Estate of Vda. De Gabriel v.

CIR
G.R. No. 155541 January 27, 2014

FACTS: Juliana Gabriel entered into a contract of agency with the Philippine Trust Company
(PhilTrust) for the latter to manager her business affairs. In April 1979, Gabriel died. Two days
after her death, PhilTrust filed the income tax return (ITR) of Gabriel. PhilTrust however did not
mention therein that Gabriel already died. PhilTrust petitioned to be appointed as administrator of
her estate but the probate court assigned an heir instead. Meanwhile, the Bureau of Internal
Revenue (BIR) found that Gabriel has a tax deficiency in the amount of P318k. Eventually in
November 1982, a final assessment notice (FAN) addressed to Gabriel was sent via registered mail
to PhilTrust. At this point, the BIR was still uninformed about Gabriel’s death. PhilTrust did not
answer the FAN and so a warrant of distraint and levy was issued against the property of Gabriel.
The administrator of the estate protested the warrant on the ground that there was an invalid service
of assessment. The Commissioner of Internal Revenue (CIR) maintained that there was a valid
service because a) PhilTrust was the agent of Gabriel, and b) the tax code (of 1977) does not
require that the assessment be actually received by the taxpayer; that all it requires is that the
assessment be released, mailed, and sent to the taxpayer at the address stated in the ITR filed.

ISSUE: Whether or not the CIR is correct.

HELD: No. PhilTrust was no longer the agent of Gabriel when the FAN was issued in 1982. The
contract of agency ceased when Gabriel died in 1979. Since the agency was extinguished, the
estate of Gabriel cannot be bound by the mistakes and omission of PhilTrust i.e., failure to notify
BIR of Gabriel’s death and failure to file an answer for the FAN issued.

Anent the second argument of the CIR, although there is really no statutory requirement that the
FAN should be actually received by the taxpayer, the same should be sent to the taxpayer. In this
case, it was sent to PhilTrust. Also, although there is no specific requirement that the taxpayer
should receive the notice within the prescriptive period (so long as the FAN was made within such
period), due process requires at the very least that such notice actually be received. An assessment
contains not only a computation of tax liabilities, but also a demand for payment within a
prescribed period. It also signals the time when penalties and interests begin to accrue against the
taxpayer. To enable the taxpayer to determine his remedies thereon, due process requires that it
must be served on and received by the taxpayer.