TAX JUDICIAL REMEDIES OF GOVERNMENT

8/13/2019 TAX JUDICIAL REMEDIES OF GOVERNMENT

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JUDICIAL REMEDIES OFGOVERNMENT

Prepared by:Nolen B. Endaya


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Tax is the life and blood of the Government, withoutwhich the government will be useless. In this regard the Bureauof Internal Revenue was created with the main function to raiserevenues for the operation of the government.

Section 220 of the NIRC of the Philippines- civil or criminalactions and proceedings can be instituted in behalf of theGovernment to effect the collection of delinquent taxes. Suchaction shall be brought in the name of the Government of thePhilippines and shall be conducted by legal officers of the BIR.

The Role of the Bureau of Internal Revenue


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The Role of the Judiciary in Taxation

The role of courts is limited to the applicationand interpretation of tax laws. The courts check

abuses and injustices of the legislative andadministrative agents of the State in the exerciseof the power of taxation.

Judicial Remedies of the Government


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The Role of the Judiciary in Taxation

In Section 218 of NIRC it was expressly statedthat No court shall have the authority to grant aninjunction to restrain the collection of any nationalinternal revenue tax, fee or charge imposed by theTax Code. However, under Section 7 of R.A. 1125,the CTA was given the power to restrain thecollection of national internal revenue taxes subject

to certain condition, which makes section 218 not

absolute.


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Also, under the revenue memorandum order no.42- 2010 issued on May 4, 2010 it states that it

prohibits the issuance of the Temporary Restraining

Order (TRO) on the collection of taxes against the BIR by courts other than the CTA which means that onlythe CTA can validly grant or issue a TRO with respectto collection of taxes.



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Collector of I nternal Revenue vs. Jose Avel ino et al .,

It therefore appears that when it refers to the Collection ofincome tax it is mandatory that the right of the Collector ofInternal Revenue to collect it by the summary methods ofdistraint and levy be exercised within the period of three yearsfrom the time the income tax return is filed, otherwise the rightcan only be enforced by judicial action



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Collector of I nternal Revenue vs. Jose Avel ino et al .,

Since, admittedly, the deficiency taxes in question were assessedand the warrants for their collection by distraint and levy wereissued after the period of three years from the filing of the returns,it is evident that said warrants, as well as the steps taken inconnection with the sale of the properties of the taxpayer, wereissued without authority of the law and, hence, the Court of TaxAppeals acted properly in enjoining their enforcement as prayed

for by petitioner.



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CIVIL ACTION The civil tax liability of a taxpayer is enforced by the

Government in two (2) ways:

1. By filing the civil case for the collection of the sum ofmoney with the proper regular court (i.e., MTC or RTC).2. By filing an answer to the petition for review filed by

the taxpayer with the Court of Tax Appeals.



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CIVIL ACTION When the CIR files the civil action for the collection of

taxes, the party plaintiff is the Republic of the Philippinesand not the Commissioner of Internal Revenue. But when itis the taxpayer that files a petition for review in the CTA, therespondent is the CIR, not the Republic of the Philippines.



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Jurisdiction over Civil Actions The Government can only initiate civil action when

the tax liability becomes delinquent and collectible. In civil Action the Jurisdiction of the court is determined based onthe amount of delinquent taxes to be collected as stated inthe civil action filed/to be filed. If it is Less than one (1)Million it is under the jurisdiction of the RTC and the

jurisdiction is vested to the CTA if it is one (1) million or

more.



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Collectibility of Tax Liability1. Self-assessed tax shown in the return was not paid within thedate prescribed by law.

Internal revenue taxes are self-assessing and no further

assessment by the government is required to create the taxliability, where the taxpayer merely filed his tax return showing anamount of tax due, without paying the same or paying only aportion thereof. In such case, the taxpayer is immediatelyconsidered as delinquent with respect to the unpaid amount of

tax.



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Collectibility of Tax Liability

Note: Taxes are considered delinquent when it remainsunpaid after the lapse of the last day prescribed by law for

its payment. Likewise, it could also be considered asdelinquent where an assessment for deficiency tax hasbecome final and the taxpayer has not paid it within theperiod given in the notice of assessment.



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Note: A delinquent account refers to the amount of tax due froma taxpayer who failed to pay the same within the time prescribedfor its payment arising from (a) a self-assessed tax, whether or

not a tax return was filed , or (b) a deficiency assessment issuedby the BIR, which has become final and executory. Where noreturn was Filed, the taxpayer shall be considered delinquent asof the time the tax on such return was due, and in availing of thecompromise, a tax return shall be filed as a basis for computing

the amount of compromise to be paid .



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2. Final assessment is not protested administratively within 30 daysfrom date of receipt.

The assessment may be protested administratively by filing arequest for reconsideration or reinvestigation within thirty (30) days fromreceipt of the assessment in such form and manner as may beprescribed by implementing rules and regulations. Otherwise, theassessment shall become final ( Sec. 229, NIRC). The filing of theprotest within the thirty (30) day period is mandatory and it is notextendable, and if the BIR imposes certain conditions for the approval ofsuch protest, said conditions must be satisfied with by the taxpayer.



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Marcos II vs. Court of Appeals, 273 SCRA 47

Failure to question assessment served upon the decedents

heirs. Apart from failing to file the required estate tax return,petitioner and the other Marcos heirs failed to question theassessment served on them as heirs of the late PresidentFerdinand Marcos, thereby allowing said assessment to lapseinto finality. Said assessment having become final and executory,

the same may be collected by summary remedy of distraint orlevy .



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3. Non-compliance with the condition laid in the approval ofprotest.

The protest letter filed by the taxpayer or his authorized

agent, provided it is not considered as pro forma, is generallyapproved by the Commissioner. In some instances, theCommissioner imposes certain conditions or requires the filing ofposition papers in granting the request for reinvestigation orreconsideration, in order to adequately evaluate the validity of the

arguments and documents mentioned in the protest letter. Thus,failure of the taxpayer to comply .



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Dayrit vs Cruz, 165 SCRA 571Facts: Estate and inheritance taxes were assessed against the

estate of Spouses Marta Teodoro and Don Toribio Teodoro. The

heirs then filed a request for reconsideration of the assessments andasked that they be given 30 days within which to submit theirposition paper in support of their claim. The position paper was notsubmitted. When the Government sought to collect the tax liabilitiesin the settlement proceedings on the estate, the heirs interposed the

defense that the assessment have not become final and executory.



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Dayrit vs Cruz, 165 SCRA 571Held : Supreme Court ruled that the request for

reconsideration cannot be considered as a protest against

the assessment. The failure of the heirs to substantiate theirclaim against the assessment due to the non-submission oftheir position paper justified the Commissioners action incollecting the tax in the court settlement proceedings .



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4. Failure to file a timely appeal to the CTA on the finaldecision of the Commissioner or his authorizedrepresentative on the disputed assessment.



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Basa vs Republic, 138 SCRA 34Taxpayer filed with the BIR a request for reinvestigation after

he was assessed deficiency income tax. Subsequently, a letter-

decision demanding payment was issued by BIR. Since thetaxpayer did not appeal, a civil action for collection was filed bythe Government. The court ruled that the taxpayers failure toappeal the decision to the CTA deprive him of the right toquestion the commissioners authority to collect the tax within the

prescribed period provided by law .



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Mambulao Lumber Co. vs. Republic, 132 SCRA 1Where the taxpayer failed to comply with a conditioned laid

down by the Commissioner for the reinvestigation of the case and

its failure to appeal to the CTA made the assessment final andexecutory, so that if an action to collect the tax assessment isfiled by the government in the ordinary court, this is akin to anaction to enforce a judgment such that no inquiry can be madethereon as to the merits of the original case or the justness of the

judgment relied upon.



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Fernandez Hermanos, Inc. vs. Commissioner, 29 SCRA 552The fact that no civil action to collect the taxpayers tax

liability was filed by the Government (in the RTC) is no

ground for claiming that the right of the Government to collectsaid liability had already prescribed. The Supreme Courtruled that prescription had not set in inasmuch as theGovernments answer in the CTA was filed well within theprescriptive period prescribed by law.



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In other words, the answer filed by the government inthe CTA was tantamount to the filing of the civil actionfor collection in the regular court. Incidentally, whenaction for collection filed in the regular courts,prescription is tolled.



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Who approves the filing of Civil Action?

Sec. 220, NIRC- No civil or criminal action for the recovery oftaxes or the enforcement of any fine, penalty or forfeiture underthis code shall be filed in court without the approval of theCommissioner .

Republic vs Hizon, 320 SCRA 574 A Regional Director may also approve the filing of civil actions forcollection of delinquent tax, if this power is expressly delegated to

him by the Commissioner under an appropriate revenuememorandum (or Administrative) order on the matter.



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When to go to court?

General Rule : The BIR can file a civil action for thecollection of a tax that has become delinquent orcollectible within five (5) years from the date ofassessment.



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Republic vs. Lim Tian Teng Sons, 16 SCRA 584the Supreme Court held that nowhere in the tax code is theCommissioner required to rule first on the taxpayers request

for reinvestigation before he can go to court for the purposeof collecting tax assessed. The legislative policy is to give theCommissioner much latitude in the speedy and promptcollection of taxes because it is on taxation that theGovernment depends to obtain the means to carry on itsoperations.



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Republic vs. Lim Tian Teng Sons, 16 SCRA 584The court further said that when the Commissioner did notreply to the taxpayers request for reconsideration and

instead referred the case to the Solicitor General for judicialcollection, this was indicative of his decision againstreinvestigation. Failure on the part of the taxpayer to file theappeal to the CTA makes the final decision of theCommissioner on the disputed assessment final andexecutory.



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BPI vs. Commissioner, GR No. 139736, Oct. 17, 2005

Distraint and levy proceedings are validly begun or

commenced by the issuance of the warrant and servicethereof on the taxpayer. under Section 233 (c) of the TaxCode, it is not essential that the warrant of distraint and/orlevy be fully executed so that it can suspend the running ofthe statute of limitations on the collection of the tax.



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BPI vs. Commissioner, GR No. 139736, Oct. 17, 2005

It is enough that the proceedings have validly begun and that

their execution has not been suspended by reason of thevoluntary desistance of the CIR. Jurisprudence establishesthat distraint and levy proceedings are validly begun orcommenced by the issuance of the warrant and servicethereof on the taxpayer .



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Yabes vs Flojo, 115 SCRA 278

However, the filing of a civil action in the regular court (RTC)

to collect a tax which was the subject of a pending protest inthe BIR was a justifiable basis for the taxpayer to appeal tothe CTA and to move for a dismissal in the trial court of theGovernments action to collect a tax liability under dispute.



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Republic vs. Dorego, GR L-16594, Apr. 26, 1962 Another exception relates to an action to collect on the bonds,which is an action separate and distinct from an action to collecttaxes. Art. 1144 of the civil code which provides that action upon awritten contract must be brought within ten (10) years from thetime the right of action accrues, finds a fitting application. Itappearing that said bonds were executed on June 12 and 29,1946, the right of the government to collect the amounts covered

thereby, prescribed on June 12 and 29, 1956. the complaint wasfiled on February 18, 1953.



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TAX JUDICIAL REMEDIES OF GOVERNMENT