FILIPINAS PALMOIL PLANTATIONS, INC., v. COMMISSIONER OF INTERNAL REVENUE

Republic of the Philippines COURT OF TAX APPEALS Quezon City EN BANC FILIPINAS PALMOI I. PLANTATIONS , INC ., CTA EB CASE NO. 550 Petiti oner, (CTA Case No. 6429) -versus- Present: ACOSTA, P.J., CASTANEDA, JR. BAUTISTA UY CASANOVA PALANCA-ENRIQUEZ FABON-VICTORINO MINDARO-GRULLA COMMISSIONER OF INTERNAL COTANGCO-MANALASTAS, JJ. REVENUE, Respondent. X--------------------------------------------------------------------------------------X DECISION MINDARO -GRULLA, J.: Submitted for decision is a Petition for Review for the Court en bone under Rule 8 of the 2005 Revised Rules of the Court of Tax Appeals, as amended, of the Decision 1 doted March 31, 2009, rendered by thi s Court's former Second Division 2 in CTA Case No. 6429, and its Resolution 3 doted October 06, 2009. 1 En bone Docket, pp. 24-48. 2 Penned by Associate Justice Juanita C. Castaneda,Jr., concurred in by Associate Justice Erlinda P. Uy and Associate Ju stice O lga Polan co-E nriquez. 3 En bane Docket, pp . 50-55. ( 984

• I Filipinos Palmoil Plantations, Inc. v. C/R Page 2 of 23 C TA EB Case No. 550 . DECISION Petitioner Filipinos Polmoil Plantations , Inc. (" FPPI ") seeks reversal of both the aforesaid Dec ision and Resolution, the dispositive portions of which, respe ctively, read os fol lows: Dec ision doted Marc h 3 1, 2009: "WHEREFORE, th e instant Petition for Review is DISMISSED fo r being filed beyond th e reglementary period under Sec tion 228 of the NIRC o f 1997 in re lation (to) Section I I o f RA I 125, as amended. SO ORDERED." Resolution doted October 06, 2009: "WHEREFORE, premises considered, pe titioner' s Motion fo r Reconsideration is he reby DENIED for lack of merit. SO ORDERED." The fa cts as narrated by this Court' s former Seco nd Divisio n ore undisputed : "Petitioner is a domestic corporation duly registered with the Securities and Exc hange Commissio n, and existing under and by virtue o f the Philippine law, wi th princi pal o ffice loca ted at 71h Fl oor, C itibank Ce nte r, Paseo de Roxas, Makoti Ci ty. It is engaged in the business o f cu ltiva ting , developing , o p era tin g, main tainin g oil plantations and o ther agricultural land s, and harvesting oil palm and o th er agricultural c rops th ereon, and is a value-added lax (VAT) taxpayer registered with th e Bureau o f Interna l Revenue (BIR) as such in accordance with Sec tion 236 of the Notional Internal Revenue Code (NIRC) of 1997 wi th VAT Reg istration/Taxpayer Identification No. 000- 317-036. O n the o th er hand, respondent is th e Commissio ner o f Internal Revenue duly appointed to perform the duties of his office, including , among o th ers, the power to act upon and render final decisions o n th e protest against internal tax ( 98 S

' I Filipinos Po/moil Plontolions. Inc. v. CIR Page 3 of 23 CTA EB Case No. 550 DECISION assessments , and ho lds o ffice a t the BIR National Offi ce Building , Agham Road , Diliman. Quezon Ci ty, where he may be served with su mmons and o ther lega l processes . · On December 4, 1998, petit ioner was served with Let ter o f Au th ority No. 141790 da ted Dec.e mber 2, 1998, whereby Revenue O fficers Noli M . Perez and Lisa To mameng were authorized to examine petitioner's books o f accounts and o ther accounting records for VAT for the period from January l, 1996 to December 31, 1996. On separate da tes, the BIR issued three notices addressed to petitioner, wherein pe titioner was required to submit the fo ll owing documents: books of accoun ts, sa les and purchase journa ls, subsidiary sales and purchase books . sa les receipts/in voices, purchase in voices, inventory list, schedule stating the name o f se ller/suppliers, schedu le o f input taxes c laimed and all other pertinent documen ts and records relative to the period under audit. On May 20. 1999, pe titioner execu ted a WA IVER OF THE DEFENSE OF PRESCRIPTION UNDER THE STATUTE OF LIMITATIONS O F THE NATI ONA L INTERN AL REVENUE CODE (waiver), which will expire on December 31, 1999. On October 22. 1999, th e BIR issu ed a Pre-Assessme nt Notice covering th e VAT liabilities for the year 1996 of pe titi oner. On December 2. 1999, th e BIR received from petitioner a le tter dated November 24, 1999 from petitio ner. requesting for a reinvestigation or review of the finding of th e BIR. On December 6, 1999, petitioner execu ted another Waiver to expire on December 31, 2000. On May 25, 2000, petitioner received fro m th e respondent Assessmen t Notice No. 104-97-000 13-35 and Formal Letter of Demand bo th dated April 19, 2000 assessing Petitioner for deficien cy VAT for taxable year 1996 in th e amount of ~ 2,306,226.38 (inc lusive of interes t) broken down as follows: Value-Added Tax VAT Sa les per aud it ~ 529,224.459.03 Add: Other in come per in come sta tement 4 480 109.00 Tota l Vo table Income ~ 533,70 4,568.03 Output Tax ~ 53,370.456.80 Less: Input Ta x Per Audit 2 096 947.42 ( 98G

Filipinos Palmoil Plantations, Inc. v. CIR Page 4 of 23 CTA EB Case No. 550 DECISION VAT Due ~ 51 ,273,509.38 Less: VAT Payments 49 879 984.60 Deficiency VAT j;1, 1,393,524.78 Add: Interest from 1.21.97 to 4.30.00 912 70 1.60 To tal VAT Due and Payable j;1, 2,306,226.38 The above deficiency VAT allegedly arose due to th e fol lowing: (i) Unrecorded Votable Soles amounting to ~896,315.27 on th e ground that sa id amoun t was not subjec ted to VAT; and (ii) Disallowance of input tax c laimed amounti ng to ~855,882.35 on th e ground th a t total a llowable input ta xes per source document amou nted only to ~2.096.947.42 while per return total input claimed was~ 2,952.829.77. On June 16, 2000. w it hin the 30-doy. period wi thin which to formal ly pro tes t any deficiency tax assessment. pe titioner filed with the O ffice o f the Acting Regional Director of Reve nue Region No. 17 (Butuon Ci ty) its protest letter doted June 5, 2000 pursuan t to then Sec tion 229 of the NIRC. as amended, speci fyin g the factual and legal bases of th e protest against th e aforecited assessmen t, requesting the reinvestigation o f th e deficiency VAT assessmen t th erein, and enc losing a copy of petitioner's letter to one o f its major customers granting its reques t for a higher discount due to the very poor quality of c rude palm oil and copies o f th e only available soles invoices (#s 577 and 578) . In th e said protest le tte r, petitioner, in port. stated- 1. UnrecordE;;d votable soles xxxx We hove enclosed a copy of our letter to one of our major cus tomers grantin g th eir request for a higher discount due to th e very poor quality of the CPO and copies of the only available soles in voices (#s577 and 578) with th e adjusted discounts reflected including the corresponding adjus ting en tri es. Our problem, however, is we lost some o f our records during the transfer of our office from Makoti Ci ty to Quezon City. Thus, we have been unable to produce a ll the o th er so les invoices (' 987

Filipinos Polmoil Plantations, Inc. v. CIR Page 5 of 23 CTA EB Case No. 550 . DECISION which will account for th e entire amount of the supposed unrecorded soles. xxxx Our accountant presented all the original documents pertaining to the compa ny's money placements to prove that port of other income shown in the income statement was already subjected to final withholding tax. However, it seems that this was not considered in the assessment. 2. Unsupported input tax claimed Only the transactions o f the Manila office, which constitutes a small number o f transa ctio ns, hod no support for the some reason that records were lost. However, we submitted all the supports for the Aguson transactions plus a summary of the Manila office transactions. However, it seems that the entire assessment for deficien cy covered transa c tions of both offices. xxxx On December 20, 2000, the BIR received from the petitioner another letter doted December 19, 2000, which were written by way of a supplemental protest to the above-stated June 5, 2000 protest letter, arguing that the Formal Letter of Demond doted April 19, 2000 was already barred by prescription , pursuant to Sections 203 and 222 (b) of the NIRC of 1997. On January 4, 2001, after reinvestigation pursuant to the protest letter doted June 5, 2000, petitioner received from the respondent Assessment Notice No . 104-97-00013-35 doted December 18, 2000 assessing Petitioner for deficiency VAT for taxable year 1996 in the amo unt of ~2,369,262.94 (inclusive of interest ) broken down as follows: Value-Added Tax VAT Soles per audit ~ 529,224,459.03 Add: Other income per Income Statement 4 480 109.00 Total Votable Income ~ 533,704,568.03 ------------- Output Tax ~ 53,370,456.80 ~ 988

Filipinos Polmoil Plantations, Inc. v. CIR Page 6 of 23 CTA EB Case No. 550 DECISION Less: Input Tax per Audit P 2,096,947.42 Additional input tax per investigation 69 048.48 2 165 995.90 VAT Due ~ 51 ,204,460.90 Less: Y AT Payments 49 879 984.60 Deficiency VAT 1,324,47 6.30 Add: Interest from 1.21.97 to 12.31.00 1 044 786.64 Total VAT Due and Payable 2,369,262.94 The above deficiency Y AT allegedly arose due to the following: (i) Unrecorded Votable Soles amounting to ~896 , 315.27 on the ground that the said amount was not subjected to VAT; and (ii) Disallowance of input tax claimed amounting to j;/186,833.87 on the ground that total allowable input taxes per source document amounted only to P,2, 165,995 .90 while per return total input claimed was ~2,952,829.77. Said Assessment Notice No. 104-97-000 13-35 doted December 18, 2000, together with a Formal Demond Letter, also doted December 18, 2000 were released and sent by moil on December 22, 2000. It must be noted that the Assessment Notice No. 104-97- 00013-35 doted December 18, 2000 raise the some issues and finding s, except that in the Iotter notice th e BIR allowed input tax in the amount of P,69,048.48. On January 27, 2001 , petitioner received a letter dated December 27, 2000 from Mr. Danilo Duncano, Acting Regional Director of Revenue Region No. 17- Butuan City, informing petitioner that the case has become final and demandable and was already forwarded to the respondent, and that any further action and/ or protest regarding the case should already be addressed to the same. (Emphasis supplied) On February 28, 2001, respondent received a letter from petitioner referring to the above-stated letter of Mr. Duncono. On March 11 , 2002, petitioner received from respondent a Final Notice Before Seizure (FNBS) doted January 23,2002, demanding petitioner to pay the deficiency VAT assessment for the taxable year 1996 in the total amount of j;f2,369,262.94. (' 989

Filipinos Polmoil Plantations, Inc. v. CIR Page 7 of 23 CTA EB Case No. 550 DECISION On March 21, 2002, petitioner also received from the respondent o Warrant of Distraint and/or Levy doted January 31, 2002 seeking to enforce col lec tion measures for the deficiency VAT assessment for the taxable year 1996 in the to tal amount of fl.2,369 ,262.94. On the some dote, petitioner was informed by the Philippine Notional Bonk, Aguson Del Sur Branch, that o Warrant of Garnishment doted January 31, 2002 was issued by the respondent against the deposit of petitioner in said Bonk. On April 10, 2002, the instant PETITION FOR REVIEW WITH MOTION FOR SUSPENSION OF COLLECTION OF TAX was filed with this Court." On January 7, 2003, this Court's former Second Division issued a Resolution 4 ordering respondent to cease and desist from enforcing the Warrant of Distraint and/or Levy and the Warrant of Garnishment. After trial on the merits, this Court's former Second Division rendered the assailed Decision s , stating among others that the return filed by petitioner is a false return as defined in Aznar v. CTA , 58 SCRA 519 ( 197 4). Thus , the assessment within the ten ( 10) year period after the discovery of falsity will apply and not the three (3) year period after the lost day prescribed by low for the filing o f the return. Also, this Court's former Second Division held that the assessment has become final, executory and demandable considering that the petitioner foiled to appeal within thirty (30) days from re ceip t of the letter doted December 27, 2000 of the Acting Regional Director of Revenue Region 4 Second Division Docket, pp. l 03-l 04. s Supra Note l. C.. 990

Filipinos Polmoil Plantations. Inc. v.·ciR Page 8 of 23 CTA EB Case No. 550 DECISION No . 17-Butuan City which constitutes as the Final Disposition and not the Final Notice Before Seizure (FNBS). Not satisfied, petitioner filed a Motion for Reconsideration 6 which was denied in a Resolution ? doted October 06, 2009. Hence, ' petitioner filed the instant Petition for Review with the following assignment of errors : 1. WITH ALL DUE RESPECT, THE CIRCUMSTANCES IN THIS CASE AND THE PRINCIPLES OF SUBSTANTIAL JUSTICE AND EQUITY WARRANT THE RELAXATION OF THE RIGID APPLICATION OF PROCEDURAL RULES AND THE ALLOWANCE OF FPPI 'S APPEAL. 2. WITH ALL DUE RESPECT, THE SECOND DIVISION OF THIS HONORABLE COURT ERRED IN RULING THAT THE SUBJECT ASSESSMENTS ARE NOT YET BARRED BY PRESCRIPTION . 3. WITH ALL DUE RESPECT, THE SECOND DIVISION OF THIS HONORABLE COURT ERRED IN NOT RULING THAT FPPI IS NOT LIABLE FOR THE DEFICIENCY TAXES ASSESSED AGAINST IT." We find no re ve rsible error. Suffice it to soy that the instant petition involves the assessment mode by respondent against petitioner for the taxable year 1996. When the demands to pay proved to be futile , respondent tried to enforce collection for the deficiency VAT assessment in the total 6 En bone Docket. pp. 126-141. 7 Supra. Note 3. { 991

Filipinos Polmoil Plantations, Inc. v . CIR Page 9 of 23 CTA EB Case No. 550 DECISION amount of ~2 , 369,262.94, through a Warrant of Distraint and/or Levy. Thereafter, petitioner was informed by the Philippine National Bank, Agusan Del Sur Branch th at a Warrant of Garnishmen t was issued against petitioner's deposit account. Hence , petitioner filed before this Court a Petition for Review with Motion for Suspension of Collection o f Ta x which was raffled to this Court's former Second Division . This Court's former Second Division held that petitioner filed a fal se return and that th e assessment has become final, executory and demandable. Section 2288 of the Notional internal Revenue Code (NIRC), as amended, provides that a taxpayer has thirty (30) days from receipt o f the decision of the protest, o r from the lapse of the one hundred eighty ( 180) - day period to appeal before this Court. Otherwise the decision of the Commissioner of Internal Revenue or his duly authorized representative shall become final, executory and demandable. s SEC. 228. Protesting of Assessment .-xxx The ta xpayer shall be informed in writing of the low and the facts on which the assessment is mode; otherwise, the assessment shall be void. XXX XXX XXX Such assessment may be protested administratively by filing a request for reconsideration or reinvestigation within thirty (30) days from receipt o f the assessment in such fo rm and manner as may be prescribed by implementing rules and regulations. Within sixty (60) days from filing of the protest. all relevant support ing documents shall hove been submitted; otherwise, the assessment shall become final. If the protest is denied in whole or is not acted upon within one hundred eighty ( 180) days from submission of documents, the taxpayer adversely affected by the decision or inaction may appeal to the Courl of Tax Appeals within thirty (30) days from receipt o f the said decision; or from the lapse of the One Hundred Eighty ( 180)-doy period; otherwise, the decision shall become final , executory and demandable . XXX XXX XXX( 992

Filipinos Polmoil Plantations, Inc. v. CIR Page 10 o f 23 CTA EB Case No. 550 DECISION In the some vein, Sec ti on 3.1.5 of Revenue Regulation No . 12-99 9 , states that if the taxpayer foils to eleva te his protest to the Commissioner of Internal Revenue within thirty (30) days from receipt o f the final decision o f the Commissioner's duly au th o rized representative, the Iotter's decision shall be final, executory and demandable . Consequently, w ithin thirty (30) days from the final decision o f the Commissioner's duly authorized representative, pe ti tioner has the option to either appeal to this Cou rt by way of a petition fo r review or 9 3.1 .5 Disputed Assessment.- The taxpayer or his duly authorized representative may protest administratively against the aforesaid formal letter o f demand and assessment notice within (30) days fr om dote of receipt, thereof. If there ore several issues in volved in th e formal le tt er of demand and assessment notice but the ta xpayer only disputes or protests against the vc:ilidily of some of the issues raised, the taxpayer shall be required to pay the deficiency tax or taxes attributable to the undisputed issues, in which case, a collec tion letter shall be issued to the taxpayer ca llin g for payment o f the said deficiency lox, inclusive o f the applicable surcharge and/or interest. No action shall be Ioken on the taxpayer's disputed issues until the ta xpayer has paid the deficiency lox or taxes attributable to the said undisputed issues. The prescriptive period for assessment or collec ti on of the tax or taxes attributable to the d isputed issues shall be suspended XXX XXX XXX If the taxpayer foils to file a valid protest against the formal letter of demand and assessment notice within thirty (30) days from do te o f re ceipt thereof, the assessment shall become final, executory and demandable. If the protest is denied , in whole o r in port, by the Commissioner, the taxpayer may appeal to the Court of Tax Appeals within thirty (30) days from dote of receipt of the said decision, otherwise, the assessment shall become final , executory and demandable. In general, if the protest is denied, in whole or in port, by the Commissioner or his duly authorized representative, the taxpayer may appeal to the Court of Tax Appeals within thirty (30) days from dote of receipt of the said decision, otherwise, the assessment shall become final, executory and demandable: Provided, however. that if the taxpayer elevates his protest to the Commissioner w ithin thirty (30) days from dote o f receipt of the final decision of the Commissioner's duly authorized representative, the Iotter's decision shall not be considered final, executory and demandable, in which case. the protest shall be decided by the Commissioner. If the Commissione r or his duly authorized representative fails to oct on the taxpaye r's pro test within one hundred eighty days from dote of submission, by the taxpayer. of the required documents in support of his protest. the taxpayer may appeal to th e Court of Tax Appeals within thirty (30) days from the lapse of the said 180-d oy period, otherwise, the assessment shall become final. executory and demandable. ( 99 3

Filipinos Polmoil Plantations , In c . v. CIR Page 11 of 23 CTA EB Case No. 550 DECISION elevate to the Commissioner of Internal Revenue its protest. Otherwise, the final decision of th e Commissioner's duly authorized representative shall be final, executory and demandable. Records disclose that on Ma y 25, 2000, petitioner received from respondent the Assessment Notice No. 104-97-00013-35 and Formal Letter of Demand both dated April 19, 2000, assessing petitioner for deficiency VAT for taxable year 1996 in the amount of P2,306.226.38 (inclusive of interest). On June 16, 2000, petitioner filed w ith the Office of the Acting Regional Director of Revenue Region No. 17 (Butuan City) its first protest letter dated June 5, 2000 within the 30-day period. Petitioner submitted other documents and requested for a reinvestigati on. On December 20, 2000, the BIR received from petitioner another letter dated December 19, 2000 10 which was written by way of a supplemental protest (2nd protest) to the June 5, 2000 protest letter, arguing that the Formal Letter of Demand dated April 19, 2000 was already barred by prescription , pursuant to Sections 203 and 222(b) of the NIRC of 1997. After reinve stigation pursuant to the protest letter dated June 5, 2000, petitioner received from respondent the Assessment Notice No. 104-97-00013-35 dated December 18, 2000 assessing petitioner for 1o Exhibit "C" ~ 994

Filipinos Palmoil Plantations , Inc. v . C/R Page 12 of 23 CTA EB Case No. 550 DECISION deficiency VAT for ta xable year 1996 in the amount of P2,369,262.9 4 9 (inclusiv e of interest). This protest was denied upon receipt b y petitioner on January 27, 2001, o f a letter 1 1 from Mr. Danilo Duncano, Acting Reg iona l Director o f Revenue Region No. 17-Butuan City, informing that the case has become final and demandable and that it was forwarded to the Commissioner of Internal Re venue, and that any further action and/or protest regardin g the case should likewise be addressed to the Commissioner of Internal Revenue. Based on the facts, from January 27, 2000, petitioner had until Februa ry 26, 200 1 to appea l to this Cou rt by way o f a petition for review or elevate to the Commissioner of Internal Revenue its third protest. Failure to do so wou ld render th e decision final, executory and demandable. Petitioner failed to avail of both remedies . Consequen tl y, the decision of the Acting Regional Direc tor of Revenue Regio n No. 17- Butuan C ity has become final , executory and demandable . As aptly found by this Court's former Second Division: "Petitioner failed to exercise its right to bring the matter before thi s Court within th e reglementary period upon receipt o f the letter of Mr. Duncano dated December 27 , 2000. Being a final disposition by th e BIR, the same would have been a proper subject o f an appeal. The period of thirty (30) days to appeal th e adverse decision on pe titioner's protest had a lready lapsed when the instant petition was filed with this Cou rt (raffl ed to the second Division) on ly on April 10, 2002 . 11 Exhibit "D" (.. 99 5

Filipinos Palmoil Plantations, Inc . v. CIR Page 13 of 23 CTA EB Case No . 550 DECISION On the o ther hand, when petitioner elevated its protest to the Commissioner of Internal Revenue, it was again filed out of time. It should be noted that it was on January 27, 2001 when petitioner received Mr. Duncono' s letter. Accordingl y, petitioner has thirty (30) days from January 27, 2001 or until February 26, 2001 to elevate his case to the Com missioner. It was only on February 28, 2001 t,hot the Commissioner o f Internal Revenue received o letter from petitioner referring to the le tter o f Mr. Dunco no doted December 27,2000. Clearly, petiiioner failed to a vai l of its right to bring the matter before this Court wi thin the reglementary period upon receipt o f the decision stating that the case has become fif!al and demandable and was forwarded to the Commissioner of Internal Revenue , which constituted the final determination on petitioner's protest. Being a final disposition , the same would ha ve been a proper subject for appeal had petitioner filed the sa me within the reglementary period : Instead of filing a petition for review, petitioner filed a letter of protest (3rd protest) w hich was received by the Commissioner of Internal Revenue on February 28, 2001 . However, petitioner had o nly until February 26, 2001 to elevate to the Com miss ioner o f Internal Revenue its protest. Said letter protest to the CIR was filed ou tside the thirty (30) day period. Evidently, it was filed ou t of time . Concomitantly, said belated protest does no t change th e fact that the assessment had become final, e xec utory and demandable. Petitio ner 's stubb o rn insistence that the thirty (30) day period should not ha ve co mmenced on January 27, 2001 whic h is a Saturday C., 99 6

Filipinos Polmoil Plantations, Inc. v. CIR Page 14 o f 23 CTA EB Case No. 550 DECISION (the day petitioner received Mr. Dun ca no's letter) but rather on the next succeeding business day, or on January 29, 2001, deserves scant consideration. It is so o nly if the last day fo r doing an act required or permitted by law falls on a Saturda y, Su nda y o r a legal holidays where the time shal l not run until the next working ho liday and not on the day of the act or event from w hich the designated peri od of time begins in accordance w ith Sec tion 1 Rule 22 of th e Revised Ru les O f Cou rt 12. We will no longer belabor the obvious. In Commissioner of Internal Revenue v. Bank of the Philippine Islands, 13 the Supreme Court held that - "Even if we considered th e December 10, 1988 letter as a protest, BPI must neverthel ess be deemed to hove failed to appeal the CIR's final decision regarding the dispu ted assessments within the 30-day period provided by low. The CIR, in his May 8, 1991 response, stated that it was his "final dec isio n ... o n the matter." BPI th ere fore had 30 days from the tim e it re ceive d the decision on June 27, 1991 to appeal but it did no t. Instead it filed a request for reconsideration and lodged its appeal in Ihe CT A o nly on February 18, 1992, way beyond the reglementary period. BPI must now su ffer th e repercussio ns o f its omission." In Rizal Commercial Banking Corporation v. Commissioner of Internal Revenue , 1 ~ the Supreme Cou rt hel d that this 30-day period within which to file an appeal is jurisdictional and failure to comply 12 Section 1. How to compute ti me.- In computing any period of time prescribed or allowed by th ese Rules, or by order of the Court, or by any applicable sta tute, the day of the oct or event which the designated period of time begins to run is to be excluded and the dote of performance included. If the lost day o f the period, as thus computed, falls on a Saturday, a Sunday, or a legal holiday in the place where the cou rt sits, the time shall not run until the next working day. 13 G .R. No. 134062. April 17, 2007. 14 G.R. No. 168498. April 24, 2007 .. ( 99 7

Filipinos Palmoil Plantations , Inc. v. CIR Page 15 of 23 C TA EB Case No. 550 DECISION therewi th wo ul d bar th e appea l and depri ve the Court o f Ta x Appeals of its jurisdi c ti o n i o e ntertain a nd d e te rmi n e the corre c tne ss o f the assessm e nts; su c h peri o d is not merely directory but mandatory and it is bey ond the p ower o f th e cou rts to exte nd t h e sam e. We qu o te: " Besides, tax assessm en ts by lax exam iners are presumed correc t and made in good fa it h, and a ll p resump ti ons are in fa vor o f th e correc tn ess o f a tax assessme nt unless prove n o th erwise. Also, pe titio ner's fa il ure to file a pe titio n fo r review w ith th e Court o f Tax Appea ls wi thin the sta tutory period re ndered th e d ispu ted assessment fina l, execu tory and demandable , th ereby p recluding it fro m interposing th e defe nses o f lega lity or validi ty o f the assessme nt a nd prescription o f th e Govern me nt's righ t to assess. The Court o f Ta x Appeals is a court o f sp ecia l jurisd ic tio n and c an o nly take cog niza nce o f suc h ma tt ers as are c le arly w ithin its jurisd ic tion. Section 7 of Republic Ac t (R.A. ) No. 9282, a m e nd ing R.A. No. 1125, o therwise known as the Law Crea ting th e Co urt of Tax Appea ls, p rovides: Sec. 7. Jurisd ic tion . - The CTA shall exercise: (a ) Exc lusive appella te jurisdic tio n to rev iew by appea l, as he re in provided: ( 1) Dec isions of the Commissioner o f Interna l Revenue in cases involving d ispu ted assessments , re funds o f interna l revenue taxes, fees o r o ther c harges, pe na lties in re la tio n th ere to, or o th e r m a tt ers arising under the Na tio nal Intern a l Reve nue or o ther laws admin istered by th e Bureau o f In terna l Reve nue; (2) Inactio n by th e Com m issio ner o f Intern a l Reve nue in cases involving d isp uted assessm e nts, re funds o f in tern al revenue taxes, fees o r other c harges, pena lties in re la tion th ere to, or o th er m a tt ers arising under the Natio na l Intern a l Revenue Code or o th er laws adm inistered by the Bureau o f Intern a l Revenue , w here the Na ti o nal Internal Revenue Code provides a speci fi c period of actio n, in wh ic h case the inaction sha ll be deemed a denia l; Also, Section 3, Rule 4 and Section 3 (a), Rule 8 of the Revised Rul es of th e Court o f Tax Appea ls 6 sta te : ( 993

Filipinos Palmoil Plantations, Inc. v. CIR Page 16 of 23 CTA EB Case No. 550 DECISION RULE 4 Jurisd ict ion o f the Court XXX XXX XXX SECTI O N 3. C ases With in th e Jurisdic tio n o f th e Court in Divisio ns.- Th e Co urt in Divisio ns sha ll exerc ise : (a ) Exclusive o rig ina l or appella te ju risd iction to review by appe al th e fo llowing: ( 1) Decisio ns of th e Com missioner o f Inte rn a l Reve nu e in c ases involving dispute d assessme nts, refunds o f internal reve nue ta xes, fees o r o ther c harg es, p enalties in re latio n th ere to, or o th er ma tt ers arising under the No tional Inte rnal Reve nue Code o r o th e r lows adminis tered by the Bureau of Inte rnal Reve nue; (2) Inacti o n by th e Commissio ner o f Inte rnal Reve nue in cases involvi ng disputed assessm e nts, re funds o f interna l re venue ta xes, fees o r o th e r c harges, penalties in re latio n th e reto , o r o th e r matte rs arising unde r th e No tio nal Inte rnal Revenue Code or o th er lows a dministered b y th e Burea u o f Inte rnal Reve nu e, w he re th e Notio na l Interna l Reve nue Cod e o r othe r applic able low provid es a speci fic p eri o d fo r a c tio n : Provided, th a t in case o f d ispu ted assessm e nts, th e in ac tio n o f the Commissio ne r o f Inte rnal Revenue w ith in the o ne hundre d e ig hty d a y-period under Sec tion 228 o f th e No tio nal Inte rn a l Revenue Code shal l be deemed a denia l for purposes o f allowi ng the taxpa yer to appea l his case to the Court a nd d oes no t necessarily co nstitute a forma l decisio n o f the Commissio ne r o f Inte rn a l Reve nue o n th e tax case; Provid e d , furth e r, th a t shou ld th e taxpayer op t to await the fi nal decision o f th e Commissio ner . o f Inte rn a l Reve nue o n th e d isp ute d assess m e nts b eyo nd th e o ne hund red e ig hty day- p erio d above m e ntio ned, th e taxpayer may appea l suc h fin a l decisio n to th e Cou rt under Sec tio n 3(o), Rule 8 o f th ese Rules; and Provide d , still furth e r, th a t in th e case o f c laims fo r re fund o f ta xes e rro neously or illega lly co ll ec ted, th e taxpa yer must file a pe titio n for rev iew w ith th e Court prior to the e xpira tion o f th e two -ye ar perio d unde r Sec tio n 229 o f th e Notio nal Inte rnal Reve nue Code; XXX XXX XXX RULE 8 Procedure in Civil Cases XXX XXX XXX SECTI O N 3. Wh o M ay Ap pea l; Pe ri od to File Pe titio n. - (a) A party adverse ly a ffec te d by a decision, ru li ng o r th e inac tio n o f th e Com missioner of Internal Revenue o n d ispu ted asse ssm e nts o r c laims fo r re fund o f inte rn a l revenue taxe s, or b y a dec isio n o r rulin g o f th e Commissio ne r o f C usto m s, the ~ 999

Filipinos Palmoil Plantations, Inc. v. CIR Page 17 of 23 C TA EB Case No. 550 DECISION Se c retory o f Finan ce, th e Secre tory o f Trad e a nd Ind ustry, th e Secre tory o f Ag ricu lture, o r a Reg io na l Trial Court in th e exerc ise o f its o riginal jurisdictio n m ay appeal to the Cou rt by p e titio n fo r review fil e d w ithin thirty days a fte r receipt o f a co py o f suc h d ecision o r ruling, o r exp ira tion of the period fixed by low for th e Commissio ne r o f Intern a l Revenue to oc t o n th e dispute d assessments . In case of inac tion o f the Commissioner o f Inte rna l Reve nue on cla ims fo r refund of in terna l reve nue taxes erro neously or illega lly co llec ted, the taxpayer m ust fil e a p e titio n for review w ith in th e two-year p e riod prescribed by low fro m paym e nt o r co ll ec ti o n o f th e taxes. (n ) Fro m th e fo regoing, it is clear th a t the jurisd ic ti on o f th e Court of Ta x Ap pea ls has been expanded to inc lude no t on ly d ecisio ns or rulin gs but inaction as we ll o f th e Com missione r o f Inte rn a l Revenue . The decisions, rulings or inaction of the Commissioner are necessary in order to vest the Court of Tax Appeals with jurisdiction to entertain the appeal, provided it is filed within 30 days after the receipt of such decision or ruling , or within 30 days after the expiration of the 180-day period fixed by law for the Commissioner to act on the disputed assessments. This 30 -day period within which to file an appeal is jurisdictional and failure to comply therewith would bar the appeal and deprive the Court of Tax Appeals of its jurisdiction to entertain and determine the correctness of the assessments. Such period is not merely directory but mandatory and it is beyond the power of the courts to extend the same. In case the Commissioner foi led to ac t on the d ispu ted assessme nt wi th in th e 180-doy period fro m do te o f submissio n o f docum e nts, o tax pa yer con e ithe r: 1) fil e o pe titio n for rev iew wi th th e Court o f Tax Appea ls wi thin 30 days a ft er th e expira tion o f th e 180-doy peri od; or 2) awa it the fina l decision o f the Com m issioner o n th e d isp uted assessmen ts a nd a ppea l suc h fino! d ecisio n to th e Cou rt o f Tax Appea ls w ithin 30 d ays a ft er receip t o f a copy o f suc h d ecisio n . However, th ese op tions o re mutuall y exclusive, and resort to o ne bars the applic atio n o f th e o th er. In th e insta nt case, th e Comm issio ner foi led to oct o n th e d ispu ted assessmen t w ithin 180 days from dote of submission o f docume nts. Thus, pe titi oner op ted to fi le a pe titi on for rev iew b e fore th e Court o f Ta x Ap pea ls. Un fortuna te ly, th e p e titio n for revie w was fi led o ut o f time, i.e., it was fil ed m ore th an 30 days a fte r th e lapse o f th e 180-doy period. Conseque ntly, it was d ism issed by the Court of Tax Appeals for la te filing . Pe titioner did no t fil e a m o tion for reconsidera ti on or make on appea l; he nce, the dispu ted assessment become final, demandable a nd exec utory ." L 100 0

Filipinos Palmoil Plantations, Inc. v .· CIR Poge 18 of 23 CTA EB Case No. 550 .· DECISION This now brings us to the crux of the matter as to whether this Court's former Second Division erred in finding that petitioner filed a false return. If petitioner did file a false return, the 10-year prescriptive period shall be in effect. O therwise. the Assessment Notice No. 104- 97-00013-35 and Formal Letter o f Demond both doted April 19, 2000 or the subsequent assessment mode after rein ves tigati on, Assessment Notice No. 104-97-00013-35 and Formal Demond Letter, both doted December 18, 2000, mode after the three-year prescriptive period, hove prescribed. Petiti o ner claims that it did not conceal anything from the CIR as it submitted all the pertinent documents and records relative to the period of audit and that the unrecorded amount of P896,3 15. 27 was on honest belief that this amount refer to rebates deductible from the computation o f its gross soles. Petitioner points out that hod it reall y filed a fal se VAT return . the CIR would hove assessed it 50% penalty but the CIR did no t. Hence, this appears as on admission on the port of the CIR that the VAT Return is not a false return. Likewise. petitioner argues that reliance in the Aznar case is misplaced as it does not establish a hard and fast rule that every deviation from the truth necessarily brings a particular return C 100 1

Filipinos Palmoil Plantations, Inc. v. C/R Page 19 of 23 C TA EB Case No. 550 DECISION under the coverage o f Section 222 15 o f the NIRC and that it should not be given a sweeping application in all cases. We are not p ersuaded. In the Aznar Case, o false return merely implies o deviation from the truth or fact , whe ther intentional or no t. We agree that the Aznar Case should no t be given a sweep ing application in all cases as not every mistake o r deviation from the truth nec.essarily brings o particular return under the coverage o f Sec tion 222 o f the NIRC. However, inconsistencies in repre sen tation, non-recording of transactions, violation o f the NIRC and among other factors as the ci rcums tan ces would warrant should be put into considera tion. Petitioner claims to hove lost some o f its records, ye t in its appeal to this Court, petitioner presented additional evidence w hic h it co uld hove easily presented in the administrative leve l. Likewise , petitioner appears to have viola ted the invoicing requirements of Sectio n 108(o) o f the NIRC. Th ese circums tan ces convince us to apply the Aznar Case . Thus , we find th e pertine nt ru lin g of the Decision of this Cou rt 's fo rmer Second Division to be correct. 15 Sec. 222 . Exceptions as to Period o f Limitation of Assessment and Collection of Taxes.- (a) In th e case of a false o r fraudulent return with intent to evade tax or of failure to file a return, the tax may be assessed, or a proceeding in court for th e col le c tio n o f such tax may be filed without assessment, a t any time within ten ( 10) years after th e discovery of the falsity, fraud or om ission: Provided, Tha t in a fraud assessment which has become final and executory, th e fact of fra ud shal l be judicially ta ken cognizance of in the civil or criminal action for the collection thereof. XXX XXX XXX C 1002

Filipinos Polmoil Plantations, Inc. v. CIR Page 20 of 23 CTA EB Case No. 550 DECISION We quote: "In its protest letter dated June 5, 2000 or at the administrative level, petitioner made the following explanations in regard to the said " unrecorded votable sales"- xxx. You would note, therefore, that the supposed unrecorded sales occurred only in January with transactions for the rest of the year fou nd in order. We have enclosed a copy of our letter to one of our major customers granting their request for a higher discount due to the very poor quality of the CPO and copies of the only available sales invoices (#s 577 and 578) with the adjusted discounts reflected including the corresponding adjusting entries. Our problem, however, is we los t some o f our records during the transfer of our office from Makoti City to Quezon City.xxx. Notwithstanding such explanation, petitioner, in this appeal was able to present and offer additional documentary evidence, viz: pages 4, 14, and 21 of petitioner's supposed general ledger for the year 1996, to prove that the said unrecorded sales had been adjusted or reversed in petitioner's financial records . This cannot be allowed. XXX XXX XXX Suffice it to state, however, that th e said sa les invoices are inadequate to establish the fact o f recording of the transactions therein indicated . For one thing , said sales invoices failed to comply with the invoicing requirements under Sec. 108 (a) o f the NIRC, as amended by not indica ting petitioner's VAT registration number or Tax identification Number. Thus , said invoices are invalid. For another, to be considered as "recorded", it must be shown that the transaction s are reflec ted on ALL the books of accounts required to be kept by the taxpayer xxx xxx. Thus, for a sale to be considered as recorded , the taxpayer must present .not only the sales invoices, but also the journal, ledger, and subsidiary sales journal. {. 1 003

Filipinos Polmoil Plantations, Inc. v. C/R Page 2 1 of 23 CTA EB Case No. 550 DECISION Furthermore, . it is of no momenl . that there ore, in soles invoices nos. 577 and 578, supposed "adjusting entries", since such entries ore not in its proper place. Accounting entries ore recorded in the above-stated books of accounts, not in the soles invoices. XXX XXX XXX Thus, having foiled to refute the finding of "unrecorded votable soles" by the BIR, such finding stands. Correspondingly, the soles and the VAT thereon were never reflected in the VAT quarterly return of petitioner for the first quarter of 1996. Such being the case, such return is a false return as defined in Aznor." Indeed, there was a false return. The non-recording and non- compliance with the invoicing requirements puts the instant case under the coverage of Section 222 of the NIRC 16. CIR's non- assessment of the 50% penalty for filing a false return is of no consequence. Corollary, the assessments and formal demand have not prescribed and that the Decision of the Acting Regional Director of Revenue Region No. 17-Butuan City on petitioner's protest thereon has become final, executory and demandable. But unfortunately, the instant petition for review was filed out of time, i.e., it was not filed within 30 days after the receipt of said decision. We find it unnecessary to discuss the third assignment of error for being moot. 16ibid. ( 1004

Filipinos Palmoil Plantations, Inc. v. C/R Page 22 of 23 CTA EB Case No. 550 DECISION In fin e, we find no cogen t reason to reverse the finding s o f this Court's former Second Division . WHEREFORE , th e instant pe tition is DENIED . Th e Decisio n o f this Court's former Second Divisi o n in CTA Case No. 6429, doted March 31,2009, and its Resolution doted Oc tober 6, 2009 , ore AFFIRMED . No pronouncement as to cos ts . SO ORDERED. f'.·~~o:-t N . l\!1~~- G~ ~ N. MINDARO-GRULLA Associate Justice WE CONCUR: D~'-l- ~ ~NESTO D. ACOSTA Presiding Justice ~~ Q. . ~ \)_ JffANITO C . CASTANEDA/Jr. . Associate Justice ER~. UY CAESAR A. CASANOVA Associate Justice ~~~ Associate Justice ~~ /- ~-~ &~lA R. ~-OT ANGCO -MANALAST AS Associate Justice l OOS

Filipinos Polmoil Plantations, Inc. v. CIR Page 23 of 23 CTA EB Case No. 550 DECISION CERTIFICATION Pursuant to Article VIII, Sec tion 13 of the Constitu tion, it is hereby certified that the conclu sions in th e above Decision were reached 'in co nsu ltation among th e members of th e Court En Bane before the case was assigned to th e writer of the opinion of th e Court En Bane ~~ ~.~ ERNESTO D. ACOSTA Presiding Justice 100 6