As the late US President John F. Kennedy once said: “There are risks and costs to action. But they are far less than the long range of risk of comfortable inaction.”
This was proven true in the case of Light Rail Transit Authority v. the Bureau of Internal Revenue which was decided by the Supreme Court on 20 Jun 2022. The case originated from a deficiency tax assessment issued by the BIR against the LRT in December of 2008 for P3,521,915.61. The LRT protested the assessment which was routinely denied. Accordingly, and through its regional director, the BIR issued a final decision on the disputed assessment that the LRT received on 26 April 2011. The LRT appealed this to the Commissioner on 6 May 2011.
Meanwhile, a reinvestigation of the deficiency assessment ensued. This ended with a declaration by the revenue district officer that the final decision on the disputed assessment has become final and unappealable. The LRT received notice of this decision on 17 June 2014.
In a separate letter dated 30 June 2014, the regional director, acting on the LRT’s appeal with the Commissioner, again declared the case final, executory, and demandable. The LRT received notice of this second decision on 12 August 2014.
On 11 September 2014, the Light Rail Transit filed a petition for review before the Court of Tax Appeals. In its 2 February 2015 Resolution, the Court of Tax Appeals Third Division agreed with the Bureau of Internal Revenue and granted its Motion to Dismiss for lack of jurisdiction. According to the Court of Tax Appeals Third Division, the Light Rail Transit did not protest the formal assessment notice, rendering the assessment final and unappealable. Consequently, the Court of Tax Appeals had no jurisdiction over the cognizance of the Petition for Review
The Supreme Court overturned the decision of the Court of Tax Appeals as follows.
“In the case of a decision on the protest, the appeal must be filed 30 days from receipt of the adverse decision. On the other hand, in the case of inaction on the protest, the taxpayer may either: 1. File a petition for review with the Court of Tax Appeals within 30 days after the expiration of the 180-day period fixed by law for the CIR to act on the disputed assessment; or 2. Await the final decision of the CIR on the disputed assessment and appeal such final decision to the Court of Tax Appeals within 30 days after receipt of a copy of such decision. This is true even if the 180-day period for the Commissioner to act on the disputed assessment had already expired.”
Here, the Supreme Court declared that there was inaction by the BIR on LRT’s appeal of the final decision on a disputed assessment. Accordingly, the Supreme Court found that LRT genuinely chose to await the CIR’s final decision on its appeal.
As further explained, “Contrary to the ruling of the Court of Tax Appeals En Banc, therefore, the Final Decision on the disputed assessment cannot be considered as the decision appealable to the Court of Tax Appeals… where the 30-day period was reckoned. The Court explained that the CTA En Banc’s interpretation will render nugatory the remedy of appeal to the Office of the Commissioner of Internal Revenue of the denial of protest issued by his or her duly authorized representative, a remedy which was properly and timely availed of by petitioner.”
The Court further expounded that Subsection 3.1.5 of Revenue Regulation 12-99 is clear that if the protest is elevated to the respondent Commissioner of Internal Revenue, “the latter’s decision shall not be considered final, executory and demandable, in which case, the protest shall be decided by the Commissioner.”
To summarize, the Supreme Court ruled in this wise:
“In cases of inaction by the Commissioner of Internal Revenue on appeals of denial of protest, the taxpayer has the option to await the Commissioner’s decision on appeal before filing a petition for review before the Court of Tax Appeals. The petitioner for review can be filed notwithstanding the expiration of the 180-day period for the Commissioner to resolve the protests of assessment.”