On March 27, 2012, the Bureau of Internal Revenue (BIR) issued a notice of assessment against Blue Water Industries Inc. (BWI), a domestic corporation, informing the latter of its alleged deficiency corporate income tax for the year 2009. On April 20, 2012, BWI filed a letter protest before the BIR contesting said assessment and demanding that the same be cancelled or set aside.
However, on May 19, 2013, that is, after more than a year from the filing of the letter protest, the BIR informed BWI that the latter’s letter protest was denied on the ground that the assessment had already become final, executory and demandable. The BIR reasoned that its failure to decide the case within 180 days from filing of the letter protest should have prompted BWI to seek recourse before the Court of Tax Appeals (CTA) by filing a petition for review within thirty (30) days after the expiration of the 180-day period as mandated by the provisions of the last paragraph of Section 228 of the National Internal Revenue Code (NIRC). Accordingly, BWI’s failure to file a petition for review before the CTA rendered the assessment final, executory and demandable. Is the contention of the BIR correct? Explain. (5%)
Suggested answer only. Not an official answer and not legal advice.
No, the contention of the BIR is not correct.
Under Sec. 228, NIRC and Lascona Land v. CIR, in case of CIR inaction on a disputed assessment within 180 days, the taxpayer has the option to either appeal the inaction to the CTA within 30 days after the 180-day period expires, or await the CIR's final decision and appeal it within 30 days from receipt.
Here, BWI validly exercised its option to await the BIR's decision on its letter protest rather than appealing the 180-day inaction. Its failure to file a petition for review upon the lapse of 180 days did not render the assessment final, executory, or demandable.
Thus, the BIR erred in declaring the assessment final and executory, as BWI rightfully opted to await the final decision.
This is not an official scoring system and carries no weight with the Supreme Court or any bar review provider. It measures how much of the suggested answer's wording your response covers, not whether your reasoning is correct. For practice only.
Quick check
Under Section 228 of the NIRC, what options does a taxpayer have if the CIR fails to decide a protest within 180 days?
Section 228 grants the taxpayer the option to either appeal the 180-day inaction or await the CIR's final decision.
Which landmark case established that failure to appeal the CIR's 180-day inaction does not render the assessment final?
Lascona Land held that awaiting the CIR's decision beyond the 180-day period does not make the assessment final.
Within how many days from receipt of the CIR's final decision on a disputed assessment must the taxpayer appeal to the CTA?
The taxpayer has thirty days from receipt of the CIR's final decision to file a petition for review with the CTA.
What is the legal effect if the CIR fails to act on a protest within 180 days from submission of supporting documents?
Inaction within 180 days gives the taxpayer the option to appeal immediately or await a final decision.
If a taxpayer chooses to await the CIR's final decision after 180 days of inaction, when does the CTA appeal period begin?
If the taxpayer chooses to wait, the 30-day period to appeal to the CTA runs from receipt of the final decision.
Learn more about these topics
1. Disputed Assessment Options
Under Section 228 of the National Internal Revenue Code, if the Commissioner of Internal Revenue fails to act on a disputed tax assessment within one hundred eighty days from the submission of supporting documents, the taxpayer is granted two mutually exclusive options. The taxpayer may either appeal the administrative inaction to the Court of Tax Appeals within thirty days from the lapse of the one hundred eighty-day period, or await the final decision of the Commissioner and appeal that decision within thirty days from receipt.
2. Lascona Land Doctrine
In Lascona Land, Incorporated versus Commissioner of Internal Revenue, the Supreme Court clarified that a taxpayer's failure to appeal the Commissioner's one hundred eighty-day inaction to the Court of Tax Appeals does not render the tax assessment final, executory, or demandable. The administrative remedy to await the final decision of the Commissioner remains available, and the assessment only becomes final if the taxpayer fails to appeal the actual decision within thirty days from receipt.
3. Inaction Appeal Period
The option to appeal administrative inaction within thirty days after the lapse of the one hundred eighty-day period is merely permissive and intended for the taxpayer's benefit. Inaction by the tax authority does not constitute a denial of the protest by operation of law. Therefore, forcing the taxpayer to appeal immediately upon the expiration of the one hundred eighty-day period would divest the Commissioner of the statutory jurisdiction to decide protests on disputed assessments.