FACTS:

The Court of Tax Appeals (CTA) En Banc affirmed the decision of the CTA in Division in canceling and setting aside the Formal Letter of Demand and Assessment Notices issued by the petitioner against the respondent for deficiency income tax, final income tax – Foreign Currency Deposit Unit (FCDU), and expanded withholding tax (EWT) in the aggregate amount of P33,076,944.18. The CTA found that the assessment was issued beyond the reglementary period and that the waivers of the statute of limitations executed by the parties did not comply with the requirements set forth in Revenue Memorandum Order (RMO) No. 20-90. The respondent protested the assessment and filed a Petition for Review when no decision was rendered on its protest. The respondent also filed a Supplemental Petition for Review seeking credit for payments made through the BIR’s Electronic Filing and Payment System (eFPS). The CTA in Division granted the respondent's petition and admitted the supplemental petition. The case was then submitted for decision after the parties filed their memoranda. The CTA in Division cancelled the assessment based on prescription and ruled that the waivers were invalid for failing to comply with the requirements of RMO No. 20-90. The CTA En Banc affirmed this decision and denied the petitioner's Motion for Reconsideration. Dissatisfied, the petitioner filed a Petition for Review on Certiorari before the Supreme Court arguing that the respondent is estopped from questioning the validity of the waivers due to partial payments made on the deficiency taxes. The primary issue before the Supreme Court is whether the assessment has prescribed, and subsequently, whether the respondent is estopped from questioning the validity of the waivers.

ISSUES:

1. Whether the waiver of the statute of limitations is a renunciation of the right to invoke the defense of prescription.

2. Whether the waiver executed by the taxpayer and the Commissioner of Internal Revenue (CIR) complied with the prescribed form and requirements.

3. Whether the waivers of the Statute of Limitations signed by Assistant Commissioners instead of the Commissioner of Internal Revenue are valid.

4. Whether the waivers indicated the date of acceptance by the Assistant Commissioners.

5. Whether the waivers specified the kind and amount of tax due.

6. Whether the language used in the waivers complied with the prescribed requirements of RMO No. 20-90.

7. Whether the partial payments made by the respondent waived the defense of prescription.

8. Whether the payment of the deficiency WTC and FWT assessments extinguished the taxpayer's obligation to pay the subject taxes.

9. Whether the waivers of the statute of limitations executed by the taxpayer were valid.

10. Whether the assessment notices issued beyond the three-year prescriptive period are void.

RULING:

1. The waiver of the statute of limitations is not automatically a renunciation of the right to invoke the defense of prescription. It is a bilateral agreement between the taxpayer and the BIR to extend the period for assessment and collection of taxes to a specific date. The waiver only becomes effective if it is validly executed by both parties.

2. The waiver executed by the taxpayer and the CIR must comply with the prescribed form and requirements. It must be in the proper form, signed by the taxpayer or his authorized representative, duly notarized, and accepted by the BIR. The date of execution by the taxpayer and the date of acceptance by the BIR should be before the expiration of the period of prescription or before the lapse of the period agreed upon in case a subsequent agreement is executed.

3. The waivers of the Statute of Limitations signed by Assistant Commissioners instead of the Commissioner of Internal Revenue are defective and did not validly extend the original three-year prescriptive period.

4. The waivers did not indicate the date of acceptance by the Assistant Commissioners.

5. The waivers did not specify the kind and amount of tax due.

6. The language used in the waivers did not comply with the prescribed requirements of RMO No. 20-90.

7. The partial payments made by the respondent did not waive the defense of prescription.

8. Yes. The payment of the deficiency WTC and FWT assessments effectively extinguished the taxpayer's obligation to pay the subject taxes.

9. No. The waivers of the statute of limitations executed by the taxpayer were void due to the flaws found in them. The supposed suspensions of the prescriptive periods were not legally effected.

10. Yes. The assessment notices issued beyond the three-year prescriptive period are void.

PRINCIPLES:

• The period for assessing and collecting internal revenue taxes is limited to three years, unless otherwise provided by law.

• The waiver of the statute of limitations is a bilateral agreement between the taxpayer and the BIR, and must be validly executed by both parties.

• The waiver must comply with the prescribed form and requirements, including being signed by the taxpayer or his authorized representative, duly notarized, and accepted by the BIR.

• The exceptions to the law on prescription should be strictly construed.

• The waivers of the Statute of Limitations must strictly comply with the requirements set forth in RMO No. 20-90 in order to be considered valid and effective.

• Failure to comply with any of the requisites of the waivers renders them defective and ineffectual.

• A taxpayer's payment of certain deficiency taxes does not waive the defense of prescription as to remaining tax deficiencies, unless there is clear indication of intent to waive the defense of prescription.

• Obligations are extinguished by payment or performance.

• The execution of a Waiver of Statute of Limitations must comply with guidelines and procedural requirements to be valid.

• The law on prescription of tax assessments and collections is beneficial to both the government and its citizens, providing protection against unscrupulous tax agents and giving taxpayers a feeling of security.