Case Summary (G.R. No. 134062)
Petitioner and Respondent
Petitioner: Commissioner of Internal Revenue
Respondent: Bank of the Philippine Islands
Key Dates
• October 28, 1988 – Notices of deficiency assessments issued
• December 10, 1988 – BPI’s letter requesting basis of assessments
• May 8, 1991 – CIR’s final decision letter explaining assessments
• July 6, 1991 – BPI’s request for reconsideration of May 8 decision
• December 12, 1991 – CIR’s denial of reconsideration
• February 18, 1992 – Petition filed in the Court of Tax Appeals (CTA)
• November 16, 1995 – CTA decision dismissing for lack of jurisdiction
• May 29, 1998 – Court of Appeals (CA) decision reversing CTA
• April 17, 2007 – Supreme Court decision
Applicable Law
• 1986 National Internal Revenue Code (NIRC), former Section 270 (now Section 228) on protesting assessments
• Republic Act (RA) 1125, Sections 7 and 11 on CTA jurisdiction and appeals
• 1987 Philippine Constitution, due process clause (Art. III, Sec. 1)
Background of Assessments
On October 28, 1988, the CIR issued two deficiency notices totaling P129,488,656.63 for BPI’s 1986 percentage and documentary stamp taxes. The notices, based on BIR Form No. 17.08, contained computations, surcharges, interest, and penalties, but did not state legal or factual bases. BPI’s counsel immediately sought explanation rather than lodging a formal protest.
Initial Assessment and Protest
By letter dated December 10, 1988, BPI challenged the form of the assessments, requesting the basis for deficiency. The CIR responded on May 8, 1991, deeming BPI’s prior correspondence not a valid protest, but nonetheless explaining the grounds and stating that his letter was his final decision. BPI requested reconsideration on July 6, 1991, which the CIR denied on December 12, 1991.
Procedural History
BPI filed a petition for review in the CTA on February 18, 1992. The CTA dismissed for lack of jurisdiction, ruling the 1988 notices had become final and unappealable under former Section 270 and RA 1125. On appeal, the CA held the 1988 notices invalid for failure to state bases, treating the 1991 letter as the true assessments and remanding to the CTA. CIR elevated the case to the Supreme Court.
Issues Presented
- Whether the October 28, 1988 notices were valid assessments or became final and unappealable.
- Whether BPI is liable for the assessed deficiency percentage and documentary stamp taxes.
Validity of the October 28, 1988 Notices
Former Section 270 required the CIR to notify the taxpayer of his findings and demand payment; it did not mandate stating legal or factual bases. The statutory requirement to inform taxpayers of law and facts was only introduced in 1997 when Section 270 was renumbered to Section 228 by RA 8424. Accordingly, the 1988 notices satisfied the law and jurisprudence then in force.
Due Process and Jurisprudential Requirements
The CA’s invocation of due process to require “law and facts” in 1988 notices imposed obligations not present in the old Section 270. Judicial precedent held that valid assessments need only computation of liability, amount due, and demand for payment. No judicially imposed requirement existed in 1988 for detailed explanations.
Finality of Assessments and Presumptions
Under former Section 270, a taxpayer had 30 days from recei
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Facts of the Case
- In two notices dated October 28, 1988, the Commissioner of Internal Revenue (CIR) assessed the Bank of the Philippine Islands (BPI) for 1986 deficiency percentage tax (P7,270,892.88 plus surcharge, interest, compromise penalty; total P12,319,441.13) and deficiency documentary stamp tax (P93,723,372.40 plus compromise penalty; total P93,738,372.40).
- The notices demanded payment within 30 days and included a boilerplate note referencing assessments “based on return… as verified… pending investigation.”
- On December 10, 1988, BPI, through counsel, protested that the notices failed to state the factual and legal bases of the assessments and thus were not proper assessments.
- On May 8, 1991, the CIR replied that BPI’s December 10 letter did not qualify as a protest under Revenue Regulations No. 12–85 but nonetheless explained the assessment bases and declared his letter his “final decision.”
- BPI sought reconsideration on July 6, 1991; the CIR denied it by letter dated December 12, 1991 (received January 21, 1992).
- On February 18, 1992, BPI filed a petition for review with the Court of Tax Appeals (CTA).
Procedural History
- CTA Decision (November 16, 1995): Dismissed BPI’s petition for lack of jurisdiction, ruling the October 28, 1988 notices had become final and unappealable due to BPI’s failure to protest under Section 270 of the NIRC and Sections 7 and 11 of RA 1125.
- CTA Resolution (May 27, 1996): Denied BPI’s motion for reconsideration.
- Court of Appeals (CA) Decision (May 29, 1998): Reversed CTA; held the October 28, 1988 notices were invalid for failing to inform BPI of legal and factual bases, treated the May 8, 1991 letter as the proper assessments, and held BPI’s CTA petition timely filed.
- Petition for Review: CIR elevated the matter to the Supreme Court under Rule 45, raising issues on finality of the assessments and BPI’s liability.
Issues
- Whether the October 28, 1988 notices constituted valid assessments under the law prevailing at the time.
- Whether BPI’s failure to protest or appeal within the reglementary periods rendered the assessments final and