Case Summary (G.R. No. 167765)
Key Dates
- April 15, 1996: FMF filed its Corporate Annual Income Tax Return, initially declaring a loss of P3,348,932.
- May 8, 1996: FMF amended its tax return to declare a revised loss of P2,826,541.
- October 6, 1998: The Bureau of Internal Revenue (BIR) issued pre-assessment notices for alleged tax liabilities.
- January 22, 1999: Notice of reassignment of reinvestigation was communicated to FMF.
- February 9, 1999: FMF signed a waiver extending the three-year prescriptive period for tax assessment until October 31, 1999.
- October 18, 1999: FMF received amended pre-assessment notices.
- October 25, 1999: The BIR issued an assessment notice reflecting FMF’s alleged tax deficiencies.
- December 31, 2002: FMF filed a petition for review with the Court of Tax Appeals (CTA).
- March 20, 2003: The CTA ruled in favor of FMF, cancelling the assessment.
- January 31, 2005: The Court of Appeals affirmed the CTA’s decision.
- April 14, 2005: The Court of Appeals denied the motion for reconsideration.
Applicable Law
The assessment issue is examined under the provisions of the National Internal Revenue Code (NIRC), with particular reference to Sections 203 (period of limitation upon assessment) and 222 (exceptions to the period of limitation).
Background and Proceedings
FMF's tax declarations were scrutinized by the BIR, leading to pre-assessment notices that FMF protested. Following a series of communications, FMF executed a waiver extending the assessment period. However, subsequent assessments revealed alleged deficiencies, prompting FMF to contest the validity of the assessments due to claims of prescription, arguing that the waiver was invalid based on non-compliance with procedural requirements outlined in Revenue Memorandum Order No. 20-90.
Issue of Waiver Validity
The crux of the case revolves around the validity of the waiver executed by FMF. The CTA found that the waiver did not adhere to mandatory procedural requirements such as specifying the dates of execution and acceptance, and it lacked the signature of the Commissioner of Internal Revenue, which was necessary given the amount involved in the assessment exceeded P1 million. Thus, the agreement could not be considered valid, leading to the conclusion that the assessment was time-barred.
Court Findings
The Court of Appeals upheld the CTA's findings, concluding that the waiver did not meet the necessary legal requirements to effectively extend the prescriptive period. Furthermore, the provisions of RMO No. 20-90 were deemed strictly mandatory, and any deviations rendered the waiver ineffective for extending the assessment period. The government’s argument that procedural lapses should not invalidate
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Case Overview
- The case involves a petition for review on certiorari filed by the Commissioner of Internal Revenue (CIR) against FMF Development Corporation (FMF) regarding the cancellation of a tax assessment for deficiency income and withholding taxes for the taxable year 1995.
- The appeal was prompted by the decisions of the Court of Appeals affirming the Court of Tax Appeals’ (CTA) ruling that the assessment was time-barred.
Background Facts
- FMF filed its Corporate Annual Income Tax Return for 1995 on April 15, 1996, declaring a loss of P3,348,932, which was later amended to a loss of P2,826,541 on May 8, 1996.
- On October 6, 1998, the Bureau of Internal Revenue (BIR) sent pre-assessment notices to FMF regarding alleged tax liabilities.
- FMF protested these notices and requested a reconsideration.
- A waiver to extend the three-year prescriptive period for tax assessment was executed by FMF’s President, Enrique Fernandez, on February 9, 1999, and accepted by Revenue District Officer Rogelio Zambarrano.
Tax Assessment and Protests
- On October 18, 1999, FMF received amended pre-assessment notices followed by a Demand Letter and Assessment Notice No. 33-1-00487-95 on October 25, 1999, detailing alleged tax deficiencies totaling P2,053,698.25.
- FMF filed a protest against this assessment, arguing that the waiver was invalid due to