For people who know each other well, non-verbal communication may transcend the limits of words. One can choose to be silent, and still be understood. This, however, may not hold true for all occasions. Sometimes, we need to speak up in order to be heard and understood.
This principle resonates in a case dated Feb. 4, 2015 in which the Supreme Court (SC) favored the taxpayer who invoked the defense of prescription, notwithstanding that such defense was never raised in the protest filed before the Bureau of Internal Revenue (BIR) nor on appeal with the Court of Tax Appeals (CTA).
Under the Tax Code, after a tax return has been filed with the BIR, the Commissioner of Internal Revenue or his duly authorized representative may authorize the examination of any taxpayer’s records and issue an assessment for the correct amount of tax that must be paid. While this authority of the BIR Commissioner seems to be a powerful tool for collecting taxes, such authority can be restricted by a more compelling defense known as prescription which relates to the statute of limitations.
To revisit the concept, the statute of limitations pertains to a period set by the Tax Code within which the BIR can assess the internal revenue taxes of a taxpayer. The standard period is set at three years and is counted from the time the tax return is filed with the BIR. In cases of fraud, a ten-year period will apply counted from the discovery of the falsity, fraud or omission in the returns.
When faced with a tax investigation, taxpayers are given an opportunity to defend themselves through formal communication with the BIR, in accordance with the rules and procedures on tax assessments. Aside from disputing the assessment based on the merits of the case, taxpayers are also given the liberty to raise the defense of prescription in their protest, if applicable.
There are two stages for seeking relief from BIR assessments. First is at the administrative or BIR level, and second is at the court level. If the taxpayer is unable to resolve the assessment issues after exhausting all administrative remedies, he may seek judicial remedy by filing an appeal with the CTA within the period prescribed under the regulations.
When filing an appeal with the CTA, it is a well established rule that the pleadings should contain the complete facts and issues involved in the case, as well as the reasons or defenses relied upon in challenging the assessment. Whenever a taxpayer decides to elevate the assessment case before the CTA (in the event of denial or inaction on the part of the BIR), all arguments and defenses, both factual and legal, should be presented clearly. Defenses not raised would be deemed waived and thus, will not be considered by the court.
Based on earlier mentioned decision of the high court, however, there are exceptions to this rule. One such exception is if it appears from the pleadings or pieces of evidence on record that the assessment is barred by prescription or the statute of limitations.
In that case, the SC ruled that, notwithstanding the taxpayer’s failure to raise the defense of prescription at the administrative level and at the CTA, the BIR’s assessment was still considered as time-barred based on the evidence on record. Hence, the Court was constrained to dismiss the assessment even if the taxpayer did not raise prescription as a defense at the first instance.
The SC referred to an earlier case decided back in 2010 where it declared that it is imbued with sufficient discretion to review matters, not otherwise assigned as errors on appeal, if it finds that their consideration is necessary to arrive at a complete and just resolution of the case. This prerogative is wielded more so when the provisions on prescription were enacted to afford protection to the taxpayer against unreasonable investigation. Principles of equity dictate that the provisions relating to timeliness of assessments should be construed and applied liberally in favor of the taxpayer.
According to the SC, the BIR could have crushed the taxpayer’s belated defense of prescription by merely invoking the rule against setting up such defense only at the appeal stage. The BIR, however, failed to do so by being silent. The Court ruled that the BIR’s silence spoke loudly of its intent to waive its right to object to the argument of prescription. Thus, it would appear that had the BIR challenged the taxpayer’s belated defense of prescription on appeal, the Court may have had a different appreciation of the case.
WHAT CAN WE LEARN FROM THIS CASE?
While prescription can be considered even when taxpayers fail to raise it as a defense against BIR assessments, it is still best practice that such legal defenses be expressed whenever applicable. For taxpayers undergoing tax audits, all defenses should be properly raised and supported by pieces of evidence even during the initial stages of the assessment. After all, it is still better to speak if one really has something to say, than to be barred or risk being misinterpreted by one’s silence.
Iris Kristine D. Lacebal is an assistant manager at the Tax Services Department of Isla Lipana & Co., the Philippine member firm of the PwC network.
source: Businessworld
This principle resonates in a case dated Feb. 4, 2015 in which the Supreme Court (SC) favored the taxpayer who invoked the defense of prescription, notwithstanding that such defense was never raised in the protest filed before the Bureau of Internal Revenue (BIR) nor on appeal with the Court of Tax Appeals (CTA).
To revisit the concept, the statute of limitations pertains to a period set by the Tax Code within which the BIR can assess the internal revenue taxes of a taxpayer. The standard period is set at three years and is counted from the time the tax return is filed with the BIR. In cases of fraud, a ten-year period will apply counted from the discovery of the falsity, fraud or omission in the returns.
When faced with a tax investigation, taxpayers are given an opportunity to defend themselves through formal communication with the BIR, in accordance with the rules and procedures on tax assessments. Aside from disputing the assessment based on the merits of the case, taxpayers are also given the liberty to raise the defense of prescription in their protest, if applicable.
There are two stages for seeking relief from BIR assessments. First is at the administrative or BIR level, and second is at the court level. If the taxpayer is unable to resolve the assessment issues after exhausting all administrative remedies, he may seek judicial remedy by filing an appeal with the CTA within the period prescribed under the regulations.
When filing an appeal with the CTA, it is a well established rule that the pleadings should contain the complete facts and issues involved in the case, as well as the reasons or defenses relied upon in challenging the assessment. Whenever a taxpayer decides to elevate the assessment case before the CTA (in the event of denial or inaction on the part of the BIR), all arguments and defenses, both factual and legal, should be presented clearly. Defenses not raised would be deemed waived and thus, will not be considered by the court.
Based on earlier mentioned decision of the high court, however, there are exceptions to this rule. One such exception is if it appears from the pleadings or pieces of evidence on record that the assessment is barred by prescription or the statute of limitations.
In that case, the SC ruled that, notwithstanding the taxpayer’s failure to raise the defense of prescription at the administrative level and at the CTA, the BIR’s assessment was still considered as time-barred based on the evidence on record. Hence, the Court was constrained to dismiss the assessment even if the taxpayer did not raise prescription as a defense at the first instance.
The SC referred to an earlier case decided back in 2010 where it declared that it is imbued with sufficient discretion to review matters, not otherwise assigned as errors on appeal, if it finds that their consideration is necessary to arrive at a complete and just resolution of the case. This prerogative is wielded more so when the provisions on prescription were enacted to afford protection to the taxpayer against unreasonable investigation. Principles of equity dictate that the provisions relating to timeliness of assessments should be construed and applied liberally in favor of the taxpayer.
According to the SC, the BIR could have crushed the taxpayer’s belated defense of prescription by merely invoking the rule against setting up such defense only at the appeal stage. The BIR, however, failed to do so by being silent. The Court ruled that the BIR’s silence spoke loudly of its intent to waive its right to object to the argument of prescription. Thus, it would appear that had the BIR challenged the taxpayer’s belated defense of prescription on appeal, the Court may have had a different appreciation of the case.
WHAT CAN WE LEARN FROM THIS CASE?
While prescription can be considered even when taxpayers fail to raise it as a defense against BIR assessments, it is still best practice that such legal defenses be expressed whenever applicable. For taxpayers undergoing tax audits, all defenses should be properly raised and supported by pieces of evidence even during the initial stages of the assessment. After all, it is still better to speak if one really has something to say, than to be barred or risk being misinterpreted by one’s silence.
Iris Kristine D. Lacebal is an assistant manager at the Tax Services Department of Isla Lipana & Co., the Philippine member firm of the PwC network.
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