Of rights and taxes
Under our Civil Code, acts executed against the mandatory provisions of law are void, except when the law itself authorizes the validity of those acts
Published in Daily Tribune on November 18, 2021
by: Juan Romulo R. Taleon
When the government cannot be estopped by the negligence or omission of its agents, the mandatory provisions on Sections 203 and 228 of the National Internal Revenue Code (NIRC) cannot be rendered nugatory by the mere act of the Commissioner of Internal Revenue (CIR). This is what the Supreme Court elucidated in the case of Commissioner of Internal Revenue v. Unioil promulgated last 4 August 2021. Taxpayers should take note that any assessment must indicate the computation of tax liabilities with a demand for payment made within the prescribed period to be considered valid.
Section 203 of the NIRC mandates the government to assess internal revenue taxes within three years from the last day prescribed by law for the filing of the tax return or the actual date of filing of such return, whichever comes later. Therefore, any assessment notice issued after the three-year prescriptive period is neither valid nor effective. This provision, however, is subject to the following exceptions provided under Section 222 of the NIRC, to wit: a. filing of a false or fraudulent return with the intent to evade tax; b. failure to file a return; or, c. a written agreement to waive and extend the period within which to assess the taxpayer’s liability.
The CIR, in its bid to sustain the validity of the assessment it issued to Unioil in the said case, argued before the Supreme Court that Unioil’s filed returns were tainted with falsity and fraud. The Court disagreed and pointed out that bare allegation of falsity or fraud, especially when the CIR neither states nor points to any other detail establishing actual fraud, was used only by the CIR to evade the three-year prescriptive period to assess the tax.
Section 228 of the NIRC and its implementing rule and regulation, more particularly Section 3 of Revenue Regulations 12-99, mandate the contents for an assessment, which states: “The taxpayer shall be informed in writing of the law and the facts on which the assessment is made; otherwise, the assessment shall be void.”
The Court, in denying the petition filed by the CIR, explained that the abovementioned statutory requirement for the BIR to state in writing the factual and legal bases for the assessment is a substantive requirement and failure to comply therewith will render the assessment void. The Court further emphasized that to proceed heedlessly with tax collection without first establishing a valid assessment is evidently violative of the cardinal principle in an administrative investigation: That taxpayers should be able to present their case and adduce supporting evidence.
The Court made it a point to remind everyone that “[t]ax laws are civil in nature.” Under our Civil Code, acts executed against the mandatory provisions of the law are void, except when the law itself authorizes the validity of those acts. Failure to comply with Section 228 does not only render the assessment void, but also finds no validation in any provision in the Tax Code.
Finally, when rights are violated in the process of tax collection, it is no longer feasible for a country to be supported. But when rights are protected in order for taxes to be collected, any government service is worthy of applause.
