CTA Case No. 4836 (Decision)

Repub.l"ic of th�:,, PhilippinE'S CUUF~T OF' TAi< APPEAL:; tJuezon City CHEMFIELDS, INC., C.T.A. CASE�NO. 4836 Pet.i t.j_oner, ~" PROMULGATED: - versus - APR 28 mi COMMISSIONER OF INTERNAL REVENUE, Respondent. >t - This is an asse�ssment case for alleged deficiency incorne t.a}~ aocl e~�{panded withholding tax in the amoun�t of ~385,301.21 for the fiscal year 1987. Petitioner is a domestic corporation organized in accordance with Philippine laws, with principal office at Rudgen Bldg., Shaw Boule~ard, Pasig, Metro Manila. On 1\pt-il 14, 1'388, petit.ione�r filed its Annual Income Tal-: Return for the fiscal year ending December 31, 1987. Petitioner received on December 8, 1908 a copy of the letter of authority frorn the BIR dated November 28, 1988 in its old office at Mandaluyong, Metro Manila. In a letter dated December 13, 1988, petitioner informed the BlR particularly the Revenue District Officer of Rev. Dirc~L. No. :J1, Hegiun 4�-B of it.s change of address from Mandaluyong to Pasig <Exh. "H II, p. 27, CTA Records>. 736

DECISION - C.T.A. CASE NO. 4835 -2- Unknown to the petitioner on April 18, 1<.::190, i t was assessed for alleged deficiency income tax and e;.:panded wi tl!bolcling ta)t for Ute yea I 1987 in the amount of P-385, 301. 21. The final assessment covering deficiency income tax assessment no. FAN 01-87-90 for Ji?l18,047.05 and de� iciency e>:panded withholding tax no. FAN -01-�B7 -'30 were either issued on April 2G, 1'390 and May 11, 1990, as the documents bear two dates. A:fterwhich a warrant of garnishment dated September 23, 1'3'31 was issued against petitioners bank account with Bank of Philippine Islands. Finally on July 9, 1992, petitioner was informed by the Bank of Philippine Islands, its depository bank that a Warrant of Garnishment was issued by the BIR to enforce collection of deficiency income tax and expanded withholding tax under Assessment No. FAN-1-81-90 in the amount of P385,301.21. Then, on July 31, 1992 petitioner wrote a letter to the respondent, requesting for a reconsideration of the assessment and the lifting of the warrant of garnishment <Exh. "F">. Again, in a letter dated July 31, 1992 petitioner reiterated its :request for the cancellation of the assessment and the lifting of the writ of garnishment. However, per investigation conducted by the Bureau of Internal Revenue, petitioners income tax return for 1987 reveals deficiency income and E')tpanded withholding 737 .)

DECISION �- C.T.A. CASE NO. 483b -3- taxes in the sum of ~385,301.21 which is computed as follows: DEFICIENCY INCOME TAX Net Income per investigation p 44,056,944.58 Add: Disallowed Salaries - v/o v/holding tax 192,581.08 Net taxable inco~e p 44,249,525.66 Tax due thereon Less: Tax Paid ---------------- Deficiency income tax Add: 25X surcharge p 15,487,333.98 15,419,931.00 20/. interest fr. 4-16-88 to 4-18-90 Total A1ount Due l Collectible p 67,402.98 16,850.75 33,793.32 , 118,047.05 ---------------- DEFICIENCY EXPANDED WITHHOLDING TAX , IP2,638,040.18 x lOXI Hgt. &Prof. fees 263,804.02 Security Services IP582,608.59 x lXI 5,826.09 Advertising IP127,581.08 X 1XI 1, 275.81 Rent !P209,255.67 x SXI 10,462.78 Repairs &Haintenance IP2,005,383.00 x 1Xl 20,053.83 IP134,000.00 x lOXI Director's fees , 13,400.00 Total EliT due 314,822.53 Less: Payment 167,816.02 Deficiency EWT p 147,006.51 Add: 25X surcharge 36,751.63 201. interest fr. 1-10-88 to 4-18-90 , 83,496.02 Total A10unt Due l Collectible 267,254.16 ---------------- The sole issue to be resolved in this case is whether or not petitioner was properly assessed :for deficiency income tax and expanded withholding tax. Considering the :fact that prescription to assess within the period had already set-in, discussion o:f the other issues had already become moot and academic. 738

DECISION - C.T.A. CASE NO. 4836 - 4 -� It can be deduced from the ~urn of events that no assessment was received by the petitioner as it was sent to the wrong address. Sum1oarily, there is no assessment to speak of in this case. ConsidPring the fact that petitioner failed to receive the assessment notice and the failure on the part of the :r�espondent �to conduct the re-inves~igation, evidently prescription had already set in. The tax liability involved was for the year 1987 and the three year prescriptive period commence to run on Apr�il 15, 1988 the last day when pe�ti tioner is required to file a return. Exactly on April 15, 1991, sucll action prescribes for failure to assess within the period allowed by law. It was only on July 9, 1992 that petitioner came to know of the assessment through its bank. Under the National In�ternal Revenue Code the prescriptive period for assessment if a return was filed is three years from the date the return was due (last day for filing> or was filed. In Section 268, NIRC, it is s~at.ecl that the 3-year period for purposes of assessment shall be "after the last day prescribed by law for the filing of the return". Where the return is filed beyond the period prescribed by law, the 3-year period shall be counted from the day the return was filed. A return filed before the last day prescribed by 739

DECEiiON - C.T.A. CASE NO. 4836 law for the filin9 thereof shall be cons:idered as filed on such last day. 1 nsofar as per t inen-t Sections 2E.8 and 271 of the National Internal Revenue Code is herein quoted for reference: Sec. 2GB <now 203 >. Period of Lim-itation upon assessment and col.lection. Except as provided in the succeeding section, internal revenue taxes shall be assessed within three years after the last day prescribed by law for the filing of the return, and no proceeding in court without assessment .for the collection of such ta}tes shall be begun after the expiration of such period: Provided, That in a case where a return is filed beyond the period prescribed by law, the three-year period slH.lll be coun led fr am the day the return was filed. For the purposes of this section, a return filed before the last day prescribed by law for the filing thereof shall be considered as filed on such last day. <As amended by B.P. Blg. 700> Section 271 (now 224>. Suspens.ion of running of statute. The running of the statute of limitations provided in Sections 268 and 269 on the making of assessment and the beginning of distraint or levy or a proceeding in court for collection, in respect of any deficiency, shall be suspended for the period during which the Commissioner is prohibited from making the assessment of beginning distraint or levy or a proceeding in court and for sixty days thereafter; when th~ taxpayer requests for a re--investigation which is granted by the Commissioner; when the ta:Kpayer cannot be located in the address given by him in the return filed upon which a ta>: is being assessed or collecb;~d: Provided, That if the taxpayer informs th~ Commissioner of any change in address, the statute will not be suspended; when the warrant o� distraint 74_0

DECISION - C.T.A. CASE NO. 4836 -6 - alld levy is duly servE�d upon the ta:-tpayer, h.is autho:c�izE�d representative, or a member of his household with sufficient discretion, and no property could be loca�ted; and when the ta:.:pa)�ex� is out of the Philippines. <Underscoring supplied> From this provision, i-t specifically p:covides that .�,hen the La:�:payer informs the Commissioner of any change in address, the statute of limitation will not be suspended. In the case at bar, petitioner was able to inform the Revenue District Officer, Dist. 31, Region 4- lo ctf its change o:f adell ess, so that when �the assessment was issued the w:con~1 address, there is yet no assessment to speak of. In effect the statute of limitation continues to run, it is not. deemed suspended, mainly because respondent had been properly notified of petitioner's change of address. Thus, resulting in prescription for failure to assess within the period set by law. Nor� eover, it is also noteworthy to state that petitioner's right. to due process was wantonly disregarded in this case. Citing the case of Banco Espanol "'s. Palanca, 37 Phil,. 921, it was held that in the observance of pxocedural due process, this Court is always mindful that a taxpayer being made liable with his property be given an opportunity to be heard which is one o:f its essential elements. In view of the failure of the respondent to strictly comply with the 741

DEC1!310N - C.T.A. CASE NO. 4836 -7 - procedure prescribed by law and �or �ailure of the petitioner to receive a copy of the alleged assessment, the latter was not afforded its right to be heard for it was denied the opportunity to disput~ the assessment. <BPi Data Systems CorporaL-ion [formerly Filipinas l'Janagement and Leasinf1 Services, Incl. vs. CIR, CTA Case No. 4530, Jant1ary 12, J 994). WHEREFOREr in view of the foregoing premises, petitioners assessment for deficiency income tax and expanded withholding tax {n the amount of F385,301.21 for the year 1987 is hereby cancelled. Respondent is likewise ordered to lift the warrant of garnishment on petitioners bank accounts. SD ORDERED. I ht!E K. !::~ciate GRUBA ~Tudge WE CONCUR: Leave) D. ACOSTA Pre �iding Judge AH~.I eD!EJuJVd~EJ~'YI~' ~ Associat 742

DECISION - C.T.A. CASE NO. 4836 -8- CERTIFICATION I hereby certify that ttte decision was reached after due consultation among the members of the Court of Tax Appeals in accordance with Section 13, Article VIII of the Constitution. MANUEL GRUBA Associate Judge Court of Tax Appeals 743