Lascona Land Co., Inc. vs Commissioner of Internal Revenue
Taxation – Failure of the CIR to Decide a Protest – Remedies of the Taxpayer
In March 1998, the Commissioner of Internal Revenue (CIR) issued a formal assessment notice (FAN) to Lascona Land Co., Inc. (LLCI) demanding the latter to pay P753k in taxes. LLCI filed a timely protest on April 20, 1998. From said date (since no supporting document was required to be submitted), the CIR has 180 days to decide on the protest. However, the CIR promulgated its decision on March 3, 1999. LLCI received a copy of the decision on March 12, 1999. On April 12, 1999, LLCI appealed the decision to the Court of Tax Appeals (CTA). The CIR moved for the dismissal of the appeal on the ground that under a revenue regulation issued by the Bureau of Internal Revenue (RR No. 12-99), if the CIR or its representative failed to act on a protest within the 180-day period the taxpayer may appeal within 30 days from the lapse of the 180-day period to the CTA otherwise, the decision shall become final and executory; that LLCI failed to appeal within the said period hence the CTA has no jurisdiction over the case appealed by LLCI.
ISSUE: Whether or not the CIR is correct.
HELD: No. The revenue regulation is invalid. Under the law (Section 228 of the National Internal Revenue Code), a taxpayer has two remedies if the CIR failed to act on his protest within the 180-day period, to wit;
1) the taxpayer adversely affected by the decision may appeal to the CTA within 30 days from receipt of the decision, or
2) may appeal to the CTA within 30 days from the lapse of the one hundred eighty (180)-day period.
Interpreting the above provision, the taxpayer has two options in case of inaction by the CIR. First is to appeal to the CTA within 30 days from the lapse of the 180 day period; or second, wait for the CIR to issue the decision and then appeal, if adverse, to the CTA within 30 days from the receipt of the decision by the taxpayer (because even if the CIR failed to decide on the case within the 180 day period, it can still decide on it and may even issue a favorable judgment to the taxpayer, hence it may be logical to wait and only appeal if the adverse decision is actually received).
In the case at bar, LLCI chose to wait for the CIR to decide on the case and it did not appeal within 30 days from the lapse of the 180-day period. LLCI received the adverse decision of the CIR on March 12, 1999. It appealed on April 12, 1999 which is still within the 30-day period to appeal to the CTA.
The revenue regulation in question is invalid because in effect, it limited the remedy provided for by the law. Section 228 of the NIRC prevails over the said revenue regulation. The said revenue regulation cannot validly take away the option of the taxpayer to continue waiting, even after the lapse of the 180 day period, for the CIR to decide on the case and just appeal, within 30 days from receipt, if the CIR’s ruling is adverse.
It must however be noted that these two remedies are mutually exclusive.