Virginia L. Mr. Percival T. Not indicated of the waiver is Not indicated on the face of indicated in the on the face of Trinidad, Salazar, original the Waiver the Waiver As sistant Assistant Not indicated Not indicated Commi ssion er, Commissioner, on th e face of on the face of Large Enforcement th e Waiver the Waiver Taxpayers Service Service Not indicated Not indicated on the face of on th e face of the Waiver the Waiver Not indicated Not indicated on the face of on the face of the Waiver the Waiver - ~

DECISION CTA CASE No. 699 2 It is incumbent upon this Court to first pass upon the validity of the First Waiver (Exhibit "A"/Ex hibit "5") for if this Court finds that the First Waiver is not valid and binding between petitioner and respondent, it is no longer necessary for the Court to determine the validity of the subsequent Waivers of the Statute of Limitations (Second Waiver to Fourth Waiver71 ) as the same served no purpose . In such a case, the subseq uent waivers had no binding effect as there was nothing to extend in the very first place .72 The BIR issued RMO No . 20-90 dated April 4, 1990 in order to guide the BIR and the taxpayers on the procedures in the execution of waivers. Pertinent portions of RMO No . 20-90 are quoted below : " Pursuant to Section 223 of the Tax Code, internal revenue taxes may be assessed or collected after the ordinary prescriptive period, if before its expiration, both the Commissioner and the taxpayer have agreed in writing to its assessment and/or collection after said period . The period so agreed upon may be extended by subsequent written agreement made before the expiration of the period previously agreed upon . Thi s written agreement between the Commi ssioner and the taxpayer is the so -called Waiver of the Statute of Limitations . 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 ' but not after 19 ' 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/co ll ection of the tax in addition to the ordinary prescriptive period . 2. The waiver shall be signed by the taxpayer himself or his duly V authorized representative . In the case of a corporation , the waiver must be signed by any of its responsible officials. 71 Exhibits " B" , "C" , and " D" and Exhibits " 18", " 16" , and " 17", docket, pp . 1606 to 1608. 72 Pelican, Inc. vs. Commission er of Internal Revenue, CTA Case No . 5997, M ay 16, 2003; Starpa ck Philippin es Corporation vs. Commission er of Internal Revenue, CTA Case No . 6486, April 21, 2005 .

DECISION CTA CASE No. 6992 Soon after the waiver is signed by the taxpayer, the Commissioner of Interna l Revenue or the revenue official authori zed by him , as hereinafter provided, shal l sign the waiver indicating that the Bureau has accepted and agreed to the waiver. The date of su ch 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 3. The fo llowing revenue officials are authorized to sign the waiver. A. In the National Office 1. AC IRs for Col lection, For tax cases involving Special Operations, National Assessment, Excise and not more than Legal on tax cases pending before their respective PSOO,OOO .OO offices. In the absence of the ACIR, the Head Executive Assistant may sign the waiver. 2. Deputy Commissioner For tax cases involving more than PSOO,OOO.OO but not more than PlM 3. Commissioner For tax cases involving more than PlM 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. Th e fact of recei pt by the taxpaye r of his/her file copy shall be indicated in th e origin al copy . 5. Th e 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/col lect shall be administratively dealt with." (Emphasis supplied) Time and again, this Court has maintained its posit ion on the matter, wherein V this Court pronounced that :

DECISION CTA CASE No. 699 2 " It bears stressing that RMO 20-90 is directed to all concerned internal revenue officers. Th e said RMO even provides that t he procedures f ound th erein should be strictly f ollowed, under pain of being adm inistratively dealt w ith should non-com pliance result to presc ri ption of t he right t o assess/ coll ect. " 73 (Emphasis supplied) The strict compliance with the requirements provided for in RMO No. 20-90 ha s been upheld by the Supreme Court in the case of Philippine Journalists, Inc. vs. Commissioner of Internal Revenue74 . The High Court in reversing the decision of the Court of Appeals promulgated on Augu st 5, 2003, and rein stating thi s Court's decision promulgated on May 14, 2002, ruled that : "The NIRC, under Sections 203 and 222, provides for a statute of limitations on the assessment and collection of internal revenue taxes in order to safeguard the interest of the taxpayer against unreasonable investigation . Unreasonable investigation contemplates cases where the period of assessment exte nds indefinitely because this deprives the taxpayer of the assurance that it will no longer be subjected to further investiga tion for taxes after the exp iration of a reasonable period of time .. XXX XXX XXX RMO No . 20-90 implements these provisions of th e NIRC relating to the period of prescription for th e assessment and collection of taxes . A cursory rea ding of t he Order su pports petitioner's argument that the RM O must be strictly fo llowed, xxx" (Emphasis supplied) Based on the foregoing, this Court has determined with certainty that the First Waiver executed by petitioner on April 18, 2000 (Exhibit "A"/Exhibit "5") is without any binding effect on petitioner for reasons discussed below. First, the First Waiver was not signed by the BIR Commissioner . RMO No. 20- 90 specifically requires that for tax cases involving more than P1 ,000,000 .00, the V revenue officer authorized to sign a waiver is only the BIR Commissioner. As aptly 73 DOLE Philippin es, In c. vs. Commiss ion er of Internal Revenue, CTA Case No. 57 05, July 1, 2003, cit in g Philippin e Journalists, In c. vs. Commission er of Internal Reve nue, CTA Case No. 6108, May 14, 2002 . 74 G.R. No. 16285 2, Dece mb er 16, 2004

DECISION CTA CASE No . 699 2 pointed out by petitioner, when the First Waiver was executed on April 18, 2000, Revenue Delegation Authority Order (RDAO) No . 05-01 was not yet in effect. Thus, Ms . Virginia L. Trinidad, the Assistant Commissioner of the Large Taxpayers Service, was not authorized to sign and accept the First Waiver. In Philippine Journalists, Inc. vs . Commissioner of Internal Revenue75 , the Highest Tribunal, in holdin g that the waiver signed by the taxpayer is not valid for, among others, the reason that the waiver was not accepted by the authorized revenue officer, ruled as follows: "The waiver is also defective from the government side because it was signed only by a revenue district officer, not the Commissioner, as mandated by the NIRC and RMO No. 20-90. The waiver is not a unilateral act by the taxpayer or the BIR, but is a bilateral agreement between two parties to extend the period to a date certain . The conformity of the BIR must be made by eit her the Commissioner or the Revenue District Officer. This case involves taxes amounting to more than One Million Pesos (Pl,OOO,OOO.OO) and executed almost seven months before the expiration of the three -year prescription period. For this, RMO No . 20-90 requires the Commissioner of Internal Revenue to sign for the BIR . The case of Commissioner of Internal Revenue v. Court of Appeals, dealt with waivers that were not signed by the Commissioner but were argued to have been given implied consent by the BIR . We invalidated the subject waivers and ruled: 'Petitioner's submission is inaccurate .... XXX XXX XXX The Court of Appeals itself also passed upon the validity of the waivers executed by Carnation, observing thus: We cannot go along with the petitioner's theory. Section 319 of the Tax Code earlier quoted is clear and explicit that the waiver of the five -year prescriptive period must be in writing and signed by both the BIR Commissioner and the taxpayer. V Here, the three waivers signed by Carnation do not bear the written consent of the BIR Commissioner as required by law. 75 Supra .

DECISION CTA CASE No. 699 2 We agree with the CTA in holding 'these 'waivers' to be invalid and without any binding effect on petitioner (Carnation} for the reason that there was no consent by the respondent (Commissioner of Internal Revenue} .' XXX XXX XXX For sure, no such written agreement concerning the said three waivers exists between the petitioner and private respondent Carnation. XXX XXX XXX What is more, the waivers in question reveal that they are in no wise unequivocal, and therefore necessitates for its binding effect the concurrence of the Commission er of Internal Revenue ... . On this basis neither implied consent con be presumed nor con it be contended that the waiver required under Sec. 319 of the Tax Code is one which is unilateral nor con it be said that concurrence to such on agreement is a mere formality because it is the very signatures of both the Commissioner of Internal Revenue and the taxpayer which give birth to such a valid agreement." Likewise, in the case of Starpack Philippines Corporation vs. Commissioner of Internal Revenue76 , this Court ruled that the waiver executed by petitioner and accepted by the Assistant Commissioner of Internal Revenue is not binding between petitioner and the Revenue Commissioner due to failure of the latter to accept and sign the same himself. Relevant portions of this Court's decision are quoted below: " In the present case, the subject assessment involves a total amount of P62,527,167 .91 as deficiency VAT, definitely a tax case involving more than P1,000,000.00. Notwithstanding the fact that the waiver executed on January 10, 2000 (Exhibit '0') was just ten (10} days before the period to assess was about to prescribe, this Court is given no choice but to interpret the provisions of RMO No . 20-90 to the letter. We note that the subject provisions of RMO No . 20-90 distinguish those revenue officials assigned in the National and Regional offices who are authorized to sign the waiver. By segregating the revenue officials, logic dictates that the qualification provided therein, particularly the phrase 'about to prescribe regardless of amount', is applicable only to the revenue officials enumerated under paragraph ' B' thereof, titled : ' In the Regional Offices' . It does not include those revenue officials enumerated under paragraph 'A' thereof, titled : ' In the National Office' , which~ 76 CTA Case No . 6486, April 2 1, 2005

DECISION CTA CASE No. 699 2 includes the Assistant Commissioner of Internal Revenue . As a matter of fact, the authority granted to revenue officials enumerated under paragraph 'A' is actually qualified depending upon the amount involved in a particular tax case . Therefore, revenue officials in the National office could not be authorized to sign a waiver, regardless of the amount involved, by mere implication. It is of no moment that they have a higher rank in position compared to the revenue officials in the Regional offices, as insisted upon by respondent. The said revenue memorandum cou ld have easi ly provided the same if that was the intention . In adopting the interpretation above -stated and after applying the foregoing jurisprudence, it is without a doubt that the aforesaid waiver (Exhibit '0'), which was signed by the Assistant Commissioner of Internal Revenue (Exhibit '0-2'}, is not binding between the petitioner and the Commissioner due to failure of the latter to accept and sign the same himself. Consequently, as there was no valid waiver (Exhibit '0 '} executed by the petitioner before the expiration of the time prescribed by law for the assessment of the VAT, the waivers subsequently executed (Exhibits 'P' to 'T') after the prescribed period had no binding effect as there was nothing to extend in the first place." (Emphasis supplied) In the instant case, the assessment emanated from the National Office and the amount of which exceeds P1,000,000.00. Based on the clear wordings of RMO No. 20-90, the First Waiver should have been accepted and signed by the BIR Commissioner herse lf. Since the First Waiver was signed only by the Assistant Commissioner of the Large Taxpayers Service, the First Waiver is not binding between petitioner and the CIR; hence, it could not extend the original three-year prescriptive period to issue the assessment . Furthermore, while RDAO No. 05-01 authorizes the Assistant Commissioner to sign and accept waivers, RDAO No . 05-01 was issued only on August 2, 2001 and took effect only after the execution of the First Waiver. In other word s, at the time that petitioner issued the First Waiver, the authorized revenue officer to sign and accept the same wa s the CIR pursuant to RMO No. 20-90. [/

DECISION CTA CASE No. 699 2 Pa ge 31 of 36 Second, even assuming that the Assistant Commissioner of the Large Taxpayers Service had the authority to sign and accept the Waiver, still the First Waiver is invalid for it failed to indicate the date of its acceptance by Ms . Trinidad. This requirement is necessary to determine whether the Waiver was validly accepted before the expiration of the original three-year prescriptive period. The Supreme Court applied RMO No . 20-90 in the case of Commissioner of Internal Revenue vs. FMF Development Corporation77 , when it ruled that the waiver executed by the taxpayer was defective and did not validly extend the original three- year prescriptive period for the reason, among others, that the waiver did not contain the date of acceptance by the BIR Commissioner; a requisite necessary to determine whether the waiver was validly accepted before the expiration of the original three-year period, to wit: " Under Section 203 of the NIRC, 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 mandate governs the question of prescription of the government's right to assess internal revenue taxes primarily to safeguard the interests of taxpayers from unreasonable investigation. Accordingly, the government must assess internal revenue taxes on time so as not to extend indefinitely the period of assessment and deprive the taxpayer of the assurance that it will no longer be subjected to further investigation for taxes after the expiration of reasonable period of time. An exception to the three -year prescriptive period on the assessment of taxes is Section 222 (b) of the NIRC, which provides : 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 V agreed upon may be extended by subsequent written agreement made before the expiration of the period previously agreed upon . 77 G.R. No . 167765, Jun e 30, 2008

DECISION CTA CASE No. 6992 XXX XXX XXX The above prov1s1on authorizes the extension of the original three-year period by the execution of a valid waiver, where the taxpayer and the BIR agreed in writing that the period to issue an assessment and co ll ect the taxes due is extended to an agreed upon date . Under RMO No . 20-90, which implements Sections 203 and 222 (b), th e followin g procedure s shou ld be followed : 1. The waiver must be in the form identified as Annex 'A' hereof... 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 Applying RMO No . 20-90, the waiver in question here was defective and did not validly extend the original three-year prescriptive period . xxx it did not contain the date of acceptance by the Commissioner of Internal Revenue, a requisite necessary to determine whether the waiver was validly accepted before the expiration of the original three-year period . Bear in mind that the waiver in question is a bilateral agreement, thus necessitating the very signatures of both the Commissioner and the taxpayer to give birth to a valid agreement." (Emphasis supplied) Likewise, in the case of Commissioner of Internal Revenue vs. Kudos Metal Corporotw. n 78, the Supreme Court applied RMO No . 20-90 in holding that the waivers executed by the taxpayer were defective and did not validly extend the~ 78 G.R. No. 178087, May 5, 2010

DECISION CTA CASE No . 699 2 original three-year prescriptive period on the basis, among others, that the waivers failed to indicate the date of acceptance. Third, the fact of receipt of the First Waiver by petitioner was not indicated in the original copy of the First Waiver (Exhibit " A" /Exhibit "5") . It is to be noted that under RMO No . 20-90, the waiver mu st be executed in three (3) copies, the second copy of which is for the taxpayer. It is likewise required that the fact of receipt by the taxpayer of his/her file copy be indicated in the original copy. Again , respondent failed to comply with this requisite . This Court ca nnot over emphasize the fact that RMO No . 20-90 is directed to all concerned internal revenue officers and it clearly requires that the procedures found therein should be strictly followed . The First Waiver, formally offered to this Court as evidence by both petitioner and res pondent, doe s not show on its face the fact of receipt by petitioner of the duly accepted First Waiver in violation of the strict requirement impose d by RMO No . 20-90. Re spondent did not formally offer any other copy of the First Waiver, which would show the fact of receipt by petitioner of its file copy. Pursuant to Section 34 of Rule 132 of the Rules of Court on Evidence, this Court shall consider no evidence which ha s not been formally offered. Clearly, the First Waiver is not binding between petitioner and re sp ondent due to its failure to strictly comply with the requirements of RMO No . 20-90. As there wa s no valid waiver (First Waiver79 ) executed by petitioner before the expiration of the period prescribed by law for the assessment of the deficiency withholding tax/CWT for the taxable year ending December 31, 1997, the waivers /-- 79 Ex hibit "A" and Ex hibit "5", dock et, p. 1605

D ECISION CTA CASE No . 699 2 (Second Waiver, Third Waiver and Fourth Waiver80 ) subsequently executed after the prescribed period were likewise not valid and binding. The Second Waiver, Third Waiver and Fourth Waiver cannot be considered as "subsequent written agreement(s) made before the expiration of the period previously agreed upon" referred to in the second sentence of the earlier quoted Section 223(b) of the 1977 Tax Code, as amended, as there is no "period previously agreed" to speak of. Finally, even assuming arguendo that the First Waiver is valid, it extended the three-year prescriptive period until June 30, 2001 only. The Second Waiver (Exhibit "B"/Exhibit "18") was executed on July 18, 2001 or eighteen (18) days after the expiration of the extended period indicated in the First Waiver. Hence, the Second Waiver is invalid for violating Section 223(b) of the 1977 Tax Code, as amended , which mandates that the period agreed upon in a waiver of the statute of limitations can still be extended by subsequent written agreement, provided that it is executed prior to the expiration of the first period agreed upon . Consequently, as the Second Waiver was not executed by petitioner before the expiration of the period extended by the First Waiver, the waivers subsequently executed after the Second Waiver did not likewise have any binding effect as there was nothing to extend in the first place . Accordingly, this Court holds that since the four Waivers of the Statutes of Limitations are not valid and binding, the three-year period prescribed by law to issue an assessment was not extended. Therefore, the FAN and Assessment Notices, which were received by petitioner on August 8, 2003, are void for they were t-- issued beyond the prescriptive period provided under Section 203 of the 1977 Tax 80 Ex hibits " B", "C" , and " D" and Exhibits " 18", " 16", and " 17", docket, pp . 1606 to 1608

DECISION CTA CASE No . 6992 Code, as amended. As a co nseq uence, the FDDA dated June 14, 2004, which sprung from the void FAN and Assessment Notices, is likewise void and should be set aside . In view of the foregoin g, thi s Court find s the remaining stipulated issues, more particularly, the merits of the subject assessment, no longer necessary for the di sposition of this case . WHEREFORE , premises considered, the instant Petition for Review and the Supplement (To Petition for Review) are hereby GRANTED. Accordingly, the Final Assessment Notice and the As sess ment Notices are hereby CANC ELLED and WITHDRAWN for being issued beyond the pre scri ptive period allowed by law. Consequently, the Final Decision on Disputed Assess ment dated June 14, 2004 demanding payment of assessed deficiency withholding tax plu s interest in the total amount of P15,293,391.99 for taxable year ending December 31, 1997 is hereby CANCELLED and SET ASIDE . SO ORD ERED . M/-4-~J-- AMELIA R. COTANGCO- MANALASTAS Associate Justice W E CONCUR: ~tP~~'--- OLGA PALANCA- ENRIQUEZ Associate Justice

'' DECISION CTA CASE No . 699 2 ATT EST A T I O N I attest that the conclus ions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court' s Division . CERTIFICATION Pursuant to Section 13, Article VIII of the 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. Lw.~ ERNESTO D. ACOSTA Presiding Justice