CIR V CA 303 SCRA 614 (February 25, 1999)

Facts: Carnation Philippines field its annual income and percentage tax returns for the fiscal year ending September 30, 1981 on January 15, 1982 and November 20, 1981, respectively. Later, the corporation thru its vice president executed waivers of the statute of limitation, waiving the running of the prescriptive period provided for in Sections 318 and 319 of the NIRC. On July 29, 1987, the BIR assessed the corporation for deficiency taxes. The company seasonably protested but the BIR denied. On appeal, the CTA ruled against the BIR declaring that the assessment is null and void for having been issued beyond the five-year prescriptive period provided by law. It noted that the company’s 1981 income and sales taxes should have been validly assessed only until January 14, 1987 and November 19, 1986, respectively. However, Carnation’s income and sales taxes were assessed on July 29, 1987, which is beyond the five-year prescriptive period.

The CIR claims that the waivers signed by Carnation were valid although not signed by the Commissioner because (a) when the BIR agents/examiners extended the period to audit and investigate the tax returns, the BIR gave it implied consent to such waivers; (b) the signature of the commissioner is a mere formality and the lack of it does not vitiate the binding effect of the waivers; and (c) that a waiver is not a contract but a unilateral act of renouncing one’s right to avail of the defense of prescription and remains binding in accordance with the terms and conditions set forth in the waiver. In effect, the assessment is valid.

Held: CIR is wrong. Sec. 319 of the Tax Code clearly and explicitly provides that waiver of the five-year prescriptive period must be in writing and signed by both the CIR and the taxpayer. Subject waivers signed by Carnation do not bear the written consent of the BIR commissioner as required by law, therefore it is invalid. Indeed, the questioned assessments are null and void for having been issued beyond the five-year prescriptive period.