G.R. No. 185371.  December 8, 2010.* which the assessment is made.

ich the assessment is made. The law imposes a substantive, not The CTA-En Banc affirmed in toto the decision of its Second
COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. METRO merely a formal, requirement. To proceed heedlessly with tax Division (CTA-Second Division) in CTA Case No. 7169 reversing the
STAR SUPERAMA, INC., respondent. collection without first establishing a valid assessment is evidently February 8, 2005 Decision of the CIR which assessed respondent
violative of the cardinal principle in administrative investigations — that Metro Star Superama, Inc. (Metro Star) of deficiency value-added tax
Taxation; Court of Tax Appeals; Appeals; Court will not lightly taxpayers should be able to present their case and adduce supporting and withholding tax for the taxable year 1999.
set aside the conclusions reached by the Court of Tax Appeals (CTA) evidence.
which by the very nature of its functions has accordingly developed an Based on a Joint Stipulation of Facts and Issues 3 of the parties,
exclusive expertise on the resolution unless there has been an abuse Same; Same; The sending of a Preliminary Assessment Notice the CTA Second Division summarized the factual and procedural
or improvident exercise of authority.—The general rule is that the (PAN) to taxpayer to inform him of the assessment made is but part of antecedents of the case, the pertinent portions of which read:
Court will not lightly set aside the conclusions reached by the CTA the due process requirement in the issuance of a deficiency tax
which, by the very nature of its functions, has accordingly developed assessment, the absence of which senders nugatory any assessment FACTS:
an exclusive expertise on the resolution unless there has been an made by the tax authorities.—It is clear that the sending of a PAN to
abuse or improvident exercise of authority. In Barcelon, Roxas taxpayer to inform him of the assessment made is but part of the “due Metro Star Superama, Inc. is a domestic corporation duly organized
Securities, Inc. (now known as UBP Securities, Inc.) v. Commissioner process requirement in the issuance of a deficiency tax assessment,” and existing by virtue of the laws of the Republic of the Philippines.
of Internal Revenue, the Court wrote: Jurisprudence has consistently the absence of which renders nugatory any assessment made by the
shown that this Court accords the findings of fact by the CTA with the tax authorities. The use of the word “shall” in subsection 3.1.2 January 26, 2001 – RD of BIR RR No. 10, Legazpi City, issued
highest respect. In Sea-Land Service Inc. v. Court of Appeals  [G.R. describes the mandatory nature of the service of a PAN. The authority to RO Daisy G. Justiniana to examine Metro Star Superama,
No. 122605, 30 April 2001, 357 SCRA 441, 445-446], this Court persuasiveness of the right to due process reaches both substantial Inc.’s books of accounts and other accounting records for income tax
recognizes that the Court of Tax Appeals, which by the very nature of and procedural rights and the failure of the CIR to strictly comply with and other internal revenue taxes for the taxable year 1999.
its function is dedicated exclusively to the consideration of tax the requirements laid down by law and its own rules is a denial of
problems, has necessarily developed an expertise on the subject, and Metro Star’s right to due process. Thus, for its failure to send the PAN September 26, 2001 - OIC of BIR Legal Division issued an
its conclusions will not be overturned unless there has been an abuse stating the facts and the law on which the assessment was made as Indorsement dated informing Revenue District Officer of Revenue
or improvident exercise of authority.  Such findings can only be required by Section 228 of R.A. No. 8424, the assessment made by Region No. 67, Legazpi City to proceed with the investigation based
disturbed on appeal if they are not supported by substantial evidence the CIR is void. on the best evidence obtainable preparatory to the issuance of
or there is a showing of gross error or abuse on the part of the Tax assessment notice, for Metrostar’s failure to comply with several
Court. In the absence of any clear and convincing proof to the Same; Same; While taxes are the lifeblood of the government, requests for the presentation of records and Subpoena Duces Tecum.
contrary, this Court must presume that the CTA rendered a decision the power to tax has its limits in spite of all its plenitude.—It is an
which is valid in every respect. elementary rule enshrined in the 1987 Constitution that no person November 8, 2001, RDO Socorro O. Ramos-Lafuente issued a
shall be deprived of property without due process of law. In balancing Preliminary 15-day Letter stating that a post audit review was held and
  Same; Assessment; If the taxpayer denies ever having the scales between the power of the State to tax and its inherent right it was ascertained that there was deficiency value-added and
received an assessment from the Bureau of Internal Revenue (BIR), it to prosecute perceived transgressors of the law on one side, and the withholding taxes due from petitioner in the amount of P 292,874.16.
is incumbent upon the latter to prove by competent evidence that such constitutional rights of a citizen to due process of law and the equal
notice was indeed received by the addressee.—Jurisprudence is protection of the laws on the other, the scales must tilt in favor of the November 9, 2001 – Metrostar received the Preliminary 15-day Letter
replete with cases holding that if the taxpayer denies ever having individual, for a citizen’s right is amply protected by the Bill of Rights
received an assessment from the BIR, it is incumbent upon the latter under the Constitution. Thus, while “taxes are the lifeblood of the April 11, 2002 - Metrostar received a Formal Letter of Demand dated
to prove by competent evidence that such notice was indeed received government,” the power to tax has its limits, in spite of all its plenitude. April 3, 2002 from RDO No. 67, Legazpi City, assessing Metrostar the
by the addressee. The onus probandi was shifted to respondent to amount of P292,874.16. for deficiency value-added and withholding
prove by contrary evidence that the Petitioner received the PETITION for review on certiorari of the decision and resolution of the taxes for the taxable year 1999.
assessment in the due course of mail. The Supreme Court has Court of Tax Appeals.       
consistently held that while a mailed letter is deemed received by the    The facts are stated in the opinion of the Court. May 12, 2003 - RDO No. 67 sent a copy of the Final Notice of Seizure
addressee in the course of mail, this is merely a disputable   Office of the Solicitor General for petitioner. giving Metrostar last opportunity to settle its deficiency tax liabilities
presumption subject to controversion and a direct denial thereof shifts   Baterina, Baterina, Casals, Lozada & Tiblani  for respondent. within ten (10) [days] from receipt thereof, otherwise BIR shall be
the burden to the party favored by the presumption to prove that the constrained to serve and execute the Warrants of Distraint and/or
mailed letter was indeed received by the addressee (Republic vs. MENDOZA, J.: Levy and Garnishment to enforce collection.
Court of Appeals, 149 SCRA 351). This petition for review on certiorari under Rule 45 of the Rules of
Court filed by the petitioner Commissioner of Internal May 15, 2003 – Metrostar received the Final Notice of Seizure.
Same; Same; Section 228 of the Tax Code clearly requires that Revenue (CIR) seeks to reverse and set aside the 1] September 16,
the taxpayer must be informed that he is liable for deficiency taxes 2008 Decision1 of the Court of Tax Appeals En Banc (CTA-En Banc), February 6, 2004 - Metrostar received from RDO No. 67 a Warrant of
through the sending of a Preliminary Assessment Notice (PAN).— in C.T.A. EB No. 306 and 2] its November 18, 2008 Distraint and/or Levy No. 67-0029-23 dated May 12, 2003 demanding
Section 228 of the Tax Code clearly requires that the taxpayer must Resolution2 denying petitioner’s motion for reconsideration. payment of deficiency value-added tax and withholding tax payment in
first be informed that he is liable for deficiency taxes through the the amount of P292,874.16.
sending of a PAN. He must be informed of the facts and the law upon
Metrostar filed MR with BIR Commissioner but was denied. On the matter of service of a tax assessment, a further perusal of
our ruling in  Barcelon  is instructive,  viz.: Industrial Textile Manufacturing Co. of  the Phils., Inc. vs. CIR,
CTA Second Division – granted Metrostar’s petition for review. CTA Case 4885, August 22, 1996).” (Emphases supplied.)
“Jurisprudence is replete with cases holding that if the taxpayer The failure of the respondent to prove receipt of the assessment by
No clear showing that Metro Star actually received the alleged denies ever having received an assessment from the BIR, it is the Petitioner leads to the conclusion that no assessment was issued.
Preliminary Assessment Report dated January 16, 2002. It, incumbent upon the latter to prove by competent evidence that Consequently, the government’s right to issue an assessment for the
accordingly, ruled that the Formal Letter of Demand dated April 3, such notice was indeed received by the addressee. The onus said period has already prescribed.
2002, as well as the Warrant of Distraint and/or Levy dated May 12, probandi was shifted to respondent to prove by contrary
2003 were void, as Metro Star was denied due process evidence that the Petitioner received the assessment in the due Section 228 of the Tax Code which reads:
course of mail. The Supreme Court has consistently held that while a
CTA-En Banc – denied CIR’s petition due to lack of merit, affirmed mailed letter is deemed received by the addressee in the course of “SEC. 228. Protesting of Assessment.—When the
CTA 2nd Division in toto. mail, this is merely a disputable presumption subject to controversion Commissioner or his duly authorized representative finds that
and a direct denial thereof shifts the burden to the party favored by the proper taxes should be assessed, he shall first notify the
ISSUE: WON Metro Star was denied due process (no receipt of the presumption to prove that the mailed letter was indeed received by the taxpayer of his findings: provided, however, that a preassessment
Preliminary Assessment Report) addressee (Republic vs. Court of Appeals, 149 SCRA 351). Thus as notice shall not be required in the following cases:
held by the Supreme Court in Gonzalo P. Nava vs. Commissioner of
Is the failure to strictly comply with notice requirements prescribed Internal Revenue, 13 SCRA 104, January 30, 1965: (a) When the finding for any deficiency tax is the result of
under Section 228 of the National Internal Revenue Code of 1997 and mathematical error in the computation of the tax as appearing on the
Revenue Regulations (R.R.) No. 12-99 tantamount to a denial of due “The facts to be proved to raise this presumption are (a) that the face of the return; or
process? letter was properly addressed with postage prepaid, and (b) that
it was mailed. Once these facts are proved, the presumption is that (b)  When a discrepancy has been determined between the tax
Specifically, are the requirements of due process satisfied if only the the letter was received by the addressee as soon as it could have withheld and the amount actually remitted by the withholding agent; or
FAN stating the computation of tax liabilities and a demand to pay been transmitted to him in the ordinary course of the mail. But if one of
within the prescribed period was sent to the taxpayer? the said facts fails to appear, the presumption does not lie. (VI, (c)  When a taxpayer who opted to claim a refund or tax credit of
Moran, Comments on the Rules of Court, 1963 ed, 56-57 excess creditable withholding tax for a taxable period was determined
citing Enriquez vs. Sunlife Assurance of Canada, 41 Phil. 269).” to have carried over and automatically applied the same amount
PRINCIPLE: claimed against the estimated tax liabilities for the taxable quarter or
x x x. What is essential to prove the fact of mailing is the quarters of the succeeding taxable year; or
GR: Court will not lightly set aside the conclusions reached by the registry receipt issued by the Bureau of Posts or the Registry
CTA which, by the very nature of its functions, has accordingly return card which would have been signed by the Petitioner or its (d) When the excise tax due on exciseable articles has not been
developed an exclusive expertise on the resolution unless there has authorized representative. And if said documents cannot be paid; or
been an abuse or improvident exercise of authority. located, Respondent at the very least, should have submitted to
Barcelon, Roxas Securities, Inc. (now known as UBP Securities, the Court a certification issued by the Bureau of Posts and any (e)  When the article locally purchased or imported by an exempt
Inc.) v. Commissioner of Internal Revenue, other pertinent document which is executed with the intervention person, such as, but not limited to, vehicles, capital equipment,
“Jurisprudence has consistently shown that this Court accords the of the Bureau of Posts.  machineries and spare parts, has been sold, traded or transferred to
findings of fact by the CTA with the highest respect.  non-exempt persons.
This Court does not put much credence to the self serving
Sea-Land Service Inc. v. Court of Appeals  [G.R. No. 122605, 30 documentations made by the BIR personnel especially if they are The taxpayers shall be informed in writing of the law and the
April 2001, 357 SCRA 441, 445-446] unsupported by substantial evidence establishing the fact of mailing. facts on which the assessment is made; otherwise, the
assessment shall be void.
Court of Tax Appeals, which by the very nature of its function is Coll. of Int. Rev. vs. Bautista, L-12250 and L-12259, May 27, 1959
dedicated exclusively to the consideration of tax problems, has Nava vs. CIR, 13 SCRA 104, January 30, 1965 Within a period to be prescribed by implementing rules and
necessarily developed an expertise on the subject, and its conclusions regulations, the taxpayer shall be required to respond to said notice. If
will not be overturned unless there has been an abuse or improvident “While we have held that an assessment is made when sent within the the taxpayer fails to respond, the Commissioner or his duly authorized
exercise of authority. Such findings can only be disturbed on appeal if prescribed period, even if received by the taxpayer after its expiration, representative shall issue an assessment based on his findings.
they are not supported by substantial evidence or there is a showing this ruling makes it the more imperative that the release, mailing or
of gross error or abuse on the part of the Tax Court.  In the absence of sending of the notice be clearly and satisfactorily proved. Mere Such assessment may be protested administratively by filing a
any clear and convincing proof to the contrary, this Court must notations made without the taxpayer’s intervention, notice or control, request for reconsideration or reinvestigation within thirty (30) days
presume that the CTA rendered a decision which is valid in every without adequate supporting evidence cannot suffice; otherwise, the from receipt of the assessment in such form and manner as may be
respect.” taxpayer would be at the mercy of the revenue offices, without prescribed by implementing rules and regulations. Within sixty (60)
adequate protection or defense.” days from filing of the protest, all relevant supporting documents shall
x x x. have been submitted; otherwise, the assessment shall become final.
 by the said Office, calling for payment of the taxpayer’s deficiency tax Commissioner of Internal Revenue v. Algue, Inc.
If the protest is denied in whole or in part, or is not acted upon liability, inclusive of the applicable penalties.
within one hundred eighty (180) days from submission of documents, “Taxes are the lifeblood of the government and so should be
the taxpayer adversely affected by the decision or inaction may appeal 3.1.3 Exceptions to Prior Notice of the Assessment.—The notice collected without unnecessary hindrance. On the other hand, such
to the Court of Tax Appeals within thirty (30) days from receipt of the for informal conference and the preliminary assessment notice shall collection should be made in accordance with law as any
said decision, or from the lapse of one hundred eighty (180)-day not be required in any of the following cases, in which case, issuance arbitrariness will negate the very reason for government itself. It
period; otherwise, the decision shall become final, executory and of the formal assessment notice for the payment of the taxpayer’s is therefore necessary to reconcile the apparently conflicting interests
demandable.” (Emphasis supplied). deficiency tax liability shall be sufficient: of the authorities and the taxpayers so that the real purpose of
taxation, which is the promotion of the common good, may be
R.R. No. 12-99 of the BIR (i) When the finding for any deficiency tax is the result of achieved.
mathematical error in the computation of the tax appearing on xxx   xxx   xxx
“SECTION 3. Due Process Requirement in the Issuance of a the face of the tax return filed by the taxpayer; or
Deficiency Tax Assessment.—
(ii) When a discrepancy has been determined between the tax RULING: Yes, denied due process.
3.1 Mode of procedures in the issuance of a deficiency tax withheld and the amount actually remitted by the withholding
assessment: agent; or The Court agrees with the CTA that the CIR failed to discharge its duty
and present any evidence to show that Metro Star indeed received the
3.1.1 Notice for informal conference.—The Revenue Officer who (iii) When a taxpayer who opted to claim a refund or tax credit of PAN dated January 16, 2002. It could have simply presented the
audited the taxpayer's records shall, among others, state in his report excess creditable withholding tax for a taxable period was registry receipt or the certification from the postmaster that it mailed
whether or not the taxpayer agrees with his findings that the taxpayer determined to have carried over and automatically applied the the PAN, but failed. Neither did it offer any explanation on why it failed
is liable for deficiency tax or taxes. If the taxpayer is not amenable, same amount claimed against the estimated tax liabilities for to comply with the requirement of service of the PAN. It merely
based on the said Officer’s submitted report of investigation, the the taxable quarter or quarters of the succeeding taxable year; accepted the letter of Metro Star’s chairman dated April 29, 2002,
taxpayer shall be informed, in writing, by the Revenue District Office or or that stated that he had received the FAN dated April 3, 2002, but
by the Special Investigation Division, as the case may be (in the case not the PAN; that he was willing to pay the tax as computed by the
Revenue Regional Offices) or by the Chief of Division concerned (in (iv) When the excise tax due on excisable articles has not been CIR; and that he just wanted to clarify some matters with the hope of
the case of the BIR National Office) of the discrepancy or paid; or lessening its tax liability.
discrepancies in the taxpayer’s payment of his internal revenue taxes,
for the purpose of “Informal Conference,” in order to afford the (v) When an article locally purchased or imported by an exempt Section 228 of the Tax Code provides that the taxpayers shall be
taxpayer with an opportunity to present his side of the case. If the person, such as, but not limited to, vehicles, capital equipment, informed in writing of the law and the facts on which the
taxpayer fails to respond within fifteen (15) days from date of receipt of machineries and spare parts, has been sold, traded or assessment is made; otherwise, the assessment shall be void.
the notice for informal conference, he shall be considered in default, in transferred to non-exempt persons. Indeed, Section 228 of the Tax Code clearly requires that the taxpayer
which case, the Revenue District Officer or the Chief of the Special must first be informed that he is liable for deficiency taxes through the
Investigation Division of the Revenue Regional Office, or the Chief of 3.1.4 Formal Letter of Demand and Assessment Notice.—The sending of a PAN. He must be informed of the facts and the law upon
Division in the National Office, as the case may be, shall endorse the formal letter of demand and assessment notice shall be issued by the which the assessment is made.
case with the least possible delay to the Assessment Division of the Commissioner or his duly authorized representative. The letter of
Revenue Regional Office or to the Commissioner or his duly demand calling for payment of the taxpayer’s deficiency tax or taxes The law imposes a substantive, not merely a formal,
authorized representative, as the case may be, for appropriate review shall state the facts, the law, rules and regulations, or jurisprudence on requirement. To proceed heedlessly with tax collection without first
and issuance of a deficiency tax assessment, if warranted. which the assessment is based, otherwise, the formal letter of demand establishing a valid assessment is evidently violative of the cardinal
and assessment notice shall be void. principle in administrative investigations—that taxpayers should
3.1.2 Preliminary Assessment Notice (PAN).—If after review and be able to present their case and adduce supporting evidence.
evaluation by the Assessment Division or by the Commissioner or his The same shall be sent to the taxpayer only by registered mail or by PAN shall be sent to the taxpayer only by registered mail or by
duly authorized representative, as the case may be, it is determined personal delivery. personal delivery.
that there exists sufficient basis to assess the taxpayer for any
deficiency tax or taxes, the said Office shall issue to the taxpayer, at If sent by personal delivery, the taxpayer or his duly authorized The sending of a PAN to taxpayer to inform him of the assessment
least by registered mail, a Preliminary Assessment Notice (PAN) for representative shall acknowledge receipt thereof in the duplicate copy made is but part of the “due process requirement in the issuance of a
the proposed assessment, showing in detail, the facts and the law, of the letter of demand, showing the following: (a) His name; (b) deficiency tax assessment,” the absence of which renders nugatory
rules and regulations, or jurisprudence on which the proposed signature; (c) designation and authority to act for and in behalf of the any assessment made by the tax authorities.
assessment is based (see illustration in ANNEX A hereof). If the taxpayer, if acknowledged received by a person other than the
taxpayer fails to respond within fifteen (15) days from date of receipt of taxpayer himself; and (d) date of receipt thereof. The use of the word “shall” in subsection 3.1.2 describes the
the PAN, he shall be considered in default, in which case, a formal x x x.” mandatory nature of the service of a PAN. The persuasiveness of
letter of demand and assessment notice shall be caused to be issued the right to due process reaches both substantial and procedural rights
and the failure of the CIR to strictly comply with the requirements laid
down by law and its own rules is a denial of Metro Star’s right to due to surrender part of one’s hard-earned income to taxing authorities,
process.15 Thus, for its failure to send the PAN stating the facts While taxes are the lifeblood of the government, the power to tax every person who is able to must contribute his share in the running of
and the law on which the assessment was made as required by has its limits in spite of all its plenitude.— the government. The government for its part is expected to respond in
Section 228 of R.A. No. 8424, the assessment made by the CIR is the form of tangible and intangible benefits intended to improve the
void. It is an elementary rule enshrined in the 1987 Constitution that no lives of the people and enhance their moral and material values. This
person shall be deprived of property without due process of law. In symbiotic relationship is the rationale of taxation and should
RA No. 8424 has already amended the provision of Section 229 on balancing the scales between the power of the State to tax and its dispel the erroneous notion that it is an arbitrary method of
protesting an assessment. The old requirement of merely notifying the inherent right to prosecute perceived transgressors of the law on exaction by those in the seat of power.
taxpayer of the CIR’s findings was changed in 1998 to informing the one side, and the constitutional rights of a citizen to due process
taxpayer of not only the law, but also of the facts on which an of law and the equal protection of the laws on the other, the But even as we concede the inevitability and indispensability of
assessment would be made. Otherwise, the assessment itself would scales must tilt in favor of the individual, for a citizen’s right is taxation, it is a requirement in all democratic regimes that it be
be invalid.17 The regulation then, on the other hand, simply provided amply protected by the Bill of Rights under the Constitution. exercised reasonably and in accordance with the prescribed
that a notice be sent to the respondent in the form prescribed, and that Thus, while “taxes are the lifeblood of the government,” the power to procedure. If it is not, then the taxpayer has a right to complain and
no consequence would ensue for failure to comply with that form. tax has its limits, in spite of all its plenitude. the courts will then come to his succor. For all the awesome power of
the tax collector, he may still be stopped in his tracks if the taxpayer
The Court need not belabor to discuss the matter of Metro Star’s It is said that taxes are what we pay for civilized society. Without can demonstrate x x x that the law has not been observed.”
failure to file its protest, for it is well-settled that a void assessment taxes, the government would be paralyzed for the lack of the motive
bears no fruit. power to activate and operate it. Hence, despite the natural reluctance ——o0o——