SHIP TO SHORE MEDICAL ASSIST, INC. v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY THIRD DIVISION SHIP TO SHORE MEDICAL CTA Case No. 10550 ASSIST, INC., Petitioner, Members: -versus- MANAHAN, Chairperson, REYES-FAJARDO, and ANGELES, JJ. COMMISSIONER OF Promulgated: INTERNAL REVENUE, "O-CT gO 202ft ..,......-- Respondent. x- - - - - - - - - - - - - - - - - - - - - - - _J_/ ; 3], - �- �~- ~- - - - - - -x RESOLUTION MANAHAN, J.: This resolves respondent's Motion for Reconsideration (Re: Decision dated June 6, 2024) filed on July 5 , 2024 ("Mot ion"),I with petitioner's Comment/ Opposition [To the Motion for Reconsideration dated 04 July 2024] filed on July 19, 2024 .2 Re spondent's Motion prays that the Court reconsider and set aside its Decision dated June 6, 2024 ("assailed Decision")3 which cancelled the assessments against petitioner for deficiency income tax, value-added tax ("VAT"), withholding tax on com pensation ("WTC") , improperly accumulated earnings tax ("IAET"), and compromise penalty for taxable year 2016. The dispositive portion of the assailed Decision reads: ACCORDINGLY, the present Petition for R e view is GRANTED. The FLD / FAN dated January 14, 2020 asse ssing petitioner of deficiency income tax, VAT, WTC, IAET, and compromise p enalty, all for taxable year 2016, in the aggregate amount of !>23,492,099.42 is CANCELLED and SET ASIDE. The CIR, his 1 Dock et- Vol. II , pp . 769-784 . 2 Dock et - Vol. II , pp . 786-80 4. ~ 3 Docket - Vol. II, pp. 749- 768 .~

RESOLUTION CTA Case No. 10550 representatives or agents, or any person acting on his behalf are ENJOINED from collecting or taking any further action on the subject assessments. SO ORDERED. In its Motion, respondent maintains that the Court has no jurisdiction over the Petition for Review since the subject tax assessments have already attained finality. Petitioner should have filed its Petition for Review within 30 days from initial receipt of the Notice ofGarnishment on February 15, 2021, not from subsequent notice thereof on May 10, 2021 nor from receipt of the second Notice ofGarnishment dated June 7 , 2021 . Respondent argues that even assuming that the Court has jurisdiction, the Petition for Re view should not have been granted on the ground that the assessment notices were not received by an authorized representative. The requirement that the recipient must be duly authorized applies only in cases of personal service. Where the assessment notice is sent through registered mail or licensed courier, the security guard can properly receive the same. In its Comment/ Opposition, petitioner contends that it is incumbent upon respondent to prove that petitioner received the Notice of Garnishment dated February 15, 2021. Respondent failed to do so. On the other hand, petitioner was able to establish that such notice was returned to sender. Petitioner stresses that it did not receive any Final Assessment Notice ("FAN") or Final Letter of Demand ("FLD"), ther eby depriving it of the opportunity to protest the assessment. Despite this procedural defect , r espondent arbitrarily issued the Notice of Garnishment. Petitioner also notes that respondent's knowledge of its new address is shown by the fact that petitioner received the Notice of Informal Conference and Preliminary Assessment Notice at such address. Petitioner avers that respondent's own guidelines prefer person a l service of assessment notices, a nd only wh en it is not 4 Docket - Vol. I, pp. 7 to 29 .~

RESOLUTION CTA Case No. 10550 possible shall the same be served by substituted service or by mail. Unlike in the cases mentioned by respondent wherein the authority of the security guard is admitted by the taxpayer, ((SG Carillo," the recipient of the FAN /FLD in this case, has no authority whatsoever. We now resolve. First, on the matter of jurisdiction, the Court finds without merit respondent's contention that the 30-day period to appeal should be reckoned from February 15, 2021. As explained in the assailed Decision, ...aside from mere allegation that petitioner received the Notice of Garnishment dated February 15, 2021 on even date, respondent did not offer any evidence to support such claim.s In the present Motion, respondent merely reiterated its allegation and did not present any new argument to convince the Court otherwise. Meanwhile, petitioner proved non-receipt of the Notice of Garnishment dated February 15, 2021 through the registry return card and testimony of Zyra Mae Oswa, Branch Manager of BPI Alfaro Branch. As to the second Notice of Garnishment dated June 7, 202 1, neither party presented evidence to prove receipt nor non-receipt thereof; hence, the Court applied the presumption that the same was received in the regular course of the mail6 and ruled that: The estimated turnaround time for registered mail to be delivered is seven (7) working days. 7 Even assuming that petitioner received the second Notice of Garnishment on the earliest possible date, i.e. the same day it was mailed, 5 Docket- Vol. II , p. 759. 6 RULES OF COURT, Rule 131 , Sec. 3. 7 Philippine Postal Corporation, Post Office Delivery Lead Time. https: / / phlpost.gov .ph/postal-office-delivery-lead-time. Accessed on April 4, 2023. -4..r... - -

RESOLUTION CTA Case No. 10550 petitioner would have had 30 days from June 7, 2021, or until July 7, 2021, within which to file its judicial appeal. As the present Petition for Review was filed on June 7, 2021, the Court properly acquired jurisdiction to entertain the case. Second, on the matter of due process, the Court finds u ntenable respond ent's con tention that the requ irem ent of d esignation and a u t h ority a p plies only in personal service. In Commissioner of Internal Revenue v. South Entertainment Gallery, Inc., 8 the Supreme Court highlighted the burden of the CIR to establish actual or con structive service of the ass essm en t on t h e taxp ayer or its duly authorized representative, even if the mode of service is through registered m a il : To prove that the FLD-DDAN was properly served on SEGI, the CIR merely presented and formally offered in evidence the registry receipt, the certification issued by the Philippine Postal Corporation, and the testimonies of Ocampo and Victoria. Their respective narrations show that Ocampo p laced th e assessm ent notice in a sealed envelope and delivered the mail matter to the Post Office of San Fernando Pampanga on January 8, 2010, while Victoria delivered the mail matter recorded as registered letter no. 44 to Ms. Rose Ann Gomez, an administrative officer of SM City Pampanga on January 13, 20 10. Victoria testified that he did not attempt to directly deliver the said mail to the SEGI's place of business. Clearly, the testimonies of Ocampo and Victoria merely proved that the FLD-DDAN was served only on an administrative officer of SM City Pampanga, who was allegedly in charge of receiving mail matters for all mall tenants like SEGI. However, their testimonies fell short in showing that the FLD-DDAN was either actually or constructively served on SEGI or its duly authorized represe ntative, as required by Sees. 3. 1.4 and 3.1.7 of RR No . 12- 99. s G.R. No. 22376 7, April 24, 2023 [Per C.J. Gesmundo, First Division] . ~

RESOLUTION CTA Case No. 10550 The BIR cannot relieve itself of its duty to ensure receipt of the assessment notices by the taxpayer or its duly authorized representative through the mere expedient of resorting to service by mail. Again, unless the recipient possesses a certain degree of authority or discretion, he or she would not grasp the gravity of an assessment notice and its potential financial impact on the taxpayer.9 Due process demands that service of the assessment notice, regardless of the mode thereof, be made only on the taxpayer or its authorized representative. On this score, we quote the pertinent portion of the assailed Decision: In this case, although the records establish that the assessment notices were mailed via LBC and that they were received by a certain "SG Carillo," no evidence was adduced by respondent to prove that SG Carillo was authorized to receive assessment notices on behalf of petitioner. Respondent's mere presentation of the official receipt issued by LBC with the notation "Released to authorized rep. SG Carillo 1/17/20" does not suffice to show that he satisfied the due process mandate under Section 228 of the NIRC that he shall notify the taxpaye r of his findings. While it is true that under RR No. 18-2013, the official receipt issued by the professional courier company containing identifiable details of the transaction constitute sufficient proof of mailing, this remains a disputable presumption subject to controversion. A direct denial of receipt shifts the burden upon the party favored by the presumption to prove that the mailed matter was indeed received by the addressee. Respondent therefore should have authenticated the notation appearing on the official receipt. However, not only did he fail to do so; as a matter of fact, he expressly admitted that the recipient is not an authorized representative of petitioner. 9 Mannasoft Technology Corporation v. Commissioner of Internal Revenue, G.R. No. 244202 . July 10, 2023 [Per J. Dimaampao , Third Division] . .._......---

RESOLUTION CTA Case No. 10550 ACCORDINGLY, the respondent's Motion for Reconsideration (Re: Decision dated June 6, 2024) filed on July 5, 2024 is DENIED for lack of merit. SO ORDERED. C~' r. /AC............- - - - WE CONCUR: cATHERINE T. MANAHAN Associate Justice ~ ~ /f ~~~ - ~~~ MARIAN IvY{~-. REY~~FAJ~RDO Presiding Justice ff_c HENRY ANGELES Associate Justice