G.R. No. 220835 - COMMISSIONER OF INTERNAL REVENUE, VS. SYSTEMS TECHNOLOGY INSTITUTE, INC..DECISION - Supreme Court E-Library

Ruling

WHEREFORE , premises considered, the instant Petition for Review is hereby GRANTED . Accordingly, the assessments against petitioner for deficiency income tax, deficiency expanded withholding tax, and deficiency value-added tax for fiscal year ending March 31, 2003 are hereby CANCELLED and SET ASIDE on the ground of prescription. [16] The CTA Division found the waivers executed by STI defective for failing to strictly comply with the requirements provided by Revenue Memorandum Order (RMO) No. 20-90 issued on April 4, 1990 and Revenue Delegation Authority Order (RDAO) No. 05-01 issued on August 2, 2001. Consequently, the periods for the CIR to assess or collect internal revenue taxes were never extended; and the subject assessment for deficiency income tax, VAT and EWT against STI, which the CIR issued beyond the three-year prescriptive period provided by law, was already barred by prescription. [17] On May 9, 2013, the CIR filed a motion for reconsideration, but this was denied by the CTA Division in its Resolution dated July 17, 2013. [18] Undaunted, the CIR appealed to the CTA En Banc . [19] In the assailed Decision, [20] the CTA En Banc denied the CIR's petition for lack of merit. The CTA En Banc affirmed the Decision and Resolution of the CTA Division, reiterating that the requirements for the execution of a waiver must be strictly complied with; otherwise, the waiver will be rendered defective and the period to assess or collect taxes will not be extended. It further held that the execution of a waiver did not bar STI from questioning the validity thereof or invoking the defense of prescription. [21] On September 2, 2015, the CTA En Banc issued the assailed Resolution [22] denying the CIR's motion for reconsideration for lack of merit. Hence, the instant petition raising the following issue: WHETHER OR NOT PRESCRIPTION HAD SET IN AGAINST THE ASSESSMENTS FOR DEFICIENCY INCOME TAX, DEFICIENCY VAT AND DEFICIENCY EXPANDED WITHHOLDING TAX. [23] The CIR asserts that prescription had not set in on the subject assessments because the waivers executed by the parties are valid. [24] It also claims that STI's active participation in the administrative investigation by filing a request for reinvestigation, which resulted in a reduced assessment, amounts to estoppel that prescription can no longer be invoked. [25] To support its contention, the CIR cites the case of Rizal Commercial Banking Corporation v. Commissioner of Internal Revenue , [26] where the Court considered the taxpayer's partial payment of the revised assessment as an implied admission of the validity of the waivers. [27] For its part, STI contends that the requisites under RMO No. 20-90 are mandatory and no less than this Court has affirmed that the failure to comply therewith results in the nullity of the waiver and consequently, the assessments. [28] Tested against these requisites and settled jurisprudence, the subject waivers are defective and invalid and, thus, did not extend the per