Oceanic Wireless Network vs Commissioner of Internal Revenue

Facts: Oceanic Wireless is a corporation filed its 1995 Annual Corporate Annual Income Tax Return in April 1996. In December 1996, petitioner received a letter from the Revenue District Officer authorizing Revenue Officers to examine the books of accounts and other records for the period January to December 1995. Oceanic executed a Waiver of Defense of Prescription of the NIRC within which respondent may assess petitioner for deficiency taxes. A preliminary report of tax assessment was issued and petitioner was requested to attend an informal conference to discuss the result of the investigation done on the books. Petitioner received again another pre-assessment notice this time with Details of Discrepancies. The company was advised to file a written protest or set up an office conference to discuss the deficiencies. Since the authority of respondent to assess was about to prescribe in July 31 1999, demand letters were sent on July 30, 1999.

Petitioner’s contention: The assessment notices for taxable year 1995 are void for having been issued beyond the 3-yr prescriptive period as provided under the NIRC. Since the tax return was filed in April 1995, respondent has 3 years to assess the petitioner.  But the assessment was done only in 1999, hence the action has already prescribed.

Respondent’s contention: Petitioner executed a waiver extending the period of the respondent pursuant to the provisions in the Tax Code.

Issue:

1. Whether or not the BIR’s right to assess has already prescribed. NO

2. Whether or not the deficiency assessments are void for failure to state the law and facts to which the assessments are made. NO

3. Whether or not petitioner is liable for deficiency income tax. YES

Held:

1. No. BIR’s right has not yet prescribed and the assessment notices are valid. At the time of the execution of the waiver, there was no preliminary assessment issued yet against petitioner where the kind and amount of tax could be referred to. Such details cannot be specified in the waiver since it was still unascertainable at the time. Since the period of respondent to assess was extended up to July 31, 1999 in view of the waiver, the deficiency assessments issued against petitioner on July 30, 1999 are within the period allowed by law.

2. No. The purpose of Section 228 of the National Internal Revenue Code of 1997 in requiring that "the taxpayer be informed of the law and facts on which assessment is made" is to give the taxpayer the opportunity to refute the findings of the examiner and give a more accurate and detailed explanation regarding the proposed assessment. In the case, there was substantial compliance with Sec. 228 of the NIRC because petitioner was able to protest the assessments intelligently, thereby implying that it had actual knowledge of the factual and legal bases of the assessments. The fact that petitioner was furnished the computation and brief explanation of how the assessment for deficiency quarterly income tax was arrived at, the requirement under Section 228 of the 1997 Tax Code is deemed complied with. And even if petitioner was not furnished of the detailed computation of the deficiency quarterly income tax, the same was discussed with petitioner during the informal conference. 

3. Yes. Petitioner having failed to comply with the requirement of the law in disputing an assessment, the same became final, executory and demandable.  Sec. 228 states that:

x x x If the protest is denied in whole or in part, or is not acted upon within one hundred eighty (180) daysfrom 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. Undoubtedly, a taxpayer has sixty (60) days from the filing of the protest to submit the relevant documents to support its protest, otherwise, the assessment becomes final. Within one hundred eighty(180) days from the submission of the relevant documents, the respondent should act on the protest. If the respondent rendered his decision within the period or failed to act on it, the remedy of the taxpayer is to file within thirty (30) days from the receipt of the decision or from the lapse of one hundred eighty(180) days, an appeal to this court, otherwise, the assessment will become final, executory and demandable. x x x

In the case, petitioner failed to submit supporting documents contrary to what was jointly stipulated by the parties. Hence, the reckoning of the 180-day period would be the day the protest was filed which was August 16, 1999. However, respondent failed to render his decision within 180 days or until February 12, 2000. The remedy of petitioner was to file within 30 days there from an appeal with this court which would be until March 14, 2000. But since the Petition for Review was filed only on May 12, 2000, the same was definitely filed beyond the date prescribed by law.