Application of 25% Civil Penalty to Deficiency Tax Collected After Field Investigation

October 6, 1988 BIR RULING NO. 483-88 248 (a) 000-00 483-88 M a d a m : This refers to your letter dated September 16, 1988 requesting a ruling as to whether the civil penalty equivalent to 25% of the amount due in addition to the tax required to be paid in case of failure to pay the tax within the time prescribed for its payment pursuant to Section 248(a)(3) of the Tax Code, as amended shall apply to deficiency tax collected after field investigation but before formal assessment is issued. cdtech It appears that the Revenue District Officer of Revenue District Office No. 31, Mandaluyong, Metro Manila issued a Memorandum dated September 9, 1988 to the Asst. Revenue District Officer, Group Supervisors, Revenue Enforcement Officers and others concerned pertinent portion of which reads as follows: xxx xxx xxx "Pursuant to Section 248 thereof, in addition to the tax required to be paid, the penalty equivalent to 25% of the amount due shall be imposed in case of failure to pay the tax within the time prescribed for its payment. This also applies to deficiency tax assessed after investigation ." In reply thereto, please be informed that under Section 49(b) of the Tax Code, as amended, after the return is filed, the commissioner of Internal Revenue shall examine it and assess the correct amount of the tax. The tax or deficiency income tax so discovered shall be paid upon notice and demand from the Commissioner. In case of non-payment upon said notice and demand, the civil penalty of 25% shall be imposed. This is in line with Section 248(a)(3) of the Tax Code, as amended, which provides that a civil penalty equivalent to twenty-five percent (25%) of the amount due shall be imposed in addition to the tax required to be paid in case of "failure to pay the tax within the time prescribed for its payment." In other words, the civil penalty equivalent to 25% of the amount due, in addition to the tax required to be paid, shall be imposed where a formal assessment notice has been issued therefor. Such being the case, the above instance cited in the Memorandum of the Revenue District Officer of Mandaluyong pertaining to a deficiency tax ascertained after investigation which will be paid by the taxpayer before an assessment notice is issued does not come under Section 248(a)(3) of the Tax Code. Accordingly, and since the said instance does not also come under the other cases enumerated in Section 248(a) of the Tax Code, the same is not subject to the civil penalty of 25%. Very truly yours, (SGD.) EUFRACIO D. SANTOS Deputy Commissioner