GR 227544; (November, 2017) (Digest)
G.R. No. 227544 November 22, 2017
COMMISSIONER OF INTERNAL REVENUE, Petitioner, vs. TRANSITIONS OPTICAL PHILIPPINES, INC., Respondent.
FACTS
The Bureau of Internal Revenue (BIR) issued a Letter of Authority on March 23, 2006, authorizing an examination of respondent Transitions Optical Philippines, Inc.’s books for taxable year 2004. Two Waivers of the Defense of Prescription were subsequently executed, extending the assessment period first to June 20, 2008, and then to November 30, 2008. The waivers were signed by the company’s Finance Manager and BIR revenue officers. A Preliminary Assessment Notice was issued on November 11, 2008, followed by a Final Assessment Notice (FAN) and Formal Letter of Demand dated November 28, 2008, demanding deficiency taxes for 2004. Transitions Optical protested, arguing the assessment had prescribed. The Commissioner of Internal Revenue (CIR) contended the waivers validly extended the period and that the respondent was estopped from questioning them, as the extensions were necessitated by the company’s own delays in submitting audit documents.
ISSUE
Whether the deficiency tax assessment against Transitions Optical for the year 2004 was issued within the prescriptive period.
RULING
The Supreme Court denied the CIR’s petition and affirmed the cancellation of the assessment. The Court applied the principle of estoppel against the taxpayer, holding that Transitions Optical was barred from questioning the authority of its Finance Manager to sign the waivers because it failed to raise this objection at the earliest opportunity and benefited from the extensions by gaining more time to comply with audit requirements. However, the assessment was still declared void. The CIR failed to prove that the FAN was issued and served within the extended period ending November 30, 2008. The FAN was dated November 28, 2008, but the registry receipt showed it was mailed only on December 2, 2008. Service by mail is deemed complete upon mailing. Since the mailing occurred after the agreed-upon deadline, the assessment was issued beyond the prescriptive period. The Court emphasized that the three-year period for assessment, extendible by a valid waiver, is mandatory and jurisdictional. An assessment issued after the expiration of the period, whether original or extended, is void. Thus, despite the application of estoppel against the taxpayer’s procedural challenge, the substantive failure of the CIR to act within the prescribed timeframe rendered the assessment invalid.