G.R. No. 214933 , February 15, 2022
Republic of the Philippines, represented by the Bureau of Internal Revenue, Petitioner, vs. First Gas Power Corporation, Respondent.

FACTS

The Bureau of Internal Revenue (BIR) issued a Letter of Authority on October 24, 2002, to examine the books of First Gas Power Corporation for taxable years 2000 and 2001. After an informal conference and the issuance of Preliminary Assessment Notices (PANs), the BIR issued Final Assessment Notices (FANs) and Formal Letters of Demand on July 19, 2004, assessing First Gas for deficiency income taxes and penalties for 2000 and 2001. To extend the prescriptive period for assessment, three Waivers of the Defense of Prescription were executed between the parties on April 12, June 14, and August 13, 2004, all signed by the BIR’s Celia C. King. First Gas protested the assessments and, after the BIR failed to act, filed a Petition for Review before the Court of Tax Appeals (CTA). The CTA Third Division granted First Gas’s petition, canceling the assessments. The CTA En Banc affirmed this decision. The BIR filed the present petition, arguing the assessments were valid.

ISSUE

Whether the deficiency tax assessments for taxable years 2000 and 2001 issued by the BIR against First Gas are valid.

RULING

No, the assessments are not valid. The Supreme Court affirmed the CTA En Banc’s decision.
1. For Taxable Year 2000: The assessments were issued beyond the three-year prescriptive period. The Waivers intended to extend the period were invalid because they did not indicate the date of acceptance by the BIR, a mandatory requirement under Revenue Memorandum Order No. 20-90 and established jurisprudence. The absence of this date rendered the waivers defective and ineffectual in extending the period. Consequently, the right to assess for the year 2000 had prescribed.
2. For Taxable Year 2001: The FAN and Formal Letter of Demand were invalid because they failed to state a specific date or period within which First Gas was required to pay the assessed liabilities. Citing Commissioner of Internal Revenue v. Metro Star Superama, Inc., the Court held that a valid assessment must not only state the facts and legal basis but must also contain a demand for payment within a prescribed period. This requirement is essential to inform the taxpayer of when the obligation becomes due and demandable. The omission of this payment deadline rendered the notices of assessment void.
Therefore, the Court upheld the cancellation and withdrawal of the Final Assessment Notices and Formal Letters of Demand dated July 19, 2004.