Commissioner of Internal Revenue vs. Next Mobile, Inc.

Waiver of Prescription. — Section 203 of the 1997 NIRC mandates the BIR to assess internal revenue taxes within three years from the last day prescribed by law for the filing of the tax return or the actual date of filing of such return, whichever comes later. Hence, an assessment notice issued after the three-year prescriptive period is not valid and effective. Exceptions to this rule are provided under Section 222 of the NIRC.

Section 222(b) of the NIRC provides that the period to assess and collect taxes may only be extended upon a written agreement between the CIR and the taxpayer executed before the expiration of the three-year period. This written agreement between the Commissioner and the taxpayer is the so-called Waiver of the Statute of Limitations. In the execution of said waiver, the following procedures should be strictly followed:

(1) it must specify a definite agreed date between the BIR and petitioner within which the former may assess and collect revenue taxes; (2) signed by the Commissioner; (3) signed by the taxpayer himself or his duly authorized representative, in the case of a corporation, the waiver must be signed by any of its responsible officials; (4) date of such acceptance by the Bureau should be indicated; (5) both the date of execution by the taxpayer and date of acceptance by the Bureau 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; and (6) taxpayer and office accepting the waiver must be furnished a copy of the waiver.

While the Supreme Court reiterated that a waiver must strictly comply with the requirements prescribed by the regulations, it qualified and held that a taxpayer cannot impugn the validity of the waiver on the basis of the defects he himself has caused after benefiting from it, as he will be deemed estopped by his bad faith. Despite the waiver’s non-compliance with the requirements in the regulations, the Supreme Court ruled in favor of the BIR and treated the waiver as valid and binding upon the taxpayer since the defect was attributable to the latter’s deliberate acts.

There is no hard-and-fast rule on the issuance of waivers, which is why taxpayers need to take all factors into consideration. While executing a waiver may allow more time for a taxpayer to gather and submit relevant documents before an assessment is finalized, it also prolongs the tax audit taking a toll on the taxpayer’s time and resources, not to mention the continuous running of the interest penalty should the assessment be found valid.