749 PHIL. 280
Petitioner is the duly appointed officer of the Bureau of Internal Revenue (BIR) mandated to exercise the powers and perform the duties of his office including, among others, the power to decide disputed assessments, refunds of internal revenue taxes, fees and other charges, penalties imposed in relation thereto, or other matters arising under the National Internal Revenue Code. Respondent, on the other hand, is a domestic corporation duly organized and existing under Philippine laws and duly registered with the Securities and Exchange Commission. Its office address is at the 5th Floor, Pan Pacific Hotel, Adriatico Street corner Gen. Malvar Street, Manila.
Respondent is authorized “to engage in the business of designing, manufacturing, fabricating, or otherwise producing, and the purchase, sale at wholesale, importation, export, distribution, marketing or otherwise dealing with, construction and hardware materials, tools, fixtures and equipment.”
On January 1, 1979, respondent and Stanley Works Agencies (Pte.) Limited, Singapore (Stanley-Singapore) entered into a Representation Agreement. Under such agreement, Stanley-Singapore appointed respondent as its sole agent for the selling of its products within the Philippines on an indent basis.
On April 16, 1990, respondent filed with the BIR its Annual Income Tax Return for taxable year 1989.
On March 19, 1993, pursuant to Letter of Authority dated July 3, 1992, the BIR issued against respondent a Pre-Assessment Notice (PAN) No. 002523 for 1989 deficiency income tax.
On March 29, 1993, respondent received its copy of the PAN.
On April 12, 1993, petitioner, through OTC Domingo C. Paz of Revenue Region No. 4B-2 of Makati, issued to respondent Assessment Notice No. 002523-89-6014 for deficiency income tax for taxable year 1989. The Notice was sent on April 15, 1993 and respondent received it on April 21, 1993.
On May 19, 1993, respondent, through its external auditors Punongbayan & Araullo, filed a protest letter and requested reconsideration and cancellation of the assessment.
On November 16, 1993, a certain Mr. John Ang, on behalf of respondent, executed a “Waiver of the Defense of Prescription Under the Statute of Limitations of the National Internal Revenue Code” (Waiver). Under the terms of the Waiver, respondent waived its right to raise the defense of prescription under Section 223 of the NIRC of 1977 insofar as the assessment and collection of any deficiency taxes for the year ended December 31, 1989, but not after June 30, 1994. The Waiver was not signed by petitioner or any of his authorized representatives and did not state the date of acceptance as prescribed under Revenue Memorandum Order No. 20-90. Respondent did not execute any other Waiver or similar document before or after the expiration of the November 16, 1993 Waiver on June 30, 1994.
On January 6, 1994, respondent, through its external auditors Punongbayan & Araullo, wrote a letter to the Chief of the BIR Appellate Division and requested the latter to take cognizance of respondent's protest/request for reconsideration, asserting that the dispute involved pure questions of law. On February 22, 1994, respondent sent a similar letter to the Revenue District Officer (RDO) of BIR Revenue Region No. 4B-2 and asked for the transmittal of the entire docket of the subject tax assessment to the BIR Appellate Division.
On September 30, 1994, respondent, through its external auditors Punongbayan & Araullo, submitted a Supplemental Memorandum on its protest to the BIR Revenue Region No. 4B-2.
On September 20, 1995, respondent, through its external auditors Punongbayan & Araullo, filed a Supplemental Memorandum with the BIR Appellate Division.
On November 29, 2001, the Chief of the BIR Appellate Division sent a letter to respondent requiring it to submit duly authenticated financial statements for the worldwide operations of Stanley Works and a sworn declaration from the home office on the allocated share of respondent as a “branch office.”
On December 11, 2001, respondent, through its counsel, the Quisumbing Torres Law Offices, wrote the BIR Appellate Division and asked for an extension of period within which to comply with the request for submission of documents. On January 15, 2002, respondent sent a request for an extension of period to submit a Supplemental Memorandum.
On March 4, 2002, respondent, through its counsel, the Quisumbing Torres Law Offices, submitted a Supplemental Memorandum alleging, inter alia, that petitioner's right to collect the alleged deficiency income tax has prescribed.
On March 22, 2004, petitioner rendered a Decision denying respondent’s request for reconsideration and ordering respondent to pay the deficiency income tax plus interest that may have accrued. The dispositive portion reads:IN VIEW WHEREOF, this Office resolves, as it hereby resolves, to DENY the request for reconsideration of STANLEY WORK SALES (Philippines), INC. dated May 19, 1993 of Assessment No. 002523-89-6014 dated April 12, 1993 issued by this Bureau demanding payment of the total amount of Php41,284,968.34 as deficiency income tax for taxable year 1989. Consequently, Stanley Works Sales (Philippines), Inc. is hereby ordered to pay the above-stated amount plus interest that may have accrued thereon to the Collection Service, within thirty (30) days from receipt hereof, otherwise, collection will be effected through the summary remedies provided by law.On March 30, 2004, respondent received its copy of the assailed Decision. Hence, on April 28, 2004, respondent filed before the Court in Division a Petition for Review docketed as C.T.A. Case No. 6971 entitled “The Stanley Works Sales (Philippines), Inc., petitioner, vs. Commissioner of Internal Revenue, respondent. x x x
This constitutes the final decision of this Office on the matter.
Whether or not petitioner’s right to collect the deficiency income tax of respondent for taxable year 1989 has prescribed.
Whether or not respondent’s repeated requests and positive acts constitute “estoppel” from setting up the defense of prescription under the NIRC.
(1) Conformity of either petitioner or a duly authorized representative;
(2) Date of acceptance showing that both parties had agreed on the Waiver before the expiration of the prescriptive period; and
(3) Proof that respondent was furnished a copy of the Waiver.
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 x x x
2. x x x x
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. x x x.
3. The following revenue officials are authorized to sign the waiver.
A. In the National Office
x x x xB. In the Regional Offices
3. Commissioner For tax cases
than P1M1. The Revenue District Officer with respect to tax cases still pending investigation and the period to assess is about to prescribe regardless of amount.
x x x x
5. The foregoing procedures shall be strictly followed. Any revenue official found not to have complied with this Order resulting in prescription of the right to assess/collect shall be administratively dealt with.
Furthermore, jurisprudence is replete with requisites of a valid waiver:
1. The waiver must be in the proper form prescribed by RMO 20-90. The phrase “but not after ______ 19 ___”, which indicates the expiry date of the period agreed upon to assess/collect the tax after the regular three-year period of prescription, should be filled up.
2. The waiver must 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. In case the authority is delegated by the taxpayer to a representative, such delegation should be in writing and duly notarized.
3. The waiver should be duly notarized.
4. The CIR or the revenue official authorized by him must sign the waiver indicating that the BIR has accepted and agreed to the waiver. The date of such acceptance by the BIR should be indicated. However, before signing the waiver, the CIR or the revenue official authorized by him must make sure that the waiver is in the prescribed form, duly notarized, and executed by the taxpayer or his duly authorized representative.
5. 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.
6. The waiver must be executed in three copies, the original copy to be attached to the docket of the case, the second copy for the taxpayer and the third copy for the Office accepting the waiver. The fact of receipt by the taxpayer of his/her file copy must be indicated in the original copy to show that the taxpayer was notified of the acceptance of the BIR and the perfection of the agreement.
The provision of law on prescription was adopted in our statute books upon recommendation of the tax commissioner of the Philippines which declares:Under the former law, the right of the Government to collect the tax does not prescribe. However, in fairness to the taxpayer, the Government should be estopped from collecting the tax where it failed to make the necessary investigation and assessment within 5 years after the filing of the return and where it failed to collect the tax within 5 years from the date of assessment thereof. Just as the government is interested in the stability of its collection, so also are the taxpayers entitled to an assurance that they will not be subjected to further investigation for tax purposes after the expiration of a reasonable period of time. (Vol. II, Report of the Tax Commission of the Philippines, pp. 321-322)The law prescribing a limitation of actions for the collection of the income tax is beneficial both to the Government and to its citizens; to the Government because tax officers would be obliged to act promptly in the making of assessment, and to citizens because after the lapse of the period of prescription citizens would have a feeling of security against unscrupulous tax agents who will always find an excuse to inspect the books of taxpayers, not to determine the latter's real liability, but to take advantage of every opportunity to molest peaceful, law-abiding citizens. Without such legal defense taxpayers would furthermore be under obligation to always keep their books and keep them open for inspection subject to harassment by unscrupulous tax agents. The law on prescription being a remedial measure should be interpreted in a way conducive to bringing about the beneficient purpose of affording protection to the taxpayer within the contemplation of the Commission which recommends the approval of the law.