GR No 170257

Rizal Commercial Banking Corporation vs. Commissioner of Internal Revenue

GR No 170257

FACTS:

          On Aug 15, 1996, RCBC received a letter of authority issues by the CIR Chato, authorizing a special audit team to examine the books of account and other accounting records of RCBC from Jan 1, 1994 to Dec 31, 1995. On Jan 1997, RCBC executed two Waivers of the Defense of Prescription under the Statute of Limitations covering the internal revenue taxes due for the years 1994 and 1995. It was provided under Section 203 of the Tax Code that the period of limitation upon assessment and collection is three (3) years except as provided in Section 222.

          On January 2007, RCBC received a Formal Letter of Demand together with Assessment Notices for the total deficiency tax of P4,170,058,634.49. RCBC disagreed with it and thus filed a protest of Feb 2004. On December 2006, after the reinvestigation, the amount was reduced to P303,160,496.55, which RCBC immediately paid.

        Further assessments for the deficiency onshore tax and documentary stamp tax remained unpaid as RCBC refused to do so as RCBC argued that the waivers of the Statute of Limitations in Jan 1997 were not valid as those were not signed or conformed to by the CIR as required under Section 222 (b) of the Tax Code.

          Consequently, RCBC filed its Motion for Reconsideration.

ISSUE:

          WON the waivers of the defense of prescription were valid thus period of limitation of assessment and collection has prescribed.

HELD:

      YES, the waivers were valid and the period of limitation of assessment and collection has not prescribed.

      RCBC assails the validity of the waivers on the ground that those were merely attested to by Esquivas, then Coordinator for the CIR, and that he failed to indicate acceptance or agreement of the CIR as required under Section 223 (b) of the 1977 Tax Code. It further argued that the doctrine of estoppel cannot be applied against it because its payment of the other tax assessments does not signify a clear intention on its part to give up its right to question the validity of the waivers.

         The Court disagrees. Under Art 1431 of the Civil Code, the doctrine of estoppel is anchored on the rule that “an admission or representation is rendered conclusive upon the person making it, and cannot be denied or disapproved as against the person relying thereon.” A party is precluded from denying his own acts, admissions or representations to the prejudice of the other party in order to prevent fraud and falsehood.

          Estoppel is clearly applicable to the case at bench. RCBC, through its partial payment of the revised assessments issued within the extended period as provided for in the questioned waivers, impliedly admitted the validity of those waivers. Had petitioner truly believed that the waivers were invalid and that the assessments were issued beyond the prescriptive period, then it should not have paid the reduced amount of taxes in the revised assessment. RCBC’s subsequent action effectively belies its insistence that the waivers are invalid. The records show that on December 6, 2000, upon receipt of the revised assessment, RCBC immediately made payment on the uncontested taxes.

         Thus, RCBC is estopped from questioning the validity of the waivers. To hold otherwise and allow a party to gainsay its own act or deny rights which it had previously recognized would run counter to the principle of equity which this institution holds dear.