GR 157064; (August, 2006) (Digest)
G.R. No. 157064 August 7, 2006
BARCELON, ROXAS SECURITIES, INC. (now UBP SECURITIES, INC.), Petitioner, vs. COMMISSIONER OF INTERNAL REVENUE, Respondent.
FACTS
Petitioner Barcelon, Roxas Securities, Inc. filed its 1987 Annual Income Tax Return on April 14, 1988. After an audit, the Bureau of Internal Revenue (BIR) issued a deficiency income tax assessment dated February 1, 1991, disallowing certain salaries and bonuses as deductible expenses due to alleged non-withholding of taxes. The BIR claimed the Formal Assessment Notice (FAN) was sent via registered mail on February 6, 1991, but the petitioner denied ever receiving it. The first tangible action petitioner acknowledged was the service of a Warrant of Distraint and/or Levy on March 17, 1992. Petitioner protested this warrant, and after the BIR denied the protest with finality in 1998, petitioner sought recourse before the Court of Tax Appeals (CTA).
ISSUE
The core issue is whether the right of the BIR to assess the petitioner for deficiency income tax for the year 1987 had prescribed, which hinges on whether the assessment notice was validly served to toll the prescriptive period.
RULING
The Supreme Court ruled in favor of the petitioner and held that the right to assess had prescribed. The legal logic centers on the application of the prescriptive period for tax assessments and the burden of proving valid service. Under Section 203 of the National Internal Revenue Code, the BIR has three years from the last day prescribed for filing the return to issue an assessment. Petitioner’s return for 1987 was filed on April 14, 1988; thus, the assessment must be made by April 15, 1991. The BIR issued the FAN on February 1, 1991, but the petitioner denied receipt.
While a mailed letter is presumed received in the regular course of mail, this is a disputable presumption. A direct denial of receipt shifts the burden of proof to the party claiming mailing—here, the BIR—to prove that the notice was indeed mailed and received. The Court found the BIR’s evidence, consisting mainly of a machine-copied registry receipt and an unauthenticated list of mail, insufficient to constitute competent proof of mailing and receipt. The CTA, as a specialized court, found this evidence unreliable, and the Supreme Court deferred to this factual finding. Consequently, without valid proof of service, the assessment did not toll the prescriptive period. Since the Warrant of Distraint was served beyond the three-year period, the right to assess had prescribed, rendering the assessment void. The Court reinstated the CTA decision canceling the assessment.