Revenue v. Kudos Metal Corporation

DEL CASTILLO, J.:

The prescriptive period on when to assess taxes benefits both the government and the taxpayer.1 Exceptions extending the period to assess must, therefore, be strictly construed. This Petition for Review on Certiorari seeks to set aside the Decision2 dated March 30, 2007 of the Court of Tax Appeals (CTA) affirming the cancellation of the assessment notices for having been issued beyond the prescriptive period and the Resolution3 dated May 18, 2007 denying the motion for reconsideration. Factual Antecedents On April 15, 1999, respondent Kudos Metal Corporation filed its Annual Income Tax Return (ITR) for the taxable year 1998.

Pursuant to a Letter of Authority dated September 7, 1999, the Bureau of Internal Revenue (BIR) served upon respondent three Notices of Presentation of Records. Respondent failed to comply with these notices, hence, the BIR issued a Subpeona Duces Tecum dated September 21, 2006, receipt of which was acknowledged by respondent's President, Mr. Chan Ching Bio, in a letter dated October 20, 2000. A review and audit of respondent's records then ensued.

On December 10, 2001, Nelia Pasco (Pasco), respondent's accountant, executed a Waiver of the Defense of Prescription,4 which was notarized on January 22, 2002, received by the BIR Enforcement Service on January 31, 2002 and by the BIR Tax Fraud Division on February 4, 2002, and accepted by the Assistant Commissioner of the Enforcement Service, Percival T. Salazar (Salazar). This was followed by a second Waiver of Defense of Prescription5 executed by Pasco on February 18, 2003, notarized on February 19, 2003, received by the BIR Tax Fraud Division on February 28, 2003 and accepted by Assistant Commissioner Salazar. On August 25, 2003, the BIR issued a Preliminary Assessment Notice for the taxable year 1998 against the respondent.

This was followed by a Formal Letter of Demand with Assessment Notices for taxable year 1998, dated September 26, 2003 which was received by respondent on November 12, 2003. Respondent challenged the assessments by filing its "Protest on Various Tax Assessments" on December 3, 2003 and its "Legal Arguments and Documents in Support of Protests against Various Assessments"

on February 2, 2004. On June 22, 2004, the BIR rendered a final Decision6 on the matter, requesting the immediate payment of the following tax liabilities: Kind of Tax Amount Income Tax ₱ 9,693,897.85 VAT 13,962,460.90 EWT 1,712,336.76 Withholding Tax-Compensation 247,353.24 Penalties 8,000.00 Total