CTA Case No. 4593 (Resolution)

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY WILSON E. LIIIPO. Petitioner, - versus - C.T.A. CASE NO. 4593 COIIIIISSIONER OF INTERNAL REVENUE. Respondent. X- - - - - - - - - - - X R E S 0 L UT I 0 K Respondent assails the jurisdiction � o:f this Court over the instant case, on the ground that the assessment subject matter thereo:f has become :final and unappealable, by reason o:f petitioner's :failure to protest the same in accordance with the provisions o:f Section 229 o:f the Tax Code. We :first put :forth an abbreviated presentation o:f the :facts o:f the case which relate directly to the instant motion to dismiss. The BIR Records 1 show that on December 19, 1986, respondent issued Assessment/Demand Notice No. 32-48-05-168838-81 against petitioner and his 1 5eP BJR Records, p. 19.

RESOLUTION C.T.A. CASE NO. 4593 - 2- wife for the payment of P2, 351, 000. 00 in alleged deficiency income taxes due, exclusive of interest and surcharge. Respondent alleges that: "xxx. Notwithstanding of said demand by the Bureau of Internal Revenue upon petitioner to pay the tax liability, the latter failed and/or neglected to pay the same <sic>. Neither petitioner has made effort to request for reconsideration, protest or contest said tax assessment in accordance with Section 229 of the National Internal Revenue Code, as amended <sic>. "xxx xxx xxx." CTA Records, <Motion To Dismiss, p. 3; p. 19 > On July 22, 1989, respondent's collection agents served upon petitioner and his wife Warrant of Distraint Of Personal Property No. N-A2205-89 and Warrant Of Levy On Real Property No.N-A2204-89, both dated May 3, 1989. Both warrants were issued to enforce collection of petitioner's and his wife's alleged tax liability under Assessment/ Demand Notice No.32-4B-05-168838-81. On different dates in February and April 1990, separate warrants of garnishment were issued by respondent against the bank deposits of petitioner and his wife in the United Coconut Planters Bank, Philippine Commercial International Bank, Prudential Bank, and the Bank of the Philippine Islands, respectively.

.. RESOLUTION C.T.A. CASE NO. 4593 -3- Petitioner, through counsel, requested for the cancellation and lifting of the May 3, 1989 warrants of distraint and levy through a letter, dated May 7, 1990 <and received by the BIR's Collection Division on May 10, 1990>, addressed to respondent through the BIR's Assistant Commissioner for Collection. Said letter reads, in part, thus: "xxx XXX XXX "We write on behalf of our abovenamed clients <petitioner herein and his wife> in relation to your _ aforementioned alleged tax assessment and the warrants of levy on real property and of distraints of personal property which you issued against our clients to enforce the said assessment. "Our clients have not received your assessment, and we have not been able to see one in your files. There could have been some error in this matter, and we request you to lift the warrants while you re-examine your files. "An assessment fixes and determines the tax liability of a taxpayer and as soon as it is served, an obligation arises on the part of the taxpayer concerned to pay the amount assessed and demanded xxx. The assessment notice must be sent to the proper taxpayer, otherwise the assessment produces no effect and does not become final and executory xxx. The tax collector has the duty to show the release, mailing, or sending of the assessment notice by clear and satisfactory proofs. Mere notations made without the taxpayer's intervention, notice or control, without adequate supporting proofs, cannot suffice; otherwise, taxpayer would be at the mercy of the revenue offices, without adequate protection or defense. The fact that the

RESOLUTION C.T.A. CASE HO. 4593 -4- taxpayer acknowledged receipt of a second final notice is no proof that he received the first notice xxx. "In view of the foregoing, we request that the warrants of levy on real property and of distraint of personal property you issued against our clients be cancelled and lifted immediately. In this regard, please be advised that your continued restraints upon our clients' property, particularly their bank accounts, have caused them undue and tremendous financial prejudice and social humiliation. We reserve our clients' right to seek redress for their grievances. "xxx xxx xxx" <BIR Records, pp. 58-59) Respondent replied through a letter addressed to petitioner's counsel, dated January 29, 19912 and received by petitioner on March 6, denying petitioner's protest/request for cancellation and lifting of warrants, thus: "xxx XXX XXX "With reference to your letter dated May 7, 1990, requesting for the lifting of the Warrant of Garnishment issued against your client Mr. Wilson E. Limpo on the ground that the assessment notices have not been received by your client, please be informed that the records of this Office show that the assessment notices were actually issued against your client last December 19, 1986. As there are no compelling legal reasons to warrant the lifting of the Writ of Garnishment, this Office reiterates the 2 BIR Records, p. 77. 3 Annex 'D', Petition for Review; CTA Records, p. 10.

RESOLUTIOH C.T.A. CASE HO. 4593 -5- execution of the said Writ against your client. "Further, it is clear that the validity of the assessment remains unassailable considering that your ~lient has deducted the losses or expenses of one line of business against the other line of business by your client, which is a clear violation of Section 30 of the Tax code as amended which provided for the non-deduction of such losses or expenses in one line of business against the other line of business of any taxpayer <sic>. "Accordingly, it is therefore, requested that you urge your client to pay the deficiency income tax of P3,546,718.00 for 1981 within ten <10> days from receipt hereof, otherwise, this Office will reiterate collection thru <sic> summary remedies provided by law. "This constitutes our final decision on the matter. "xxx XXX x~x" On April 4, 1991, the present action was instituted by petitioner when he filed his Petition For Review with this Court. Under Section 229 of the Tax Code, petitioner had thirty days from receipt o:f the assessment to protest the same administratively. Otherwise, the same would become final and unappealable. Respondent, in the instant motion to dismiss, contends that: "As early as July 3, 1986, respondent Commissioner o:f Internal Revenue by way of pre-assessment notice xxx informed the petitioner about his tax

RESOLUTION C.T.A. CASE NO. 4593 - 6- liabilities �or the year 1983. Petitioner was invited �or a conference with the respondent in the morning o� July 29, 1986 to make any objection to the proposed assessment. Therea:fter, on December 19, 1986 respondent Commissioner o� Internal Revenue issued against petitioner Assessment/Demand Notice No. 32-43-05-168838-81 xxx and sent to the petitioner by mail at his address stated in his income tax return for the year 1983 xxx, requiring petitioner to pay the amount o� P3,546,718.60 as deficiency income tax �or the said year. Notwithstanding o� said demand by the Bureau o� Internal Revenue, upon petitioner to pay the tax liability, the latter �ailed and/or neglected to pay the same <sic>. Neither petitioner has made e��ort to request �or reconsideration, protest or contest said tax assessment in accordance with Section 229 o:f the National Internal Revenue Code, as amended <sic>. "xxx XXX XXX "The �ailure o� the petitioner to �ile a protest as prescribed in the above-mentioned provision o� the Tax Code makes the assessment �inal, executory and demandable and the petitioner is �orever barred �rom disputing the assessment. " <Motion To Dismiss, pp. 1-3; CTA Records, pp. 17-19> Petitioner opposes respondent's motion to dismiss mainly on the strength o� the Supreme Court decision in the case o� Kava vs. Co��issioner o:f Interna1 Revenue, 13 SCRA 104 <1965>, arguing thus: "In Nava v. Comm'r o:f Int. Rev. xxx which involved similar �actual setting, the Supreme Court held that: xxx, respondent utterly �ailed to prove by substantial evidence that the assessment

RESOLUTION C.T.A. CASE HO. 4593 -7- notice xxx and the other supposed written demand letters or notices subsequent thereto were in �act issued or sent to taxpayer Nava. bar. xxx xxx. llere notations �ade without the taxpayer's intervention. notice, or control.. without adequate supporting evidence. cannot su.f.fice; otherwise, the taxpayer voul.d be at the �ercy o.f the revenue o.f.fices <sic>.._ vithout adequate protection or de.fense. xxx "Respondent �ailed to adduce clear and satis�actory evidence to prove the issuance o� the assessment notice. More importantly, on 27 December 1988, respondent sent petitioner "Preliminary Notice o� Assessment" �or 1983 taxable year xxx. The preliminary notice clearly states: This is HOT a statutory notice o� de�iciency. However, upon expiration o� the 10 day a�ter receipt thereo� <sic>, xxx the report shall be submitted �or approval by higher authorities, and the statutory notice vil.J. then be sent to you as provided by J.avs. xxx "The �oregoing xxx clearly negates respondent's claim that he had earlier issued an assessment notice to petitioner �or taxable year 1983. Respondent contended �urther: Arguendo, that petitioner has not received the assessment/demand notice issued against him, the service o� the warrants indicates that an assessment has become �inal and

RESOLUTIOH C.T.A. CASE HO. 4593 -8- shall encourage [him] to �ile a protest, but which he �ailed to do. "The a�orecited Nava decision has rejected a similar argument, thus: The �act that in Exhibit "E" Nava acknowledged receipt o� the second �inal notice personally delivered to him is no proo� that he received the �irst notice by mail. There is a di��erence between receiving a second �inal notice and receiving a �inal notice �or the second time. xxx "Warrants o� distraint and levy are administrative measures to en�orce tax assessments xxx and the rule is recognized that these warrants are proo�s o� the �inality o� the assessment, except when protest has been seasonably �iled xxx. Clearly, the said warrants do not, and cannot, substitute �or the tax assessments. Indeed, the principle is well settled that tax assessments cannot depend on mere presumption xxx." <Opposition To Motion To Dismiss, pp. 1- 3; CTA Records, pp. 26-28> We �ind merit in respondent's motion to dismiss. We �ind that the portions o� the Nava decision quoted by petitioner in his "Opposition To Motion To Dismiss" are not in point in the case at bar. The �actual scenario behind the said ruling is di��erent �rom the �acts o� the instant case. In Nava, the Supreme Court �ound that: "xxx Petitioner Nava denied having received the original copy o� said notice. The Revenue commissioner, on the

RESOLUTION C.T.A. CASE HO. 4593 - 9- other hand, presented a witness <Mr. Pablo Sangil, an employee [clerk l o:f the B. I. R. ) who attempted to establish that the original copy thereo:f was actually issued or sent on March 30, 1955. This witness, however, disclaimed having personal knowledge o:f its issuance or release on said date either by mail or personal delivery because, according to him, he was assigned in the income tax section o:f the Bureau o:f Internal Revenue in October, 1956 only. Sangil also declared that there is no notation whatsoever in said :file copy xxx, nor even a slip o:f paper attached to the records, to show that the original copy o:f said exhibit was ever actually issued or sent to the taxpayer. He even admitted that he had no hand in the preparation or sending o:f written notices or demand letters o:f the Bureau o:f Internal Revenue to the taxpayers, his duties being merely to keep the dockets o:f taxpayers pertaining to income tax, to post and transmit papers to the other branches o:f the Bureau :for action, and to keep letters o:f taxpayers, memorandum and other o:f:ficial matters. Respondent presented another witness, Mr. Eliseo B. Fernandez, whose duties as record clerk o:f the Records Control Section o:f the Bureau o:f Internal Revenue since 1957 xxx, are to send mail and to keep a record book o:f letters which are mailed to the taxpayers. Inso:far as the testimony o:f the witness is concerned, he only declared as to the :fact that there appears in his record book a note xxx that a letter dated March 15, 1957 was mailed by special delivery with return card to Gonzalo P. Nava. He admitted, however, that he was not the one who prepared such entry in the record book. What was the nature o:f the letter does not appear; at any rate, it was mailed beyond the 5-year limitation period." <Underscoring Ours>

RESOLUTIOH C.T.A. CASE HO. 4593 - 10 - Petitioner claims that he never received the assessment/demand notice o� respondent covering his alleged 1983 income tax de�iciency. However, respondent has presented proo� in the �orm o� a "certi�ied xerox copy �rom the duplicate o� transmittal o� mailing" signed by the acting Assistant Chie� o� the Administrative Branch o� the BIR's Revenue Region No. 4B in Quezon City, 4 that the said assessment/demand notice was sent to petitioner at the same address indicated in his income tax return dated April 16, 1984.e Unlike in the case, the said uncontroverted6 transmittal list, which enjoys the presumption o� having been executed in the regular per�ormance o� o��icial duty, shows that an assessment/demand covering the amounts o� P3, 546, 718. 60 and P300. 00 was sent to petitioner and his wi�e at 23 J. Luna St., SLV, Makati, MM, through registered mail with Registry Receipt 4 Exhibit '7'; CTA Records, p. 47. 5 Exhibit '1'; BIR Records, p. 3. 6 In his 'Objections To Fonal Offer', petitioner adaitted 'the existence of said docuaent' and aerely objected �to tbe purpose for which it was offered� for the reason that �tbe face of tbe said docuaent shows tbat the assessaent allegedly aailed was for the taxable year 1981, therefore irrelevant and iaaaterial to the pending incident. � <CTA Records, pp. 49-50>

RESOLUTION C.T.A. CASE NO. 4593 - 11 - No. 8756 on January 19, 1987"7 , well within the �ive-year period within which respondent may assess petitioner under the Tax Code. That, as petitioner points out, the transmittal list indicates that the assessment/demand letter sent to petitioner and his wi�e on January 19, 1987 covers tax de�iciencies �or the year 1981, and not 1983, is o� no moment, since the transmittal list was o��ered in evidence to show that the assessment/demand notice �ound in the BIR Records o� this case was actually sent to petitioner and his wi�e. It was not o�:fered to prove the year covered by said notice. With this prescribed purpose in mind, the Court notes that the entries in the transmittal list corresponding to petitioner <that is, the addressees, the address and, especially, the amount covered by the assessment> are exactly the same as those in the assessment/demand letter which petitioner claims never to have received. This, the Court �inds to be clear proo� that the transmittal list entry respecting "Wilson E. Limpo & Wi�e" evidences the registered mailing o� the very assessment/demand letter �ound in the BIR Records o� this case. There�ore, unlike in the Nava case, there is, in 7 Exhibit '7-b'; CTA Records, p. 47.

RESOLUTION C.T.A. CASE NO. 4593 I - 12 - the case at bar, in fact, proof submitted to the Court of the sending/transmittal of the allegedly missing notice to the petitioner through registered mail. Having found, therefore, that respondent's Exhibit "3" was actually sent to petitioner via registered mail on January 19, 1987, then this Court deems petitioner to have received the same way before May 10, 1990 <when respondent received petitioner's counsel's letter protesting the issuance of the warrants of distraint and levy against petitioner and his wife), by virtue of the disputable presumption provided for in Section 1<v>, Rule 131 of the Revised Rules of Court: "<v> That a letter duly directed and mailed was received in the regular course of the mail. " Consequently, We find that the thirty-day period in which petitioner is allowed under the Tax Code to protest the subject assessment has long elapsed without petitioner filing the said protest. Furthermore, We find that, even if petitioner's May 10, 1990 protest letter against the warrants of distraint and levy, dated May 3, 1989, is to be considered as petitioner's protest to the subject tax assessment, We find that said protest was filed beyond the thirty-day prescriptive period under

RESOLUTIOH C.T.A. CASE HO. 4593 - 13 - Section 229 o� the Tax Code. Therefore, We find that the said assessment has become final and unappealable to Us. WHEREFORE, finding the assessment subject matter o� the instant petition for review to have become final and unappealable by reason o� petitioner's failure to protest the same within the period prescribed by the Tax Code, the Court hereby resolves to GRAHT respondent's instant motion to dismiss. The instant petition �or review is hereby DISJIISSED. SO ORDERED. Quezon City, Metro Manila, November 26, 1992. <(~Q~ ~ GRUBA Judge ERHESTO D. ACOSTA Presiding Judge ,._' 1/._ ...!.j%f RAJIOH 0. DE VE A Associate Ju e I L-