EXERCISES 16 – 1 Income tax 15,000 00 8,000.0 7,000.0 Less: Withholding tax Income tax due Add: Penalties Late filing and late payment (7,000 x 25%) Interest (7,000 x 20% x 1/24) 1,750.0 58 33 Total 1,808.3 8,808.3 Due, 1st installment (15,000 x ½) Less: Withholding tax Available for withholding on 2nd installment 7,500 8,000 ( 50 0) Due, 2nd installment (15,000 x 1/2) 7,500.0 500.0 7,000 00 Less: Withholding tax Due, 2nd installment Add: Penalty for late payment (7,000 x 25%) Interest –from July 15 (7,000 x 20% x 1/12) Tax payable 1,750.0 116.6 a Income tax Add: Penalty for late filing/payment (15,000 x 25%) Interest – 4/16 to 5/15 (15,000 x 20% x 1/12) Tax payable b Income tax Less: Payment, April 15, 2009 1,866 87 8,866 67 P15,00 3,750 250 4,000 19,000 15,000 00 7,500 00 Balance, 2nd installment Add: Penalty and interest Penalty for late payment (7,500 x 25%) Interest – 7/15 to 8/1 (7,500 x 20% x 1/24) Payable, 2nd installment c Income tax Add: Penalty and interest Penalty for late filing/payment (15,000 x 50%) Interest – 4/15 to 5/15 (5,000 x 20% x 1/12) Income tax 7,500 00 1,875.0 62.50 15,000 7,500 250 7,750 22,750 Income tax Add: Penalties Late filing and late payment (30,000 x 50%) Interest (30,000 x 20% x 6/12) Income tax due 1,937 50 9,437 50 P30,00 P15,000 3,000 18,000 48,000 Yes, he is liable for the deficiency tax However, he may be excused for paying the 50% penalty for the falsified tax return Fraud in filing return cannot be presumed but must be clearly established (Graphic Arts vs CIR, July 18, 1984) EXERCISES 16 – ANSWER: A In case of willful neglect to file the return within the period prescribed by this code or by rules and regulations, or in case a false or fraudulent return is willfully made, the penalty to be imposed shall be 50% of the tax (Sec 248{B}, NIRC) ANSWER: C See the discussion in No.1 above ANSWER: D See the discussion in No.1 above ANSWER: D Civil penalty includes the payment of interest, the imposition of 25% and 50% penalty and the payment of fine Imprisonment is considered as criminal sanction for criminal offenses committed Answer: D Income tax due Less: Withholding tax Income tax due payable as of April 15, 2008 Add: Penalty and interest Penalty (P45,000 x 25%) Interest (P45,000 x 20% x 3/12) P 50,000 5,000 45,000 11,250 2,250 Income tax due as of July 15, 2008 Answer: C Income tax payable as of April 15, 2008 Add: Penalty and interest Penalty (P 45,000 x 50%) Interest (P 45,000 x 20% x 3/12) Income tax due as of July 15, 2001 P 45,000 P 22,500 2,250 24,7 50 69,750 Answer: B Payable, 2nd installment Add: Interest (5,000 x 20% x 3/12) Penalty for late payment (5,000 x 25%) Payable as of October 15, 2008 13,5 00 58,500 5,00 250 1,250 6,500 Answer: A Income tax Add: Penalty and interest 120,0 00 Penalty (120,000 x 25%) Interest (120,000 x 20% 2.5/12) 30,00 5,000 Income tax due as of June 30, 2008 Answer: C Income tax Add: Penalty and interest Penalty (P120,000 x 50%) Interest (P120,000 x 20% x 2.5/12) Income tax due as of June 30, 2008 35,00 155,00 120,0 00 60,00 5,000 65,00 185,00 Answer: B Income tax Add: Penalty (P120,000 x 25%) Total amount due Less: Amount already paid Amount still due 120,0 00 30,00 150,00 120,00 30,00 11 Answer: C Amount due per audit Less: Amount paid Deficiency tax Add: Interest (50,000 x 20% x 15/12) Amount still due 200,0 00 150,00 50,000 12,5 00 62,50 12 Answer: D There is tax delinquency on the delay in the payment of the tax on April 25, 2008 instead of April 15, 2008 There is tax deficiency because the amount paid is P130,000 only instead of P135,000 EXERCISES 17 – 1 Upon failure of the person owing any delinquent tax to pay the same at the time required, the BIR can exercise the distraint of the personal property or levy of real property, or both, on the properties owned by him The rule is whenever a tax return is filed on or before April 15 of any year, the counting of the three-year period for assessment of taxes shall start on April 16, the day following the deadline for filing the return However, when the return is filed after the deadline, the counting of the three-year period shall commence to run on the date of filing Since the return was filed on April 13, 2007, the 3-year period shall expire on April 15, 2010 Consequently, the assessment made on April 14, 2010 was made on time However, the assessment on April 17, 2010 is not valid because the same is made beyond the prescriptive period a If it is found out that the overstatement of expenses reported in the tax return resulted to more than 30% of the actual deductions, it shall constitute a prima facie evidence of a fraudulent return In this case, the BIR is given a 10-year prescriptive period to assess the return In cases of fraudulent returns, the period shall commence to run from the discovery of the fraud Therefore, the last day for the BIR to make a valid assessment is on the 10 th year after the discovery of the fraud in the tax return filed by Bobby However, if the overstatement of expenses does not constitute fraud, the last day for the BIR to issue an assessment is April 15, 2007 b The BIR is given five (5) years following the issuance of assessment to execute warrant of distraint Since the assessment is made March 12, 2010, it shall have until March 12, 2015 to execute a warrant c No, because the 5-year period for distraint had already lapsed a The taxpayer is given 30 days from receipt of assessment to file a protest or request for reconsideration with the Bureau of Internal Revenue Roselle received the assessment on April 25, 2007, therefore, she has until May 25, 2007 to act on the assessment Considering that the request for reconsideration was filed on May 2, 2007, the request was filed on time b Roselle is given 30 days from receipt of the decision of the BIR denying her request to appeal to the Court of tax Appeals The decision was received on October 20, 2007, therefore, she has until Nov 19, 2007 to appeal the decision of the Commissioner to the Court of Tax Appeals EXERCISES 17-2 D A C B D A C D - April 15, 2011 B 10 D - April 10, 2016 11 D 12 C 13 C 14 C 15 B 16 C 17 C 18 Answer: C Deficiency income tax Add: Interest (20,000 x 20%) Amount payable per assessment notice 19 C 20 Answer: E October, 2008 November, 2008 P 20,000 4,00 24,00 31 30 December, 2008 January, 2009 February, 2009 March, 2009 (last day to act on the documents) Total (expiration date) March, 2009 April, 2009 (last day to appeal to CTA) Total (expiration date) 31 31 28 29  180 28  30 EXERCISE 17-3: On the first question: NO, the waiver was not validly executed for the following reasons: It was not proven that respondent was furnished a copy of the BIRaccepted waiver The waiver was signed only by a revenue district officer, when it should have been signed by the Commissioner as mandated by the NIRC and RMO No 20-90, considering that the case involves an amount of more than P1 million, and the period to assess is not yet about to prescribe It did not contain the date of acceptance by the Commissioner, a requisite necessary to determine whether the waiver was validly accepted before the expiration of the original 3-year period Bear in mind that the waiver in question is a bilateral agreement, thus necessitating the very signatures of both the Commissioner and the taxpayer to give birth to a valid agreement On the second question: Yes NIRC taxes must be assessed within years counted from the period fixed by law for the filing of the tax return or the actual date of filing, whichever is later This mandate governs the question of prescription of the government’s right to assess internal revenue taxes primarily to safeguard the interests of taxpayers from unreasonable investigation The government must assess internal revenue taxes on time so as not to extend indefinitely the period of assessment and deprive the taxpayer of the assurance that it will no longer be subjected to further investigation for taxes after the expiration of reasonable period of time EXERCISE 17-4: Section 76 offers two options: (1) filing for tax refund and (2) availing of tax credit The two options are alternative and the choice of one precludes the other However, the failure to indicate a choice will not bar a valid request for a refund, should this option be chosen by the taxpayer later on The requirement is only for the purpose of easing tax administration particularly the self-assessment and collection aspect In this case, PERF did not mark the refund box in its 1997 FAR Neither did it perform any act indicating that chosen tax credit In fact, in its 1998 ITR, PERF left blank the portion “Less: Tax Credit/ Payments.” That action coupled with the filing of a claim for refund indicates that PERF option to claim a refund Under these circumstances, PERF is entitled to a refund of its 1997 excess tax credits in the amount of P1,280,504 EXERCISE 17-5: The proper party to question, or seek a refund of an indirect tax is the statutory taxpayer, the person on whom the tax is imposed by law and who paid the same even if he shifts the burden thereof to another Even if Petron passed on to Sikair the burden of the tax, the additional amount billed to Silkair for jet fuel is not a tax but part of the price which Silkair had to pay as a purchaser An excise tax is an indirect tax where the tax burden can be shifted to the customer but the tax liability remains with the manufacturer or producer The excise taxes are collected from manufacturers or producers before removal of the domestic products from the place of production Although excise taxes can be considered as taxes on production, they are really taxes on property as they are imposed on certain specified goods When Petron removes its petroleum products from its refinery in Limay, Bataan, it pays the excise taxes due on the petroleum products thus removed Petron, as manufacturer or producer, is the person liable for the payment of the excise tax as shown in the Excise Tax Returns filed with the BIR Stated otherwise, Petron is the taxpayer that is primarily, directly and legally liable for the payment of the excise taxes However, since an excise tax is an indirect tax, Petron can transfer to its customers the amount of the excise tax paid by treating it as part of the cost of the goods and tacking it on to the selling price Silkair as the purchaser and end consumer, ultimately bears the tax burden, but this does not transform petitioner’s status into a statutory taxpayer In the refund of indirect taxes, the statutory taxpayer is the proper party who can claim the refund Petitioner should invoke its tax exemption to Petron before buying the aviation jet fuel Petron, however, remains the statutory taxpayer on those excise taxes EXERCISE 17-6 In the instant case, petitioner timely filed a protest after receiving the PAN In response thereto, the BIR issued a Formal Letter of Demand with Assessment Notices Pursuant to Section 228 of the NIRC, the proper recourse of petitioner was to dispute the assessments by filing an administrative protest within 30 days from receipt thereof Petitioner, however, did not protest the final assessment notices Instead, it filed a Petition for Review with the CTA Thus, if we strictly apply the rules, the dismissal of the Petition for Review by the CTA was proper However, a careful reading of the Formal Letter of Demand with Assessment Notices leads us to agree with petitioner that the instant case is an exception to the rule on exhaustion of administrative remedies, i.e., estoppel on the part of the administrative agency concerned In this case, we find the CIR estopped from claiming that the filing of the Petition for Review was premature because petitioner failed to exhaust all administrative remedies We cannot ignore the fact that in the Formal Letter of Demand with Assessment Notices, respondent used the word “appeal” instead of “protest”, “reinvestigation”, or “reconsideration” Although there was no direct reference for petitioner to bring the matter directly to the CTA, it cannot be denied that the word “appeal” under prevailing tax laws refers to the filing of a Petition for Review with the CTA As aptly pointed out by petitioner, under Section 228 of the NIRC, the terms “protest”, “reinvestigation” and “reconsideration” refer to the administrative remedies a taxpayer may take before the CIR, while the term “appeal” refers to the remedy available to the taxpayer before the CTA Section of RA 9282, amending Section 11 of RA 1125, likewise uses the term “appeal” when referring to the action a taxpayer must take when adversely affected by a decision, ruling, or inaction of the CIR As we see it then, petitioner in appealing the Formal Letter of Demand with Assessment Notices to the CTA merely took the cue from respondent Besides, any doubt in the interpretation or use of the word “appeal” in the Formal Letter of Demand with Assessment Notices should be resolved in favor of petitioner, and not the respondent who caused the confusion To be clear, we are not disregarding the rules of procedure under Section 228 of the NIRC, as implemented by Section of BIR Revenue Regulations No 12-99 It is the Formal Letter of Demand and Assessment Notice that must be administratively protested or disputed within 30 days, and not the PAN What we are saying in this particular case is that, the Formal Letter of Demand with Assessment Notices which was not administratively protested by the petitioner can be considered a final decision of the CIR appealable to the CTA because the words used, specifically the words “final decision” and “appeal”, taken together led petitioner to believe that the Formal Letter of Demand with Assessment Notices was in fact the final decision of the CIR on the letter-protest it filed and that the available remedy was to appeal the same to the CTA EXERCISE 17 – THE first motion should be granted while the second motion should be denied Section 11 of Republic Act 9282 states that the Petition for Review shall be filed with the CTA following the procedure analogous to Rule 42 of the Revised Rules of Civil Procedure which also states that the Petition for Review of an adverse judgment or final order of the RTC must be filed with the Court of Appeals within: (1) the original 15-day period from receipt of the judgment or final order to be appealed; (2) an extended period of 15 days from the lapse of the original period; and (3) only for the most compelling reasons, another extended period not to exceed 15 days from the lapse of the first extended period Following by analogy Section 1, Rule 42 of the Revised Rules of Civil Procedure, the 30-day original period for filing a Petition for Review with the CTA under Section 11 of Republic Act No 9282, as implemented by Section 3(a), Rule of the Revised Rules of the CTA, may be extended for a period of 15 days No further extension shall be allowed thereafter, except only for the most compelling reasons, in which case the extended period shall not exceed 15 days Even the CTA en banc, in its decision dated January 18, 2008, recognizes that the 30day period within which to file the Petition for Review with the CTA may, indeed, be extended EXERCISE 17-8 The advice of tax deficiency, given by the CIR to an employee of Enron, as well as the preliminary letter were not valid substitutes for the mandatory notice in writing of the legal and factual bases of the assessment These steps were mere perfunctory discharges of the CIR’s duties in correctly assessing a taxpayer The requirement for issuing a preliminary or final notice, as the case may be, informing a taxpayer of the existence of a deficiency tax assessment is markedly different from the requirement of what notice must contain Just because the CIR issued an advice, a preliminary letter during the pre-assessment stage and a final notice, in the order required by law, does not necessarily mean that Enron was informed of the law and facts on which the deficiency tax assessment was made The legal and factual bases of the assessment must be stated in the formal letter of demand and assessment notice Thus, such cannot be presumed Otherwise, the express provisions of Article 228 of the NIRC and RR 12-99 would be rendered nugatory The alleged “factual bases” in the advice, preliminary letter and “audit working papers” did not suffice There was no going around the mandate of the law that the legal and factual bases of the assessment be stated in writing in the formal letter of demand accompanying the assessment notice Such requirement is in keeping with the constitutional principle that no person shall be deprived of property without due process In view of the absence of a fair opportunity for Enron to be informed of the legal and factual bases of the assessment against it, the assessment in question was void Verily, taxes are the lifeblood of the government and so should be collected without unnecessary hindrance However, such collection should be made in accordance with law as any arbitrariness will negate the very reason for the government itself EXERCISE 17-9 NO It cannot be said that FEPCI failed to submit relevant supporting documents that would render the assessment final because when FEPCI submitted its protest, FEPCI attached the GIS and Balance Sheet Further, CIR cannot insist on the submission of proof of DST payment because such document does not exist as respondent claims that it is not liable to pay, and has not paid, the DST on the deposit on subscription The term “relevant supporting documents” should be understood as those documents necessary to support the legal basis in disputing a tax assessment as determined by the taxpayer The BIR can only inform the taxpayer to submit additional documents The BIR cannot demand what type of supporting documents should be submitted Otherwise, a taxpayer will be at the mercy of the BIR, which may require the production of documents that a taxpayer cannot submit FEPCI, having submitted its supporting documents on the same day the protest was filed, had until July 31, 2002 to wait for petitioner reply to its protest On August 28, 2002 or within 30 days after the lapse of the 180-day period counted from the filing of the protest as the supporting documents were simultaneously filed, FEPCI filed a petition before the Court of Tax Appeals FEPCI has complied with the requisites in disputing an assessment pursuant to Sec 228 of the Tax Code Hence, the tax assessment cannot be considered as final, executory and demandable EXERCISE 18 – 1 No The appellant is given only 30 days from receipt of the decision of the Commissioner of Internal Revenue to file an appeal with the Court of Tax Appeals Considering that it took Lani Perez three (3) years to appeal with the appellate court, she is already estopped from filing said appeal Furthermore, the appeal was filed with the Court of Tax Appeals after more than two (2) years from payment He should immediately file a Petition for Review with the Court of Tax Appeals, notwithstanding the failure of the Commissioner of Internal Revenue to render a decision Otherwise, Mr Santos’ right to seek recourse to court action would prescribe as he has only two (2) years from the payment of the tax within which to file the petition No A decision of the of the Commissioner of Internal is appellable to the Court of Tax Appeals and not to the Court of Appeals This jurisdiction is an exclusive appellate jurisdiction of the CTA A motion for reconsideration filed July 20, 2007 is ineffective because the right of Pareng Budong to file said motion is already barred by prescription No A decision of a City Board of Assessment Appeals is appellable to the Central Board of Assessment Appeals whose decision is also appealable to the Court of Tax Appeals Hence, the appeal was not property made Yes The Court of Tax Appeals has exclusive appellate jurisdiction over decisions of the Commissioner of Customs involving forfeitures The decision of the Court of Tax Appeals is not appealable to the Court of Appeals because they are of the same level or co-equal with each other Both justices should agree on the issue because an affirmative vote of two members of a decision is necessary for the rendition of a decision EXERCISE 18 – C D C C C C C C C 10 A ... 2009 March, 2009 (last day to act on the documents) Total (expiration date) March, 2009 April, 2009 (last day to appeal to CTA) Total (expiration date) 31 31 28 29  180 28  30 EXERCISE 17-3:... her request to appeal to the Court of tax Appeals The decision was received on October 20, 2007, therefore, she has until Nov 19, 2007 to appeal the decision of the Commissioner to the Court... D - April 10, 2 016 11 D 12 C 13 C 14 C 15 B 16 C 17 C 18 Answer: C Deficiency income tax Add: Interest (20,000 x 20%) Amount payable per assessment notice 19 C 20 Answer: E October, 2008 November,