REPUBLIC OF THE PHILIPPINES

COURT OF TAX APPEALS

Quezon City

Third Division

LORENZO SHIPPING CTA CASE NO. 8694

CORPORATION,
Petitioner,

Members:
-versus- BAUTISTA, Chairperson;
F ABON-VICTORINO,
RINGPIS-LIBAN, JJ.

COMMISSIONER OF
INTERNAL REVENUE Promulgated:
Respondent. J UN B 2018
x--------------------------------------------------------------¥;~~~~:-~------------x

DECISION

RINGPIS-LIBAN, ].:

The Case

This Petition for Review prays for the cancellation of the deficiency tax
assessment in the aggregate amount of Two Billion, Eight Million, Four Hundred
Seventy Two Thousand, Five Hundred Eighty Four and 91/100 Pesos
(Php2,008,472,584.9 1), inclusive of interest, surcharges and compromise
penalties for taxable year ("TY") 2008, as contained in the undated Final
Assessment Notice ("FAN") and undated Audit Result/ Assessment Notices
issued by Mr. Alfredo V. Misajon, OIC-Assistant Commissioner, Large
Taxpayers Service, Regular Large Taxpayers Audit Division I, which was
received on April 18, 2013. 1

The Facts

Petitioner Lorenzo Shipping Corporation is a domestic corporate entity

organized and existing under the laws of the Rupublic of the Philippines with

Docket, Joint Stipulation of Facts and Issues ("JSFI"), Joint Stipulations of Facts, par. 8, p.
1098. (
DECISION
CTA CASE NO. 8694
Page 2 of 25

principal office address at 20F Times Plaza Building, United Nations Avenue
corner Taft Avenue, Ermita, Manila. 2

On the other hand, Respondent is the duly appointed Commissioner of

the Bureau of Internal Revenue ("BIR") who has the power to act upon and
render final decisions on protests filed against internal revenue tax assessments,
and other matters arising under National Internal Revenue Code or other laws
administered by the BIR. He holds office at the BIR National Office Building,
Agham Road, Diliman, Quezon City. 3

On May 27, 2009, a Letter of Authority No. 2007-00049470 evenly dated

was issued by Zenaida Garcia, OIC-ACIR, Large Taxpayers Service of the BIR4
for the examination of its books of accounts and other accounting records for
all internal revenue taxes covering the period of January 1, 2008 to December
31, 2008. 5

On June 23, 2010, Petitioner received a Notice of Informal Conference

dated June 17, 2010, issued by Mr. Rey Asterio L. Tambis, Head Revenue
Executive Assistant, Large Taxpayers Service- Regular. 6

On March 06, 2013, Petitioner received from Respondent an undated

Preliminary Assessment Notice ("PAN"), assessing Petitioner for deficiency
income tax, value-added tax ("VAT"), withholding tax on compensation
("WTC"), expanded withholding tax ("EWT"), fringe benefits tax ("FBT"), and
documentary stamp tax ("DST"), inclusive of interest and compromise penalty
in the amounts ofPhp1,480,082,550.48, Php420,882,135.71, Php22,521,583.43,
Php43,707,236.86, Php15,751,331.62, and Php1,989,950,674.28, respectively. 7

Subsequently, Petitioner and Respondent allegedly executed Waivers of

Statute of Limitations on March 31, 2011 8, on October 08, 2011 9 and on June
29, 201210 .

2
Docket, Petition for Review, Parties, par. 1, p. 14.
3
!d.,Pre-Trial Order, Facts, par. 1, p. 1111.
4
Id.,JSFI, Joint Stipulations of Facts, par. 3, p. 1097.
5
Id, Letter of Authority, Exhibit "P-13", p. 1248.
6
Id, JSFI, Joint Stipulations of Facts, par. 4, pp. 1097 to 1098.
7
Id, Preliminary Assessment Notice, Exhibit "P-12", pp. 1235 to 1247; BIR Records, Exhibit "R-
3-Merit", pp. 1028 to 139.
8
BIR Records, Exhibit "R-9-Merit", p. 255.
9 Docket, Waiver of Statute of Limitations dated October 08, 2011, Exhibit "P-8", p. 1223; BIR
Records, Exhibit "R-10-Merit", p. 257.
10
Id, Waiver of Statute of Limitations dated June 29, 2012, Exhibit "P-9", p. 1224; BIR Records,
Exhibit "R-11-Merit", p. 1001. ~
DECISION
CTA CASE NO. 8694
Page 3 of 25

On April18, 2013, Petitioner received from Respondent an undated FAN

and undated Audit Result/ Assessment Notices assessing Petitioner for alleged
deficiency income tax, VAT, WTC, EWT, FBT, and DST, inclusive of
surcharges, interest and compromise penalty, broken down as follows: 11

Nature of Deficienc Amount

Income Tax Ph 1,493,935,124.39
Value-Added Tax 424,740,697.17
22,727,015.18
44,105,7 56.98
15,894,659.44
7,069,331.75
TOTAL Ph 2,008,472,584.91

As a result, Petitioner filed a protest to the FAN dated May 17,2013 12

allegedly on the same day via registered mail. 13

Thereafter, on June 26, 2013, Petitioner received from Respondent

through Mr. Alfredo V. Misajon, a Preliminary Collection Letter dated June 21,
2013. 14

In response, on July 04, 2013, Petitioner filed with the Office of Mr.
Alfredo V. Misajon a Letter Reply dated July 02, 2013. 15

On July 15,2013 16 , Petitioner received from Respondent a letter dated July

12, 2013 denying its protestY

Consequently, Petitioner filed the instant Petition for Review18 on August

13, 2013 with a prayer for the issuance of a Temporary Restraining Order and/ or
Writ of Preliminary Injunction. In support thereof, Petitioner presented its
witness Ms. Edna F. Valenzuela during the September 05, 2013 hearing. 19

11
Docket, JSFI, Joint Stipulations of Facts, par. 8, p. 1098; Formal Assessment Notice, Exhibit
"P-2", pp. 1175 to 1192; BIR Records, Exhibits "R-4-Merit", "R-4-a-Merit", "R-4-b-Merit", "R-4-
c-Merit", "R-4-d-Merit", "R-4-e-Merit" and "R-4-f-Merit", pp. 1046 to 1063.
12
/d., Protest to the Formal Assessment Notice, Exhibit "P-4", pp. 1193 to 1217.
13
/d., Registry Receipt attached to the Protest to the Formal Assessment Notice, Exhibit "P-5",
p. 1193.
14
/d., JSFI, Joint Stipulations of Facts, par. 6, p. 1098.
15
/d., JSFI, Joint Stipulations of Facts, par. 7, p. 1098.
16
Id., Reply Letter dated August 12, 2013 to the Letter dated July 12, 2013, Exhibit "P-7", pp.
1220 to 1221.
17
/d., Letter dated July 12, 2013, Exhibit "P-6", pp. 1218 to 1219.
18
Id., pp. 14 to 57.
19
/d., September 05, 2013 Minutes of Hearing, p. 227.
~
DECISION
CTA CASE NO. 8694
Page 4 of 25

On September 09, 2013, the Court in a Resolution 20 granted the

suspension of collection of deficiency taxes of Petitioner for 1Y 2008. Petitioner
then posted a surety bond.

In the Answer21 ftled on April 8, 2015 via registered mail, Respondent

interposed the following special and affirmative defenses:

"WITH ALL DUE RESPECT,

THE HONORABLE
COURT HAS NO
JURISDICTION OVER THE
INSTANT PETITION. THE
ASSESSMENT HAS
ALREADY BECOME
FINAL, EXECUTORY AND
DEMANDABLE.

6. Respondent respectfully submits that this Honorable

Court has no jurisdiction to take cognizance of the present petition
considering that the assessment had become final, executory, and
demandable due to petitioner's failure to interpose a valid and
timely protest. Section 228 of the National Internal Revenue Code
of 1997 (hereinafter, 'NIRC') sets the period within which a
taxpayer may contest an assessment in the administrative level, to
wit:

'xxx XXX XXX

Such assessment may be protested

administratively by filing a request for
reconsideration or reinvestigation within thirty
(30) days from receipt of the assessment in such
form and manners as may be prescribed by
implementing rules and regulations.

Within sixty (60) days from filing of the protest,

all relevant supporting documents shall have
been submitted: otherwise, the assessment shall
become final.
20
Docket, pp. 396 to 401.
21
Id., pp. 838 to 865.
/
DECISION
CTA CASE NO. 8694
Page 5 of 25

xxx xxx xxx' (Emphases and underscoring

supplied)

7. Such manner of interposing an administrative protest are

further treshed out and provided for in Section 3.1.5 of Revenue
Regulation No. 12-99 (hereinafter, 'RR 12-99'), which sets forth as
follows:

'3.1.5 Disputed Assessment. - The taxpa_ver or his

dulv.- authorized revresentative
.... mav.- .....vrotest
administrativel_v against the aforesaid formal
letter of demand and assessment notice within
thirt_v (30) da_vs from date ofreceipt thereof.

XXX XXX XXX

The taxpa_ver shall submit the required

documents in support of his protest within sixty
(60) da_vs from date offiling ofhis letter ofprotest,
otherwise. the assessment shall become Bnal.
executory and demandable. The phrase "submit
the required documents" includes submission or
presentation of the pertinent documents for scrutiny
and evaluation by the Revenue Officer conducting the
audit. The said Revenue Officer shall state this fact in
his report of investigation.

If the taxpa_ver faild to file a valid protest against

the formal letter of demand and assessment
notice within thirt_v (30) da_vs from date ofreceipt
thereof. the assessment shall become final.
executory and demandable.' (emphases and
underscoring supplied)

8. Petitioner received the Formal Assessment Notice

(hereinafter, 'FAN') on 18 April 2013. Therefore, it had thirty (30)
days from 18 April2013, or until18 May 2013, within which to file
its administrative protest.

~
DECISION
CTA CASE NO. 8694
Page 6 of 25

9. Petitioner allegedly filed a letter of protest through

registered mail on 17 May 2013.

10. However, respondent received said letter only on 4 July

2013. Verification with the Muntinlupa Central Post Office
(MCPO) showed that said letter was actually posted and dispatched
by the same Post Office under Registered Letter 5281 only on 19
June 2013 or more than thirty days from 18 April2013.

11. Given that petitioner belatedly protested the assessment

against it, respondent earnestly maintains that petitioner failed to
comply with the statutory mandate in section 228 of the NIRC, and
effectively prevented this Honorable Court from assuming
jurisdiction over this petition. To be more precise, respondent
points out that petitioner's failure to file its administrative protest
on time, and to thoroughly apply the administrative remedy
available to it, ultimately rendered the assessment against it as final,
executory and demandable.

12. Respondent humbly contends that once the assessment

attained finality, it had become immutable and absolute.
Respondent also adds that this Honorable Court may no longer
modify the same, in any respect.

13. Consequently, through a Letter dated 12 July 2013,

respondent ruled:

'Evidently, the letter protest was filed beyond the

thirty (30)-day prescribed period which thereby makes
our assessment final, executory and demandable.

Accordingly, your protest against our Formal Letter

of demand and assessment Notice is denied for being
flied late.'

14. However, petitioner erroneously considered

respondent's Letter dated 12 July 2013 as a 'decision' which gave it
thirty days within which to file the instant Petition for Review
before this Honorable Court pursuant to Section 228 of the NIRC.

/Y'
DECISION
CTA CASE NO. 8694
Page 7 of 25

15. Respondent earnestly maintains that no such decision, as

contemplated under Sections 7(a) and 11 of Republic Act No. 1125,
was ever rendered, by the Commissioner of Internal Revenue or
otherwise, since the deficiency tax assessment remained undisputed
because petitioner failed to interpose a timely administrative protest
thereto.

16. Therefore, respondent respectfully submits that there is

no decision over which this Honorable Court can exercise its
executive appellate jurisdiction.

17. The issuance of the Letter dated 12 Ju!J 2013 cannot be the
reckoning point of the petition because it was not a 'decision' on
the merits of petitioner's case. If it will be otherwise, it is as if
respondent unintentionally gave petitioner a chance to circumvent
the rule laid down by Section 228 of the NIRC.

18. Respondent respectfully reiterated that the assessment

had already become final, executory, and demandable at this
juncture, and that it was already too late for petitioner to contest
the assessment against it.

19. Due to their failure to file a timely protest against the

FAN, petitioner seems to attempt to save its cause by filing the
present petition under the guise of questioning the validity of the
assessments on the gorund of prescription. Petitioner alleges that
this issue of prescription is duly encompassed or included in the
term 'other matters' over which the Honorable Court of Tax
Appeals has appellate jurisdiction.

20. Petitioner invokes the jurisdiction of the Honorable

Court by anchoring its claim to Section 7(a) of Republic Act No.
1125, as amended by Republic Act No. 3457 and further amended
by R.A. no. 9282 and R.A. 9503, the pertinent part of which is:

Sec. 7. Jurisdiction. The CTA shall exercise:

a. Exclusive appellate jurisdiction to review by appeal,

as herein provided:

1. Decisions of the Commissioner of Internal

Revenue in cases involving disputed assessments,

~
DECISION
CfA CASE NO. 8694
Page 8 of 25

refunds of internal revenue taxes, fees or other

charges, penalties in relation thereto, or other matters
arising under the National Internal Revenue Code or
other law or part of law administered by the Bureau
of Internal Revenue;

xxxxxxxxxx

21. Petitioner emphasized this specific part of the above-

stated section: 'other matters arising under the National Internal Revenue
Code or other law or part of law administered lry the Bureau of Internal
Revenue' to justify their claim of the Honorable Court's jurisdiction.
Petitioner's interpretation of Section 7 of RA No. 1125 is rather
misplaced. Their allegation that the appellate jurisdiction of the
CTA covers their position lacks legal and factual basis. To take this
in isolation would be a clear misreading of the above stated section.

XXX XXX XXX

22. The emphasized portion of the cited jurisprudence

clearly dictates that the 'other matters' contemplated therein must
also be direcdy related to the disputed assessment. It cannot be
taken in isolation to invoke the specialized jurisdiction of the
Honorable Court.

23.It is worthy to note that the enumeration in Section 7(a)

of Republic Act No. 1125 clearly provides that the exclusive
appellate jurisdiction of the Court of Tax Appeals involves
decisions of the Commissioner of Internal Revenue, Regional
Trial Courts, Commissioner of Customs, Central Board of
Assessment Appeals, Secretary of Finance and Secretary fo Trade
and Industry.

24. As discussed above, respondent reiterates that its Letter

dated 12 July 2013 does not involve a decision of the respondent.

XXX XXX XXX

26. Respondent also respectfully submits that pettttoner

should be considered as to have failed to make use of the

~
DECISION
CTA CASE NO. 8694
Page 9 of 25

administrative remedy available to it. The law provides that such

non-availment, or as in this case, a belated availment, removes the
taxpayer's right to judicial relief. Even if the taxpayer attempts to
seek judicial relief, the non-availment or belated availment also
serves to bar this Honorable Court from assuming jurisdiction over
the action initiated by the taxpayer.

27. In view of petitioner's actual failure to timely ftle its

administrative protest, the intendment of the law, in prescribing
that the taxpayer comply with all the administrative requirements
continuing up to judicial review, was not served. Otherwise stated,
petitioner did not exhaust its administrative remedies.

28. Respondent respectfully submits that the requirement to

exhaust administrative remedites is not satisfied with the mere filing
of an administrative protest. Rather, respondent contends that an
administrative remedy shall only be deemed to have been exhausted
if the same had been thoroughly applied. Which was not happened
in this case. In this case, petitioner ftled its protest beyond the thirty
(30) - day period within which to do so, and did not submit all
documents which may be relevant or important in substantiating its
protest. Such being the case, petitioner's recourse to judicial action
merely becomes an attempt by it to circumvent the administrative
protest and bypass respondent's office.

29. In support of [his] position, respondent respectfully

invites the attention of this Honorable Court to the case of Jesus
A. J ariol v. Commission on Elections, wherein the honorable
Supreme Court made the following pronouncement:

'xxx XXX XXX.

A party aggrieved thereby must not merely initiate the

prescribed administrative procedure to obtain relief,
but also must pursue it to its's a [sic] appropriate
conclusion before seeking jusidicial intervention in
order to give that administrative agency an
opportunity to decide the matter by itself correctly
and prevent unnecessary and premature resort to the
court[.]

XXX XXX XXX[.]'

~
DECISION
CTA CASE NO. 8694
Page 10 of 25

30. Petitioner bypassed its administrative remedy, and it is

only now at the judicial stage, before this Honorable Court, that
petitioner interposes its protest. Respondent respectfully submits
that this should not be allowed as this pernicious practice
contravenes the well-settled principle that matters not preliminarily
raised in the administrative level cannot be raised for the first time
upon judicial appeal.

31. The concept and consequences of the non-exhaustion of

administrative remedies need not be discussed in detail. Suffice it
to say that the Honorabel Supreme Court has long and consistently
held that if a remedy within the administrative machinery can still
be resorted to by giving the administrative officer every opportunity
to decide upon a mater that comes within his or her jurisdiction,
then such remedy must be exhausted first before the court's power
of judicial review can be sought.

32. Applying the foregoing juriprudential guidelines to the

case at hand, respondent respectfully maintains that petitioner's
non-exhaustion of its administrative remedies should bar it from
seeking judicial recourse. Its failure to exhaust all administrative
remedies is fatal to its claim considering that such non-exhaustion
is not merely for purposes of practicality and formality, but is also
jurisdictional in nature.

33. Hence, petitioner's failures, firstly, in failing to interpose

a timely protest against the FAN issued against it, and secondly, in
not submitting the complete documents necessary to substantiate
its claim, warrant a dismissal of its petition.

34. Finally, assuming the Honorable Court has jurisdiction,

respondent submits the succeeding arguments in support of the
assessment.

RESPONDENT'S RIGHT
TO ASSESS DID NOT
PRESCRIBE.

35. The right of respondent to assess petitioner for

deficiency taxes has not prescribed.
DECISION
CTA CASE NO. 8694
Page 11 of 25

36. Petitioner primarily anchors its claim on Sections 203,

222 and 114 of the National Internal Revenue Code (NIRC) of
1997, as amended[.]

XXX XXX XXX

37. Contrary to petitioner's claim, the right of respondent to

assess petitioner's deficiency VAT liabilities for calendar year 2006
did not prescribe in view of petitioner's execution of three (3)
Waiver of the Statute of Limitations under the NIRC of 1997, as
amended, ('waiver' for brevity), which extended the period od
assessment, to wit:

Waiver Date Executed Extended Assessment Period Until

pt Waiver March 31, 2011 December 31, 2011
2nd Waiver October 8, 2011 June 30, 2012
Yd Waiver June 29, 2012 June 30, 2013

38. Having executed a waiver before the expiration of the

ordinary prescriptive period for assessment, petitioner cannot bank
on its issue of prescription.

39. Petitioner alleges that petitioner's records do not show

any explicit written authority in favor of the waiver signatory to
waive the defense of prescription under the Tax Code for calendar
year 2008.

40. Assuming for the sake of argument that petitioner's

Board did not authorize anyone to waive its rights under the Statute
of Limitations, the Honorable Supreme Court in the case of
People's Aircargo and Warehousing co [sic], Inc. vs. Court of
Appeals and Stefani Sano made it explicit that it is familiar
doctrine that if a corporation knowingly permits one of its officers,
or any other agent, to act within the scope of an apparent authority,
it holds him out to the public as possessing the power to do those
acts; and thus, the corporation will, as against anyone who has in
good faith dealt with it through such agent, be estopped form
denying the agent's authority.

41. In the case at hand, three waivers were executed by no

less than petitioner's Budget and Financial Reporting Manager. The

/
DECISION
CTA CASE NO. 8694
Page 12 of 25

petitioner cannot allege that its manager was not authorized to

execute the waivers nor that the petitioner is not bound by the acts
of its manager.

42. What is more, petitioner is estopped from assailing the

validity of the waiver/ s. A perusal of the BIR Records will show
that petitioner only raised the issue of validity of the waiver/ s only
after the issuance of the FAN. It is ironic for them to question such
documents that they themselves signed and used for this
assessment process. It will be utterly unfair to put weight on
petitioner's afterthought since it will be able to defeat the validity
of the very same thing that it utilized for its own advantage as,
through which, it was able to submit additional documents that
enabled them to reverse some discrepancies found out after audit.

43. Deriving benefit from the waivers executed at its instance

constitutes estoppel. In %"zal Commercial Banking Corporation vs.
CommissionerofinternalRevenue', the Supreme Court had the occasion
to say:

'Petitioner is estopped from questioning the

validity of the waivers

RCBC assails the validity of the waivers of the

statute of limitations on the ground that the said
waivers were merely attested to by Sixto
Esquivias, then Coordinator for the CIR, and that
he failed to indicate acceptance or agreement of the
CIR, as required under Section 223 (b) of the 1977
Tax Code. RCBC further argues that the principle of
estoppel cannot be applied against it because its
payment of the other tax assessments does not signify
a clear intention on its part to give up its right to
question the validity of the waivers.

The Court disagrees.

Under Article 1431 of the Civil Code, the doctrine

of estoppel is anchored on the rule that 'an
admission or representation is rendered
conclusive upon the person making it, and
cannot be denied or disproved as against the

/
DECISION
CTA CASE NO. 8694
Page 13 of 25

person relying thereon.' A party is precluded from

denying his own acts, admissions or representations
to the prejudice of the other party in order to prevent
fraud and falsehood.

Estoppel is clearly applicable to the case at bench.

RCBC, through its partial payment of the revised
assessments issued within the extended period as
provided for in the questioned waivers, impliedly
admitted the validity of those waivers. Had petitioner
truly believed that the waivers were invalid and that
the assessments were issued beyond the prescriptive
period, then it should not have paid the reduced
amount of taxes in the revised assessment. RCBC's
subsequent action effectively belies its insistence that
the waivers are invalid. The records show that on
December 6, 2000, upon receipt of the revised
assessment, RCBC immediately made payment on the
uncontested taxes. Thus, RCBC is estopped from
questioning the validity of the waivers. To hold
otherwise and allow a party to gainsay its own act
or deny rights which it had previously recognized
would run counter to the principle of equity
which this institution holds dear." (Emphasis and
underscoring supplied)

44. Article 1431 of the New Civil Code is quite instructive in

providing that an admission or representation is rendered
conclusive upon the person making it and cannot be denied against
the person relying upon it. As the Supreme Court opined in one
case: 'Petitioner, having performed affirmative acts upon which the
respondents based their subsequent actions, cannot thereafter
refute his acts or renege on the effects of the same, to the prejudice
of the latter. To allow him to do so would be tantamount to
conferring upon him the libery to limit his liability at his whim and
caprice, which is against the very principles of equity and natural
justice as abovestated.

45. In the case of Philippine Journalists, Inc. (PJI) vs.

Commissioner of Internal Revenue the Supreme Court held:

"A waiver of the statute of limitations under the

NIRC, to a certain extent, is a derogation of the

/
DECISION
CTA CASE NO. 8694
Page 14 of 25

taxpayers' right to security against prolonged and

unscrupulous investigations and must therefore be
carefully and strictly construed. The waiver of the
statute of limitations is not a waiver of the right to
invoke the defense of prescription as erroneously held
by the Court of Appeals. It is an agreement between
the taxpayer and the BIR that the period to issue an
assessment and collect the taxes due is extended to a
date certain. The waiver does not mean that the
taxpayer relinquishes the right to invoke prescription
unequivocally particularly where the language of the
document is equivocal. For the purpose of
safeguarding taxpayers from any unreasonable
examination, investigation or assessment, our tax law
provides a statute of limitations in the collection of
taxes."

46. The very soul of the doctrine enunciated in the PJI case
is that the waiver of the Statute of Limitations can never be used as
an instrument of malice. However, respondent would like to point
out that this doctrine was never meant to favor one party over
another where both were at fault.

47. 'A party cannot, in the course of litigation or in dealings

in pais, be permitted to repudiate his representations, or occupy
inconsistent positions, or in the letter of Scotch law, to approbate
or reprobate.'

48. Therefore, the waiver(s) executed by petitioner are valid,

thus extending respondent's period to assess petitioner until June
30, 2013.

49. The FAN for calendar year 2008 were [sic] issued on 18
April2013. Foregoing considered, due to the valid execution of the
waiver for calendar year 2008, it can be manifest that the right of
respondent to assess petitioner did not prescribe. The FAN for
calendar year 2008 were [sic] validly issued in accordance with law.

[PETITIONER] SLEPT ON
ITS RIGHTS. ITS FAlLURE
TO TIMELY ASSERT ITS
CLAIM THAT THE
WAIVERS ARE INVALID

#
DECISION
CTA CASE NO. 8694
Page 15 of 25

RENDERS A LATER
INVOCATION BARRED BY
LACHES

50. Laches has been defined as the failure of or neglect for

an unreasonable and unexplained length of time to do that
which by exercising due diligence, could or should have been
done earlier, or to assert a right within reasonable time,
warranting a presumption that the party entitled thereto has
either abandoned it or declined to assert it. Thus, the doctrine
of laches presumes that the party guilty of negligence had the
opportunity to do what should have been done, but failed to do so.
Conversely, if the said party did not have the occasion to assert the
right, then, he can not be adjudged guilty of laches. Laches is not
concerned with the mere lapse of time, rather, the party must
have been afforded an opportunity to pursue his claim in
order that the delay may sufficiently constitute laches.
(Emphasis supplied)

51. It is humbly submitted that petitioner's right to question

the validity of the subject wiavers accrued from the very moment it
saw the infirmities of the First Wavier executed on 31 March 2011.
And when a Second and/ or Third Waiver was about to be excuted,
it should have raised its argument against the validity of the First
Waiver. However, [petitioner] did not choose to do so and went on
with execution of the Second and Third waiver.

52. Hence, respondent insists that the following factual

circumstances are enough to be considered as implied admission of
the validity of the subject waivers:

a) Petitioner only raised the issue of validity of the

waiver/ s after the issuance of FAN, or after 18
April 2013, which is more or less four years of
actively participating in the assessment process;

b) Petitioner executed a Second and Third Waiver

through one and the same
representative/ employee who executed the 1st
wruver;

~
DECISION
CTA CASE NO. 8694
Page 16 of 25

53. Respondent maintains its contention that petitioner is

estopped from assailing the validity of the waiver/ s. A perusal of
the BIR Records will show that petitioner only raised the issue of
validity of the waiver/ s after more or less four years of actively
participating in the assessment process. It is as if petitioner led
respondent to believe that its right to assess has not yet prescribed
and it can continue with its audit/ examination, relying on the
waivers executed by representatives/ employees of petitioner.

RESPONDENT'S ASSESSMENT
HAS BASIS BOTH IN FACT
AND LAW AND WAS ISSUED IN
ACCORDANCE WITH LAW,
RULES AND JURISPRUDENCE.

54. Petitioner Lorenzo Shipping Corporation ('Lorenzo', for

brevity) is liable to pay its deficiency income tax, value-added tax,
expanded withholding tax, withholding tax on compensation,
fringe benefits tax and documentary stamp tax in the total amount
of Two Billion Eight Million Four Hundred Seventy-Two
Thousand Five Hundred Eighty-four and 90/100 Pesos
(Php2,008,472,584.90) for the calendar year 2008.

XXX XXX XXX"

On September 10, 2015 Petitioner ftled its Pre-Trial Brief 22 • While

Respondent's Pre-Trial Brie£23 was filed on September 14, 2015.

The parties submitted their Joint Stipulation of Facts and Issues 24 on

October 05, 2015. Consequendy, the Court issued a Pre-Trial Order 25 on
November 16, 2015.

During trial, Petitioner presented Ms. Edna F. Mendiola, Atty. Arsenio C.

Cabrera, Jr. and Mr. Roberto S. Quiogue as its witnesses. Afterwards, Petitioner
formally offered its documentary evidence as well as its testimonial evidence,
which the Court all admitted via Resolutions dated July 14, 2016 26 , September 09,
2016 27 and December 18, 2017 28 •

22
Docket, pp. 934 to 940.
23 Id., pp. 1084 to 1090.
24 Id., pp. 1097 to 1102.
25
Id., pp. 934 to 940.
26
Id., pp. 1312 to 1313.
27
Id., pp. 1328 to 1329.
28
Id., pp. 1468 to 1470.

/
DECISION
CTA CASE NO. 8694
Page 17 of 25

On the other hand, Respondent presented his witnesses, Regional

Director Alfredo V. Misajon, Division Chief Cesar D. Escalada, Major Melanio
Layugan (Ret.) and Revenue Officer Gilquin B. Tolentino, and formally offered
his documentary evidence; which were all admitted by the Court in the
Resolutions dated March 05, 2015 29 and December 18, 2017 30 , except for
Exhibits "R-1" and "R-1-a" for failure to submit duly marked exhibits in the
records corresponding to the formally offered exhibits.

In a Resolution 31 , the Court declared the case deemed submitted for

decision on March 21, 2018, considering the filing of Petitioner's Memorandum32
on February 05, 2018 and Respondent's Memorandum33 on February 12, 2018
via registered mail.

The Issues

The parties submitted the following issues 34 for the Court's determination:

1. Whether or not Petitioner is liable for the amount of

Php2,008,472,584.91 representing deficiency taxes for 1Y
2008 comprising of income tax, VAT, WTC, EWT, FBT, DST,
surcharges, interest and compromise penalty;

2. Whether or not Respondent's right to assess Petitioner for the

alleged deficiency taxes for 1Y 2008 in the aggregate amount
of Php2,008,472,584.90 has already prescribed;

3. Whether or not the FAN issued by Respondent is null and void

for its failure to state a clear and unequivocal demand for
payment of the computed tax liabilities within a prescribed
period;

4. Whether or not the Honorable Court has jurisdiction over the

case; and

29
Docket, pp. 794 to 800.
3o Id., pp. 1468 to 1470.
31
Id., p. 1615.
32
Id., pp. 1477 to 1530.
Id., pp. 1574 to 1608.
~
33
34
Id., JSFI, Issues, pp. 1098 to 1099.
DECISION
CTA CASE NO. 8694
Page 18 of 25

5. Whether or not Revenue Memorandum Order No. 20-90 is an

internal issuance.

Discussion/Ruling

The Court has jurisdiction

over the present case.

The Court shall determine first the timeliness of the filing of the instant
Petition for Review.

Section 228 of the National Internal Revenue Code ("NIRC") of 1997, as

amended, provides:

"SEC. 228. Protesting of Assessment. - When the

Commissioner or his duly authorized representative finds that
proper taxes should be assessed, he shall first notify the taxpayer of
his findings: Provided, however, That a preassessment notice shall not
be required in the following cases:

XXX XXX XXX

The taxpayers shall be informed in writing of the law and the

facts on which the assessment is made; otherwise, the assessment
shall be void.

Within a period to be prescribed by implementing rules and

regulations, the taxpayer shall be required to respond to said notice.
If the taxpayer fails to respond, the Commissioner or his duly
authorized representative shall issue an assessment based on his
findings.

Such assessment may be protested administratively by filing

a request for reconsideration or reinvestigation within thirty (30)
days from receipt of the assessment in such form and manner
as may be prescribed by implementing rules and regulations.
Within sixty (60) days from filing of the protest, all relevant
supporting documents shall have been submitted; otherwise, the
assessment shall become final.

~
DECISION
CTA CASE NO. 8694
Page 19 of 25

If the protest is denied in whole or in part, 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 Court of Tax Appeals within thirty (30)
days from receipt of the said decision, or from the lapse of the one
hundred eighty (180)-day period; otherwise, the decision shall
become final, executory and demandable."35

It is undisputed that Petitioner received the FAN on April 18, 2013. 36

Following the mandate of Section 228 of the NIRC of 1997 in relation to
Revenue Regulation No. 12-99 37 , Petitioner has until May 20, 2013 which is the
next working day after May 18, 2013, within which to file its administrative
protest.

After a careful perusal of the records of case, this Court finds that
Petitioner indeed flied its administrative protest by registered mail on May 17,
2013, well within the 30-day period provided by law to flle the same.

Section 3, Rule 13 of the Revised Rules of Court ("Revised ROC")

provides the manner of filing pleadings and other documents, as follows:

"SEC. 3. Manner of filing. The filing of pleadings,

appearances, motions, notices, orders, judgments and all other
papers shall be made by presenting the original copies thereof,
plainly indicated as such, personally to the clerk of court or by
sending them by registered mail. In the first case, the clerk of
court shall endorse on the pleading the date and hour of filing. In
the second case, the date of the mailing of motions, pleadings,
or any other papers or payments or deposits, as shown by the
post office stamp on the envelope or the registry receipt, shall
be considered as the date of their filing, payment, or deposit

35 Emphasis and underscoring supplied.

36 Docket, JSFI, Joint Stipulations of Facts, par. 8, p. 1098.
37 3.1.5 Disputed Assessment. -The taxpayer or his duly authorized representative may
protest administratively against the aforesaid formal letter of demand and assessment notice
within thirtv (30) days from date of receipt thereof. If there are several issues involved in
the formal letter of demand and assessment notice but the taxpayer only disputes or protests
against the validity 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 collection letter
shall be issued to the taxpayer calling for payment of the said deficiency tax, inclusive of the
applicable surcharge and/or interest. No action shall be taken on the taxpayer's disputed issues
until the taxpayer has paid the deficiency tax or taxes attributable to the said undisputed issues.
The prescriptive period for assessment or collection of the tax or taxes attributable to the
disputed issues shall be suspended.

;/
DECISION
CTA CASE NO. 8694
Page 20 of 25

in court. The envelope shall be attached to the record of the

case." 38

Based on the foregoing provision, if pleadings or other documents are

ftled via registered mail, then the date of mailing shall be considered as the date
of filing. It does not matter when the court actually receives the mailed
pleading. 39 Thus, in this case, as the administrative protest was flied by registered
mail on May 17, 2013, well within the reglementary period provided by law, it is
inconsequential that the same was actually received by Respondent on July 4,
2013, as stated in its Letter dated July 12, 2013. 40

The date of filing of Petitioner by registered mail is evidenced by Registry

Receipt No. 5821 bearing even date 41 , the Certiftcation of the Muntinlupa Central
Post Offtce ("MCP0") 42 , as well as the testimony43 of Mr. Roberto S. Quiogue,
former Postmaster of MCPO who issued said Certiftcation. In Alma B. Russel vs.
Teojista Ebasan and Agapito Austria 44, the Supreme Court determined that fact of
mailing on a said date is proven by the registry return receipt, the afftdavit of
service and the certiftcation of the Offtce of the Postmaster. Further, in South
Villa Chinese Restaurant and City Foods Corporation vs. NLRC 45 , the Supreme Court
held that under the Revised ROC, the date of the post offtce stamp on the
envelope or the registry receipt is considered the date of illing of a pleading sent by
registered mail.

This Court recognizes that the illing of administrative protest by

registered mail is a practice expressly favored by the BIR itself when it issued
Revenue Memorandum Circular No. 39-2013 on April 04, 2013 and signed by
herein Respondent. The pertinent provision are as follows:

"[T]he guidelines for receipt of protest letters and other

similar correspondences are clarified as follows:

1. All letters of protest, requests for

reinvestigation/ reconsideration and similar
correspondences shall only be flied by the taxpayers or their
duly authorized representatives, in person or through

38
Emphasis and underscoring supplied.
39
Alma B. Russel vs. Teofista Ebasan and Agapito Austria, G.R. No. 184542, April 23, 2010.
40
Docket, Letter dated July 12, 2013, Exhibit "P-6", pp. 1218 to 1219.
41
Id., Registry Receipt attached to the Protest to the Formal Assessment Notice, Exhibit "P-5",
p. 1193.
42
Id., Certification from Muntinlupa Central Post Office, Exhibit "P-7-a", p. 1162.
43
Id., May 17, 2016 Minutes of Hearing, p. 1222.
44
G.R. No. 184542, April 23, 2010.
45
G.R. No. 112120, November 23, 1995.

~
DECISION
CTA CASE NO. 8694
Page 21 of 25

registered mail with return card, with the Office of the

concerned Regional Director (RD), Assistant
Commissioner-Large Taxpayers Service (ACIR-LTS) and
Assistant Commissioner-Enforcement Service (ACIR-ES),
who signed the Preliminary Assessment Notices (PANs),
FANs and Formal Letters of Demand, for proper recording
of the protests, and evaluation if the same is in accordance
with Section 228 of the NIRC, as implemented by Revenue
Regulations No. 12-99. If the aforesaid procedures are not
followed, then the letters of protest, requests for
reinvestigation/ reconsideration and similar
correspondences shall be considered void and without force
and effect. " 46

In its Letter dated July 12, 2013, Respondent anchored its claim of
Petitioner's failure to ftle a timely protest on the ground that upon verification
from the MCPO, the letter of protest on May 17, 2013 was actually posted and
dispatched by MCPO under Registered Letter No. 5281 only on June 19, 2013
or more than thirty (30) days from April18, 2013_47

However, in its Letter-Reply to the BIR dated August 12, 2013 48 ,

Petitioner stated that the administrative protest was duly received by the MCPO
for mailing purposes on May 17, 2013. Petitioner then attached a Certification49
from the MCPO explaining why the same was posted and dispatched only on
June 19, 2013, quoted as follows:

"Above registered mail was received by Lorenzo Banguilan,

clerk/ dispatcher of the office. When the services of Lorenzo
Banguilan was terminated because of his negligence effective June
7, 2013 his work area was inspected and the subject registered mails
together with other classes of mails was found, and immediately
turned over to the registry dispatcher for dispatch on June 19,2013,
Wednesday thru Bill #88, Page 1. Col. 1, Line 4.

By reason of the foregoing inadvertence and oversight, this Office

issued a Certification dated July 10, 2013 upon request of Atty.
Gilquin B. Tolentino (RLT AID I, BIR Q.C.) to the effect that the
subject mail matter was dispatched on June 19, 2013 despite the

46
Emphasis and underscoring supplied.
47
Docket, Letter dated July 12, 2013 with attached Certification dated July 10, 2013 and signed
by Roberto S. Quiogue, Postmaster V of MCPO; Exhibit "P-6", pp. 1218 to 1219.
48
/d., Reply Letter dated August 12, 2013 to the Letter dated July 12, 2013, Exhibit "P-7", pp.
1220 to 1221.
49
/d., Certification from Muntinlupa Central Post Office, Exhibit "P-7-a", p. 1162.

/
DECISION
CTA CASE NO. 8694
Page 22 of 25

fact that the same was actually mailed and duly received by Lorenzo
Banguilan at the Muntinlupa City Post Office on May 17, 2013."

Mr. Roberto S. Quiogue, the signatory of the said Certification,

corroborated the same during his presentation as a witness. The relevant portion
of the Stenographic Notes during the May 17, 2016 are as follows:

JUSTICE VICTORINO
Can you tell us the circumstances surrounding the issues of this
certification which is dated as August 8, 2013 under OR No.
21619640?

MR. QUIOGUE
A Your Honors, there was a request from Lorenzo Shipping
through Lea Fernandez-Manotoc requesting for clarification
with regard to the registered mail no. 5281 because hindi ko po
dinedetry nakapag issue kami ng certification yung una sa BIR so there
was an oversight, hindi agad nakita nayung registered mail na po na ryun,
yun lang po ang registered mail na involve na nakita dun sa folder ng
aming terminated na COS na ginawa po naming ng report immediatefy
on duty then ng makita po naming eh June 18, 2013, the following dcry it
was then offered on June 19, 20 13 at dinispatch po namin, pero actualfy
yun po cry na receive ni Lorenzo Manguilian on Mcry 17, 2013.

JUSTICE LIBAN
Then you dispatched on?

MR. QUIOGUE
June 19, 2013." 50

Based on the foregoing, there is no doubt that the administrative protest

was filed on time.

Petitioner received on July 15,2013 51 a Letter from Respondent dated July

12, 2013 denying its administrative protest. Hence, Petitioner has thirty (30) days
or until August 14, 2013 within which to file an appeal before this Court. The
receipt of the denial of the administrative protest prompted Petitioner to file the

50
Transcript of Stenographic Notes (TSN) dated May 17, 2016, pp. 25 to 26.
51
Docket, Reply Letter dated August 12, 2013 to the Letter dated July 12, 2013, Exhibit "P-7",
pp. 1220 to 1221; Judicial Affidavit of Ms. Edna F. Mendiola, Question No. 31, p. 947.

~
DECISION
CTA CASE NO. 8694
Page 23 of 25

instant Petition for Revie~ 2 on August 13, 2013 which is well within the period
prescribed by law to ftle the same.

For lack of a definite and

unequivocal demand for
payment of a certain date, the
assessment is perforce void.

In Commissioner of Internal Revenue v. Pascor Realty and Development

Corporation53 , the Supreme Court categorically pronounced that an assessment
contains not only a computation of tax liabilities, but also a demand for
payment within ~ prescribed period.

In other words, an assessment is a notice to the effect that the amount

therein stated is due as a tax and a demand for the payment thereof. 54 It fixes and
determines the tax liability of a taxpayer.

In the case at bar, the last paragraph of the undated FAN 55 provides:

"In view thereof, you are requested to pay your aforesaid

deficiency internal revenue tax liabilities through the duly
authorized agent bank in which you are enrolled using the BIR
Payment Form (BIR Form 0605) attached herewith within the
time shown in the enclosed assessment notice. Afterwards,
submit copy thereof to Regular Large Taxpayers Audit Division-
1 located at Rm 216 National Office Building, Bir Road, Diliman,
Quezon City for updating of your records and cancellation of the
herein FAN if warranted."

However, a careful scrutiny of the records shows that for each of the
enclosed Audit Result/ Assessment Notices referred to in the FAN, there is no
indicia of any definite period or a date certain within which Petitioner must pay
the alleged deficiency assessment. On the contrary, the due dates on the enclosed
Audit Result/ Assessment Notices for all the assessment items were left blank or
unaccomplished. 56

52 Docket, pp. 14 to 57.

53 G.R. No. 128315, June 29, 1999.
54 Republic v. Lim De Yu, G.R. No. L-17438, April10, 1964, citing Alhambra Cigar and Cigarette
Manufacturing Company v. The Collector of Internal Revenue, L-12026, May 29, 1959.
55 Docket, Formal Assessment Notice, Exhibit "P-2", p. 1178; BIR Records, Exhibit "R-4-Merit", p.
1060.
56 Id., Audit Result I Assessment Notices, Exhibit "P-3", p. 1187 to 1192; BIR Records, Exhibits
"R-4-a-Merit", "R-4-b-Merit", "R-4-c-Merit", "R-4-d-Merit", "R-4-e-Merit" and "R-4-f-Merit", pp.
1046 to 1051.

~
DECISION
CTA CASE NO. 8694
Page 24 of 25

In Commissioner of Internal Revenue v. Fitness By Design, IncY, the Supreme

Court cancelled the Final Assessment Notice as well as the Audit
Result/ Assessment Notice for failure to contain a definite period for payment
of the tax assessed. According to the Supreme Court, the lack thereof negates
BIR's demand for payment.

Following the doctrine laid above, Respondent's assessment in this case

similarly cannot withstand the test of validity. The subject FAN cannot be
deemed a valid formal assessment notice absent a specific date or period within
which the alleged tax liabilities must be settled or paid by Petitioner.

It must be emphasized that the date certain for the payment of tax
liabilities is indispensable in an assessment as it dictates the time when the
penalties, surcharges and interest begin to accrue against. 58 The uncertainty in
the date of payment is a far cry from the basic requirement, viz.:, a definite
demand to immediately pay the assessed tax liabilities within a time certain.

With the above disquisitions, a discussion on the remaining issues 1s

deemed unwarranted.

WHEREFORE, premises considered, the instant Petition for Review is

GRANTED. Accordingly, the the undated Final Assessment Notice assessing
Petitioner deficiency taxes in the aggregate amount of Two Billion, Eight Million,
Four Hundred Seventy Two Thousand, Five Hundred Eighty Four and 91/100
Pesos (Php2,008,472,584.91), inclusive of interest, surcharges and compromise
penalties for taxable year 2008 is CANCELLED and SET ASIDE.

SO ORDERED.

~.~ ~'-
MA. BELEN M. RINGPIS-LIBAN
Associate Justice

57
G.R. No. 215957, November 09, 2016.
58 Commissioner of Internal Revenue v. Pascor Realty and Development Corporation, G.R. No.
128315, June 29, 1999.
DECISION
CTA CASE NO. 8694
Page 25 of 25

WE CONCUR:

LOVE~ R. BAUTISTA
Associate 1ustice

or-

ATTESTATION

I attest that the conclusions in the above decision were reached in

consultation before the case was assigned to the writer of the opinion of the
Court.

LOVEL ~- 1 BAUTISTA
Asfo!ate ustice
Chairperson

CERTIFICATION

Pursuant to Article VIII, Section 13 of the Constitution, and the

Division Chairperson's Attestation, it is hereby certified that the conclusions in
the above Decision were reached in consultation before the case was assigned to
the writer of the opinion of the Court.

Presiding 1ustice