Veredium Energy Ventures, Inc. v. Commissioner of Internal Revenue

SPECIAL THIRD DIVISION [C.T.A. CASE NO. 8706. January 8, 2019.] VEREDIUM ENERGY VENTURES, INC. , petitioner , vs. COMMISSIONER OF INTERNAL REVENUE , respondent . DECISION RINGPIS-LIBAN , J p : The case involves the Petition for Review filed by Veredium Energy Ventures, Inc. on September 6, 2013, praying for the cancellation and withdrawal of the Final Decision and the Final Letter of Demand (FLD) issued by the Commissioner of Internal Revenue on July 30, 2013 and on September 21, 2012, respectively, that found it liable for deficiency taxes for taxable year 2007. THE FACTS Petitioner Veredium Energy Ventures, Inc. is a domestic corporation duly organized and existing under and by virtue of the laws of the Republic of the Philippines, with address at No. 2074 J.B. Miguel St.,Bambang, Pasig City. 1 On the other hand, respondent is the duly appointed Commissioner of the Bureau of Internal Revenue (BIR) who has the power to decide disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties imposed in relation thereto or other matters arising under the National Internal Revenue Code (NIRC) or other laws or portions thereof administered by the BIR. He holds office at the BIR National Office Building, Agham Road, Diliman, Quezon City. On December 12, 2008, petitioner received Letter of Authority (LOA) No. 2008-00010366 dated December 9, 2008 authorizing certain revenue officers to examine its books of accounts and other accounting records for all internal revenue taxes for the period covering January 1 to December 31, 2007. 2 Petitioner executed a Waiver of the Defense of Prescription Under the Statute of Limitations of the National Internal Revenue Code ("Waiver" for brevity) on September 27, 2010. 3 The said Waiver was executed to extend the assessment period until August 31, 2011. On August 17, 2011, petitioner received a Post Reporting Notice from the BIR informing it that after investigation, there has been found deficiency income tax, value-added tax (VAT),and expanded withholding tax (EWT) for taxable year 2007. 4 Petitioner then filed a Protest 5 to the Post Reporting Notice on September 9, 2011. Respondent issued a Preliminary Assessment Notice 6 (PAN) dated September 3, 2012, assessing petitioner for alleged deficiency income tax, VAT and EWT, and imposing penalties for the late filing/payment of Director's fee. Petitioner protested the PAN on September 21, 2012, raising, among others, the following defenses: (1) respondent failed to consider its Net Operating Loss Carry-Over (NOLCO);and (2) the period to assess has already prescribed. 7 Afterwards, respondent issued a Formal Letter of Demand (FLD) on September 21, 2012 and was received by petitioner on October 9, 2012. 8 On November 6, 2012, petitioner filed its Protest to the FLD. 9 Respondent then issued his Final Decision 10 on July 30, 2013, demanding payment from petitioner of the assessed deficiency taxes based on the FLD. Petitioner alleged that the Final Decision was received on August 7, 2013. As a result, petitioner filed the instant Petition for Review 11 on September 6, 2013. Petitioner also filed an Urgent Motion for Suspension of Collection of Taxes 12 on January 28, 2014. On February 14, 2014, respondent filed an Answer 13 interposing the following special and affirmative defenses: "She reiterates and re-pleads the foregoing paragraphs of this Answer as part of her Special and Affirmative Defenses; 13. The Honorable Court has no jurisdiction on the Petition. Herein Petitioner failed to establish by convincing evidence that the instant Petition for Review was filed on time. Hence, the Assessment has become final, demandable and unappealable; 14. The Honorable Court has no jurisdiction on the Petition. The assessment became final and demandable considering the fact the Petitioner failed to substantiate their claims in their protest. Thus, Petitioner failed to file a valid and binding protest with the Respondent." In the Resolution dated January 28, 2015, petitioner's Urgent Motion for Suspension of Collection of Taxes was denied by this Court there being no actual and existing urgency at the time of its filing. 14 The case was scheduled for pre-trial conference on April 14, 2015. 15 Both parties filed their respective Pre-Trial Briefs 16 on April 10, 2015. On April 27, 2015, the parties filed their Joint Stipulation of Facts and Issues. 17 Thereafter, a Pre-Trial Order 18 was issued by the Court on May 21, 2015. During trial, petitioner presented Mr. Petteri J. Makitalo, 19 petitioner's Chief Executive Officer (CEO) and Mr. Neil Zernan Q. Florita, 20 petitioner's Accountant. On September 17, 2015, petitioner filed its Formal Offer of Evidence, consisting of Exhibits "P-1" to "P-11" and "P-13" to "P-15",inclusive of sub-markings. The Court admitted all of petitioner's formally offered exhibits via Resolution 21 dated December 2, 2015. On the other hand, respondent presented Revenue Officer Rosalia Y. Mermal, who testified by way of Judicial Affidavit 22 and was presented in Court on March 7, 2016. 23 However, the Court denied the admission of respondent's exhibits for failure to comply with the period granted by the Court and for consistently delaying the case. 24 Petitioner filed its Memorandum 25 on October 7, 2016 through registered mail and received by the Court on October 20, 2016. Respondent, on the other hand, failed to file his Memorandum as per Records Verification Report 26 of the Court's Judicial Records Division dated December 28, 2017. Accordingly, the Court declared the case submitted for decision on January 12, 2018. 27 THE ISSUES The parties submitted the following issues 28 for this Court's disposition: 1. Whether or not respondent is barred by prescription to assess petitioner of its alleged tax delinquency for taxable year 2007; 2. Whether or not respondent committed errors in the computation of petitioner's income tax that resulted to tax delinquencies; and 3. Whether or not the petitioner is liable to pay the questioned deficiency income tax, value-added tax, expanded withholding tax and increments. THE RULING OF THE COURT The Court shall determine first whether it has jurisdiction to entertain the present Petition for Review. The jurisdiction of the CTA regarding internal revenue tax assessments is provided under Section 7 (a) (1) and (2) of Republic Act (RA) No. 1125, as amended by RA Nos. 9282 and 9503, which provides: "SEC. 7. Jurisdiction . The CTA shall exercise: (a) Exclusive appellate jurisdiction to review by appeal, as herein provided: (1) Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the Nati onal Internal Revenue Co de or other laws administered by the Bureau of Internal Revenue; (2) Inaction by the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the Nati onal Internal Revenue Co de or other laws administered by the Bureau of Internal Revenue, where the Nati onal Internal Revenue Co de provides a specific period for action, in which case the inaction shall be deemed a denial;" Similarly, Section 3 (a) (1) and (2) of Rule 4 of the Revised Rules of the Court of Tax Appeals states: "SEC. 3. Cases within the jurisdiction of the Court in Division . The Court in Division shall exercise: (a) Exclusive original over or appellate jurisdiction to review by appeal the following: (1) Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the Nati onal Internal Revenue Co de or other laws administered by the Bureau of Internal Revenue; (2) Inaction by the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the Nati onal Internal Revenue Co de or other laws administered by the Bureau of Internal Revenue, where the Nat ional Internal Revenue Co de or other applicable law provides a specific period for action: x x x" Section 228 of the NIRC of 1997, 29 as amended, and Section 3.1.5 of Revenue Regulations (RR) No. 12-99 provide for a 30-day period to appeal before the CTA reckoned from the receipt of the decision of the BIR Commissioner, or from the expiration of one hundred eighty (180)-day period to decide. Petitioner claims that it received the copy of the Final Decision 30 of respondent on August 7, 2013. Thus, counting 30 days from receipt, petitioner filed its Petition for Review with this Court on September 6, 2013. Upon perusal of the copy of the Final Decision offered by petitioner as evidence, the Court notes that it has no date of receipt, which would indicate when the 30-day period within which to file its Petition for Review shall be reckoned. Well-settled is the doctrine that jurisdiction over the subject matter of a case is determined by the allegations of the complaint or petition, regardless of whether the plaintiff or petitioner is entitled to the relief asserted. 31 In the instant case, petitioner, aside from the allegations stated in the petition, presented its CEO, who testified that petitioner received the Final Decision on August 7, 2013. In respondent's Answer, he admitted the existence and receipt of the Final Decision but specifically denied the date of receipt for lack of knowledge sufficient to form a belief. Thus, unless respondent has sufficient evidence to prove that the Final Decision was received by petitioner on a date earlier than August 7, 2015, then the jurisdiction as acquired by this Court upon the filing of the instant petition based on the allegations therein, shall be sustained. The Court shall now resolve the first issue submitted by the parties for resolution. Petitioner claims that the issued assessment for taxable year 2007 has already prescribed. Section 203 of the NIRC of 1997, as amended, states the period of limitation upon the assessment of taxes, to wit: "SEC. 203. Period of Limitation Upon Assessment and Collection . Except as provided in Section 222, internal revenue taxes shall be assessed within three (3) years after the last day prescribed by law for the filing of the return, and no proceeding in court without assessment for the collection of such taxes shall be begun after the expiration of such period: Provided ,That in a case where a return is filed beyond the period prescribed by law, the three (3)-year period shall be counted from the day the return was filed. For purposes of this Section, a return filed before the last day prescribed by law for the filing thereof shall be considered as filed on such last day." Based on the above-quoted provision, internal revenue taxes must be assessed by the government within three (3) years from the last day prescribed by law for the filing of the tax return or from the date of actual filing of such return, whichever comes later. Accordingly, an assessment notice issued after the said three-year prescriptive period is no longer valid and effective. 32 Petitioner filed its Amended Annual ITR 33 on June 27, 2008 for taxable year 2007. Thus, counting three years from the date of filing, respondent had until June 27, 2011 to assess petitioner for deficiency income taxes. On the other hand, Section 114 (A) of the NIRC of 1997, as amended, as implemented by Section 4.114-1 (A) of Revenue Regulations No. 16-2005, as amended, provides that Quarterly VAT Returns shall be filed within twenty-five (25) days following the close of each taxable quarter. As there is no evidence offered to prove the actual date of filing of the Quarterly VAT Returns, it shall be presumed that petitioner has filed the same on time. Applying the provision of Section 203 of the NIRC of 1997, as amended, respondent had until January 25, 2011, at the latest, within which to assess petitioner for any deficiency VAT for taxable year 2007. With respect to EWT, Section 2.58 of Revenue Regulations No. 2-98, as amended by RR No. 17-03, provides that the filing of EWT Monthly Remittance Returns should be made within ten (10) days after the end of each month, except for taxes withheld for the month of December of each year, which shall be filed on or before January 15 of the following year. Considering that the latest that respondent can assess petitioner for deficiency EWT for taxable year 2007 was on January 15, 2011, the FLD for deficiency EWT and for deficiency income tax and VAT, issued on September 21, 2012 and received by petitioner on October 9, 2012, was issued beyond the 3-year prescriptive period. However, Section 222 (b) of the NIRC of 1997, as amended, provides for an exception to the three-year prescriptive period for the assessment of deficiency internal revenue taxes under Section 203 of the NIRC of 1997, as amended, to wit: "SEC. 222. Exceptions as to Period of Limitation of Assessment and Collection of Taxes . xxx xxx xxx (b) If before the expiration of the time prescribed in Section 203 for the assessment of the tax, both the Commissioner and the taxpayer have agreed in writing to its assessment after such time, the tax may be assessed within the period agreed upon. The period so agreed upon may be extended by subsequent written agreement made before the expiration of the period previously agreed upon." Based on the foregoing, respondent's period to assess may be extended beyond three years from the date of filing of the tax returns, provided the parties would execute an agreement in writing for the said purpose. In the instant case, a Waiver was executed on September 27, 2010, extending the period to assess petitioner until August 31, 2011. 34 However, petitioner pointed out the following flaws in the Waiver: (1) the lack of authority on the part of the alleged authorized representative; (2) the absence of the date of acceptance on the part of respondent's representative; (3) the notarization was defective; and (4) the fact of receipt of petitioner was not indicated in the original copies of the Waiver. 35 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 provide for the procedure for the proper execution of a waiver, to wit: "REVENUE MEMORANDUM ORDER NO. 20-90 xxx xxx xxx Pursuant to Section 223 of the Tax Code, internal revenue taxes may be assessed or collected after the ordinary prescriptive period, if before its expiration, both the Commissioner and the taxpayer have agreed in writing to its assessment and/or collection after said period. The period so agreed upon may be extended by subsequent written agreement made before the expiration of the period previously agreed upon. 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 followed: 1. The waiver must be in the form identified hereof. This form may be reproduced by the Office concerned but there should be no deviation from such form. The phrase 'but not after _________ 19____' should be filled up. This indicates the expiry date of the period agreed upon to assess/collect the tax after the regular three-year period of prescription. The period agreed upon shall constitute the time within which to effect the assessment/collection of the tax in addition to the ordinary prescriptive period. 2. The waiver shall be 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. Soon after the waiver is signed by the taxpayer, the Commissioner of Internal Revenue or the revenue official authorized by him, as hereinafter provided, shall sign the waiver indicating that the Bureau has accepted and agreed to the waiver. The date of such acceptance by the Bureau should be indicated. 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. 3. The following revenue officials are authorized to sign the waiver. xxx xxx xxx 4. The waiver must be executed in three (3) copies, the original copy to be attached to the docket of the case, the second copy for the taxpayer and the third copy for the Office accepting the waiver. The fact of receipt by the taxpayer of his/her file copy shall be indicated in the original copy. 5. The foregoing procedures shall be strictly followed. Any revenue official found not to have complied with this Order resulting in prescription of the right to assess/collect shall be administratively dealt with." "REVENUE DELEGATION AUTHORITY ORDER NO. 05-01 xxx xxx xxx I. Revenue Officials Authorized to Sign the Waiver The following revenue officials are authorized to sign and accept the Waiver of the Defense of Prescription Under the Statute of Limitations (Annex A) prescribed in Sections 203, 222 and other related provisions of the Natio nal Internal Revenue Code of 19 97: A. For National Office cases Designated Revenue Official 1. Assistant Commissioner (ACIR),Enforcement Service For tax fraud and policy cases 2. ACIR, Large Taxpayers Service For large taxpayers cases other than those cases falling under Subsection B hereof 3. ACIR, Legal Service For cases pending verification and awaiting resolution of certain legal issues prior to prescription and for issuance/compliance of Subpoena Duces Tecum 4. ACIR, Assessment Service (AS) For cases which are pending in or subject to review or approval by the ACIR, AS 5. ACIR, Collection Service For cases pending action in the Collection Service B. For cases in the Large Taxpayers District Office (LTDO) The Chief of the LTDO shall sign and accept the waiver for cases pending investigation/action in his possession. C. For Regional cases Designated Revenue Official 1. Revenue District Officer Cases pending investigation/verification/reinvestigation in the Revenue District Offices 2. Regional Director Cases pending in the Divisions in the Regional Office, including cases pending approval by the Regional Director. In order to prevent undue delay in the execution and acceptance of the waiver, the assistant heads of the concerned offices are likewise authorized to sign the same under meritorious circumstances in the absence of the abovementioned officials. The authorized revenue official shall ensure that the waiver is duly accomplished and signed by the taxpayer or his authorized representative before affixing his signature to signify acceptance of the same. In case the authority is delegated by the taxpayer to a representative, the concerned revenue official shall see to it that such delegation is in writing and duly notarized. The 'WAIVER' should not be accepted by the concerned BIR office and official unless duly notarized." In order to be valid and binding, a Waiver of the Statute of Limitations must faithfully comply with the afore-quoted provisions. The Supreme Court made the following declarations in the case of Philippine Journalists, Inc. vs. Commissioner of Internal Revenue : 36 "A waiver of the statute of limitat ions under the NI RC, to a certain extent, is a derogation of the taxpayer's right to security against prolonged and unscrupulous investigations and must therefore be carefully and strictly construed. The waiver of the statute of limitations is not a waiver of the right to invoke the defense of prescription as erroneously held by the Court of Appeals. It is an agreement between the taxpayer and the BIR that the period to issue an assessment and collect the taxes due is extended to a date certain. The waiver does not mean that the taxpayer relinquishes the right to invoke prescription unequivocally particularly where the language of the document is equivocal. For the purpose of safeguarding taxpayers from any unreasonable examination, investigation or assessment, our tax law provides a statute of limitations in the collection of taxes. Thus, the law on prescription, being a remedial measure, should be liberally construed in order to afford such protection. As a corollary, the exceptions to the law on prescription should perforce be strictly construed." Similar to this case, the executed waivers in the case of Commissioner of Internal Revenue vs. Kudos Metal Corporation 37 (" Kudos case " for brevity) were found ineffective to extend the period to assess or collect taxes because (a) the accountant who executed the waivers had no notarized written board authority to sign the waivers in behalf of respondent corporation; (b) there was no date of acceptance indicated on the waivers; and (c) the fact of receipt by respondent corporation of its file copy was not indicated in the original copies of the waivers. The Supreme Court, in the Kudos case, did not find merit in the BIR's arguments that respondent corporation is estopped from claiming prescription since by executing the waivers, it was the one which asked for additional time to submit the required documents. The High Court added that the BIR cannot hide behind the doctrine of estoppel to cover its failure to comply with RMO No. 20-90 and RDAO No. 05-01, which the BIR itself issued. The BIR likewise failed to verify whether a notarized written authority was given by respondent corporation to its accountant, and to indicate the date of acceptance and the receipt by respondent corporation of the waivers. Having caused the defects in the waivers, the BIR must bear the consequence. It cannot shift the blame to the taxpayer. However, in the case of Commissioner of Internal Revenue vs. Next Mobile, Inc. (formerly Nextel Communications Phils., Inc.) , 38 the Supreme Court ruled that the waivers executed by the parties are valid. Similar to this case and the Kudos case , Next Mobile, Inc.'s waivers were alleged to have the following flaws: (1) they were executed without a notarized authority from the Board; (2) the dates of acceptance by the BIR were not indicated; and (3) the fact of receipt by Next Mobile, Inc. of its copy of the Second Waiver was not indicated on the face of the original Second Waiver. The High Tribunal found the parties to be both at fault because of the following reasons: "Here, respondent, through Sarmiento, executed five Waivers in favor of petitioner. However, her authority to sign these Waivers was not presented upon their submission to the BIR. In fact, later on, her authority to sign was questioned by respondent itself, the very same entity that caused her to sign such in the first place. Thus, it is clear that respondent violated RMO No. 20-90 which states that in case of a corporate taxpayer, the waiver must be signed by its responsible officials and RDAO 01-05 which requires the presentation of a written and notarized authority to the BIR. Similarly, the BIR violated its own rules and was careless in performing its functions with respect to these Waivers. It is very clear that under RDAO 05-01 it is the duty of the authorized revenue official to ensure that the waiver is duly accomplished and signed by the taxpayer or his authorized representative before affixing his signature to signify acceptance of the same. It also instructs that in case the authority is delegated by the taxpayer to a representative, the concerned revenue official shall see to it that such delegation is in writing and duly notarized .Furthermore, it mandates that the waiver should not be accepted by the concerned BIR office and official unless duly notarized . Vis-a-vis the five Waivers it received from respondent, the BIR has failed, for five times, to perform its duties in relation thereto: to verify Ms. Sarmiento's authority to execute them, demand the presentation of a notarized document evidencing the same, refuse acceptance of the Waivers when no such document was presented, affix the dates of its acceptance on each waiver, and indicate on the Second Waiver the date of respondent's receipt thereof. Both parties knew the infirmities of the Waivers yet they continued dealing with each other on the strength of these documents without bothering to rectify these infirmities. In fact, in its Letter Protest to the BIR, respondent did not even question the validity of the Waivers or call attention to their alleged defects. In this case, respondent, after deliberately executing defective waivers, raised the very same deficiencies it caused to avoid the tax liability determined by the BIR during the extended assessment period. It must be remembered that by virtue of these Waivers, respondent was given the opportunity to gather and submit documents to substantiate its claims before the CIR during investigation. It was able to postpone the payment of taxes, as well as contest and negotiate the assessment against it. Yet, after enjoying these benefits, respondent challenged the validity of the Waivers when the consequences thereof were not in its favor. In other words, respondent's act of impugning these Waivers after benefiting therefrom and allowing petitioner to rely on the same is an act of bad faith. On the other hand, the stringent requirements in RMO 20-90 and RDAO 05-01 are in place precisely because the BIR put them there. Yet, instead of strictly enforcing its provisions, the BIR defied the mandates of its very own issuances. Verily, if the BIR was truly determined to validly assess and collect taxes from respondent after the prescriptive period, it should have been prudent enough to make sure that all the requirements for the effectivity of the Waivers were followed not only by its revenue officers but also by respondent. The BIR stood to lose millions of pesos in case the Waivers were declared void, as they eventually were by the CTA, but it appears that it was too negligent to even comply with its most basic requirements. The BIR's negligence in this case is so gross that it amounts to malice and bad faith. Without doubt, the BIR knew that waivers should conform strictly to RMO 20-90 and RDAO 05-01 in order to be valid. In fact, the mandatory nature of the requirements, as ruled by this Court, has been recognized by the BIR itself in its issuances such as Revenue Memorandum Circular No. 6-2005, among others. Nevertheless, the BIR allowed respondent to submit, and it duly received, five defective Waivers when it was its duty to exact compliance with RMO 20-90 and RDAO 05-01 and follow the procedure dictated therein. It even openly admitted that it did not require respondent to present any notarized authority to sign the questioned Waivers. The BIR failed to demand respondent to follow the requirements for the validity of the Waivers when it had the duty to do so, most especially because it had the highest interest at stake. If it was serious in collecting taxes, the BIR should have meticulously complied with the foregoing orders, leaving no stone unturned. The general rule is that when a waiver does not comply with the requisites for its validity specified under RMO No. 20-90 and RDAO 01-05, it is invalid and ineffective to extend the prescriptive period to assess taxes. However, due to its peculiar circumstances, We shall treat this case as an exception to this rule and find the Waivers valid for the reasons discussed below. First ,the parties in this case are in pari delicto or 'in equal fault.' In pari delicto connotes that the two parties to a controversy are equally culpable or guilty and they shall have no action against each other. However, although the parties are in pari delicto ,the Court may interfere and grant relief at the suit of one of them, where public policy requires its intervention, even though the result may be that a benefit will be derived by one party who is in equal guilt with the other. Here, to uphold the validity of the Waivers would be consistent with the public policy embodied in the principle that taxes are the lifeblood of the government, and their prompt and certain availability is an imperious need. Taxes are the nation's lifeblood through which government agencies continue to operate and which the State discharges its functions for the welfare of its constituents. As between the parties, it would be more equitable if petitioner's lapses were allowed to pass and consequently uphold the Waivers in order to support this principle and public policy. Second ,the Court has repeatedly pronounced that parties must come to court with clean hands. Parties who do not come to court with clean hands cannot be allowed to benefit from their own wrongdoing. Following the foregoing principle, respondent should not be allowed to benefit from the flaws in its own Waivers and successfully insist on their invalidity in order to evade its responsibility to pay taxes. Third ,respondent is estopped from questioning the validity of its Waivers. While it is true that the Court has repeatedly held that the doctrine of estoppel must be sparingly applied as an exception to the statute of limitations for assessment of taxes, the Court finds that the application of the doctrine is justified in this case. Verily, the application of estoppel in this case would promote the administration of the law, prevent injustice and avert the accomplishment of a wrong and undue advantage. Respondent executed five Waivers and delivered them to petitioner, one after the other. It allowed petitioner to rely on them and did not raise any objection against their validity until petitioner assessed taxes and penalties against it. Moreover, the application of estoppel is necessary to prevent the undue injury that the government would suffer because of the cancellation of petitioner's assessment of respondent's tax liabilities. Finally ,the Court cannot tolerate this highly suspicious situation. In this case, the taxpayer, on the one hand, after voluntarily executing waivers, insisted on their invalidity by raising the very same defects it caused. On the other hand, the BIR miserably failed to exact from respondent compliance with its rules. The BIR's negligence in the performance of its duties was so gross that it amounted to malice and bad faith. Moreover, the BIR was so lax such that it seemed that it consented to the mistakes in the Waivers. Such a situation is dangerous and open to abuse by unscrupulous taxpayers who intend to escape their responsibility to pay taxes by mere expedient of hiding behind technicalities. It is true that petitioner was also at fault here because it was careless in complying with the requirements of RMO No. 20-90 and RDAO 01-05. Nevertheless, petitioner's negligence may be addressed by enforcing the provisions imposing administrative liabilities upon the officers responsible for these errors. The BIR's right to assess and collect taxes should not be jeopardized merely because of the mistakes and lapses of its officers, especially in cases like this where the taxpayer is obviously in bad faith." Notably, the defects found in waivers in the Next Mobile case are present in the Waiver in the present case. Hence, the pronouncement of the Supreme Court in the said case is applicable in the present case. As a consequence, this Court finds the Waiver to be valid. Likewise, the period to assess and collect the deficiency tax was extended up to the date indicated in the Waiver, or until August 31, 2011. Despite the extension granted by the Waiver, it is noteworthy that the FLD was issued only on September 21, 2012 and was received by petitioner on October 9, 2012. Therefore, the period to assess has already prescribed at the time the FLD was issued. Respondent's witness, Revenue Officer Rosalia Y. Mermal, testified, through her Judicial Affidavit, that a Second Waiver was executed by petitioner and respondent to extend the period of the Statute of Limitations. 39 However, considering that respondent failed to formally offer his documentary exhibits, the alleged Second Waiver cannot be considered by this Court. Under Section 8 of RA No. 1125, the CTA is categorically described as a court of record. As cases filed before it are litigated de novo ,party-litigants must prove every minute aspect of their cases. Indubitably, no evidentiary value can be given the pieces of evidence submitted by the BIR, as the rules on documentary evidence require that these documents must be formally offered before the CTA. 40 Relevant to this matter is Section 34 of Rule 132 of the Revised Rules on Evidence, which reads: "SEC. 34. Offer of evidence . The court shall consider no evidence which has not been formally offered. The purpose for which the evidence is offered must be specified." In the case of Elvira Mato Vda. De Oate vs. The Court of Appeals, et al. , 41 the Supreme Court held: "From the foregoing provision, it is clear that for evidence to be considered, the same must be formally offered. Corollarily, the mere fact that a particular document is identified and marked as an exhibit does not mean that it has already been offered as part of the evidence of a party. In Interpacific Transit, Inc. v. Aviles ,we had the occasion to make a distinction between identification of documentary evidence and its formal offer as an exhibit. We said that the first is done in the course of the trial and is accompanied by the marking of the evidence as an exhibit while the second is done only when the party tests its case and not before. A party, therefore, may opt to formally offer his evidence if he believes that it will advance his cause or not to do so at all. In the event he chooses to do the latter, the trial court is not authorized by the Rules to consider the same." Thus, for failure of respondent to formally offer the Second Waiver, the same cannot be considered by thus Court. Consequently, the Court can only consider the period that was extended as provided in the First Waiver. Since the assessment against petitioner for taxable year 2007 has already prescribed, the Court finds no necessity to discuss the other issues raised by the parties. WHEREFORE ,premises considered, the instant Petition for Review is GRANTED .Accordingly, the Final Decision and the Final Letter of Demand assessing petitioner for deficiency income tax, VAT, and EWT for taxable year 2007 are CANCELLED . SO ORDERED. (SGD.) MA. BELEN M. RINGPIS-LIBAN Associate Justice Esperanza R. Fabon-Victorino, J. ,concurs. Footnotes 1. Par. 1, Joint Stipulation of Facts, Joint Stipulation of Facts and Issues (JSFI),docket, vol. II, p. 679. 2. Exhibit "P-2",BIR Records, p. 134. 3. Exhibit "P-3",BIR Records, p. 148. 4. Exhibit "P-5",BIR Records, pp. 586-587. 5. Exhibit "P-6",docket, vol. I, pp. 35-48. 6. Exhibit "P-7",docket, vol. I, pp. 49-51. 7. Exhibit "P-8",docket, vol. I, pp. 52-57. 8. Exhibit "P-9",docket, vol. I, pp. 68-69. 9. Exhibit "P-10",BIR Records, pp. 653-658. 10. Exhibit "P-11",BIR Records, p. 686. 11. Docket, vol. I, pp. 14-22. 12. Docket, vol. I, pp. 104-106. 13. Docket, vol. I, pp. 166-169. 14. Docket, vol. I, pp. 646-647. 15. Notice of Pre-Trial Conference, docket, vol. II, p. 648. 16. Docket, vol. II, pp. 649-653 and 658-667. 17. Docket, vol. II, pp. 679-683. 18. Docket, vol. II, pp. 694-699. 19. Exhibit "P-14",docket, vol. I, pp. 171-183; Minutes of the Hearings dated June 8, 2015, July 6, 2015, and September 7, 2015, docket, vol. II, pp. 706, 712, and 730, respectively. 20. Exhibit "P-15",docket, vol. I, pp. 298-302; Minutes of the Hearing dated August 3, 2015, docket, vol. II, pp. 726. 21. Resolution dated December 2, 2015, docket, vol. II, p. 762. 22. Docket, vol. II, pp. 771-777. 23. Minutes of the Hearing, docket, vol. II, p. 802. 24. Resolution dated November 20, 2017, docket, vol. II, pp. 970-972. 25. Docket, vol. II, pp. 873-909. 26. Docket, vol. II, p. 973. 27. Resolution, docket, vol. II, p. 975. 28. Joint Stipulation of Issues, JSFI, docket, vol. II, p. 680. 29. Section 228. Protesting of Assessment . x x x xxx xxx xxx If the protest is denied in whole or in part, or is not acted upon within one hundred eighty (180) days from submission of documents, the taxpayer adversely affected by the decision or inaction may appeal to the Court of Tax Appeals within thirty (30) days from receipt of the said decision, or from the lapse of the one hundred eighty (180)-day period; otherwise, the decision shall become final, executory and demandable. 30. Exhibit "P-14",docket, vol. 1, pp. 179-180. 31. Defensor-Santiago, et al. vs. Guingona, et al. ,G.R. No. 134577, November 18, 1998. 32. Commissioner of Internal Revenue vs. Kudos Metal Corporation , G.R. No. 178087, May 5, 2010. 33. Exhibit "P-1",BIR Records, pp. 542-544. 34. Exhibit "P-3",BIR Records, p. 148. 35. Petitioner's Memorandum, docket, vol. II, pp. 881-882. 36. G.R. No. 162852, December 16, 2004. 37. G.R. No. 178087, May 5, 2010. 38. G.R. No. 212825, December 7, 2015. 39. Docket, vol. II, p. 772. 40. Commissioner of Internal Revenue vs. Manila Mining Corporation , G.R. No. 153204, August 31, 2005. 41. G.R. No. 116149, November 23, 1995.