New San Jose Builders Inc. v. Commissioner of Internal Revenue

FIRST DIVISION [C.T.A. CASE NO. 9456. March 2, 2020.] NEW SAN JOSE BUILDERS, INC. , petitioner , vs . COMMISSIONER OF INTERNAL REVENUE , respondent . DECISION DEL ROSARIO , P.J p : This is a Petition for Review filed on August 26, 2016 pursuant to Section 7 of Republic Act (RA) No. 1125, as amended and Section 3 (a), Rule 8 of the Revised Rules of the Court of Tax Appeals (RRCTA), assailing the Final Decision on Disputed Assessment dated 1 August 2016 issued by respondent through Nestor S. Valeroso, Assistant Commissioner, Large Taxpayers Service, against petitioner for deficiency Income Tax, Value Added Tax (VAT), Withholding Tax on Compensation (WTC), Expanded Withholding Tax (EWT) and Documentary Stamp Tax (DST), including deficiency interests in the total amount of P1,840,217,223.44 for taxable year 2011. 1 TIADCc PARTIES Petitioner is a corporation duly organized and existing under the laws of the Republic of the Philippines, with principal office address at President Tower, 81 Timog Avenue, Diliman, Quezon City. 2 Respondent is the duly-appointed Commissioner of Internal Revenue (CIR), who is vested with authority to administer and enforce national internal revenue law, and holds office at the BIR National Building, Agham Road, Diliman, Quezon City. 3 FACTS On March 14, 2013, the Bureau of Internal Revenue (BIR), through OIC Assistant Commissioner, Large Taxpayers Service Alfredo Misajon, issued a Letter of Authority (LOA) No. 126-2013-00000006, authorizing Revenue Officer (RO) Lover Loveres and Group Supervisor (GS) Roberto Castro of LT Regular Audit Division 3 to examine the books of accounts and all accounting records of petitioner for all internal revenue taxes for the period from January 1, 2011 to December 31, 2011. 4 Respondent issued an undated Preliminary Assessment Notice (PAN) containing alleged deficiency income tax, DST, deficiency VAT, deficiency WTC, and deficiency EWT for the year 2011. 5 The said PAN was received by petitioner on 13 November 2015. 6 The BIR, through Nestor S. Valeroso, OIC-Assistant Commissioner Large Taxpayers Service, issued a Formal Letter of Demand (FLD) with Details of Discrepancies, and Assessment Notices (FAN) for Income Tax, DST, VAT, WTC and EWT with assessment numbers IT-126-2013-0006-11-15-189, DS-126-2013-0006-11-15-190, DS-126-2013-0006-11-15-190, WC-126-2013-0006-11-15-192, and WE-126-2013-0006-11-15-193, respectively, all dated December 1, 2015. 7 The FLD with FAN and Details of Discrepancies were served to petitioner on December 22, 2015. 8 On August 1, 2016, petitioner received the FDDA of even date holding petitioner liable for deficiency taxes as follows: 9 Kind of Tax Basic Interest up to 12/31/16 Total Income Tax 613,621,859.76 578,653,819.53 1,192,275,679.29 DST 12,655,764.00 12,634,960.00 25,290,724.00 VAT 272,207,960.27 268,777,394.20 540,985,254.47 WTC 4,734,771.14 4,701,044.01 9,435,815.15 EWT 36,243,913.17 35,985,737.35 72,229,650.52 Total 939,464,268.35 900,752,955.09 1,840,217,223.44 On August 26, 2016, petitioner filed the present Petition for Review. 10 On November 28, 2016, respondent filed his Answer 11 with the following special and affirmative defenses: (i) the LOA was validly issued for the examination of petitioner's books of accounts and other accounting records; (ii) respondent's right to assess petitioner for taxable year 2011 did not prescribe; (iii) no error or illegality can be ascribed to respondent's assessment of petitioner's deficiency tax liability as petitioner was properly apprised of its tax deficiencies; and, (iv) the law presumes the propriety and exactness of tax assessments. Petitioner filed its Pre-Trial Brief on January 27, 2017, 12 and its Amended Pre-Trial Brief on May 23, 2018. 13 Respondent, on the other hand, filed his Pre-Trial Brief on January 31, 2017. 14 During the pre-trial stage, petitioner filed a Motion for Preliminary Hearing on Affirmative Causes of Action on January 24, 2017, 15 seeking ultimately the resolution of the following issues to secure a just, speedy and inexpensive determination of the case, viz. : cSEDTC (1) Whether or not the Waiver of the defense of prescription (Waiver) purportedly issued by Rainier Carpio, petitioner's former Accounting Manager, is void considering that (i) it is not accompanied by a written authority from petitioner's Board of Directors, (ii) it does not specify the type of tax and the amount of tax due, and (iii) the Acknowledgment portion of the Waiver does not indicate any competent evidence of identity of the affiant; and, (2) Whether or not LOA No. 126-2013-00000006 dated March 14, 2013 is void considering that it was issued by Alfredo Misajon in his capacity as Officer-in-Charge (OIC)-Assistant Commissioner, Large Taxpayers Service, and not as the incumbent Assistant Commissioner, Large Taxpayers Service. Petitioner likewise filed, on March 3, 2017, an Urgent Motion for Early Resolution of Petitioner's Motion for Preliminary Hearing on Affirmative Causes of Action. 16 In the Resolution dated March 30, 2017, the Court's Second Division set a preliminary hearing for the presentation of the parties' respective witnesses for the sole purpose of properly addressing the question of the validity of the concerned Waiver and LOA. 17 In the preliminary hearing, both parties presented their respective witnesses. 18 The Court admitted their respective formally offered documentary exhibits. 19 After petitioner filed its Memorandum on December 19, 2017, 20 and considering that no memorandum was filed by respondent, 21 the issue on the validity of the Waiver and LOA was submitted for resolution on January 18, 2018. 22 In the Resolution dated February 6, 2018, the Court's Second Division held that LOA No. 126-2013-00000006 dated 14 March 2013, signed and issued by OIC-ACIR Alfredo Misajon is valid; the Waiver executed on November 13, 2014 is void for failure to strictly comply with the requirements for a valid waiver; and the assessment for deficiency VAT for taxable year 2011 has prescribed; hence, the said assessment for deficiency VAT was cancelled. 23 Respondent filed a Motion for Reconsideration Re: Resolution dated February 6, 2018 on February 27, 2018, 24 while petitioner filed its Motion for Partial Reconsideration (Resolution dated 06 February 2018) with Motion to Admit Additional Evidence on February 28, 2018. 25 In the Resolution dated April 26, 2018, the Court's Second Division denied respondent's Motion for Reconsideration; partially granted petitioner's Motion for Partial Reconsideration but denied its Motion to Admit Evidence; cancelled the assessment for deficiency income tax for taxable year 2011, together with the assessment for deficiency VAT, due to prescription; and ordered the case to proceed for pre-trial on the remaining assessments for DST, WTC, and EWT. 26 The Pre-Trial Conference was held on May 24, 2018. 27 The parties filed their Joint Stipulation of Facts and Issues (JSFI) on June 13, 2018. 28 The Court approved the parties' JSFI and terminated the pre-trial in a Pre-Trial Order issued on June 28, 2018. 29 AIDSTE During trial, both parties presented their respective testimonial and pieces of documentary evidence. 30 Petitioner filed its Formal Offer of Evidence on August 13, 2018, 31 without respondent's comment thereon. 32 Meanwhile, the present case was transferred to this Court pursuant to the Second Division's Order dated September 24, 2018, in line with CTA Administrative Circular No. 02-2012, dated September 18, 2018, "Re-organizing the Three (3) Divisions of the Court." 33 Eventually, petitioner's formally offered exhibits, as contained in its Formal Offer of Evidence, were admitted in this Court's Resolution dated October 4, 2018. 34 On the other hand, respondent manifested that he was adopting the exhibits offered in his Formal Offer of Evidence Re: Question of Validity of the Waiver of Defense of Prescription and Letter of Authority as his evidence in chief for purposes of the resolution of the case on the merits, which exhibits were admitted in the Resolution dated June 4, 2019. 35 After the parties filed their respective memoranda, 36 this case was submitted for decision on November 11, 2019. 37 ISSUE Whether or not petitioner is liable for deficiency DST, WTC and EWT as well as the interests and penalties thereon, for taxable year 2011. 38 PARTIES' ARGUMENTS Petitioner asserts that it is not liable for deficiency DST, WTC and EWT for taxable year 2011 because the assessments have prescribed; 39 it is not liable for deficiency DST for taxable year 2011 because the BIR's act, through RO Lover Loveres, of presuming January 5, 2012 as the date when the DST should have been paid, is arbitrary and lacks legal basis; 40 assuming the questioned assessments have not prescribed, it is still not liable for deficiency DST, WTC and EWT for taxable year 2011 because the assessments have no factual and legal bases; 41 and, it is not liable for any deficiency interests for taxable year 2011 on DST, EWT and WTC as the Tax Code does not sanction such imposition. 42 On the other hand, respondent avers that his right to assess withholding taxes are imprescriptible and the assessed withholding tax is a penalty which does not fall within the ambit of the period of limitation provided in Section 203 of the National Internal Revenue Code (NIRC) of 1997, amended; 43 the assessment was made in accordance with law; 44 petitioner is liable for surcharge and interest; 45 and, the assessment issued against petitioner is valid and lawful. 46 THE COURT'S RULING Jurisdiction The Court shall first determine its jurisdiction to take cognizance of the present Petition for Review. Being a court of special jurisdiction, this Court can take cognizance only of matters that are clearly within its jurisdiction. 47 RA No. 1125 48 as amended by RA No. 9282 states, among others, this Court's appellate jurisdiction, viz. : "SEC. 7. Jurisdiction. The CTA shall exercise: (a) Exclusive appellate jurisdiction to review by appeal, as herein provided: SDAaTC (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 National Internal Revenue Code or other laws administered by the Bureau of Internal Revenue; x x x" (Boldfacing supplied) Corollary, Section 11 of RA No. 1125, as amended, provides the period within which a party may appeal with this Court: "SEC. 11. Who May Appeal; Mode of Appeal; Effect of Appeal. Any party adversely affected by a decision, ruling or inaction of the Commissioner of Internal Revenue, the Commissioner of Customs, the Secretary of Finance, the Secretary of Trade and Industry or the Secretary of Agriculture or the Central Board of Assessment Appeals or the Regional Trial Courts may file an appeal with the CTA within thirty (30) days after the receipt of such decision or ruling or after the expiration of the period fixed by law for action as referred to in Section 7(a)(2) herein." (Boldfacing supplied) Considering that the present case seeks the review and cancellation of the FDDA issued by respondent a subject matter under the Court's exclusive appellate jurisdiction, and considering further that petitioner filed the present Petition for Review on August 26, 2016, which is within thirty (30) days after receipt of the FDDA on 01 August 2016, this Court has jurisdiction over this case. Prescription Section 203 of the NIRC of 1997, as amended, provides: "Section 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." The quoted provision limits the CIR's period to assess and collect internal revenue taxes to three (3) years counted from the last day prescribed by law for the filing of the return or from the day the return was actually filed, whichever comes later. Thus, assessments issued after the expiration of such period are no longer valid and effective. 49 Exceptions to the rule on prescription to assess are found in Section 222 of the NIRC of 1997, as amended, viz. : "SEC. 222. Exceptions as to Period of Limitation of Assessment and Collection of Taxes . (a) In the case of a false or fraudulent return with intent to evade tax or of failure to file a return, the tax may be assessed, or a proceeding in court for the collection of such tax may be filed without assessment, at any time within ten (10) years after the discovery of the falsity, fraud or omission: Provided, That in a fraud assessment which has become final and executory, the fact of fraud shall be judicially taken cognizance of in the civil or criminal action for the collection thereof. (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." Petitioner argues that the CIR's right to assess the disputed deficiency taxes has already prescribed as the FLD was issued more than three (3) years from the actual date of filing of the tax returns. 50 While petitioner is aware that an assessment is allowed beyond the three (3)-year period in an instance when there is a validly executed waiver, it contends that the Waiver purportedly executed by its former accounting manager, Mr. Rainier Carpio, is void as the latter was without authority to execute such Waiver covering tax audit for taxable year 2011. 51 It further asserts that aforementioned Waiver was not accompanied by a written authority from the Board of Directors; neither does it specify the type of tax and amount of tax due nor does it comply with the requirements of the rules on notarial practice as no competent evidence of identity of the affiant was indicated in the acknowledgement portion thereof. 52 AaCTcI As previously mentioned, the Court's Second Division declared in the Resolution dated February 6, 2018 that the Waiver is defective due to the following infirmities, namely: (1) the waiver was executed without the notarized written authority of said Rainier E. Castro ( sic ) to sign the Waiver on behalf of petitioner; (2) the Waiver did not contain the type and amount of tax; (3) the Waiver was not duly notarized; and (4) the fact of receipt by petitioner of the accepted Waiver was not indicated therein. The said Court ruled that the period to assess or collect taxes was not extended, and the assessments issued by the BIR beyond the three-year prescriptive period are void. 53 It found, based on available evidence then, that the assessment for deficiency VAT and Income Tax has prescribed since the FLD was issued only on December 1, 2015 but respondent had only until May 25, 2014, April 13, 2015, and January 25, 2015 to issue the assessment for deficiency VAT for the first quarter, second and third quarters, and fourth quarter, respectively; and until April 30, 2015 to issue the assessment for deficiency Income Tax. 54 No determination has yet been made, however, on the timeliness of the assessments for deficiency DST, WTC and EWT. 55 The Court has consistently held that a waiver of the statute of limitations must faithfully comply with the provisions of Revenue Memorandum Order (RMO) No. 20-90 and Revenue Delegation Authority Order (RDAO) No. 01-05 in order to be valid and binding. 56 A waiver that does not comply with the requisites for validity specified in RMO No. 20-90 and RDAO No. 01-05 is invalid and ineffective to extend the prescriptive period to assess deficiency taxes. 57 In Commissioner of Internal Revenue vs. Systems Technology Institute, Inc. , 58 the Supreme Court declared as mandatory the requirements stated in RMO No. 20-90 and RDAO No. 05-01, and enumerated certain instances that make a waiver of the statute of limitation defective, viz. : "Tested against the requirements of RMO 20-90 and relevant jurisprudence, the Court cannot but agree with the CTA's finding that the waivers subject of this case suffer from the following defects : 1. At the time when the first waiver took effect, on June 2, 2006, the period for the CIR to assess STI for deficiency EWT and deficiency VAT for fiscal year ending March 31, 2003, had already prescribed. To recall, the CIR only had until April 17, 2006 (for EWT) and May 25, 2006 (for VAT), to issue the subject assessments. 2. STI's signatory to the three waivers had no notarized written authority from the corporation's board of directors. It bears to emphasize that RDAO No. 05-01 mandates 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; and in case the authority is delegated by the taxpayer to a representative, as in this case, 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 notarized. 3. Similar to Standard Chartered Bank, the waivers in this case did not specify the kind of tax and the amount of tax due . It is established that a waiver of the statute of limitations is a bilateral agreement between the taxpayer and the BIR to extend the period to assess or collect deficiency taxes on a certain date. Logically, there can be no agreement if the kind and amount of the taxes to be assessed or collected were not indicated. Hence, specific information in the waiver is necessary for its validity. Verily, considering the foregoing defects in the waivers executed by STI, the periods for the CIR to assess or collect the alleged deficiency income tax, deficiency EWT and deficiency VAT were not extended . The assessments subject of this case, which were issued by the BIR beyond the three-year prescriptive, are therefore considered void and of no legal effect. Hence, the CTA committed no reversible error in cancelling and setting aside the subject assessments on the ground of prescription." (Boldfacing supplied) acEHCD Based on the above-quoted jurisprudence, a waiver is considered defective when, among others, (i) it is executed without the notarized written authority of the taxpayer's representative to sign the waiver; (ii) it does not specify the kind and amount of tax; and, (iii) the fact of receipt by the taxpayer of its file copy was not indicated in the original copies of the waivers. An unnotarized waiver should not even be accepted by the BIR. While the proper preparation of a waiver is primarily the responsibility of the taxpayer or his authorized representative signing the waiver, 59 the authorized revenue official is mandated to ensure that the waiver is duly accomplished and signed by the taxpayer or its authorized representative before affixing his signature to signify acceptance thereof and shall see to it that the delegation is in writing and duly notarized. 60 The acceptance of the Waiver in this case, executed by Mr. Carpio on behalf of petitioner, sans any authority from petitioner's Board of Directors, is a violation of respondent's own revenue issuance attributable solely to the BIR. The Court is well aware of the doctrine of implied admission of the validity of the waiver when the issue of the waiver's invalidity is belatedly raised. 61 In this case, however, petitioner raised the invalidity of the waiver at the earliest opportunity, in its Protest to Assessments, 62 viz. : "PERIOD OF PRESCRIPTION xxx xxx xxx NSJBI strongly denies that it has granted authority to any person to execute a waiver covering the tax audit of taxable year 2011. For your guidance, please see attached Certification issued by the Corporate Board Secretary (Annex "C") stating therein that the corporate Board of Directors never issued a board resolution authorizing any person to sign a waiver. In the absence of such notarized written authority coming from the board of directors, the authority of the BIR to issue the disputed FLD/FAN covering the tax returns listed in Table B List of Tax Returns Filed for 2011 has prescribed after the lapse of the three (3)-year period." In view of the noted defects of the Waiver, i.e. , it was executed without the notarized written authority; it did not contain the type and amount of tax; it was not duly notarized; and the fact of receipt by petitioner of the accepted waiver was not indicated therein, it is clear that the Waiver is invalid. In consequence, since respondent's period to assess petitioner was not extended, the assessments issued against petitioner beyond the three-year prescriptive period are void. This Court is not unaware of Commissioner of Internal Revenue vs. Next Mobile, Inc. (Formerly Nextel Communications Phils., Inc.) , 63 where the principle of in pari delicto was applied. In that case, the taxpayer, through its Director of Finance, executed five Waivers and delivered them to the BIR, one after the other, albeit no authority to sign was presented upon their submission; the BIR relied on the Waivers; and, the taxpayer did not raise any objection against their validity until it was assessed of the taxes and penalties. In contrast, at once glaring is the fact that the principle of in pari delicto is inapplicable to this case. Unlike Next Mobile , petitioner immediately raised the issue of the invalidity of the Waiver at the earliest opportunity and no subsequent waivers were ever executed by petitioner. Anent the assessments for deficiency WTC and EWT, records disclose the dates of filing of the tax returns, the due dates for filing, and the corresponding deadline to assess the taxes, viz. : EcTCAD For deficiency WTC: Period Filing Date of Return 64 Exhibit Due date for Filing 65 Last day to assess 66 January 2011 February 15, 2011 P-11 February 15, 2011 February 15, 2014 February 2011 March 15, 2011 P-12 March 15, 2011 March 15, 2014 March 2011 April 15, 2011 P-13 April 15, 2011 April 15, 2014 April 2011 May 16, 2011 P-14 May 15, 2011 May 16, 2014 May 2011 June 15, 2011 P-15 June 15, 2011 June 15, 2014 June 2011 July 15, 2011 P-16 July 15, 2011 July 15, 2014 July 2011 August 15, 2011 P-17 August 15, 2014 August 15, 2014 August 2011 September 15, 2011 P-18 September 15, 2011 September 15, 2014 September 2011 October 14, 2011 P-19 October 15, 2011 October 15, 2014 October 2011 November 15, 2011 P-20 November 15, 2011 November 15, 2014 November 2011 December 15, 2011 P-21 December 15, 2011 December 15, 2014 December 2011 January 16, 2012 (original Return) April 11, 2012 (amended Return) P-22; P-23 January 20, 2012 (original Return) April 11, 2015 For deficiency EWT: Period Filing Date of Return 67 Exhibit Due date for Filing 68 Last day to assess 69 January 2011 February 15, 2011 P-24 February 15, 2011 February 15, 2014 February 2011 Filed-March 15, 2011 P-25 March 15, 2011 March 16, 2014 March 2011 April 15, 2011 P-26 April 15, 2011 April 15, 2014 April 2011 May 16, 2011 P-27 May 15, 2011 May 16, 2014 May 2011 June 15, 2011 P-28 June 15, 2011 June 15, 2014 June 2011 July 15, 2011 P-29 July 15, 2011 July 15, 2014 July 2011 August 15, 2011 P-30 August 15, 2011 August 15, 2014 August 2011 September 15, 2011 P-31 September 15, 2011 September 15, 2014 September 2011 October 14, 2011 P-32 October 15, 2011 October 15, 2014 October 2011 November 15, 2011 P-33 November 15, 2011 November 15, 2014 November 2011 December 15, 2011 P-34 December 15, 2011 December 15, 2014 December 2011 January 16, 2012 P-35 January 20, 2012 January 20, 2015 Respondent had only until April 11, 2015 to assess the deficiency WTC, and January 20, 2015 to assess the deficiency EWT, with respect to the December 2011 Return period. Since the FLD was issued only on December 1, 2015 , the assessments for deficiency WTC and EWT are also barred by prescription. The Court cannot accept respondent's contention that his right to assess withholding taxes are imprescriptible, and the assessed withholding tax is a penalty which does not fall within the ambit of the period of limitation provided in Section 203 of the NIRC of 1997, amended. On this point, the declaration in Commissioner of Internal Revenue vs. La Flor Dela Isabela, Inc. , 70 is instructive: "Withholding taxes are internal revenue taxes covered by Section 203 of the NIRC. xxx xxx xxx The CIR, however, forwards a novel theory that Section 203 is inapplicable in the present assessment of EWT and WTC deficiency against La Flor. It argues that withholding taxes are not contemplated under the said provision considering that they are not internal revenue taxes but are penalties imposed on the withholding agent should it fail to remit the proper amount of tax withheld. SDHTEC In Chamber of Real Estate and Builders' Associations, Inc. v. Hon. Executive Secretary Romulo , the Court had succinctly explained the withholding tax system observed in our jurisdiction, to wit: xxx xxx xxx It is true that withholding tax is a method of collecting tax in advance and that a withholding tax on income necessarily implies that the amount of tax withheld comes from the income earned by the taxpayer/payee. Nonetheless, the Court does not agree with the CIR that withholding tax assessments are merely an imposition of a penalty on the withholding agent, and thus, outside the coverage of Section 203 of the NIRC . xxx xxx xxx The liability of the withholding agent is distinct and separate from the tax liability of the income earner. It is premised on its duty to withhold the taxes paid to the payee. Should the withholding agent fail to deduct the required amount from its payment to the payee, it is liable for deficiency taxes and applicable penalties. x x x xxx xxx xxx Thus, withholding tax assessments such as EWT and WTC clearly contemplate deficiency internal revenue taxes. Their aim is to collect unpaid income taxes and not merely to impose a penalty on the withholding agent for its failure to comply with its statutory duty . Further, a holistic reading of the Tax Code reveals that the CIR's interpretation of Section 203 is erroneous. Provisions of the NIRC itself recognize that the tax assessment for withholding tax deficiency is different and independent from possible penalties that may be imposed for the failure of withholding agents to withhold and remit taxes. x x x" (Boldfacing supplied) With respect to the assessed DST, petitioner argues that the BIR's act of presuming January 5, 2012 as the date when the DST should have been paid is arbitrary and lacks legal basis. 71 Allegedly, the three (3)-year prescriptive period for respondent to make an assessment would have ended on January 5, 2015, yet the assessment was issued only on December 1, 2015. Besides, the assessment for DST is erroneous because it was based on petitioner's Notes to Financial Statements and not on actual taxable documents evidencing a transaction. 72 The assessed deficiency DST in this case must fail due to prescription. Parenthetically, while respondent insists on its right to assess until December 31, 2015 based on the Waiver executed by Mr. Carpio on November 14, 2014, such Waiver is defective and invalid, as afore-discussed. Thus, even if the Court considers December 2011 as the date when the subject transaction was made based on petitioner's Financial Statement and consequently, the due date for filing the DST return was on January 5, 2012, 73 respondent's assessment for deficiency DST is still barred by prescription. Respondent had three (3) years from January 5, 2012 or until January 5, 2015 to issue the assessment. The FLD was issued only on December 1, 2015. HSAcaE Not even the ten (10)-year prescriptive period under Section 222 (a) of the NIRC of 1997, as amended, can be applied to this case. Perusal of records disclosed that the extraordinary ten (10)-year prescriptive period was not stated in the PAN, FLD and FAN to be applicable to petitioner that could have justified an assessment beyond three (3) years. The disquisition in Commissioner of Internal Revenue vs. Asalus Corporation 74 is most enlightening, viz. : "Substantial Compliance of Notice Requirement The CTA also posited that the ordinary prescriptive period of three (3) years applied in this case because there was no mention in the FAN or the FDDA that what would apply was the extraordinary prescriptive period and that the CIR did not present any evidence to support its claim of false returns. Again, the Court disagrees. It is true that neither the FAN nor the FDDA explicitly stated that the applicable prescriptive period was the ten (10)-year period set in Section 222 of the NIRC. They, however, made reference to the PAN, which categorically stated that '[t]he running of the three-year statute of limitation as provided under Section 203 of the 1997 National Internal Revenue Code (NIRC) is not applicable x x x but rather to the ten (10)-year prescriptive period pursuant to Section 222 (A) of the tax code x x x.' In Samar-I Electric Cooperative v. COMELEC , the Court ruled that it sufficed that the taxpayer was substantially informed of the legal and factual bases of the assessment enabling him to file an effective protest, to wit: Although the FAN and demand letter issued to petitioner were not accompanied by a written explanation of the legal and factual bases of the deficiency taxes assessed against the petitioner, the records showed that respondent in its letter dated April 10, 2003 responded to petitioner's October 14, 2002 letter-protest, explaining at length the factual and legal bases of the deficiency tax assessments and denying the protest. Considering the foregoing exchange of correspondence and documents between the parties, we find that the requirement of Section 228 was substantially complied with. Respondent had fully informed petitioner in writing of the factual and legal bases of the deficiency taxes assessment, which enabled the latter to file an "effective" protest, much unlike the taxpayer's situation in Enron. Petitioner's right to due process was thus not violated. [Emphasis supplied] Thus, substantial compliance with the requirement as laid down under Section 228 of the NIRC suffices, for what is important is that the taxpayer has been sufficiently informed of the factual and legal bases of the assessment so that it may file an effective protest against the assessment. In the case at bench, Asalus was sufficiently informed that with respect to its tax liability, the extraordinary period laid down in Section 222 of the NIRC would apply. This was categorically stated in the PAN and all subsequent communications from the CIR made reference to the PAN. Asalus was eventually able to file a protest addressing the issue on prescription, although it was done only in its supplemental protest to the FAN . Considering the existing circumstances, the assessment was timely made because the applicable prescriptive period was the ten (10)-year prescriptive period under Section 222 of the NIRC. To reiterate, there was a prima facie showing that the returns filed by Asalus were false, which it failed to controvert. Also, it was adequately informed that it was being assessed within the extraordinary prescriptive period ." (Boldfacing supplied) In sum, respondent's assessments for WTC, EWT and DST, having been issued beyond the three (3) prescriptive period, are patently void. HESIcT In closing, it is worth re-echoing that the prescriptive period to make an assessment of internal revenue taxes is provided primarily to safeguard the interest of taxpayers from unreasonable investigation. The rationale behind prescriptive periods on tax assessments is that the government must timely assess internal revenue taxes so as not to extend indefinitely the period of assessment and deprive the taxpayer of the assurance that it will no longer be subjected to further tax investigation after the expiration of a reasonable time. Rules derogating taxpayers' right against prolonged and unscrupulous investigations are strictly construed against the government. 75 WHEREFORE , premises considered, the Petition for Review is hereby GRANTED . Accordingly, respondent's Final Decision on Disputed Assessment dated August 1, 2016, including the Formal Letter of Demand (FLD) with Details of Discrepancies, and Documentary Stamp Tax, Withholding Tax on Compensation and Expanded Withholding Tax with assessment numbers DS-126-2013-0006-11-15-190, WC-126-2013-0006-11-15-192, and WE-126-2013-0006-11-15-193, respectively, all dated December 1, 2015, are CANCELLED and SET ASIDE . SO ORDERED. (SGD.) ROMAN G. DEL ROSARIO Presiding Justice Esperanza R. Fabon-Victorino and Catherine T. Manahan, JJ. , concur. Footnotes 1. CTA Docket, pp. 10-44. 2. Par. 2, Petition for Review and admitted in par. 1 of respondent's Answer; CTA Docket, pp. 10 and 125. 3. Par. 3, Petition for Review in relation to par. 1 of respondent's Answer; par. 1, Stipulation of Facts, Joint Stipulation of Facts and Issues (JSFI), CTA Docket, pp. 11, 125 and 937. 4. Par. 2, Stipulation of Facts, JSFI, CTA Docket, p. 937. 5. Par. 3, Stipulation of Facts, JSFI, CTA Docket, pp. 937-938. 6. Par. 4, Stipulation of Facts, JSFI, CTA Docket, p. 938. 7. Exhibit "R-12"; BIR Records, pp. 299-308. 8. Par. 5, Stipulation of Facts, JSFI, CTA Docket, p. 938. 9. Par. 6, Stipulation of Facts, JSFI, CTA Docket, p. 938. 10. CTA Docket, pp. 10-44. 11. CTA Docket, pp. 124-133. 12. CTA Docket, pp. 157-173. 13. CTA Docket, pp. 696-708. 14. CTA Docket, pp. 357-363. 15. CTA Docket, pp. 141-156. 16. CTA Docket, pp. 373-376. 17. CTA Docket, pp. 385-388. 18. CTA Docket, pp. 402-405, and 435-437. 19. CTA Docket, pp. 402-405, and 461-462. 20. CTA Docket, pp. 469-497. 21. Records Verification dated January 16, 2018; CTA Docket, p. 498. 22. CTA Docket, p. 500. 23. CTA Docket, pp. 524-531. 24. CTA Docket, pp. 542-554. 25. CTA Docket, pp. 555-564. 26. CTA Docket, pp. 688-693. 27. CTA Docket, pp. 881-882. 28. CTA Docket, pp. 937-947. 29. CTA Docket, pp. 995-1004. 30. CTA Docket, pp. 1015-1017. 31. CTA Docket, pp. 1023-1048. 32. Records Verification dated September 6, 2018; CTA Docket, p. 1210. 33. September 24, 2018 Order; CTA Docket, p. 1260. 34. CTA Docket, pp. 1263-1264. 35. CTA Docket, pp. 1312-1313. 36. CTA Docket, pp. 1321-1363; and 1394-1403. 37. CTA Docket, p. 1406. 38. Stipulation of Issues, JSFI, Docket, p. 938. 39. CTA Docket, p. 1329. 40. CTA Docket, p. 1336. 41. CTA Docket, p. 1338. 42. CTA Docket, p. 1359. 43. CTA Docket, pp. 1396, 1399. 44. CTA Docket, p. 1399. 45. CTA Docket, p. 1400. 46. CTA Docket, p. 1401. 47. Allied Banking Corporation vs. Commissioner of Internal Revenue , G.R. No. 175097, February 5, 2010. 48. Republic Act No. 1125 An Act Creating the Court of Tax Appeals. 49. Commissioner of Internal Revenue vs. Systems Technology Institute, Inc. , G.R. No. 220835, July 26, 2017. 50. CTA Docket, p. 23. 51. CTA Docket, pp. 18-19. 52. CTA Docket, pp. 21-22. 53. Resolution dated February 6, 2018; CTA Docket, pp. 524-531. 54. Resolutions dated February 6, 2018 and April 26, 2018; CTA Docket, pp. 524-531, 688-693. 55. Resolution dated February 6, 2018; CTA Docket, pp. 524-531. 56. Commissioner of Internal Revenue vs. Next mobile, Inc. (Formerly Nextel Communications Phils., Inc.) , G.R. No. 212825, December 07, 2015. 57. Id. 58. G.R. No. 220835, July 26, 2017. 59. Asian Transmission Corporation vs. Commissioner of Internal Revenue , G.R. No. 230861, September 19, 2018. 60. RDAO 05-01 provides: 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. 61. Commissioner of Internal Revenue vs. Transitions Optical Philippines, Inc. (G.R. No. 227544, November 22, 2017) declared: Nonetheless, respondent's acts also show its implied admission of the validity of the waivers. First , respondent never raised the invalidity of the Waivers at the earliest opportunity, either in its Protest to the PAN, Protest to the FAN, or Supplemental Protest to the FAN. It thereby impliedly recognized these Waivers' validity and its representatives' authority to execute them. Respondent only raised the issue of these Waivers' validity in its Petition for Review filed with the Court of Tax Appeals. In fact, as pointed out by Justice Del Rosario, respondent's Protest to the FAN clearly recognized the validity of the Waivers, x x x. 62. Exhibit P-9; CTA Docket, pp. 1083-1122, 1090; Annex "J" of Petition for Review; CTA Docket, pp. 73-111, 80; BIR Records, pp. 429-469, 462. 63. G.R. No. 212825, December 7, 2015. 64. Monthly Remittance Return of Income Taxes Withheld on Compensation (BIR Form No. 1601-C). 65. Section 2.81 of Revenue Regulations (RR) No. 2-98, as amended by RR 06-01, provides: SECTION 2.81. FILING OF RETURN AND PAYMENT OF INCOME TAX WITHHELD ON COMPENSATION (FORM NO. 1601). Every person required to deduct and withhold the tax on compensation, including large taxpayers as determined by the Commissioner, shall make a return and pay such tax on or before the 10th day of the month following the month in which withholding was made to any authorized agent bank within the Revenue District Office (RDO) or in places where there are no agent banks, to the Revenue District Officer of the City or Municipality where the withholding agent/employer's legal residence or place of business or office is located; provided, however, that taxes withheld from the last compensation (December) for the calendar year shall be paid not later than January 15 of the succeeding year ; Provided, however, that with respect to taxpayers, whether large or non-large, who availed of the EFPS, the deadline for electronically filing the aforesaid withholding tax return and paying the tax due thereon via the EFPS shall be five (5) days later than the deadlines set above . (Boldfacing supplied) 66. Period to assess is reckoned from the last day prescribed by law for the filing of the return, or from the day the return was filed, whichever comes later ( Commissioner of Internal Revenue vs. Systems Technology Institute, Inc. , G.R. No. 220835, July 26, 2017). 67. Monthly Remittance Return of Creditable Income Taxes Withheld (Expanded) (BIR Form No. 1601-E). 68. Section 2.58 of RR 2-98, as amended by RR 17-03 provides: Sec. 2.58. RETURNS AND PAYMENT OF TAXES WITHHELD AT SOURCE. (A) Monthly return and payment of taxes withheld at source. (1) . . . (2) WHEN TO FILE (a) For both large and non-large taxpayers, the withholding tax return, whether creditable or final (including final withholding taxes on interest from any currency bank deposit and yield or any other monetary benefit from deposit substitutes and from trust funds and similar arrangements) shall be filed and payments 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 ; and except for the final capital gains tax on the sale or other onerous disposition of real property considered as capital asset which must be taken/withheld from the seller by the buyer and remitted within thirty (30) days from the date of notarization of the transfer document to the collecting agent of the RDO having jurisdiction over the place where the property is located. Nonetheless, in case of disposition of real property classified as capital asset by an individual to the government, the tax to be imposed shall be determined either under the normal income tax rate imposed in Sec. 24 (A) or under a final capital gains tax of six percent (6%) imposed under Sec. 24 (D) (1) of the Code, at the option of the taxpayer-seller. Thus, if the seller chooses the first option, the buyer does not have to withhold the six percent (6%) final capital gains tax but no Certificate Authorizing Registration shall be issued for the transaction until the seller or the buyer shows the seller's filed income tax return reflecting the result of the subject real estate transaction. (b) With respect, however, to taxpayers, whether large or non-large, who availed of the electronic filing and payment system (EFPS), the deadline for electronically filing the applicable withholding tax returns and paying the taxes due thereon via the EFPS shall be five (5) days later than the deadlines set above , unless the EFPS regulations provide for different deadline dates and except for the final capital gains tax on the sale, barter or exchange of real property where the law fixes a definite deadline for the payment thereof." (Boldfacing supplied) 69. Period to assess is reckoned from the last day prescribed by law for the filing of the return, or from the day the return was filed, whichever comes later, as held in Commissioner of Internal Revenue vs. Systems Technology Institute, Inc. , G.R. No. 220835, July 26, 2017. 70. G.R. No. 211289, January 14, 2019. 71. Petitioner's Memorandum, CTA Docket, pp. 1321-1363, 1336. 72. Par. 70, Petition for Review, CTA Docket, p. 33. 73. Pursuant to Revenue Regulations (RR) No. 06-01. 74. G.R. No. 221590, February 22, 2017. 75. SMI-ED Philippines Technology, Inc. vs. Commissioner of Internal Revenue , G.R. No. 175410, November 12, 2014.