CASE DIGEST: CIR vs. HABRECHT & QUIST PHILIPPINES, INC. G.R. No. 169225. November 17, 2010

FACTS:

Habrecht informed BIR on February 15, 1993 of his change of business address. However, on November 4, 1993, Habrecht received a tracer letter or follow-up letter from BIR dated October 11, 1993 demanding for its payment of alleged deficiency income and expanded withholding taxes for he taxable year 1989. On December 3, 1993, respondent filed its protest letter to BIR which was denied by the latter only 8 years later from the date it was filed for a reason that Habrecht filed its protest beyond the reglementary period of 30 days. Habrecht filed a petition for review with the CTA but the latter denied the same holding that Habrecht only give his formal notice of change of address February 1993 and that the assessment had become final and unappealable for failure to file within relementary period. The CTA however, ordered the cancellation and withdrawal of the Assessment Notice and held that it failed to collect the assessed taxes within the prescriptive period.

CIR argued that due to the failure of Habrecht to file protest within the 30 day period, the assessment becomes final and unappealable. Hence, CTA acquires no jurisdiction over the case and the prescription is not applicable because the period was interrupted by Habrecht's filing of protest.

ISSUES:

1. Whether CTA acquires jurisdiction over the case.

2. Whether the period to collect the assessment has prescribed.

RULING:

1. Yes. Although it is true that CTA acquires no jurisdiction over cases of assessment that attains finality and becomes unappealable, the law does not limit the jurisdiction of the CTA to cases involving decisions of the CIR on matters relating to assessments or refunds. CTA has also jurisdiction or appellate jurisdiction to other matters pursuant to Section 223(c) of the NIRC. In this case, the issue of prescription falls  on that category and hence, CTA has the proper jurisdiction to address the matter.

2. Yes. The period to collect the assessment has already prescribed. The contention of CIR that the running of prescriptive period was interrupted when Habrecht filed its protest for reinvestigation is without merit. Under Section 224 of the NIRC, two requisites must concur before the period to enforce collection may be suspended:

a. that the taxpayer request for reinvestigation; and

b. that petitioner grants such request.

In order to suspend the running of prescriptive period for assessment and collection, the request for reinvestigation must be granted by the CIR. Consequently, mere filing of the protest without granting or acting on it does not operate to suspend the running of prescriptive period. 

In this case, there is no indication that CIR acted on the protest filed by Habrecht. Hence, CIR's right to collect assessed tax deficiencies are barred by prescription.