G.R. No. 239464 - Commissioner of Internal Revenue vs. Court of Tax Appeals, 3rd Division

Case Summary (G.R. No. 239464)

Letter of Authority, Preliminary Assessment, and Formal Letter of Demand

On April 1, 2013, the CIR issued Letter of Authority No. 116-2013-00000017 to audit Citysuper’s books for taxable year 2011. On April 1, 2015, the CIR issued a Preliminary Assessment Notice alleging deficiencies in income tax, VAT, withholding tax on compensation, expanded withholding tax, and documentary stamp tax (DST), totaling ₱2,083,016,072.43. Citysuper received the Formal Letter of Demand and Assessment Notices dated April 24, 2015; on April 29, 2015 Citysuper wrote the BIR stating it was “in the process of compiling the necessary documentation to support our protest” and attached copies of the assessment notices.

Procedural Posture in the CTA

Petition for Review, Prescription Motion, and Evidentiary Proceedings

Citysuper filed a Petition for Review under Rule 43 of the Rules of Court on August 13, 2015, attaching the audit result/assessment notices. Citysuper moved for preferential resolution of the prescription issue; hearings were held. The CIR presented a revenue officer who testified that a Waiver of Prescription was executed by Conchita V. Lee on July 10, 2014 and accepted by an officer on July 25, 2014. Citysuper produced a Secretary’s Certificate denying authorization for Lee to waive prescription and contended Lee lacked authority. An authorization letter purportedly delegating authority to Lee was not admitted into evidence by the CTA because it was not properly identified by a competent witness at the time of formal offer.

CTA’s Findings on Prescription, Waiver, and Jurisdiction

CTA Resolution: Partial Grant, Cancellation of Certain Assessments, and Remaining Issues

In its December 15, 2017 Resolution the CTA partially granted Citysuper’s petition: it set aside the Formal Letter of Demand and cancelled the assessment notices for deficiency income tax, certain VAT periods, withholding tax on compensation, and expanded withholding tax where the CTA found the prescriptive periods had elapsed. The CTA concluded the Waiver of the defense of prescription was invalid because Lee’s authority to execute it was not properly established; the authorization letter was excluded under Rule 132, Section 20, Rules of Court. The CTA ordered a further hearing on the DST assessment because prescription on DST had not been conclusively shown to have run. The CTA later denied the CIR’s motion for reconsideration (March 20, 2018), invoking estoppel by laches and relying on Tijam v. Sibonghanoy to bar the CIR from belatedly raising lack of jurisdiction.

Legal Framework Governing Prescription and Waiver

Statutory and Administrative Rules on Period of Assessment and Waiver

Section 203 NIRC prescribes that assessments for deficiency internal revenue taxes must be issued within three years from the last day prescribed to file the return or from actual filing, whichever is later. Section 222(b) permits extension of the assessment period by written agreement between the CIR and the taxpayer, and BIR issuances (RMO No. 20-90 and RDAO No. 05-01) specify procedural requirements for valid waiver execution, including signature by a duly authorized representative and proof of delegation when authority is delegated (delegation must be in writing and duly notarized). Revenue Regulations No. 18-2013 prescribes the form and substance of a valid administrative protest under Section 228 NIRC, including requirement that the protest state whether it is a request for reconsideration or reinvestigation, the date of the assessment notice, and the legal basis for the protest; a reinvestigation request requires submission of all supporting documents within 60 days or else the assessment becomes final.

CIR’s Position on Jurisdiction, Protest Validity, and Waiver

Commissioner’s Arguments on Finality, False Return, and Admissibility of Authorization Letter

The CIR argued (1) the CTA lacked jurisdiction because Citysuper’s April 29, 2015 letter did not constitute a valid protest under Section 228 and RR No. 18-2013, making the assessments final and therefore not subject to CTA review; (2) the applicable prescriptive period for some taxes should have been ten years under Section 222(a) because of alleged substantial under-declaration/false return; and (3) the Waiver was valid because the authorization letter delegating authority to Lee was notarized and should have been treated as a public document, thus admissible without further authentication.

Supreme Court’s Review of Proper Remedy and Timeliness

Rule 65 Was Appropriate Because the CTA Rulings Were Interlocutory

The Supreme Court found the December 15, 2017 and March 20, 2018 CTA Resolutions to be interlocutory because they partially resolved issues (prescription and waiver) while hearings on the DST assessment continued. As interlocutory orders, they were properly subject to a petition under Rule 65 of the Rules of Court; therefore the CIR availed the correct remedy and did so within the appropriate time.

Applicability of Tijam Doctrine and Rule on Jurisdiction

Tijam Exception vs General Rule: Jurisdiction May Be Raised at Any Stage

The Court reiterated the governing rule that lack of jurisdiction over the subject matter is a matter of law that may be raised at any stage and is not ordinarily lost by waiver or estoppel. Tijam v. Sibonghanoy—which applied estoppel by laches to bar belated jurisdictional objections—was characterized as an exceptional case to be applied only when specific extraordinary circumstances exist (e.g., long delay, party’s active participation seeking affirmative relief in the forum, statutory right in claimant’s favor, and failure to invoke that statutory right). The Supreme Court held that Tijam is the exception, not the rule, and must be applied with care.

Application of Jurisdictional Rule to the Present Case

CIR Raised Lack of Jurisdiction at Earliest Opportunity and Did Not Invoke a Contradictory Position

The Supreme Court found that the CIR had in fact raised lack of jurisdiction at the earliest opportunity: it pleaded lack of jurisdiction as a first special and affirmative defense in its Answer to the Petition for Review, identified jurisdiction as an issue in its pre-trial brief and in the joint stipulation of facts and issues, and repeatedly maintained that Citysuper’s administrative protest was invalid. Because the CIR did not wait until after an adverse judgment to object and did not seek affirmative relief inconsistent with its jurisdictional position, the Tijam doctrine did not apply to bar the CIR’s jurisdictional claim.

Analysis of the April 29, 2015 Letter and Administrative Protest Requirements

April 29, 2015 Letter Did Not Satisfy RR No. 18-2013; No Valid Protest, Thus No CTA Jurisdiction

The Court analyzed Section 228 NIRC and RR No. 18-2013 and concluded Citysuper’s April 29, 2015 communication failed to comply with the mandatory elements of a valid protest: it did not expressly state whether it sought reconsideration or reinvestigation, did not state the date of the assessment notice, and did not identify the legal grounds for the protest. Attaching copies of the assessment notices without stating required particulars and without expressly invoking reinvestigation failed to trigger the 60-day submission period for supporting documents; therefore the communication was void as a protest. The CTA’s jurisdiction under Section 7 of RA No. 9282 is appellate and limited to review of the Commissioner’s decision on a disputed assessment; absent a valid protest and a decision on it, there was no decision to appeal and no subject-matter jurisdiction in the CTA.

Precedential Support for

Case Syllabus (G.R. No. 239464)

Procedural History

Petition for Certiorari filed in the Supreme Court under Rule 65 by the Commissioner of Internal Revenue (CIR) dated June 13, 2018, assailing the Court of Tax Appeals (CTA) Third Division Resolutions of December 15, 2017 and March 20, 2018 in CTA Case No. 9117.
CTA Third Division’s December 15, 2017 Resolution partially granted Citysuper, Inc.’s Petition for Review under Rule 43, canceling deficiency assessment notices for income tax, VAT, withholding tax on compensation (WTC), and expanded withholding tax (EWT); ordered a hearing on documentary stamp tax (DST).
CTA Third Division’s March 20, 2018 Resolution denied the CIR’s Motion for Reconsideration.
CIR filed Petition for Certiorari in the Supreme Court, seeking reversal of the CTA Resolutions and praying also for temporary restraining order and/or writ of preliminary injunction to suspend CTA proceedings.
Supreme Court rendered decision on May 10, 2021 granting the Petition for Certiorari, reversing and setting aside the CTA Resolutions and dismissing the Petition for Review filed before the CTA.

Factual Background

On April 1, 2013, the CIR issued Letter of Authority No. 116-2013-00000017 authorizing BIR officers to examine Citysuper’s books and records for taxable year 2011.
On April 1, 2015, the CIR issued a Preliminary Assessment Notice for 2011 alleging deficiencies in income tax, VAT, withholding tax on compensation, expanded withholding tax, and documentary stamp tax, totaling P2,083,016,072.43.
On April 24, 2015, Citysuper received the Formal Letter of Demand (FLD) and Assessment Notices for the unpaid taxes.
On April 29, 2015, Citysuper sent a letter to the BIR stating it was in the process of compiling documentation to support its protest to the assessments.
On August 13, 2015, Citysuper filed a Petition for Review with the CTA attaching the Details of Discrepancies and Audit Result/Assessment Notices for 2011.
Citysuper filed an Urgent Motion for Preferential Resolution of the Issue on Prescription on February 29, 2016; CIR filed Comment/Opposition.
Testimony and evidentiary incidents: Citysuper presented corporate secretary Beley G. Chua on August 15, 2016; CIR presented revenue officer Rosario A. Arriola on November 15, 2016. Cross-examination of Arriola was set to continue January 24, 2017, but Citysuper’s counsel failed to appear and the CTA waived the rest of the cross-examination.

CTA Third Division Findings and Disposition (December 15, 2017)

Dispositive portion quoted by the CTA:
- "WHEREFORE, in view of all the foregoing, the present Petition for Review is PARTIALLY GRANTED. Accordingly, respondent’s Formal Letter of Demand dated April 24, 2015 is PARTIALLY SET ASIDE and the corresponding Assessment Notices for deficiency income tax, VAT, WTC, and EWT issued against petitioner are hereby CANCELLED and WITHDRAWN. Let the hearing on the merits on the DST assessment, as found in the Formal Letter of Demand dated April 24, 2015, be set on April 16, 2018 at 1:30 p.m. SO ORDERED."
CTA concluded the prescriptive period for certain deficiency VAT, WTC, and EWT assessments had elapsed because it found the Waiver of Defense of Prescription (the Waiver) was not validly executed on behalf of Citysuper.
CTA ruled the Waiver signed by Conchita V. Lee on July 10, 2014 and accepted by Officer-in-Charge-Assistant Commissioner-LTS Nestor S. Valeroso on July 25, 2014 did not bind Citysuper because Lee’s authority to sign was not properly presented and identified; CTA therefore excluded the authorization letter as evidence pursuant to Rule 132, Section 20 of the Rules of Court.
CTA found parties were not in pari delicto; Citysuper had not authorized the Waiver nor dealt with revenue officers on that basis; Citysuper had already forwarded some required documents before the Waiver was signed.
CTA ordered a full trial on the documentary stamp tax assessment due to insufficient evidence on prescription as to DST.

CIR’s Motion for Reconsideration and Arguments

CIR argued the CTA lacked jurisdiction because Citysuper admitted receipt of the FLD and Assessment Notices on April 24, 2015, giving Citysuper until May 24, 2015 to file a protest; CIR asserted Citysuper’s April 29, 2015 letter did not constitute a valid protest and therefore the assessments became final and demandable, divesting the CTA of jurisdiction which applies only to disputed assessments.
CIR argued the CTA miscomputed prescriptive periods and that Section 222(a) (ten-year period for false/false returns or substantial under-declaration) might apply due to alleged substantial under-declaration constituting a false return.
CIR argued the Waiver was valid and that Lee’s authorization letter was notarized and should be considered a public document without need for further authentication; CIR sought admission of the authorization letter into evidence.
CTA denied the Motion for Reconsideration on March 20, 2018, finding CIR’s challenge to jurisdiction barred by laches under Tijam v. Sibonghanoy and concluding Tijam had become the rule rather than the exception.

Petition for Certiorari — Main Issues Posed to the Supreme Court

Whether CIR availed the correct remedy (Rule 65 petition) against the CTA’s December 15, 2017 and March 20, 2018 Resolutions and whether the petition was timely.
Whether the CTA gravely abused its discretion in finding CIR barred by estoppel by laches from raising lack of subject-matter jurisdiction.
Whether the CTA gravely abused its discretion in refusing to admit into evidence the authorization letter in favor of Conchita V. Lee.

Statutory and Regulatory Provisions Cited in the Decision

Section 203, National Internal Revenue Code — three-year period for assessment after last day prescribed by law to file return or after actual filing, whichever is later (text quoted and summarized in the source).
Section 222(b), National Internal Revenue Code — period to assess may be extended upon written agreement between Commissioner and taxpayer; period so agreed upon may be extended by subsequent written agreement.
Revenue Memorandum Order No. 20-90 — implementation guidance for execution of waivers: waiver must be signed by taxpayer or duly authorized representative; in case of corporation, by any responsible official; BIR acceptance date must be indicated and both execution and acceptance must be before expiration of prescription period.
Revenue Delegation Authority Order No. 05-01 — modification of RMO No. 20-90 requiring revenue official to ensure waiver was duly accomplished and, if authority delegated, delegation must be in writing and duly notarized.
Section 228, National Internal Revenue Code — procedure for protesting assessments: FLD/FAN requirement; taxpayer may file request for reconsideration or reinvestigation within thirty (30) days from receipt; supporting documents to be submitted within sixty (60) days from filing of protest or assessment becomes final; appeals to CTA only from Commissioner’s decision or deemed denial.
Revenue Regulations No. 18-2013 (amending RR No. 12-99) — requirements for a valid protest: must state nature of protest (reconsideration or reinvestigation specifying newly discovered/additional evidence if reinvestigation), date of assessment notice, and applicable law/rules/jurisprudence; failure renders protest void and without force or effect; sixty-day rule for submission of supporting documents for reinvestigation requests.

Evidence, Testimony, and Evidentiary Rulings

Citysuper presented corporate secretary Beley G. Chua who issued an August 12, 2015 Secretary’s Certificate stating Citysuper’s Board did not authorize Conchita V. Lee to waive Citysuper’s defense of prescription.
CIR presented revenue officer Rosario A. Arriola who testified that Lee had executed a Waiver extending assessme