COMMISSIONER OF INTERNAL REVENUE v. SQUARE ONE REALTY CORPORATION

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY ENBANC COMMISSIONER OF CTA EB No. 2396 INTERNAL REVENUE, (CTA Case No. 9484) Petitioner, Present: -versus- DEL ROSARIO, P.J ., UY, R I N G P I S -LIBAN , MANAHAN, B A C O R R O -VILLENA, MODESTO-SAN PEDRO, REYES-FAJARDO, CUI-DAVID, and FERRER-FLORES, JJ. SQUARE ONE REALTY Promulgated: CORPORATION, Respondent. )(- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - RESOLUTION MANAHAN, J. : For this Court's resolution is petitioner's Motion for Reconsideration filed on July 20, 2022 with respondent's Comment (on the Petitioner's Motion for Reconsideration) filed on September 6 , 2022. Petitioner prays for the reversal of the Court's Decision dated June 23, 2022, the dispositive portion of which reads as follows: "WHEREFORE, the Petition for Review is DENIED for lack of m erit. Accordingly, the a ssa iled Decision da ted June 3 0 , 2 02 0 a nd the assailed Re solution d a ted November 26, 2 0 2 0 , a ll promulgated by the Third Division of this Court, a re hereby AFFIRMED. SO ORDERED." ~

RESOLUTION CTA EB No. 2396 (CTA Case No. 9484) Page 2 of6 Petitioner raises the following quoted arguments m support of her Motion for Reconsideration: "The Honorable Court En Bane erred in declaring the assessments void for the alleged failure on the part of petitioner to prove service of the Final Assessment Notice/Formal Letter of Demand (FAN/FLD) to petitioner. The Honorable Court En Bane erred in ruling that petitioner is not entitled to the benefit of the presumption that the FAN/FLD was received in the ordinary course of mail." Petitioner states that respondent is estopped from raising the issue of non-receipt of the FAN/FLD because all official notices such as the Letter of Authority (LOA), the Preliminary Assessment Notice (PAN), etc., were sent to its registered address at 1098 Sanciangco St., Otis, Paco, Manila, the receipt of which was acknowledged by respondent, except the FAN/FLD. The postal registry receipt presented during trial and which forms part of the BIR Records submitted to the Court, was deemed sufficient by petitioner to prove the fact of mailing as it clearly indicated that it was properly addressed to respondent's registered address. Given this evidentiary support, petitioner maintains that it is already beyond her function and control to prove the actual service of the said mail matter to respondent. Petitioner maintains that the presumption of regularity on the part of the personnel of the Post Office also tilts the balance of justice in her favor in resolving the issue of proper and valid service of official notices. A bare-faced denial of non-receipt of official notices by respondent without any substantial proof is seen by petitioner as insufficient to shift the burden upon her to prove valid service, hence, the presumption that a mail matter was received in the regular course of mail, remains. Petitioner then contends that the Court En Bane erred in concluding that no valid assessments were issued to respondent and that the collection efforts initiated by the government are void.~

RESOLUTION CTA EB No. 2396 (CTA Case No. 9484) On the other hand, respondent counters that petitioner did not adequately prove receipt of the FAN/FLD because it did not offer in evidence the Return Receipt or the Return Card to prove the fact of mailing and receipt of the said notices. It denies the allegation of petitioner that it did not sufficiently prove non-receipt of the FAN/FLD and recalls that it was able to present a Certification from the Postmaster dated September 23, 2016 confirming that the registered letter supposedly containing the FAN/FLD was not delivered to the addressee. RULING OF THE COURT We find for the respondent. The controversy on non-receipt of official notices such as the FAN/FLD is essentially linked to the issue of due process as the law mandates the representatives of the Bureau of Internal Revenue (BIR) to inform and notify taxpayers of their alleged tax deficiencies pursuant to Section 228 of the 1997 National Internal Revenue Code (NIRC), as amended, quoted as follows: "SEC. 228. Protesting of Assessment. - When the Commissioner or his duly authorized representative finds that proper taxes should be assessed, he shall first notify the taxpayer of his findings: Provided, however, that a pre- assessment notice shall not be required in the following cases: XXX XXX XXX Such assessment may be protested administratively by filing a request for reconsideration or reinvestigation within thirty (30) days from receipt of the assessment in such form and manner as may be prescribed by implementing rules and regulations. Within sixty (60) days from filing of the protest, all relevant supporting documents shall have been submitted; otherwise, the assessment shall become final." (Emphasis supplied) The due notification of the legal and factual bases of the findings of the CIR and/ or his representatives (via a written assessment) on the alleged tax deficiencies of a taxpayer is consistent with the constitutional principle that no person shall be deprived of property without due process of law as succinctly but clearly enunciated by the Supreme Court in the case ofCI""'"--

RESOLUTION CTA EB No. 2396 (CTA Case No. 9484) Page 4 of6 Commissioner of Internal Revenue vs. Enron Subic Power Corporation, 1 in this manner, and we quote: "We note that the old law merely required that the taxpayer be notified of the assessment made by the CIR. This was changed in 1998 and the taxpayer must now be informed not only of the law but also of the facts in which the assessment is made. Such amendment is in keeping with the constitutional principle that no person shall be deprived of property without due process of law. xxx xxx xxx" (Emphasis supplied) Proper notification of the findings of the revenue officers is also required to afford the taxpayer an opportunity to prepare an intelligent protest or appeal of the assessment or decision of the revenue officers. 2 Therefore, it is no longer uncommon for a taxpayer to raise the defense of non-receipt of tax assessment notices to challenge their validity because if proven true, such will affect their right to due process provided under the 1987 Philippine Constitution and implemented by relevant laws and regulations. During the trial in the Court in Division, respondent insists that it did not receive the FAN/FLD dated January 13, 2016, but received instead a Preliminary Collection Letter (PCL) dated August 30, 2016, and upon inquiry from the BIR, was directed to secure a proof of receipt of notice from the Central Post Office of Manila. The Central Post Office, in turn, issued a Certification that said notice was undelivered and returned to the BIRon January 18, 2016. The disputable presumption cited by petitioner that a letter duly directed and mailed was received in the regular course of mail, 3 applies only upon the existence of certain conditions, as aptly described by the Supreme Court in the case of Commissioner of Internal Revenue vs. South Entertainment Gallery, Inc., 4 thus: 1 G.R. No. 166387, January 19, 2009. 2 CIR vs. Liquigaz Philippines Corporation and Liquigaz vs. CIR, G.R. Nos. 215534 and 215557,April 18,2016. 3 "Rule 131 Burden of Proof and Presumptions Section 3. Disputable Presumptions. The following presumptions are satisfactory if uncontradicted, but may be contradicted and overcome by other evidence: (v) That a letter duly directed and mailed was received in the regular course of mail." No. 225809, March 17, 2021.~ 4 G.R.

RESOLUTION CTA EB No. 2396 (CTA Case No. 9484) Page 5 of6 "Rule 131, Section 3 (v) of the Rules of Court provides that "a letter duly directed and mailed" is presumed to have been received by the addressee thereof "in the regular course of the mail." In Nava us. Commissioner of Internal Revenue: The facts to be proved to raise this presumption are (a) that the letter was properly addressed with postage prepaid, and (b) that it was mailed. Once these facts are proved, the presumption is that the letter was received by the addressee as soon as it could have been transmitted to him in the ordinary course of the mails. But if one of the said facts fails to appear, the presumption does not lie." (Emphasis supplied) The evidence shows that the subject FAN/FLD was not delivered as affirmed by the Certification issued by the Central Post Office and was in fact returned to the BIR. The presumption that it was received by respondent in the regular course of mail, does not lie in this particular instance. Petitioner, on her part, did not present any substantial proof to contravene the evidence presented by respondent. We quote for emphasis a portion of the assailed Decision, thus: "We agree with the Court in Division that the above pieces of evidence failed to satisfactorily prove that the FAN/FLD were actually received by respondent and we quote with approval its assessment on their probative value, thus: "The Transmittal letters presented by respondent only prove that the FAN/FLO were forwarded to the Administrative Division and to the Post Office for mailing but do not establish the actual mailing and receipt thereof by petitioner. Further, the Court cannot give credence to the testimonies ofMa. Paz Arcilla and Benhur C. Nacorda since they were not the ones who actually mailed the FAN/FLO. XXX xxx xxx." It is well-established that if a taxpayer denies ever receiving an assessment from the BIR, the burden of proof is shifted to the BIR and it is incumbent upon the latter to prove by competent evidence that such notice was indeed received by the addressee." (Emphasis supplied) Finding no compelling reason to deviate from the conclusions reached by the Court in the assailed Decision, we affirm and reiterate the cancellation of the deficiency tax assessment issued against respondent for taxable year 2012. ~

RESOLUTION CTA EB No. 2396 (CTA Case No. 9484) WHEREFORE, premises considered, the petitioner's Motion for Reconsideration filed on July 20, 2022, is DENIED for lack of merit. SO ORDERED. {'~, ?� ;fb-.. t - CATHERINE T. MANAHAN Associate Justice WE CONCUR: Presiding Justice @c::; ERLINDA P. UY Associate Justice (ON OFFICIAL BUSINESS) MA. BELEN M. RINGPIS-LIBAN Ass~iate Justice MARIA ~ I~ ViJFr . R~ EiESn~� F~O MARIAN Associate Justice IJ4t#1iimL LANEE S. CUI-DAVID Associate Justice c~~:~RES Associate Justice