COURT OF TAX APPEALS DECISIONS
APPEAL OF FDDA TO THE REGIONAL DIRECTOR AND FILING OF MOTION FOR RELIEF TO THE CIR ON THE CIR’S DECISION RENDERS THE ASSESSMENT FINAL AND EXECUTORY. If the protest is denied by the Commissioner of Internal Revenue’s (CIR) duly authorized representative via Final Decision on Disputed Assessment (FDDA), the taxpayer may either: (i) appeal to the CTA within 30 days from date of receipt of the FDDA; or, (ii) elevate his protest through a request for reconsideration to the CIR’s within 30 days from date of receipt of the FDDA. Moreover, if the taxpayer decides to lodge an administrative appeal with the CIR, and the same is denied by the latter, in whole or in part, the taxpayer may appeal to the CTA the CIR’s decision, within 30 days from receipt thereof. Otherwise, the assessment shall become final, executory and demandable. Thus, where the taxpayer elevated the FDDA not in the office of commissioner but to the Regional Director, the assessment becomes final. Moreover, where the CIR issued a decision, and instead of appealing to the CTA, the taxpayer filed an Urgent Motion for Relief, the assessment becomes final, and CTA lost jurisdiction. (Permafrost Marketing, Inc. v. CIR, CTA Case No. 10410, July 4, 2025)
TAX CREDITS MUST BE CLAIMED IN THE PROPER PERIOD; EXCESS CREDITS WERE DISALLOWED TO PREVENT PREMATURE AND DOUBLE UTILIZATION. Tax credits are allowed only in the taxable period when the related income is earned or received, and may not be prematurely applied or used in a manner that results in double benefit; otherwise, their disallowance is proper. In this case, the BIR disallowed the taxpayer’s claimed creditable withholding taxes because the supporting certificates were dated outside taxable year 2016, and the taxpayer failed to prove that the related income was earned in 2016, thereby justifying the full disallowance. The BIR also deducted the excess minimum corporate income tax and excess creditable taxes carried over to the succeeding period from the taxpayer’s 2016 tax credits to prevent premature and duplicative application of these credits. Verification showed that the excess CWT was actually utilized as credits in later taxable years, confirming that allowing them again against the 2016 deficiency would result in double benefit, while the excess MCIT was not in fact utilized and thus should not have been disallowed. Consequently, the disallowance of CWT and the excess credits carried over was upheld. (Kalayaan Engineering Company Inc. v. Commissioner of Internal Revenue, CTA Case No. 10839, October 29, 2025)
3-YEAR PRESCRIPTION TO ASSESS SHALL APPLY IF 30% THRESHOLD IS NOT BREACHED AND 50% SURCHARGE IS NOT IMPOSED; 3-YEAR PRESCRIPTION TO COLLECT APPLIES FROM ISSUANCE OF ASSESSMENT AND NOT TOLLED BY REQUEST FOR RECONSIDERATION. Under the law, the prescriptive period for assessment of taxes is three years from the last day to file the return, extendable only if a false or fraudulent return is established with clear evidence, and the period to collect begins upon issuance of the assessment. In this case, there was no substantial under-declaration, overstatement of deductions, or evidence of fraud to invoke the extraordinary 10-year period, and the BIR did not impose the corresponding 50% surcharge. Consequently, the ordinary three-year period applied, making the right to assess deficiency IT, VAT, and EWT for 2013 expire before collection efforts. Moreover, the BIR has three-year period to collect from the issuance of the assessment and tolled when BIR grants a request to reinvestigation. Here, the taxpayer merely requested for reinvestigation. Accordingly, the 3-year prescription applies by the time the BIR enforced collection by filing its Answer. Thus, the Court enjoined the BIR from enforcing collection of the 2013 deficiency taxes. (Noatum Logistics Philippines, Inc. v. Commissioner of Internal Revenue, CTA Case No. 10867, July 30, 2025)
ASSESSMENT IS INVALID WHEN WAIVERS ARE NOT ACCEPTED BY THE BIR BEFORE THE ASSESSMENT PERIOD EXPIRES OR ISSUED WITHOUT PROPER AUTHORITY. The law provides that the period to assess taxes is three years, extendable only through validly executed waivers accepted by the BIR and facilitated by officers with proper authority. In this case, five waivers executed by Medicard Philippines, Inc. were defective: four lacked proof of timely BIR acceptance, and four were obtained by a revenue officer without a valid LOA. Consequently, the original three-year prescriptive period for assessing Income Tax, VAT, and EWT for TY 2014 lapsed before the undated Formal Letter of Demand and Assessment Notices were served, rendering them void. As a result, the Court canceled and set aside the assessments. (Medicard Philippines, Inc. v. Commissioner of Internal Revenue, CTA Case No. 10853, October 30, 2025)
THE CTA MAY UPHOLD DOUBTFUL VALIDITY OF THE ASSESMMENT EVEN THOUGH BIR DENIES THE OFFER OF COMPROMISE. A compromise may be granted when there exists reasonable doubt as to the validity of the assessment, and while tax assessments are generally presumed correct, such presumption does not apply when the assessment is arbitrary, capricious, or “naked,” meaning it is not anchored on actual facts but merely on presumptions. In this case, the assessment against the taxpayer was premised on alleged “unaccounted sources of cash” derived from discrepancies between its financial statements, VAT returns, and alphalists, which the BIR automatically treated as undeclared income. Consequently, the assessment was based on mere presumptions rather than factual evidence, rendering it not only of doubtful validity but legally defective. (GMA Worldwide (Phils.), Inc. v. Commissioner of Internal Revenue, CTA Case No. 11158, August 1, 2025
RECEIPT OF THE FAN BEFORE THE END OF THE 15-DAY PERIOD TO REPLY TO THE PAN RENDERS THE ASSESSMENT VOID. Taxpayer has 15 days to reply to the PAN. In this case, the records show that the taxpayer received the preliminary assessment notice on March 12, 2015 and was entitled to a full fifteen-day period, or until March 27, 2015, to submit a reply; however, the tax authority prematurely issued the formal letter of demand and final assessment notices on March 26, 2015, or one day before the lapse of the response period, a procedural defect that was expressly admitted by its own witness during trial. Jurisprudence categorically holds that the issuance of a final assessment before the expiration of the taxpayer’s response period constitutes a clear violation of due process, which is not cured by the subsequent filing of a protest or by claims of substantial compliance, and renders the assessment void, incapable of attaining finality, and without any legal basis for collection or compromise(GMA Worldwide (Phils.), Inc. v. Commissioner of Internal Revenue, CTA Case No. 11158, August 1, 2025
ASSESSMENT IS VOID IF THE FAN REITERATED THE FINDINGS IN THE PAN WITHOUT ADDRESSING THE REPLY TO THE PAN. As a legal basis, due process in tax assessment requires that the taxing authority strictly observe the mandatory procedure of fully informing the taxpayer, in writing, of the factual and legal bases of the assessment, and of genuinely considering the taxpayer’s explanations and evidence, with any rejection thereof being supported by stated reasons grounded on facts and law; failure to comply renders the assessment void and without legal effect. In this case, although a preliminary assessment was issued and a protest was timely filed, the subsequent formal letter of demand, final assessment notice, and final decision merely reiterated, almost word for word, the same findings and bases found in the preliminary notice, without addressing, evaluating, or explaining the rejection of the taxpayer’s defenses, thereby showing a patent disregard of the taxpayer’s submissions; moreover, even when the assessment amounts were modified, no reasons or factual bases were provided for such changes. This repetition of findings, coupled with the absence of any articulated consideration of the defenses raised, deprived the taxpayer of administrative due process, rendering the assessment void; in addition, the Court further found that the taxpayer is permanently exempt from income tax under its governing law, so that no deficiency income tax could legally arise in the first place, further nullifying the assessment. (Bukidnon II Electric Cooperative, Inc. v. Commissioner of Internal Revenue, CTA Case No. 11142, October 9, 2025; Imasen Philippine Manufacturing Corporation v. CIR, CTA Case No. 10402 ).
ASSESSMENT IS VOID IF A REPLACING REVENUE EXAMINER RECOMMENDED THE PAN BUT LOA NAMING SUCH EXAMINER WAS ISSUED AFTER THE ISSUANCE OF THE PAN. The Tax Code provides that the CIR or duly authorized representatives may examine a taxpayer and issue assessments, and such authority must be expressly granted through a Letter of Authority (LOA); any participation by revenue officers not named in a valid LOA renders the resulting audit or assessment void, as it violates the taxpayer’s right to due process. In this case, although the audit was initially authorized under a valid LOA, a group supervisor who was not named in the LOA participated in supervising and reviewing the audit that led to the issuance of the preliminary assessment notice, and no LOA had been issued for his involvement at that time; consequently, the participation of the unauthorized officer invalidated the assessment and related collection notices, notwithstanding any subsequent LOA or continuation by authorized officers. Accordingly, the assessment and the final decision on the disputed assessment were cancelled and set aside. (O-Healthcare Solution Phil., Inc. v. Commissioner of Internal Revenue, CTA Case No. 10951, July 30, 2025).
FAILURE TO FILE A PROTEST OR FILING AN OFFER OF COMPROMISE RENDERS THE ASSESSMENT FINAL AND EXECUTORY; HOWEVER, FAILURE TO INITIATE COLLECTION EFFORTS WITHIN THE PRESCRIBED PERIOD PREVENTS THE BIR FROM COLLECTION. Under the tax laws and implementing regulations, a final assessment becomes final, executory, and demandable when the taxpayer fails to file a valid protest within the prescribed period, fails to submit supporting documents for a protest for reinvestigation, abandons a pending protest, or fails to timely elevate an adverse decision or inaction to the CTA, after which the government is given only a limited period to enforce collection through the modes allowed by law. Applying these rules, the Court held that the deficiency income tax and VAT assessments for taxable years 2006 and 2007 had already become final and executory because the protest filed against the second assessment for 2006 was in substance a mere motion for reconsideration without submission of supporting documents, was later expressly abandoned by the filing of an application for compromise settlement which was treated as an admission of liability, and no protest at all was filed against the 2007 assessment; consequently, while the assessments were already final, the government nonetheless lost its right to collect them because no warrant of distraint and levy, garnishment, or judicial action was initiated within the applicable prescriptive period counted from the taxpayer’s receipt of the final assessment notices, rendering further collection efforts legally untenable, and for the same reasons, the taxpayer was likewise not entitled to any refund of amounts paid pursuant to the compromise application. (Remie R. Talaver v. Hon. Romeo D. Lumagui, in his capacity as Commissioner of Internal Revenue, CTA Case No. 11211, Decision dated 22 August 2025.)
INTENT MUST BE ESTABLISHED TO FOR 10-YEAR PRESCRIPTIVE PERIOD TO APPLY. Under the tax laws, the government is generally allowed 3 years which to assess internal revenue taxes, and the use of an extended prescriptive period (10 years) is permitted only in exceptional cases where there is a clear showing that the taxpayer committed false or fraudulent acts with intent to evade tax, which intent must be duly proven. Applying this rule, the Court held that the assessment for taxable year 2009 was already time-barred because the annual income tax return was filed on 15 April 2010, giving the taxing authority only until 15 April 2013 to validly issue an assessment, yet the Final Assessment Notice was issued only on 3 June 2015; at the time the ordinary three-year period lapsed, prevailing jurisprudence already required proof of intent to evade tax before the extended ten-year period could be invoked, and since no such intent was established, the taxing authority could not rely on the longer prescriptive period, rendering the assessment void for having been issued beyond the allowable time. (CTA Case No. 9837, Meridien East Realty & Development Corporation v. CIR, CTA Case No. 9837)