The government must assess internal revenue taxes on time 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 investigation for taxes after the expiration of reasonable period of time.

On January 21, 2009, taxpayer received a Formal Letter of Demand and Audit Result/Assessment Notice, both dated January 09, 2009, assessing it for deficiency expanded withholding tax the taxable year 2005 (covering the period June 2004 to May 2005). Taxpayer protested the assessment arguing, among others, that the period to assess had prescribed under Section 203 of the NIRC of 1997. Taxpayer received a Preliminary Collection Letter on March 23, 2010. Thus, it filed a petition for review with the CTA on April 22, 2010.
The CTA cancelled the assessment on the ground of prescription. According to the Court, there is nothing in the PAN, FLD, Assessment Notice, and the Preliminary Collection Letter that would hint the non-application of the three-year prescriptive period for purposes of assessment. There is no indication that taxpayer filed a false return, or a fraudulent return with intent to evade tax, or failed to file a return. The BIR therefore had three years, counted from the date of actual filing of the return or from the last date prescribed by law for the filing of such return, whichever comes later, to assess petitioner’s internal revenue taxes. Based in the evidence presented, the last EWT Return for the taxable period June 2004 to May 2005 was filed by taxpayer on June 10, 2005. Counting three years from June 10, 2005, the BIR had until June 10, 2008, at the latest, to issue an assessment for deficiency EWT for the taxable period June 2004 to May 2005. However, record reveals that the FLD and the FAN were issued only on January 9, 2009 or seven (7) months late reckoned from June 10, 2008, the last day for issuing an assessment covering the May 2005 EWT.
Significantly, there were no attending circumstances that would prevent the BIR from issuing an assessment and collecting the tax due within the period prescribed by law. Petitioner did not request for a re-investigation nor did it execute a waiver of the Statue of Limitations. Evidently, the assessment issued on January 9, 2009 or after June 10, 2008 had prescribed effectively barring the collection of alleged tax deficiency. (Hermano San Miguel Febres Cordero Medical Education Foundation (De Lasalle Health Sciences Institute), Inc. vs. Commissioner of Internal Revenue Joel L. Tan-Torres, CTA Case No. 8095, December 18, 2013)