Finality of final decision on disputed assessment

Finality of final decision on disputed assessment by Mark Julius Estur

“Of all our natural resources, the first one to be exhausted may be the taxpayer”- Anonymous

The said adage reminds every taxpayer to be mindful of its rights and remedies relative to the protection of its interests against tax assessments from the government - both substantially and procedurally.

The rule that jurisdiction is conferred by law is settled.  The Court of Tax Appeals is a court of special jurisdiction and as such it can take cognizance only of such matters as are clearly within its jurisdiction.  Its jurisdiction may only be invoked in the particular instances enumerated in Section 7 of Republic Act No. 1125 as amended by Section 7 of Republic Act No. 9282. 

The Supreme Court emphasized that the requirement to file a Petition for Review with the Court of Tax Appeals within 30 days is jurisdictional and failure to comply therewith would bar the appeal and deprive the said Court of its jurisdiction to entertain and determine the correctness of the assessment.  According to a 2008 decision, such period is not merely directory but mandatory and it is beyond the power of the courts to extend the same.

Pertinent  to this discussion is Section 3.1.5 of Revenue Regulations No. 12-99, implementing Section 228 of the NIRC, as amended which provides that if the protest is denied, in whole or in part, by the Commissioner or his duly authorized representative, the taxpayer may appeal to the Court of Tax Appeals within thirty (30) days from date of receipt of the said decision, otherwise, the assessment shall become final, executory and demandable: Provided, however, that if the taxpayer elevates his protest to the Commissioner within thirty (30) days from date of receipt of the final decision of the Commissioner's duly authorized representative, the latter's decision shall not be considered final, executory and demandable, in which case, the protest shall be decided by the Commissioner.

In the case of Fishwealth Canning Corporation vs. Commissioner of Internal Revenue (G.R. No. 179343, January 21, 2010) decided by the Supreme Court, it was held that a motion for reconsideration of the denial of the administrative protest does not toll the 30-day period to appeal to the CTA.  This is in consonance with the principle on the exhaustion of administrative remedies.  The doctrine ensures an orderly procedure which favors a preliminary sifting process, particularly with respect to matters peculiarly within the competence of the administrative agency, avoidance of interference with functions of the administrative agency by withholding judicial action until the administrative process had run its course, and prevention of attempts to swamp the courts by a resort to them in the first instance. 

Under a recent proposed regulation issued relative to the Rules of Procedures on Exhaustion of Administrative Remedies on Protested Cases, it was stated that a tribunal shall be created composed of three hearing officers, to wit: the Chief-Appellate Division as Chairman, Assistant Chief-Appellate Division as Vice-Chairman and the Action Attorney to whom the case under consideration was assigned as a member. 

Under Section 2 of the proposed regulation, cases within the Tribunal’s jurisdiction include motions for reconsideration filed by taxpayers on the denial of their protest by the duly authorized representative of the Commissioner of Internal Revenue through a FDDA.

In the most recent case enunciated by the CTA, a motion for reconsideration of the denial of the administrative protest did not toll the 30-day period to appeal to the CTA because the motion was filed with the Assistant  Commissioner of Internal Revenue (ACIR).  Had it been filed with the CIR, the period to appeal to the CTA would then be reckoned from the date of receipt of the decision on the denial of the Motion for Reconsideration.

In the said case, petitioner received the Final Decision on Disputed Assessment  (FDDA) on June 10, 2002, thus, it had until July 10, 2002 to file a petition for review with the CTA in Division. 

However, instead of appealing to the Court In Division the FDDA dated May 13, 2002 denying petitioner’s protest, within the 30-day period from the date of receipt, records show that on July 9, 2002, petitioner filed a Request for Reconsideration/Reinvestigation of the FDDA with ACIR-Large Taxpayer’s Service. 

Pursuant to Section 3.1.5 of Revenue Regulation 12-99 implementing Section 228 of the NIRC, as amended, a final decision of the Commissioner’s duly authorized representative shall be considered as final, when a protest (request for reconsideration of the FDDA of the Commissioner’s authorized representative) is filed before the Commissioner, and not with the same authorized representative of the Commissioner. 

Since in the present case, petitioner filed a Request for Reconsideration of the Final Decision on Disputed Assessment dated May 13, 2002 with the ACIR Large Taxpayer’s Service and not with the Commissioner, said Final Decision on Disputed Assessment is considered as the final decision which is appealable to the CTA. 

The request for reconsideration did not toll the running of the 30-day period to appeal the Final Decision on Disputed Assessment dated May 13, 2002 to the CTA in Division, pursuant to Revenue Regulations 12-99. 

Considering that the petitioner filed a petition for review with the former first division of the CTA on August 9, 2002 or thirty (30) days beyond the 30-day reglementary period to appeal to the CTA, the FDDA dated May 13, 2001 had become final, executor and demandable.

On the other hand, under the proposed revenue regulation on Exhaustion of Administrative Remedies the timely filing of the motion for reconsideration before the Office of the Commissioner of Internal Revenue stays the execution of the FDDA of the duly authorized representative of the Commissioner.  The Office of the duly authorized representative of the Commissioner loses jurisdiction over the case.

Furthermore, if during the pendency of the motion for reconsideration, the taxpayer appeals the FDDA to the CTA, the motion for reconsideration is deemed abandoned by the taxpayer.

Based on the aforesaid jurisprudence and proposed regulation, it appears that a decision on the motion for reconsideration of the FDDA may be appealable to the CTA as long as it has been filed with the proper authorities, that is, the Commissioner of Internal Revenue or his duly authorized representative and within the 30-day reglementary period.  Otherwise, the counting of the 30-day prescriptive period shall commence from receipt of the FDDA.