WARRANT OF DISTRAINT AND/OR LEVY: WHEN APPEALABLE
By: Atty. Aziza Hannah Bacay on July 15,2021.
In every tax assessment, due process requires that the Bureau of Internal Revenue (BIR) properly apprise the taxpayer of the nature of the tax liability, the amount due, and the law and basis for such assessment.
To streamline due process requirements, the BIR issued Revenue Regulations (RR) 12-99 as amended by RRs 18-2013 and 7-2018, that requires the issuance of BIR notices – such as Notice of Informal Conference, Preliminary Assessment Notice, Final Assessment Notice (FAN) together with a Formal Letter of Demand (FLD) and a Final Decision on Disputed Assessment (FDDA) – to the taxpayer. Once the taxpayer receives the final decision and demands for payment, he/she can elevate the matter before the Court of Tax Appeals (CTA) within 30 days from receipt of the decision.
There are instances, however, where the BIR immediately exercises its power to pursue administrative remedies in order to enforce the collection of unsettled tax liabilities. In situations where none of the abovementioned notices have been duly received by the taxpayer, what then will be the remedy if one, for instance, receives a Warrant of Distraint and/or Levy (WDL)?
It should be pointed out that the validity of a WDL is an issue that falls under “other matters arising from the National Internal Revenue Code (NIRC)” that are within the jurisdiction of the CTA pursuant to Section 7 of Republic Act 1125 as amended (Philippine Journalists Inc. v. CIR, GR 162852, December 16, 2004). Thus, the taxpayer has 30 days from receipt of the WDL to file a petition before the CTA, provided that it has not been served any other notices by the BIR.
In the case of Barrio Fiesta Manufacturing Corp. v. Commissioner of Internal Revenue (CIR) (CTA Case No. 9880, Sept. 18, 2019), the CTA division declared that the petition filed by the taxpayer within 30 days from receipt of WDL was timely filed. This was so because the taxpayer did not receive any other notices or demand for payment from the BIR. Accordingly, the receipt of the WDL triggered the counting of the period to file a petition. The CTA division decision was further affirmed by the CTA en banc. (CTA EB Case No. 2816, June 21, 2021).
On the other hand, if the taxpayer received any other letters or notices from the BIR (aside from the WDL) that demand payment of deficiency taxes, the 30-day period to appeal will be counted from the date of receipt of such letter or notice and not the date of receipt of the WDL.
As mentioned, the petition before the CTA must be filed within 30 days from receipt of the FDDA. If none is received, the period may be counted from other letters that may be deemed as the final BIR decision.
In Yap v. Bureau of Internal Revenue (CTA EB Case No. 2272; June 15, 2021), the CTA en banc treated the Preliminary Collection Letter (PCL) as the final demand or decision appealable to the CTA. The taxpayer here protested assessment notices and submitted documents to support his position within 60 days from the request for reinvestigation. He had two options: either file a petition within 30 days from the 180-day period when the CIR may decide on the protest or await the issuance of the FDDA. The taxpayer decided to just wait for the FDDA and then, without receiving the FDDA, received a PCL and eventually a WDL.
The CTA en banc held that the reckoning point for counting the 30-day period should be from the date of receipt of the PCL, not the WDL. It explained that the tenor of the PCL was a warning to the taxpayer to settle or pay his liabilities, otherwise the BIR would proceed with administrative remedies. It thus served as the final BIR decision appealable to the CTA.
In another case, CIR v. Xylem Water Systems International Inc. CTA EB Case No. 2120, March 12, 2021, the CTA en banc held that the counting of the period to file the petition should start from the date of receipt of the WDL and not the PCL. The court explained that unlike the Yap case, the taxpayer here did not receive an FLD and as a result was not able to file a protest. Thus, the PCL cannot be considered the final decision of the CIR and cannot be used to reckon the 30-day period to file an appeal.
It is, thus, very important to carefully read and appreciate letters and notices from the BIR because once the period to appeal has lapsed, the assessment will attain finality and the taxpayer will have no other choice but to comply with the demand for payment.
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Aziza Hannah Bacay is a Junior Associate of Mata-Perez, Tamayo & Francisco (MTF Counsel). This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. If you have any question or comment, email the author at info@mtfcounsel.com or visit the MTF website at www.mtfcounsel.com