G.R. No.

224327 June 11, 2018

COMMISSIONER OF INERNAL REVENUE, Petitioner BANK OF THE
PHILIPPINE ISLANDS, Respondent

Taxation; National Internal Revenue Code; Protesting of Assessment. When

the CIR or his duly authorized representative finds that proper taxes should
be assessed, he shall first notify the taxpayer of his findings within a period
to be prescribed by implementing regulations, the taxpayer shall be
required to respond to said notice. If the taxpayer fails to respond, the
Commissioner shall issue an assessment based on his findings.

Same; Failure to prove that a notice of assessment was sent and was
received by the assessed. While a mailed letter is deemed received by the
addressee in the ordinary course of mail, this is still merely a disputable
presumption subject to controversion, and a direct denial of the receipt
thereof shifts the burden upon the party favored by the presumption to
prove that the mailed letter was indeed received by the addressee. The
failure of petitioner to prove the receipt of the assessment by respondent
would necessarily lead to the conclusion that no assessment was issued.

PERALTA, J.:
FACTS: Citytrust Bank (CBC) filed its Annual Income Tax Returns for the
taxable year 1986 on April 15, 1987. Thereafter, CBC executed waivers of
the Statute of Limitations under the NIRC. On March 7, 1991, the petitioner
CIR issued a Pre-Assessment Notice (PAN) against the CBC for deficiency
taxes which was protested by the former. On May 6, 1991, the petitioner
issued a letter, with attached Assessment Notices, demanding the payment
of the deficiency taxes which was again protested by CBC. Another letter
was issued by the petitioner requesting for the payment of the latter’s tax
liabilities.
CBC issued a letter addressed to the petitioner offering a compromise
settlement on its deficiency taxes which was received by the petitioner.
Such compromise settlement was approved by the petitioner. Another letter
was issued by CBC requesting for a reconsideration of the approved
compromise settlement.
CBC issued another addressed to the petitioner requesting for a final
reconsideration. Meanwhile, the SEC approved the Articles of Merger
between CBC and BPI, the latter being the surviving corporation. CIR
issued a Notice of Denial addressed to respondent requesting for the
payment of the deficiency taxes plus all increments incident to delinquency.
 Petitioner issued a warrant of Distraint and levy against the
respondent BPI which prompted the latter to file a petition for review with
the CTA. CTA granted the said petition. It ruled that the Assessment
Notices, being issued only on May 6, 1991, were already beyond the three-
year period to assess, counting from the moment when CBC filed its Annual
Income Tax Returns which is on April 15, 1987. It further ruled that the
waivers of Statute of Limitations were not in accordance with the proper
form, thus, it failed to extend the period given to the petitioner to assess.
Petitioner filed a Motion for Reconsideration but it was denied. Hence, this
petition.

ISSUE: Whether or not the assessment made by the CIR was valid.
HELD: NEGATIVE. Section 229 of the NIRC provides that when the CIR or
his duly authorized representative finds that proper taxes should be
assessed, he shall first notify the taxpayer of his findings within a period to
be prescribed by implementing regulations, the taxpayer shall be required
to respond to said notice. If the taxpayer fails to respond, the Commissioner
shall issue an assessment based on his findings. Petitioner insists that CBC
failed to elevate the assessment to the CTA within the required period. On
the other hand, petitioner claims that it never received any final decision on
the disputed assessment. It was ruled that the petitioner failed to prove that
it sent a notice of assessment and that it was received by the respondent.
While a mailed letter is deemed received by the addressee in the ordinary
course of mail, this is still merely a disputable presumption subject to
controversion, and a direct denial of the receipt thereof shifts the burden
upon the party favored by the presumption to prove that the mailed letter
was indeed received by the addressee. In the instant case, BPI denies
receiving the assessment notice, and the CIR was unable to present
substantial evidence that such notice was, indeed, mailed or sent before the
BIR's right to assess had prescribed and that said notice was received by
BPI. The failure of petitioner to prove the receipt of the assessment by
respondent would necessarily lead to the conclusion that no assessment was
issued. Clearly, the right of petitioner to assess respondent has already
prescribed and respondent is not liable to pay the deficiency tax
assessment. The period of collection has also prescribed. It must be
remembered that the law imposes a substantive, not merely a formal,
requirement. To proceed heedlessly with tax collection without first
establishing a valid assessment is evidently violative of the cardinal
principle in administrative investigations: that taxpayers should be able to
present their case and adduce supporting evidence. Although taxes are the
lifeblood of the government, their assessment and collection should be
made in accordance with law as any arbitrariness will negate the very
reason for government itself.