CASE DIGEST : Lascona Land Co., Inc. v. Commissioner of Internal Revenue G.R. No. 171251, March 5, 2012 Third Division — Peralta, J.

 

FACTS

On March 27, 1998, the Commissioner of Internal Revenue (CIR) issued Assessment Notice No. 0000047-93-407 against Lascona Land Co., Inc. (Lascona), assessing it for alleged deficiency income tax for taxable year 1993 amounting to ₱753,266.56. Lascona filed a letter protest on April 20, 1998. The protest was eventually denied by Norberto R. Odulio, Officer-in-Charge Regional Director of BIR Revenue Region No. 8, Makati City, in a letter dated March 3, 1999.

The Regional Director stated that although the BIR agreed with the arguments raised by Lascona in its protest, the request to cancel the assessment could not be given due course because Lascona had allegedly failed to elevate the matter to the Court of Tax Appeals (CTA) within 30 days from the lapse of the 180-day period provided under Section 228 of the National Internal Revenue Code (NIRC). The Regional Director consequently considered the assessment final, executory, and demandable and advised Lascona to pay the assessed deficiency tax.

Lascona received the March 3, 1999 letter on March 12, 1999 and, on April 12, 1999, filed a petition for review before the CTA. Lascona argued that the Regional Director erred in ruling that its failure to appeal to the CTA within 30 days from the expiration of the 180-day period had caused the assessment to become final and executory.

The CTA ruled in favor of Lascona. It held that the taxpayer was not required to appeal immediately upon the expiration of the 180-day period because the CIR had not yet rendered a decision on the protest. The Court of Appeals, however, reversed the CTA and declared the assessment final, executory, and demandable. Lascona then brought the case to the Supreme Court.

ISSUE

The principal issue was whether the assessment against Lascona had already become final, executory, and demandable because Lascona did not appeal to the CTA within 30 days from the expiration of the 180-day period provided under Section 228 of the NIRC. The question involved the proper interpretation of the taxpayer's remedies when the CIR fails to act on a protest within the prescribed 180-day period.

The Court therefore had to determine the effect of the last paragraph of Section 228 of the NIRC, which provides that when a protest is denied in whole or in part, or is not acted upon within 180 days from the submission of documents, the taxpayer adversely affected may appeal to the CTA within 30 days from receipt of the decision or from the lapse of the 180-day period. The Court had to determine whether the taxpayer is required to appeal immediately upon the lapse of the 180 days even when the CIR subsequently issues a decision on the protest.

HELD

The Supreme Court GRANTED the petition of Lascona Land Co., Inc. and REVERSED and SET ASIDE the decision of the Court of Appeals. The Court REINSTATED the Decision of the Court of Tax Appeals dated January 4, 2000 and its Resolution dated March 3, 2000. The Court held that Lascona's appeal to the CTA after receipt of the CIR's decision was timely.

The Court explained that under Section 228 of the NIRC, when the CIR fails to act on a protested assessment within 180 days from the submission of the required documents, the taxpayer has two options. The taxpayer may either (1) appeal to the CTA within 30 days after the expiration of the 180-day period, or (2) await the final decision of the CIR on the disputed assessment and then appeal that decision to the CTA within 30 days from receipt thereof. The Court expressly held that these two options are mutually exclusive.

The Court further held that Lascona chose the second option. Instead of immediately appealing to the CTA after the expiration of the 180-day period, Lascona waited for the CIR's decision on its protest. When the Regional Director issued the March 3, 1999 letter denying the protest, Lascona received it on March 12, 1999 and filed its petition for review on April 12, 1999. Since the appeal was filed within 30 days from receipt of the CIR's decision, the CTA appeal was timely.

The Court also rejected the CIR's position that the assessment had automatically become final and executory upon the expiration of the 180-day period. The Court explained that the taxpayer's failure to appeal within 30 days after the lapse of the 180-day period does not by itself bar the taxpayer from waiting for the CIR's decision and subsequently appealing that decision within 30 days from receipt. Accordingly, the Supreme Court ruled in favor of Lascona and reinstated the CTA's decision and resolution.