G.R. No. 223767. April 24, 2023.
COMMISSIONER OF INTERNAL REVENUE, PETITIONER, VS. SOUTH ENTERTAINMENT GALLERY, INC., RESPONDENT.

FACTS

Respondent South Entertainment Gallery, Inc. (SEGI), a domestic corporation operating bingo games, received a Notice of Informal Conference dated May 8, 2009, assessing deficiency income tax and value-added tax (VAT) for taxable year 2007. SEGI invoked its tax-exempt status as a grantee of the Philippine Amusement and Gaming Corporation (PAGCOR). The Bureau of Internal Revenue (BIR) issued a Preliminary Assessment Notice (PAN) on September 16, 2009, and later a Formal Letter of Demand with attached Details of Discrepancies and Assessment Notice (FLD-DDAN) dated December 9, 2009. The BIR claimed the FLD-DDAN was received by SEGI on January 13, 2010. Subsequently, the BIR issued a Final Notice Before Seizure (FNBS) dated May 28, 2010, and a Warrant of Distraint and/or Levy (WDL) dated September 1, 2010. SEGI filed a Petition for Review before the Court of Tax Appeals (CTA) seeking cancellation of the WDL and declaration of non-liability for the deficiency taxes. The CTA Division initially partly granted the petition, cancelling the VAT assessment but upholding the income tax assessment. Upon SEGI’s motion for reconsideration, the CTA Division reversed itself and cancelled all assessments, finding that the BIR failed to prove valid service of the FLD-DDAN. The CTA En Banc affirmed this amended decision. The Commissioner of Internal Revenue elevated the case to the Supreme Court.

ISSUE

Whether the Court of Tax Appeals correctly ruled that the Formal Letter of Demand and Assessment Notices were invalid due to improper service, rendering the tax assessments void.

RULING

Yes. The Supreme Court denied the petition and affirmed the CTA En Banc decision. The Court held that the BIR failed to prove valid service of the FLD-DDAN upon SEGI. The evidence presented—a certification from the Office of the Postmaster and a judicial affidavit stating the FLD-DDAN was received by a certain “Rose Ann Gomez”—was insufficient. The BIR did not establish that Gomez was SEGI’s authorized representative or that the address used was SEGI’s correct address. Tax assessments must be sent to the taxpayer’s registered address or known place of business. The BIR’s use of an address different from SEGI’s registered office address without proof that it was SEGI’s known business address violated the rules. Since the FLD-DDAN was invalidly served, the assessment did not become final, executory, and demandable. Consequently, the subsequent FNBS and WDL issued to enforce the void assessment were also invalid. Strict compliance with statutory requirements for service of tax assessments is essential to protect the taxpayer’s right to due process.