Commissioner of Internal Revenue v. South Entertainment Gallery
REITERATIONFacts
The Antecedents: South Entertainment Gallery, Inc. (South Entertainment), a corporation operating bingo games under PAGCOR authority, was assessed by the Commissioner of Internal Revenue (CIR) for deficiency income tax and value-added tax for the taxable year 2005. The CIR issued a Formal Letter of Demand and Assessment Notice, followed by a Preliminary Collection Letter detailing tax liabilities amounting to P4,067,264.18. South Entertainment contested these liabilities, claiming exemption and asserting prior payment of withholding tax deficiencies. Despite this, the CIR issued a Warrant of Distraint and/or Levy. Procedural History: South Entertainment requested the cancellation of the Warrant of Distraint and Levy, asserting non-receipt of a Final Assessment Notice and its tax-exempt status. After receiving a letter reiterating the tax collection, South Entertainment filed a Petition for Review with the Court of Tax Appeals (CTA), arguing the warrant was premature and invalid due to lack of a formal assessment notice. The CTA Second Division granted the petition, cancelling the assessment and ordering the withdrawal of the warrant. The CIR's motion for reconsideration was denied. The CTA En Banc affirmed this decision, ruling that the CIR failed to prove service of the Final Assessment Notice and that South Entertainment's petition was timely filed, reckoning the appeal period from a later communication from the CIR. The Petition: The Commissioner of Internal Revenue filed a Petition for Review on Certiorari under Rule 45 of the Rules of Court, assailing the CTA En Banc's decision. The petitioner argues that the CTA erred in asserting jurisdiction, contending that South Entertainment's petition for review was filed 282 days after receiving the Warrant of Distraint and Levy, which was 252 days beyond the 30-day reglementary period to appeal. The petitioner maintains that the Warrant of Distraint and Levy constituted a final denial of any protest, and thus the appeal was time-barred. Furthermore, the petitioner challenges the CTA's finding that the Final Assessment Notice was not properly served, presenting testimonial and documentary evidence to prove its due mailing and receipt by an authorized representative, thereby establishing the validity of the assessment and the timeliness of the CIR's actions.
Issue(s)
Whether the Court of Tax Appeals committed a reversible error when it ruled that it had jurisdiction over respondent's petition for review. Whether the Court of Tax Appeals erred in affirming the Second Division's ruling that the petitioner failed to prove the sendee of the Final Assessment Notice to respondent.
Ruling
The petition is GRANTED. The January 4, 2016 Decision and July 22, 2016 Resolution of the Court of Tax Appeals En Banc are REVERSED and SET ASIDE. Respondent's Petition for Review is DISMISSED for being time-barred.
Ratio Decidendi
On the issue of jurisdiction and the timeliness of the appeal: The Court held that the warrant of distraint or levy issued by the Commissioner of Internal Revenue (CIR) constitutes a constructive and final denial of the respondent's belated protest. Therefore, the 30-day period to appeal to the Court of Tax Appeals (CTA) should be reckoned from the date of receipt of the warrant. In this case, the respondent received the Warrant of Distraint and Levy on June 22, 2010. The respondent should have filed its appeal to the CTA within 30 days from this date, which would be on or before July 22, 2010. However, the respondent filed its petition for review on March 31, 2011, which is 282 days after receiving the warrant. This belated filing clearly placed the petition outside the reglementary period, divesting the CTA of its jurisdiction to hear and decide the case. The Court emphasized that the right to appeal is a statutory right that may be lost if not exercised within the prescribed period. The respondent's subsequent request for cancellation and withdrawal of the warrant did not extend the period to appeal. On the issue of the receipt of the Final Assessment Notice (FAN): The Court found that the CIR presented sufficient testimonial and documentary evidence to prove that the FAN was properly served upon the respondent through registered mail. The evidence included the testimony of the BIR personnel who prepared and mailed the FAN, the registry receipt, and the return card signed by Brian David, a warehouse assistant authorized to receive mail for tenants of SM City Pampanga. The Court reiterated the presumption of receipt under Rule 131, Section 3(v) of the Rules of Court, which states that a letter duly directed and mailed is presumed to have been received in the regular course of mail. This presumption is disputable but can only be overcome by indubitable evidence. The respondent's bare denial of receipt was insufficient to overcome this presumption, especially since the mail was not returned to the sender. Furthermore, the respondent's failure to raise the issue of non-receipt of the FAN in its reply to the Preliminary Collection Letter, and instead raising it only after receiving the Warrant of Distraint and Levy, suggested an admission by silence or estoppel. The Court noted that the respondent's belated denial did not overcome the evidence presented by the CIR.
Main Doctrine
The warrant of distraint or levy issued by the Commissioner of Internal Revenue constitutes a constructive and final denial of a taxpayer's belated protest, from which the 30-day period to appeal to the Court of Tax Appeals should be reckoned. A petition for review filed after this period is time-barred, and the Court of Tax Appeals should dismiss it for lack of jurisdiction. Furthermore, the presumption of receipt of a mailed letter, supported by evidence of mailing and non-return, can only be overcome by indubitable evidence of non-receipt.