Commissioner of Internal Revenue v. GJM Philippines Manufacturing, Inc.
REITERATIONFacts
The Antecedents: GJM Philippines Manufacturing, Inc. (GJM) filed its 1999 Annual Income Tax Return on April 12, 2000. Its ownership later transferred to Luen Thai Overseas Limited in December 2001. GJM informed the BIR of its change of address from Makati to Rosario, Cavite, effective April 29, 2002, and its tax registration was confirmed to be transferred to Revenue District Office (RDO) No. 54. On October 18, 2002, the BIR sent a letter of informal conference regarding an investigation on GJM's 1999 income and business tax liabilities, disclosing a deficiency tax and interest totaling P1,192,541.51 due to alleged disallowances/understatements in loading and shipment, packing expenses, salaries and wages, staff employee benefits, and fringe benefits tax. GJM refuted these findings. On February 12, 2003, the BIR issued a Pre-Assessment Notice and Details of Discrepancies. On April 14, 2003, an undated Assessment Notice was issued for a deficiency income tax of P1,480,099.29. A Preliminary Collection Letter was sent on July 25, 2003, to GJM's former Makati address. GJM claimed it did not receive the Final Notice Before Seizure sent to its Cavite address on August 18, 2003. On December 8, 2003, GJM received a Warrant of Distraint and/or Levy. GJM filed a Letter Protest on January 7, 2004, which was denied by the BIR on January 15, 2004. Procedural History: GJM filed a Petition for Review before the Court of Tax Appeals (CTA) First Division. The CTA First Division rendered a Decision on January 26, 2010, canceling and withdrawing the deficiency income tax assessment and the Warrant of Distraint and/or Levy in favor of GJM. The Commissioner of Internal Revenue (CIR) filed a Motion for Reconsideration, which was denied. The CIR then elevated the case to the CTA En Banc. On March 6, 2012, the CTA En Banc affirmed the Decision of the CTA First Division. The CIR's subsequent Motion for Reconsideration was denied. The Petition: The CIR filed the instant Petition for Review before the Supreme Court, raising issues on whether the Formal Assessment Notice (FAN) was released, mailed, and sent within the three-year prescriptive period and whether the BIR's right to assess had prescribed.
Issue(s)
Whether the Formal Assessment Notice (FAN) for deficiency income tax issued to GJM for taxable year 1999 was released, mailed, and sent within the three (3)-year prescriptive period under Section 203 of the National Internal Revenue Code (NIRC) of 1997. Whether the BIR's right to assess GJM for deficiency income tax for taxable year 1999 has already prescribed.
Ruling
The petition is denied. The Decision of the Court of Tax Appeals En Banc dated March 6, 2012, and its Resolution dated July 12, 2012, are affirmed.
Ratio Decidendi
On the issue of whether the Formal Assessment Notice (FAN) was released, mailed, and sent within the three (3)-year prescriptive period: The Court reiterated that Section 203 of the 1997 National Internal Revenue Code (NIRC) provides a three-year period for the CIR to assess internal revenue taxes, counted from the last day prescribed by law for filing the return or from the actual filing date, whichever is later. GJM filed its 1999 return on April 12, 2000, making the prescriptive period expire on April 15, 2003. While the BIR claimed the FAN was sent via registered mail on April 14, 2003, well within the period, GJM denied receiving it. The Court emphasized that when a taxpayer denies receipt of an assessment, the burden shifts to the BIR to prove actual receipt by competent evidence. The BIR failed to present the registry receipt or registry return card, and its other evidence, such as the transmittal letter and postmaster's certification, was insufficient to establish that GJM actually received the FAN. The presumption of receipt of a mailed letter is disputable and was effectively controverted by GJM's direct denial. On the issue of whether the BIR's right to assess GJM for deficiency income tax for taxable year 1999 has already prescribed: Since the BIR failed to prove that GJM received the assessment notice within the prescriptive period, the Court concluded that no valid assessment was issued. Consequently, the government's right to assess the deficiency income tax for the taxable year 1999 had already prescribed. The Court noted that while an assessment is considered made when the notice is sent within the prescribed period, the release, mailing, or sending must be clearly and satisfactorily proved, and actual receipt by the taxpayer, even if beyond the prescriptive period, is still a requirement that must be proven by the BIR if receipt is denied. The failure of the CIR to discharge its duty to present evidence of GJM's receipt of the FAN led to the conclusion that the assessment was invalid and the right to assess had prescribed.
Main Doctrine
The Bureau of Internal Revenue (BIR) bears the burden of proving by competent evidence that a taxpayer actually received an assessment notice, especially when the taxpayer denies receipt. Failure to discharge this burden means the assessment is invalid, and the government's right to assess has prescribed.