G.R. No. 221780. March 25, 2019
COMMISSIONER OF INTERNAL REVENUE, PETITIONER, VS. V.Y. DOMINGO JEWELLERS, INC., RESPONDENT.

FACTS

The Bureau of Internal Revenue (BIR) issued a Preliminary Assessment Notice (PAN) against V.Y. Domingo Jewellers, Inc. for deficiency taxes for 2006. The taxpayer filed a request for reinvestigation. Subsequently, the taxpayer received a Preliminary Collection Letter (PCL) from the Revenue District Office, which referenced Assessment Notice numbers and demanded payment, inviting the taxpayer to settle the assessment. The taxpayer then requested and received certified copies of the formal Assessment Notices. Without filing an administrative protest against these Assessment Notices, V.Y. Domingo directly filed a Petition for Review before the Court of Tax Appeals (CTA) in Division, seeking to nullify the assessments for being issued beyond the prescriptive period.
The Commissioner of Internal Revenue (CIR) moved to dismiss the petition for lack of jurisdiction, arguing that the CTA’s jurisdiction is appellate and attaches only upon receipt of a decision or a denial of a protest by the CIR on a disputed assessment. The CTA First Division granted the motion, dismissing the petition. It ruled that the assessments had attained finality due to the taxpayer’s failure to administratively protest them, leaving the CTA without jurisdiction. The CTA En Banc reversed, holding that the taxpayer was confused by the procedure since it did not receive a Formal Letter of Demand (FAN) but only a PCL, and thus could not be faulted for not filing a protest. It remanded the case for further proceedings.

ISSUE

Whether the CTA Division acquired jurisdiction over V.Y. Domingo’s direct appeal of the Assessment Notices without first filing an administrative protest with the CIR.

RULING

No, the CTA Division did not acquire jurisdiction. The Supreme Court reversed the CTA En Banc and reinstated the CTA First Division’s dismissal. The Court reiterated the doctrine of hierarchy of courts and the nature of the CTA’s jurisdiction. The CTA is a court of special appellate jurisdiction over tax matters. Under Section 7 of Republic Act No. 1125, as amended, its jurisdiction over tax disputes is triggered by an appeal from the decision or inaction of the CIR on a disputed assessment. A disputed assessment arises only after the taxpayer files a valid protest against a Formal Letter of Demand and Assessment Notice.
The Court emphasized that the Assessment Notices received by V.Y. Domingo were the equivalent of a Final Assessment Notice (FAN) or Formal Letter of Demand. The Preliminary Collection Letter (PCL) did not alter this fact; it was merely a collection reminder. The legal obligation to administratively protest the FAN within 30 days to prevent finality is mandatory. By not filing a protest, V.Y. Domingo allowed the assessments to become final, executory, and demandable. Consequently, the subject of its petition was an unprotested, final assessment, not an appealable “decision” of the CIR. The CTA, therefore, had no jurisdiction to entertain the direct petition. The proper recourse for a taxpayer who fails to protest is to pay the tax and file a claim for refund, not a direct appeal to the CTA questioning the assessment’s validity. The Court clarified that alleged procedural defects, like non-receipt of a FAN, do not excuse non-compliance with the mandatory protest requirement, as the taxpayer had actual knowledge of the assessments from the documents it procured.