G.R. No. 240729, August 24, 2020
COMMISSIONER OF INTERNAL REVENUE, PETITIONER, VS. T SHUTTLE SERVICES, INC., RESPONDENT.

FACTS

On July 15, 2009, the Commissioner of Internal Revenue (CIR) issued a Letter of Notice (LN) to T Shuttle Services, Inc. (respondent) informing it of a tax discrepancy for Calendar Year (CY) 2007. A follow-up letter was sent on August 24, 2009. Due to respondent’s inaction, the CIR issued a Letter of Authority and a Notice of Informal Conference (NIC) on January 12, 2010. On March 29, 2010, the CIR issued a Preliminary Assessment Notice (PAN) assessing deficiency taxes. A Final Assessment Notice (FAN) was issued on July 20, 2010. Collection letters followed, including a Final Notice Before Seizure (FNBS). On March 20, 2013, respondent sent a letter to the Revenue District Officer (RDO) stating it was not aware of any liability, claiming the employee who received the preliminary notices was unauthorized and did not forward them, and requesting a one-month grace period. The RDO denied the request. On April 19, 2013, respondent protested the FNBS, arguing it was not liable for deficiency income tax, that as a common carrier it was VAT-exempt, that service of the NIC was invalid, and that it did not receive the PAN and FAN prior to the FNBS. A Warrant of Distraint and/or Levy (WDL) was constructively served on April 23, 2013. Respondent filed a Petition for Review with the Court of Tax Appeals (CTA) in Division on May 2, 2013. The CTA Division granted the petition, cancelling the FAN and WDL, finding a failure to prove proper service of the PAN and FAN, thus violating due process. The CTA En Banc affirmed, adding that even assuming proper service, the FAN was void for failing to prescribe a definite period for payment. The CIR filed the present petition.

ISSUE

1. Whether the CTA erred in declaring the tax assessments void for the CIR’s alleged failure to prove service of the PAN and FAN to the respondent.
2. Whether the CTA En Banc erred in ruling that the Final Assessment Notice is void for not containing a definite due date for payment.

RULING

The Supreme Court denied the petition for lack of merit.
1. On the first issue, the Court ruled that the question of whether the CIR sufficiently proved proper service of the PAN and FAN is a question of fact. The Court, in a Rule 45 petition, does not review factual questions. It recognized that the CTA’s factual findings can only be disturbed if not supported by substantial evidence or if there is a showing of gross error or abuse. The Court found no such error or abuse, as the CTA En Banc sustained the CTA Division’s finding that the CIR failed to prove the PAN and FAN were properly served and received, thus violating the due process requirement under Section 228 of the National Internal Revenue Code (NIRC) and related revenue regulations.
2. On the second issue, the Court affirmed the CTA En Banc’s alternative ruling. Citing Section 228 of the NIRC and Section 3.1.4 of Revenue Regulations No. 12-99, the Court held that a formal letter of demand and assessment notice must state a definite date for payment. The FAN and attached assessment notices issued against the respondent failed to prescribe a specific period within which to pay the deficiency taxes. This omission rendered the assessment void. The Court rejected the CIR’s argument that the period could be inferred from the fact that the assessment was already final and demandable, emphasizing that the law requires a specific deadline to be stated in the notice itself.