FEATI UNIVERSITY, INC. v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES COUR'ff OF TAX APPEALS QUEZON CITY TkiRD DIVISION FEATI UNIVERSITY, INC., CTA CASE NO. 8659 Petz�'Itz�one0 -versus- Members: BAUTISTA, Chairperson; FABON-VICTORINO, RINGPIS-LIBAN, JJ. COMMISSIONER OF INTERNAL REVENUE ~ Promulgated: 2017 Respo dent. x--------------------------------------, ----------------------e---.--------------{-:-2----s----t-o--�-----------x DECISION RINGPIS-LIBAN, ].: The Case Before this Court is the Petition for Review flied by FEATI University, Inc. which prays for the cane llation of the assessment issued against it for alleged deficiency value-added ~ax 01AT), deficiency expanded withholding tax (EWT), and deficiency documetp.tary stamp tax (DST) for fiscal year 2007. The Facts Petitioner FEATI University, Inc. is an educational institution duly organized and existing in accordance with the laws of the Republic of the Philippines, with address at ADM Main Building, Helios cor. Palanca Sts. Quiapo, Manila, Philippines.1 the On the oInthteerrnhalanRde,vreensup~on(BdeIRnt) is the duly appointed Commissioner of Bureau of who has the power to decide disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties ~ 1 Par. 1, Joint Stipulation of Facts (JSF), docket, vol. IV, p. 2012.

DECISION CTA CASE NO. 8659 i imposed in relation thereto or othetmatters arising under the National Internal Revenue Code (NIRC) or other la s or portions thereof administered by the BIR. He holds office at the BI National Office Building, Agham Road, I Diliman, Quezon City. On November 20, 2007, theiBIR issued Letter of Authority (LOA) No. 00013705 dated November 20,1t 2007, authorizing the examination of petitioner's books of accounts an other accounting records for all internal revenue taxes for the period from J ne 1, 2006 to May 31, 2007.2 I t On June 27, 2010, petition1r received from the BIR-Revenue District Office (RDO) No. 32 a Notice o~ Informal Conference dated May 31, 2010, relative to its proposed findings petitioner's alleged deficiency taxes for fiscal year 2007. The notice states at after the audit/review conducted by the examiners, petitioner was found t be liable for deficiency VAT, EWT, and DST in the total amount ofP19,37$,S07.33.3 i I I On June 10, 2011, petitionet received a Preliminary Assessment Notice (PAN) dated June 7, 2011 for defif:iency VAT, EWT and DST amounting to P21,305,147.00. 4 I ! Subsequently, on Decemberl14, 2011, petitioner received a Final Notice Before Seizure (FNBS) dated D~cember 8, 2011, demanding payment of deficiency VAT, EWT, and DST for fiscal year 2007 in the total amount of P21,969,502.22.5 ! Petitioner ftled on Decembet 23, 2011 a letter-reply dated December 22, 2011 to the FNBS6, to which theiBIR-RDO No. 32 replied, noting that the Final Assessment Notice (FAN) t~gether with the Formal Letter of Demand (FLD) was issued by the Assess~ent Division on June 29, 2011 through registered mail and was received ~y a certain Mr. Rommel Abella, a property custodian.7 i i On March 9, 2012, peti~oner requested the re-evaluation of the deficiency tax assessment in light of the alleged improper service of the FAN.8 ! ~ 2 Par. 4, JSF, docket, val. IV, p. 2013. 3 Par. 5, JSF, docket, val. IV, p. 2013. 4 Par. 6, JSF, docket, val. IV, p. 2013. 5 Par. 7, JSF, docket, val. IV, p. 2013. 6 Par. 8, JSF, docket, val. IV, p. 2014. 7 Par. 9, JSF, docket, val. IV, p. 2014. 8 Par. 10, JSF, docket, val. IV, p. 2014.

DECISION CTA CASE NO. 8659 Respondent sent a letter ~ated October 8, 2012 and received by petitioner on October 12, 2012, res?onding to the request for re-evaluation and noting that the assessment has befn forwarded to the Regional Director for proper evaluation and approval of 1request. Also, it reiterated the demand for payment of the alleged delinquent t~xes. 9 I On October 22, 2012, peti~oner requested the reconsideration of the October 8, 2012 letter of BIR-RQO No. 32. Petitioner likewise submitted another letter to the BIR-RDO Noj 32 on January 9, 2013, inviting its attention to petitioner's request for the revifiting of the legal and factual bases of the assessments against petitioner.10 ! I I However, on May 3, 2013, tespondent, through Revenue Officer (RO) Wilfreda A. Alday, served a Warrapt of Distraint and/or Levy dated April 30, 2013, seeking to enforce the colle~tion of petitioner's alleged deficiency VAT, EWT, and DST. 11 ' On May 27, 2013, petitioner! flied a letter with the BIR-Revenue Region No. 6, where it objected to the is~uance of the Warrant of Distraint and/or Levy and informed the latter that I it is considering the same as respondent's final decision on its protest letter.12 1 ' Hence, petitioner ftled the finstant Petition for Review (With Urgent Motion to Quash Warrant of qistraint and/or Levy and/or to Suspend Collection of Taxes) with this Cour~ on May 31, 2013Y Respondent ftled his Answ~r14 to the Petition for Review on July 17, 2013, interposing the following sperial and affirmative defenses: "1 0.1. The instant p�tition is primarily anchored on the petitioner's claim that the t~x deficiency assessments subject of this case are null and void onsidering that the requirements of due process for the issuanc of deficiency tax assessment under Section 228 of the Nationa Internal Revenue Code (NIRC), as amended, and Section 3 of R 12-99 has not been complied with; ~ 9 Par. 11, JSF, docket, vol. IV, p. 2014. 10 Par. 12, JSF, docket, vol. IV, p. 2014. 11 Par. 13, JSF, docket, vol. IV, p. 2014. 12 Par. 14, JSF, docket, vol. IV, p. 2014. 13 Docket, vol. I, pp. 8-40. 14 Docket, vol. I, pp. 256-264.

DECISION CTA CASE NO. 8659 10.2. In support there f, petitioner averred that it did not receive the FAN which is andatory due process requirement. Other than this bare allegatio , however, petitioner has nothing to show to prove that it did not receive the said notice; I I 10.3. On the contrary~ BIR records clearly show that said FANs dated June 29, 2011 f.,vere duly mailed through registered mail to the petitioner under IRegistry Receipt No. 922443 of the Central Post Office Manila o~ June 29, 2011. I 10.4. Petitioner like*se claimed that deficiency Value- Added Tax (VAT), Expan ed Withholding Tax (EWT) and Documentary Stamp Tax ( ST) have no legal and/or factual bases; i 10.5. Section 228 of tjhe NIRC, as amended, and RR No. 12-99 merely require that ~he taxpayer must be informed in writing of the law and the facts on which the assessment was 1 made. Thus, there was con-tpliance with the mandate of the law when the FAN is accompa~ed with complete details, such as the computations, schedules andl applicable laws, which are the factual and legal bases covering the aforementioned discrepancies 1 established during the inves~gation. [Irene C. Salud vs. CIR, CTA EB Case No. 412 (CTA Casepo. 6954), 30April2009] ! 10.6. Moreover, it sh~ld be pointed out that petitioner has submitted with the BIR se eral correspondence questioning the basis of the deficiency tax a sessment; thus, the same strengthen the fact that petitioner has I been properly informed of the said factual and legal bases of thel assessment; ! i 10.7. Finally, contra~ to the claim of the petitioner, the subject assessment is not bised on mere assumptions but based on the audit investigations onducted pursuant to an issue based Letter of Authority LOA 007 00013705 dated November 20, 2007; i 10.8. The subject ass~ssment is valid and correct and the petitioner has the burden of proof to impugn its validity (Behn Mryer & Co. vs. Collector oJIInternal Revenue, 27 PhiL 641). Thus, similarly held, tax assessmeqts by examiners are presumed correct and made in good faith an~ the taxpayer has the duty to prove !

DECISION CTA CASE NO. 8659 otherwise; (Commissioner ofin{ernal Revenue vs. Construction Resources of Asia, Inc. 145 SCRA 611); an~ assessments duly made by the BIR examiner and approved b~ her superior officers will not be disturbed (Gutierrez vs. Vil~a4 8 SCRA 541); i 10.9. The burden of proof is on the taxpayer contesting the validity or correctness of an ~ssessment to prove not only that the Commissioner of Internal ~evenue is wrong but also that the taxpayer is right (Tan Guan v{. Court ofTax Appeals, et aL, 19 SCRA 903 [1967}; Collector of Internql Revenue vs. Bohol Land Transportation Co., 107 PhiL 967 [1960}); ' 10.10. All presumptiob are in favor of the correctness of the assessment made by thel Commissioner of Internal Revenue; the taxpayer must prove tol the contrary (Commissioner of Internal Revenue vs. Antonio Tuason, Inc., 173 SCRA 397; Commissioner of Internal Revenue vs. Constructi~n Resources of Asia, Inc., 145 SCRA 611); I I 10.11. The assessme~ts were issued in the regular course and within the reglementary period to assess provided by law. BIR records show that petitioner Iexecuted a Waiver of the Defense of Prescription on April 28! 2010, waiving the defense of prescription under the statut of limitations prescribed in Sections 203 and 222, and other relat d provisions of the National Internal Revenue Code, and consent to the assessment and/or collection of tax or taxes of the covere~ taxable year not later than June 30, 2011. Hence, subject assessrpents have not yet prescribed." i The Motion to Quash Wa~rant of Distraint and/ or Levy and/or to Suspend Collection of Taxes was lset for hearing15 and the parties presented their respective evidence pertainin~I to the said motion. Thereafter, the Court granted the motion on January 1, 2015 and ordered, among others, the posting of a surety bond equivalen to one and one-half of P21,969,502.22, the disputed assessment, or in the amo,nt of P32,954,253.33.16 Upon filing of three (3) se~arate motions for extension of time, the Court gave petitioner until April 21, 2015 within which to post the required bond. 17 jV 15 Minutes of the hearing held on July 18, 2;,13, docket, vol. I, p. 306. 16 Resolution dated January 21, 2015, dock t, vol. II, pp. 872-874. 17 Resolution dated April 7, 2015, docket, v I. IV, pp. 1917-1918.

DECISION CTA CASE NO. 8659 The Court initially set the ca e for Pre-Trial Conference on January 29, 201518, which was reset to May 5, 201519. Respondent's Pre-Trial Brief was ftled on January 23, 201520; while pe 'tioner ftled by registered mail its Pre-Trial Brief on March 5, 201521 and receiv d by the Court on March 11, 2015. I On April 21, 201522 and on ]April 30, 201523, petitioner filed its fourth and fifth motions for extension of rife to ftle bond. I I On May 8, 2015, petitioner tfled a Motion for Recomputation of Surety Bond with Manifestation, requestitg the reduction of the amount of surety bond to P18,162,649.97 or any !Other amount as the Court may deem reasonable in accordance with CT1 En Bane Resolution No. 02-2015 and the submission of a surety bond in the 1reduced amount within ten (1 0) days from receipt of the order. i Subsequently, pettttoner ftl~d its Compliance on May 18, 2015 24 , complying with the Order dated J~nuary 21, 2015, and attaching thereto the following: i 1. Photocopy of the Surety $ond; 2. Original Copy of the E~dorsement by MAAGAP dated May 11, 2015; i 3. Photocopy of TCT No. 2[399; 4. Photocopy of Certificati n of Accreditation and Authority (with photos of the authorized ,gents of the Bonding Company); 5. Photocopy of Certificate ~f Compliance of MAAGAP; and 6. Photocopy of Secretary's r=ertificate dated July 14, 2014. II Petitioner further acknowleqges that the admission of the said revised surety bond is contingent upqn the resolution of the Motion for Recomputation of Surety Bond f~ed by petitioner and that it undertakes to submit a revised surety bond in sue~ amount as may be ordered or required by the Court. � I 18 Notice of Pre-Trial Conference dated Nov~mber 5, 2014, docket, vol. II, p. 724. 19 Minutes of the hearing held on March 10,/2015, docket, vol. III, p. 1453. 20 Docket, vol. II, pp. 1010-1019. ! 21 Docket, vol. III, pp. 1484-1513. 22 Docket, vol. IV, pp. 1919-1926. 23 Docket, vol. IV, pp. 1936-1947. 24 Docket, vol. IV, pp. 1977-2011.

DECISION CTA CASE NO. 8659 On May 29, 2015, the c+urt noted the Compliance and ordered respondent to file a comment on p~titioner's motion for extension and motion for recomputation.25 The Court received the pa~ties Joint Stipulation of Facts on May 29, 2015, which was flied via registeredlmail on May 20,2015.26 i A Pre-Trial Order was issu�d on June 17, 2015, terminating the pre- triaL27 , Trial ensued, givlng both parties the opportunity to present their respective evidence. After presentation, marking,, identification, and formal offer, the Court admitted Exhibits "P-8" to ''P-531', inclusive of submarkings, as petitioner's evidence. 28 As to respondent, the Co~rt admitted Exhibits "R-5" to "R-44-a", inclusive of submarkings, as part of! respondent's evidence. 29 Subsequently, respondent'~ Memorandum 30 was submitted on November 21, 2015; while petitioper filed its Memorandum31 via registered mail on December 5, 2016 and re~eived by the Court on December 9, 2016. Hence, the Court declared the ca5f submitted for decision on December 20, 2016. 32 . T~e Issues The parties submitted the fo*owing issues for the Court's disposition:33 1. Whether or not the aut~ority of the respondent to issue the VAT, EWT and DST As~essments have already prescribed; ; /' I I 25 Resolution dated May 29, 2015, docket, Jol. IV, p. 2030. 26 Docket, val. IV, pp. 2012-2027. I 27 Docket, val. IV, pp. 2043-2054. ! 28 Resolution dated March 23, 2016, docketj val. VI, pp. 3043-3044. 29 Resolution dated September 23, 2016, d9cket, val. VI, pp. 3070-3071. 30 Docket, val. VI, pp. 3083-3096. 1 31 Docket, val. VI, pp. 3097-3170. I 32 Resolution dated December 20, 2016, do�ket, val. VI, p. 3172. 33 Issues, Pre-Trial Order, docket, val. IV, pp. 2046-2047.

DECISION CTA CASE NO. 8659 ! i I 2. Whether or not the waiv~r dated April 28, 2011 was executed by petitioner in accordanqe with existing laws, regulations and jurisprudence; ! ! I 3. Whether or not there ~s a legal or factual basis for the deficiency VAT, EWT / and DST assessments rendered pursuant to LOA dated November 20, 2007; ! I ' 4. Whether or not the defictency tax assessment on VAT, EWT and DST in the amountsrof P20,705,243.02, P926,860.56 and P337,398.64, inclusive f increments under Assessment Notices with Nos. 32-FY 53107-VT-1688, 32-FY053107-WE- 1589 and 32-FY053107-tS-1690, respectively, all dated June 29, 2011, issued by resp ndent against the petitioner for the fiscal year ending May 3 ., 2007 had become final, executory and demandable; and 5. Whether or not petitioneJ is liable for the assessed VAT, EWT and DST in the amounts! of P20,705,243.02, P926,860.56 and P337,398.64, respective!~, inclusive of increments for fiscal year ending May 31, 2007 j Disc~ssion I Ruling i I The Court shall determine ~rst whether the FAN for fiscal year 2007 was properly served on petitioner a~d has already attained finality. ! i ! According to respondent, t e FAN together with the FLD dated June 29, 2011 was mailed on the same ay and was received by petitioner on July 1, 2011. Hence, petitioner had un � July 31, 2011 within which to file its administrative protest. However, etitioner failed to file its protest within the reglementary period provided byl law; thus, the FAN has become final, executory and demandable. On the other hand, petition~r claims that it did not properly receive the assessment notices in accordance ~th the requirements of the law and relevant regulations, violating petitioner's ri&ht to due process. According to petitioner, it rf'ceived the First Notice and FNBS without proper receipt of the FAN. Th issuance of the First Notice and FNBS violates due process because res ondent issued such notice of collection, ~

DECISION CTA CASE NO. 8659 without petitioner having been pro~erly served and timely received the PAN or FAN. Thus, both the First Notice tnd FNBS were prematurely issued. I I I Petitioner alleges that no Ifact was established to give rise to the presumption that the FAN was d~emed received by petitioner. By the own admission of his witness, responde*t failed to properly address the letter to any of petitioner's authorized addressee~. Respondent attempted to e~tablish that the FAN was duly sent and received by petitioner, through the testimony of Mr. Armando Macatangay. Mr. Macatangay testified that he wa~ the mailing custodian in 2011 for the Administrative Division of Reven~e Region No. 6. Mr. Macatangay stated in his answer to Question No. 9 of ~s Judicial Affidavit dated October 8, 2013 that he was tasked with the mailin of the alleged FAN and demand letter to petitioner. He said that the envel pe was addressed to Feati University, Inc. with no concrete, actual person to/ whom the letter was being brought to the attention to as the addressee. This! is fatal to the presumption that respondent is trying to establish, specifically, rhat petitioner is deemed to have properly received the FAN. It should also ~e pointed out that even the FAN attached by respondent to Mr. Macatangay1s Judicial Affidavit only shows that it was addressed to Feati University, Inc. ~thout referring to any actual person. I I The alleged failure of petitipner to prompdy respond to respondent's FAN was caused by respondent'~ failure to ensure the proper labeling or addressing of the envelope with the! correct and authorized addressee. I ' ! Petitioner likewise mentio~ that it is of no weight that the registry receipt contains the signature of a ertain Rommel Abella. Petitioner adds that this cannot be construed as an ac al or a constructive receipt by petitioner for the following reasons: : f1 1. Mr. Rommel Abella had o authority whatsoever to receive the FAN. Mr. Abella is the proper custodian of petitioner whose duty is to oversee the maintenanc and repair of petitioner's facilities. His function is limited to !matters with respect to the upkeep of petitioner's facilities andl premises. It is not within his scope of authority to receive and understand the legal implications of letters sent by various governm9nt agencies, including the BIR. 2. In his Supplemental Judi~~ial Affidavit, Mr. Gabriel Intengan testified and confirmed that Mr. ommel Abella was not authorized to receive any official communica on on behalf of petitioner. Mr. Intengan I"

DECISION CTA CASE NO. 8659 Gri presented petitioner's eral Information Sheet for the year 2011, when the FAN was aile edly sent to petitioner, to prove that Mr. Abella was not an office of petitioner and was never implicitly nor explicitly authorized to receive communication on behalf of 1 petitioner. I 3. Without any clear label oJ information in the envelope as to who the authorized addressee is a d that it contained the FAN issued by the BIR, Mr. Abella could no be expected to presume that the document received is a FAN, whic would require the immediate attention of the proper officials of etitioner, nor should he be expected to appreciate the gravity of his receipt in the computation of statutory 1 periods. � 4. In previous years, all correspondences from the BIR, except for the FAN, have been duly a dressed to, received, and acted upon by petitioner's former intern 1 auditor, Ms. Luz Narciso. In fact, during the preliminary confere ces, Ms. Narciso had been in constant communication with the IR and had rendered full cooperation and assistance in the audit o petitioner's accounting records. Thus, had respondent properly se ed the FAN upon petitioner or at least, promptly informed petitl~�ner through its authorized representative of the issuance of the FA by registered mail, petitioner would have promptly sought legal a sistance and filed the appropriate protest, given the legal implicatio4s of the document. i I On this issue, it must be po�rted out that the requirement of informing the taxpayer of the assessment is andatory in nature as provided in Section 228 of the National Internal Reven e Code of 1997, as amended, and Section 3 of Revenue Regulations (RR) No.l12-99, the pertinent portions of which are quoted hereunder for ready referenFe: ' When the "SEC. 228. Protesting! of Assessment. Commissioner or his duly !authorized representative finds that proper taxes should be assjsed, he shall first notify the taxpayer of his findings: Provided, how ver, That a preassessment notice shall not be required in the folio �ng cases: XXX I XXX XXX 1 ! I The taxpayers sha~be informed in writing of the law and the facts on which t e assessment is made; otherwise, the assessment shall be v id. ~ '

DECISION CTA CASE NO. 8659 Within a period to be prescribed by implementing rules and regulations, the taxpayer s~all be required to respond to said notice. If the taxpayer fails Fo respond, the Commissioner or his duly authorized representati~e shall issue an assessment based on his findings. 1 Such assessment may ~e protested administratively by filing a request for reconsideratio4 or reinvestigation within thirty (30) days from receipt of the ass~ssment in such form and manner as may be prescribed by imple~enting rules and regulations. Within sixty (60) days from filing olf the protest, all relevant supporting documents shall have been ~ubmitted; otherwise, the assessment shall become final. 1 If the protest is denie~ in whole or in part, or is not acted upon within one hundred elghty (180) days from submission of documents, the taxpayer adversely affected by the decision or inaction may appeal to the C urt of Tax Appeals within thirty (30) days from receipt of the sai decision, or from the lapse of the one hundred eighty (180)-da period; otherwise, the decision shall become final, executory and emandable." (Emphasis supplied) ! I "SECTION 3. Due frocess Requirement in the Issuance of a Deficienry Tax Assessment. - 3.1 Mode of procedules in the issuance of a deficiency tax assessment: ! XXX XXX XXX 3.1.4 Formal Letter of1 ~emand and Assessment Notice. - The formal letter of demand an assessment notice shall be issued by the Commissioner or his dul authorized representative. The letter of demand calling for paym~nt of the taxpayer's deficiency tax or taxes shall state the facts, I the law, rules and regulations, or jurisprudence on which the lssessment is based, othenvise, the formal letter of demand and assessment! notice shall be void (see illustration in ANNEX B hereof). The sa~e shall be sent to the taxpayer only by registered mail or by p~rsonal delivery. If sent by personal delivery, the taxpayer or hi~ duly authorized representative shall acknowledge receipt thereof! in the duplicate copy of the letter of demand, showing the follo~ng: (a) His name; (b) signature; (c) ! ,/-

DECISION CfA CASE NO. 8659 i designation and authority to ~ct for and in behalf of the taxpayer, by if acknowledged received a person other than the taxpayer himself; and (d) date of recei~t thereof." Section 228 of the NIRC o 1997, as amended, provides that taxpayers must be informed of the facts an the law upon which the assessment was made; otherwise, the assessment will be void. In addition, the taxpayer is granted the opportunity to protest he assessment within thirty (30) days from receipt thereof and if the protest i denied or not acted upon by respondent within a given period of time, the t xpayer is given another remedy of filing an appeal before this Court. i IRR Furthermore, Section 3 of No. 12-99, which laid down the due process requirement in the issuarice of a deficiency tax assessment, clearly requires the sending of the FAN ~f respondent and the receipt thereof by the taxpayer as part of due process in tl:k issuance of assessments. th~ After a careful scrutiny of records, the Court finds that there was no valid service of the FAN to petitiorier in this case. Let it be stressed that it is Iimperative for respondent to satisfactorily prove the release, mailing or sending of the FAN. This was the pronouncement of the Supreme ourt in the case of Barcelon, Roxas Securities Inc. vs. Commissioner ofInternal Revenu \ citing the case of Nava vs. Commissioner of Internal Revenutf5, the pertinent por � n of which reads: I I "While we have held at an assessment is made when sent within the prescribed period even if received by the taxpayer after its expiration, this ruling akes it the more imperative that the release, mailing or se ding of the notice be clearly and satisfactorily proved. M re notations made without the taxpayer's intervention, n tice or control, without adequate supporting evidence can ot suffice; otherwise, the taxpayer would be at the mercy oft e revenue offices, without adequate protection or defense." (Em hasis supplied) 1' On this matter, respondent1 witness, Ms. Ma. Paz Arcilla, the Revenue Officer IV-Chief of the Billing S ction of the BIR, testified that their office issued to petitioner the FAN and he FLD dated June 29, 2011 and that their original copies were transmitted on the same day to the Administrative 1 i /- 34 G.R. No. 157064, August 7, 2006. 35 G.R. No. L-19470, January 30, 1965.

DECISION CTA CASE NO. 8659 Division of BIR Manila for mailin~to petitioner, as evidenced by a transmittal with the instruction to mail th m. Ms. Arcilla further stated that the Administrative Division forward d to their office a photocopy of the transmittal letter to the Postmaster 1of the Central Post Office with information of registry receipt number of mailin~ of the FAN and FLD.36 ' The above testimony was I rther corroborated by Mr. Armando C. Macatangay, Administrative Assista t III of the Administrative Division of BIR Manila, stating that he mailed the subject FAN and FLD, and thereafter, the Central Post Office issued Registry Receipt No. 922443.37 i In this regard, it must be ~oted that Section 3(v) of Rule 131 of the Rules of Court provides that a 1 tter duly directed and mailed is deemed received in the regular course of he mail. I' However, the facts to be prpved to raise this presumption are (a) that the letter was properly addresse4 with postage prepaid, and (b) that it was mailed. Once these facts are prlen, the presumption is that the letter was received by the addressee as soon s it could have been transmitted to him in the ordinary course of the mail. B t if one of the said facts fails to appear, the presumption does not lie.38 ! In view of the Transmittal I}etter39, the Registry Receipt Card40, and the testimonies of Ms. Arcilla and Mr. I Macatangay, the Court finds that the FAN and the FLD were properly mailed.! ! Nevertheless, while it can ~�e said that respondent has established the presumption that the letter was re eived by the addressee as soon as it could have been transmitted to him in t e ordinary course of the mail, the same is merely a disputable presumption. � I In the case of Republic of the !Philippines vs. The Court ofAppeals and Nielson & Co., Inc.41 and in Barcelon, Roxas ~ecurities, Inc. (now known as UBP Securities, Inc.) vs. Commissioner ofInternal Revenui2, ~he Supreme Court held that a direct denial of the receipt of the mail shifts the burden upon the party favored by the ~ I ~az1 36 Judicial Affidavit of Revenue Officer Ma. Arcilla, docket, vol. II, pp. 1023-1028. 37 Judicial Affidavit of Armando C. Macatan ay, docket, vol. I, pp. 419-428. 38 Barcelon, Roxas Securities, Inc. vs. a mmissioenr of Internal Revenue, G.R. No. 157064 August 7, 2006. � 39 Exhibit "R-9", docket, vol. I, p. 427. 40 Exhibit "R-10", docket, vol. I, p. 428. 41 G.R. No. L-38540, April 30, 1987. 42 G.R. No. 157064, August 7, 2006.

DECISION CTA CASE NO. 8659 i ! presumption to prove that the niailed letter was indeed received by the addressee. ! I i The witness for petitioner,! Mr. Gabriel Intengan, petitioner's Vice- President and Chief Operations bfficer from 2003 to 2012, testified that petitioner did not receive any FANI or FLD for the alleged deficiency taxes for fiscal year 2007 from respondent.f3 Petitioner's denial of the receipt of the FAN and the FLD was also m ntioned in its letter to respondent dated December 22, 2011 in response to he FNBS dated December 8, 2011 issued to petitioner, stating that it never rec ived the FLD and was not informed of the basis of the assessment nor was i . even given the opportunity to protest the same.44 I' Since there is a direct denia~ of the receipt of the mail, the said denial shifts the burden upon responden~ to prove that the mailed letter was indeed received by petitioner. However, a scrutiny of the tieces of evidence presented by respondent reveals that the same are insuffi ient to prove that the FAN was indeed received by petitioner in accordanc with law and pertinent jurisprudence. I I I Respondent mainly presentfd the alleged FAN and Registry Return Receipt as proof that said mail mat,er was received by petitioner. I In this regard, it bears stres~ling that mere presentation of the Registry Return Receipt is not enough to rove that the subject notices were indeed served. Receipts for registered 1 tters and return receipts do not prove themselves; they must be properly I authenticated in order to serve as proof of receipt of the letters.45 ! I As already mentioned, Mr. racatangay, the Administrative Aide III of the Administrative Division of the BIR Manila, identified the Registry Receipt Card. However, as admitted by M . Macatangay during the cross examination, he did not see who really signed an~ accepted the return card.46 I I Furthermore, respondent fabed to show that the person who signed the Registry Return Receipt is petitio~er's authorized agent. It must be stressed ;v 43 Docket, vol. II, pp. 1263-1270. ~: 44 Exhibits "P-26" and "R-29", BIR Records, pp. 267-269. 45 Resterio vs. People of the Philippines, .R. No. 177438, September 24, 2012, citing Ting vs. Court ofAppeals, G.R. No. 140665, Nove ber 13, 2000. 46 Transcript of Stenographic Notes of the July 3, 2014 Hearing, pp. 25-27. I I I

DECISION CTA CASE NO. 8659 I that the Registry Return Receipt it~elf provides that "[a] registered article must not be delivered to anyone but th~' addressee, or upon the addressee's written order, in which case the authorize agent must write the addressee's name on the proper space and then affix legi ly his own signature below it." I The requirement that the F~N should be served on the addressee or a duly authorized agent of the addreslsee was also mentioned by this Court in the case of People vs. Typingco47, as follo"'fs: ! "Jurisprudence likewi~�e dictates that for notice by mail, it must appear that the same was served on the addressee or a duly authorized agent of I the addressee. In fact, the registry return receipt itself provides~1 that '[a] registered article must not be delivered to anyone but th addressee, or upon the addressee's written order, in which case the authorized agent must write the addressee's name on the pr~per space and then affix legibly his own signature below it.' Jj\..lso, it is a rule that receipts for registered letters and return ~eceipts do not prove themselves; they must be properly authenti~ated 1n order to serve as proof of receipt of the letters. I I I Again, the prosecutipn failed to demonstrate that the registry receipt had been ac,ally served upon the accused or upon his duly authorized agent The bare testimony of Teresita Maglunog, the BIR docume t locator and the registry receipt are utterly insufficient to pro e that the assessment notices and demand letters were receive by the accused. Such failure of the prosecution is a fatal blow t its case." (Emphasis supplied) ' In the case of SVI Technolo&~.is, Inc. vs. Commissioner ofInternal Revenui8, this Court held that there was no valid service of the FAN when respondent failed to prove that the mentioned recei �ng officer was authorized by petitioner to receive the questioned Formal Lettfr of Demand, to wit: I ! ! I "It is also pertinentj to note that even registry return receipts contain the proviso ~hat '[a] registered article must not be delivered to anyone but tht addressee, or upon the addressee's written order, in which case the authorized agent must write the addressee's name on the pr per space and then affix legibly his own signature below it.' .Lj\lso, it is a rule that receipts for registered letters and retur4 receipts do not prove themselves; I l 47 CTA Crim. Case No. 0-114, May 16, 20!2. 48 CTA Case No. 8488, February 2, 2015.

DECISION CTA CASE NO. 8659 they must be properly authe~ticated in order to serve as proof of receipt of the letters. I I I ! And in the said latteJ requisite that respondent failed to convince this Court. i A perusal of the Ce1tification dated February 20, 2013, issued by the Pasig City ~ntral Post Office, shows that the Formal Letter of Demand, 'th attached Details of Discrepancies and Assessment Notices dat d January 4, 2010, were received by a certain 'S/G Macavinta Jr' on January 12, 2010; however, respondent failed to prove at the mentioned receiving officer is authorized by petitioner to eceive the questioned Formal Letter of Demand, with attach d Details of Discrepancies and Assessment Notices. I Clearly, respondent �aped to prove that the Formal Letter of Demand, with attach~d Details of Discrepancies and Assessment Notices dated anuary 4, 2010, had been actually served and received by petiti . ner or its duly authorized agent. XXX ! XXX XXX Thus, in the absence of a valid service of the questioned Formal Letter of Demand, 'th attached Details of Discrepancies and Assessment Notices d ted January 4, 2010, addressed to petitioner, and indeed receiv d by the same or its duly authorized agent, the subject deficiency assessments cannot be considered as final, executory and demand ble." ! I As further held in Barcelon,.lRoxas Securities Inc. vs. Commissioner of Internal Revenue49 : / I ! "What is essential to ijrove the fact of mailing is the registry receipt issued by the Burea4 of Posts or the Registry return card which would have been I signed by the Petitioner or its authorized representative.j' (Emphasis supplied) I I In this case, a perusal of tht Registry Return Receipt shows a signature as proof that a person received the letter. However, said Registry Return I /' 49 G.R. No. 157064, August 7, 2006.

DECISION CTA CASE NO. 8659 i Receipt and the signature thereon{re unauthenticated.50 A further scrutiny of the evidence presented by respond nt reveals that he failed to sufficiently prove that the signature in the Registry Return Receipt belongs to the authorized representative of petitioner. ! ' I i In the case of Estate ofJ.he Late Juliana Diez Vda. De Gabriel vs. Commissioner ofInternal Revenue51 , the Supreme Court held that it is a requirement of due process that the taxpayer m st actually receive the assessment, to wit: I " ... the foregoing rult requires that the notice be sent to the taxpqyer, and not merely to a disinterested party. Although there is no specific requirement thrt the taxpayer should receive the notice within the said period due process requires at the very least that such notice actually b received. In Commissioner of Internal Revenue v. Pascor Realty and De elopment Corporation, we had occasion to say: ! An assessme~t contains not only a computation of tax li~bilities, but also a demand for payment within a pr9scribed period. It also signals the time when penal~ts and interests begin to accrue against the taxpayer., To enable the taxpayer to determine his remties thereon, due process requires that it mus be served on and received by the taxpayer." (E, rphasis supplied) ! i I Considering that respondent failed to discharge the burden of proving that the FAN dated June 29,2011 "fas actually received by petitioner or its duly authorized agent, the FAN is deemfd to have not been issued by respondent. ! I ! Consequently, respondent's tllegation that the FAN dated June 29, 2011 already attained finality for failure o protest the same is devoid of merit since petitioner cannot be expected to p otest the FAN without first being properly informed of the basis of its tax liab~ties. i i Also, respondent violated ~etitioner's right to due process when he issued the Warrant of Distraint land/or Levy because no valid notice of assessment was sent to petitioner. I"An invalid assessment bears no valid fruit. The law imposes a substantive, no~ merely a formal, requirement. To proceed heedlessly with tax collection witl}out first establishing a valid assessment is r 50 Docket, vol. I, p. 428. 51 G.R. No. 155541, January 27, 2004.

DECISION CTA CASE NO. 8659 ' evidently violative of the cardinal ppnciple in administrative investigations: that taxpayers should be able to prFsent their case and adduce supporting evidence."52 In this case, petitionet was not properly informed of the basis of its tax liabilities. And inasmuch asl no valid notice of assessment was sent to petitioner, the Warrant of Distraint and/or Levy issued by respondent against petitioner allegedly arising from th~ subject FAN dated June 29, 2011 must be cancelled. I I Lastly, anent petitioner's rtquest that the "amount claimed" to be considered in the computation of lthe amount of the surety bond should not include penalties, surcharges and~'ompromise penalties pursuant to CTA En Bane Resolution No. 02-2015, e Court finds merit in the granting of petitioner's Motion for Recomp tation of Surety Bond, and notes the submission of the corresponding R vised Surety Bond. ! With the foregoing fmding$ of the Court, discussing the other issues raised by the parties becomes unne~essary. ! ! WHEREFORE, premises ~onsidered, the instant Petition for Review is GRANTED. Accordingly, the ssessment against petitioner for deficiency VAT, deficiency EWT, and d ficiency DST for fiscal year 2007 is CANCELLED. SO ORDERED. ~. ~ 4 '- MA. BELEN M. RINGPIS-LIBAN Associate Justice WE CONCUR: LOVE~. BAUTISTA A{sociate Justice ESPE 52 Commissioner of Internal Revenue vs. BSAF Coating + Inks Phils. Inc., G.R. No. 198677, November 26, 2014.

DECISION CTA CASE NO. 8659 ATJtESTATION i i I attest that the conclusio*s in the above decision were reached in consultation before the case was *signed to the writer of the opinion of the Court. LOVELL~ BAUTISTA Associate Justice Chairperson i CERtiFICATION ! i Pursuant to Article VIII, tection 13 of the Constitution, and the Division Chairperson's Attestatio , it is hereby certified that the conclusions in the above Decision were rea hed in consultation before the case was assigned to the writer of the opiniof of the Court. OSARIO Presiding Justice