Thursday, January 26, 2012

Carnation Phils. Inc. (now merged with Nestle Phils., Inc.), vs. CIR

Facts: Petitioner comes before this Court praying for the nulling and voiding of the assessments covering its alleged deficiency income and sales for the taxable year ending September 30, 1981, in the total amount of P19.5M.

Petitioner, through its Senior Vice President Jaime O. Lardizabal, and in consideration of the approval by the CIR of petitioner's request for reinvestigation and/or reconsideration of its internal revenue case involving the assessments for the fiscal year 1981 which were pending at the time, signed three separate waivers

Neither waiver was signed by respondent Commissioner or any of his agents.

Petitioner filed a basic protest with the BIR therein disputing the assessments. These protests were denied by respondent in a letter, stating:

"In view thereof, it is requested that the aforesaid tax liabilities of your client (petitioner herein) be paid immediately, inclusive of the penalties incident to late payment.

"This is our final decision. If you are not amenable thereto, you may appeal to the Court of Tax Appeals within thirty (30) days after receipt of this letter, otherwise, your client's assessments shall become final, executory and unappealable."

Petitioner contends that the deficiency assessments subject of the instant petition are barred by prescription, since they were issued beyond five years from the filing of the returns covering the internal revenue taxes assessed therein.

Issue: whether or not the deficiency assessments subject of the instant petition are barred by prescription, since they were issued beyond five years from the filing of the returns?

Held: Yes, barred by prescription.

However, although the period of prescription is waivable by agreement, there must exist, however, two essential requisites for the waiver to be valid: first, the waiver must be entered into before expiration of the time prescribed for making an assessment; and second, the Commissioner and the taxpayer must have consented thereto in writing.

We agree with petitioner, and find that the subject assessments were issued beyond the five-year prescriptive period allowed by the Tax Code.

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