Case: 25. CIR vs. Metro Star Superama, G.R. No.

185371, December 8, 2010;

Topic: Period of limitation upon assessment and collection – Section 203 NIRC and Section
222 (d) of the NIRC

DOCTRINE: If the taxpayer denies ever having received an assessment from the Bureau of
Internal Revenue (BIR), it is incumbent upon the latter to prove by competent evidence that
such notice was indeed received by the addressee. Section 228 of the Tax Code clearly
requires that the taxpayer must be informed that he is liable for deficiency taxes through the
sending of a Preliminary Assessment Notice (PAN).

ACTION SEQUENCE: CIR assessed respondent for VAT and WHT deficiency -> Respondent
filed PetRev before CTA -> CTA granted PetRev filed -> PetRev by CIR -> Petition dismissed

FACTS

 The Regional Director of Revenue Region No. 10 Legazpi issued Letter of Authority for
Revenue Officer Daisy Justiniana to examine respondent’s books of accounts and other
accounting records for income tax and other internal revenue taxes for the taxable year
1999. Said Letter of Authority was revalidated by the Regional Director Leonardo
Sacamos.
 Respondent’s failure to comply with several requests for the presentation of records, the
OIC of BIR Legal Division issued an informing the Revenue District Officer to proceed
with the investigation based on the best evidence obtainable preparatory to the issuance
of assessment notice.
 Revenue District Officer Lafuente issued a Preliminary 15-day Letter, which petitioner
received. The said letter stated that a post audit review was held and it was ascertained
that there was deficiency value-added and withholding taxes due in the amount of P
292,874.16.
 Thereafter, petitioner received a Formal Letter of Demand containing the same
deficiency in the amount of P 292,874.16 for deficiency of VAT and WHT for the taxable
year 1999.
 Subsequently, the Revenue District Office sent a copy of the Final Notice of Seizure,
which petitioner received, giving the latter last opportunity to settle its deficiency tax
liabilities within ten (10) days from receipt thereof, otherwise BIR shall be constrained to
serve and execute the Warrants of Distraint and/or Levy and Garnishment to enforce
collection. Respondent received a Warrant of Distraint and/or Levy demanding payment
of deficiency.
 Respondent filed with the Office of Commissioner a Motion for Reconsideration pursuant
to Section 3.1.5 of Revenue Regulations No. 12-99. However, this was denied by the
Commissioner.
 Denying that it received a Preliminary Assessment Notice (PAN) and claiming that it was
not accorded due process, Metro Star filed a petition for review with the CTA.
 CTA division ruled in favor of Metro Star. The CTA Division opined that “while there is a
disputable presumption that a mailed letter is deemed received by the addressee in the
ordinary course of mail, a direct denial of the receipt of mail shifts the burden upon the
 party favored by the presumption to prove that the mailed letter was indeed received by
the addressee.” It, accordingly, ruled that the Formal Letter of Demand, as well as the
Warrant of Distraint and/or Levy were void, as Metro Star was denied due process.
 CTA en banc affirmed the decision of the CTA division.
 CIR filed a petition for review on certiorari before this Court.

ISSUE: WON respondent Metro Star was denied due process

RULING: YES, respondent Metro Star was denied due process.

CIR insists that Metro Star received the PAN, and that due process was served nonetheless
because the latter received the Final Assessment Notice (FAN).

The Court did not agree.

Jurisprudence is replete with cases holding that if the taxpayer denies ever having received
an assessment from the BIR, it is incumbent upon the latter to prove by competent
evidence that such notice was indeed received by the addressee. The onus probandi was
shifted to BIR to prove by contrary evidence that the respondent received the
assessment in the due course of mail. The SC has consistently held that while a mailed letter
is deemed received by the addressee in the course of mail, this is merely a disputable
presumption subject to controversion and a direct denial thereof shifts the burden to the party
favored by the presumption to prove that the mailed letter was indeed received by the
addressee. The Court agrees with CTA that CIR failed to discharge its duty and present
evidence to show that Metro Star received the PAN. It could have simply presented the registry
receipt or the certification from the postmaster that it mailed the PAN, but failed. Neither did it
offer any explanation on why it failed to comply with the requirement of service of the PAN. It
merely accepted the letter of Metro Star’s chairman, that stated that he had received the FAN
but not the PAN and that he just wanted to clarify some matters with the hope of lessening its
tax liability.

This now leads to the question: Is the failure to strictly comply with notice requirements
prescribed under Section 228 of the National Internal Revenue Code of 1997 and Revenue
Regulations (R.R.) No. 12-99 tantamount to a denial of due process? Specifically, are the
requirements of due process satisfied if only the FAN stating the computation of tax liabilities
and a demand to pay within the prescribed period was sent to the taxpayer?

Sec. 228 clearly requires that the taxpayer must first be informed that he is liable for deficiency
taxes through the sending of a PAN. He must be informed of the facts and the law upon which
the assessment is made. The law imposes a substantive, not merely a formal, requirement. To
proceed with tax collection without first establishing a valid assessment is evidently violative of
the principle in administrative investigations—that taxpayers should be able to present their
case and adduce evidence. This is confirmed under the provisions R.R. No. 12-99 of the BIR

DISPOSITIVE PORTION: Petition DENIED.

Digest by Lopez
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