PAGCOR v. CIR

Doctrine: A whole or partial denial by the CIR's authorized representative may be appealed to the CIR or the CTA. A whole or partial denial by the CIR may be appealed to the CTA. The CIR or the CIR's authorized representative's failure to act may be appealed to the CTA. There is no mention of an appeal to the CIR from the failure to act by the CIR's authorized representative.

Facts: [PAGCOR] provides a car plan program to its qualified officers under which 60% of the car plan availment is shouldered by PAGCOR and the remaining 40% for the account of the officer, payable in 5 years.

On October 10, 2007, [PAGCOR] received a Post Reporting Notice dated September 28, 2007 from BIR RD Misajon for an informal conference to discuss the result of its investigation on [PAGCOR's] internal revenue taxes in 2004. The Post Reporting Notice shows that [PAGCOR] has deficiencies on VAT, WTV, EWT, and FBT.

Subsequently, the BIR abandoned the claim for deficiency assessments on VAT, WTV and EWT in the Letter to [PAGCOR] dated November 23, 2007 in view of the principles laid down in CIR vs. Acesite Hotel Corporation exempting [PAGCOR] and its contractors from VAT. However, the assessment on deficiency FBT subsists and remains due to date.

On January 17, 2008, [PAGCOR] received a FAN dated January 14, 2008, with demand for payment of deficiency FBT for taxable year 2004 in the amount of P48,589,507.65.

On January 24, 2008, [PAGCOR] filed a protest to the FAN addressed to RD Misajon.

On August 14, 2008, [PAGCOR] elevated its protest to respondent CIR in a Letter dated August 13, 2008, there being no action taken thereon as of that date.

In a Letter dated September 23, 2008 received on September 25, 2008, [PAGCOR] was informed that the Legal Division of Revenue Region No. 6 sustained Revenue Officer Ma. Elena Llantada on the imposition of FBT against it based on the provisions of RR No. 3-98 and that its protest was forwarded to the Assessment Division for further action.

On November 19, 2008, [PAGCOR] received a letter from the OIC-Regional Director, Revenue Region No. 6 (Manila), stating that its letter protest was referred to Revenue District Office No. 33 for appropriate action.

On March 11, 2009, [PAGCOR] filed the instant Petition for Review alleging respondents' inaction in its protest on the disputed deficiency FBT.

CTA 1st Division ruled in favor of respondents. The CTA 1st Division ruled that RD Misajon's issuance of the FAN was a valid delegation of authority, and PAGCOR's administrative protest was validly and seasonably filed on 24 January 2008. The petition for review filed with the CTA 1st Division, however, was filed out of time. In accordance with Section 228 of the Tax Code, respondent CIR or her duly authorized representative had 180 days or until July 22, 2008 to act on the protest. After the expiration of the 180-day period without action on the protest, as in the instant case, the taxpayer, specifically [PAGCOR], had 30 days or until August 21, 2008 to assail the non-determination of its protest. The failure of [PAGCOR] to appeal from an assessment on time rendered the same final, executory and demandable. Consequently, [PAGCOR] is already precluded from disputing the correctness of the assessment. The failure to comply with the 30-day statutory period would bar the appeal and deprive the CTA of its jurisdiction to entertain and determine the correctness of the assessment. Since the car plan provided by [PAGCOR] partakes of the nature of a personal expense attributable to its employees, it shall be treated as taxable fringe benefit of its employees, whether or not the same is duly receipted in the name of the employer. Therefore, [PAGCOR's] obligation as an agent of the government to withhold and remit the final tax on the fringe benefit received by its employees is personal and direct. The government's cause of action against [PAGCOR] is not for the collection of income tax, for which [PAGCOR] is exempted, but for the enforcement of the withholding provision of the 1997 NIRC, compliance of which is imposed on [PAGCOR] as, the withholding agent, and not upon its employees. Consequently, [PAGCOR's] non-compliance with said obligation to withhold makes it personally liable for the tax arising from the breach of its legal duty.

PAGCOR filed an MR. PAGCOR filed a petition for review with urgent motion to suspend tax collection with the CTA En Banc. 

The CTA En Banc dismissed PAGCOR's petition for review and affirmed the CTA 1st Division's Decision and Resolution. The CTA En Banc ruled that the protest filed before the RD is a valid protest; hence, it was superfluous for PAGCOR to raise the protest before the CIR. When PAGCOR filed its administrative protest on 24 January 2008, the CIR or her duly authorized representative had 180 days or until 22 July 2008 to act on the protest. After the expiration of the 180 days, PAGCOR had 30 days or until 21 August 2008 to assail before the CTA the non-determination of its protest.

Moreover, Section 223 of the NIRC merely suspends the period within which the BIR can make assessments on a certain taxpayer. A taxpayer's request for reinvestigation only happens upon the BIR's issuance of an assessment within the three-year prescriptive period. The reinvestigation of the assessment suspends the prescriptive period for either a revised assessment or a retained assessment.

PAGCOR filed an MR but it was denied.

Issue: Whether or not CTA En Banc gravely erred in affirming CTA 1st Division’s ruling

Held: No. The CTA En Banc and 1st Division were correct in dismissing PAGCOR's petition. However the dismissal should be on the ground of premature, rather than late, filing. 

Section 3.1.5 of RR No. 12-99, implementing Section 228 of the Tax Code gives a protesting taxpayer like PAGCOR only three options: 

1. If the protest is wholly or partially denied by the CIR or his authorized representative, then the taxpayer may appeal to the CTA within 30 days from receipt of the whole or partial denial of the protest.
2. If the protest is wholly or partially denied by the CIR's authorized representative, then the taxpayer may appeal to the CIR within 30 days from receipt of the whole or partial denial of the protest.
3. If the CIR or his authorized representative failed to act upon the protest within 180 days from submission of the required supporting documents, then the taxpayer may appeal to the CTA within 30 days from the lapse of the 180-day period.

To further clarify the three options: A whole or partial denial by the CIR's authorized representative may be appealed to the CIR or the CTA. A whole or partial denial by the CIR may be appealed to the CTA. The CIR or the CIR's authorized representative's failure to act may be appealed to the CTA. There is no mention of an appeal to the CIR from the failure to act by the CIR's authorized representative.

PAGCOR did not wait for the RD or the CIR's decision on its protest. PAGCOR made separate and successive filings before the RD and the CIR before it filed its petition with the CTA.

PAGCOR's protest to the RD on 24 January 2008 was filed within the 30-day period prescribed in Section 228 and Section 3.1.5. The RD did not release any decision on PAGCOR's protest; thus, PAGCOR was unable to make use of the first option as described above to justify an appeal to the CTA. The effect of the lack of decision from the RD is the same, whether we consider PAGCOR's April 2008 submission of documents or not.

Under the third option described above, even if we grant leeway to PAGCOR and consider its unspecified April 2008 submission, PAGCOR still should have waited for the RD's decision until 27 October 2008, or 180 days from 30 April 2008. PAGCOR then had 30 days from 27 October 2008, or until 26 November 2008, to file its petition before the CTA. PAGCOR, however, did not make use of the third option. PAGCOR did not file a petition before the CTA on or before 26 November 2008.

Under the second option, PAGCOR ought to have waited for the RD's whole or partial denial of its protest before it filed an appeal before the CIR. PAGCOR rendered the second option moot when it formulated its own rule and chose to ignore the clear text of Section 3.1.5. PAGCOR "elevated an appeal" to the CIR on 13 August 2008 without any decision from the RD, then filed a petition before the CTA on 11 March 2009. A textual reading of Section 228 and Section 3 .1.5 will readily show that neither Section 228 nor Section 3 .1.5 provides for the remedy of an appeal to the CIR in case of the RD's failure to act. The third option states that the remedy for failure to act by the CIR or his authorized representative is to file an appeal to the CTA within 30 days after the lapse of 180 days from the submission of the required supporting documents. PAGCOR clearly failed to do this.

When PAGCOR filed its petition before the CTA, it is clear that PAGCOR failed to make use of any of the three options described above. A petition before the CTA may only be made after a whole or partial denial of the protest by the CIR or the CIR's authorized representative. When PAGCOR filed its petition before the CTA on 11 March 2009, there was still no denial of PAGCOR's protest by either the RD or the CIR. Therefore, under the first option, PAGCOR's petition before the CTA had no cause of action because it was prematurely filed. The CIR made an unequivocal denial of PAGCOR's protest only on 18 July 2011, when the CIR sought to collect from PAGCOR the amount of P46,589,507.65. The CIR's denial further puts PAGCOR in a bind, because it can no longer amend its petition before the CTA.

PAGCOR has clearly failed to comply with the requisites in disputing an assessment as provided by Section 228 and Section 3.1.5. Indeed, PAGCOR's lapses in procedure have made the BIR's assessment final, executory and demandable, thus obviating the need to further discuss the issue of the propriety of imposition of fringe benefits tax.