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LASCONA LAND CO. v. CIR

FACTS:

This case involves a Petition for Review on Certiorari filed by Lascona Land Co., Inc. (Lascona), seeking the reversal of the decisions made by the Court of Appeals (CA) and the Court of Tax Appeals (CTA). The issue revolves around the finality of an assessment issued by the Commissioner of Internal Revenue (CIR) against Lascona.

On March 27, 1998, the CIR issued Assessment Notice No. 0000047-93-407, informing Lascona of its supposed deficiency income tax for the year 1993. Lascona, in response, filed a letter protest against the assessment. However, the Regional Director denied Lascona's protest on March 3, 1999.

Following the denial, Lascona appealed the decision to the CTA, contending that the failure to appeal to the CTA within 30 days from the lapse of the 180-day period did not render the assessment final and executory. The CTA agreed with Lascona's argument and nullified the assessment in its Decision dated January 4, 2000.

The CIR then filed a motion for reconsideration, but it was denied on March 3, 2000. Dissatisfied with the CTA's ruling, the CIR appealed to the CA. The CA granted the CIR's appeal and declared the assessment as final, executory, and demandable.

Lascona, believing that it had the option to await the final decision of the Commissioner on the protest, filed a petition for review before the Supreme Court. The Supreme Court found merit in Lascona's petition and ruled in favor of the company.

ISSUES:

  1. Whether the assessment became final and executory due to the taxpayer's failure to appeal the inaction of the Commissioner within 30 days after the 180-day reglementary period

  2. Whether the taxpayer can file an appeal with the Court of Tax Appeals (CTA) after the lapse of the 180-day period for the Commissioner of Internal Revenue (CIR) to act on the protested assessment.

  3. Whether the taxpayer's choice to await the final decision of the CIR on the protested assessment bars the filing of a petition for review with the CTA.

RULING:

  1. No, the assessment did not become final and executory due to the taxpayer's failure to appeal the inaction of the Commissioner within 30 days after the 180-day reglementary period. The Court held that the taxpayer has two remedies in case of inaction by the Commissioner: (1) file a petition for review with the Court of Tax Appeals within 30 days after the expiration of the 180-day period; or (2) await the final decision of the Commissioner on the disputed assessments and appeal such final decision to the Court of Tax Appeals within 30 days after receipt of a copy of such decision. The Court also clarified that the assessment itself is not the decision appealable to the Court, but rather the Commissioner's decision on the protest of the taxpayer against the assessment.

  2. Yes, the taxpayer can file an appeal with the CTA after the lapse of the 180-day period for the CIR to act on the protested assessment. The Court held that when a taxpayer protests an assessment, they naturally expect the CIR to decide either positively or negatively. If the CIR fails to decide within the 180-day period, the taxpayer has the right to appeal the final decision of the CIR to the CTA within 30 days after receipt of a copy of such decision.

  3. No, the taxpayer's choice to await the final decision of the CIR on the protested assessment does not bar the filing of a petition for review with the CTA. The Court clarified that the two options available to the taxpayer, which are to file a petition for review with the CTA after the expiration of the 180-day period or to await the final decision of the CIR and appeal such decision to the CTA within 30 days after receipt, are mutually exclusive. Thus, resorting to one option does not prevent the application of the other option.

PRINCIPLES:

  • The inaction of the Commissioner of Internal Revenue on a disputed assessment within the 180-day period shall be deemed a denial, allowing the taxpayer to appeal the case to the Court of Tax Appeals (RCBC v. CIR).

  • The word "decisions" in paragraph 1, Section 7 of Republic Act No. 1125 refers to the decisions of the Commissioner of Internal Revenue on the protest of the taxpayer against the assessments, not the assessment itself (CIR v. Villa).

  • Taxpayers cannot be prejudiced by the inaction of the CIR on the protested assessment. It is imperative for taxpayers to be informed of the CIR's action so that they can take recourse to the tax court at the appropriate time.

  • Taxes should be collected without unnecessary hindrance but in accordance with law. The exercise of taxation should be reasonable and in accordance with the prescribed procedure, in order to achieve the purpose of promoting the common good.