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1. CIR v. GJM

1. Is the assessment barred by prescription?

Answer: Generally, No. The assessment is not barred by prescription.
However, since the assessment was not received by the taxpayer, the
assessment has already prescribed.

Section 203 of the 1997 National Internal Revenue Code (NIRC) provides
that the  internal revenue taxes shall be assessed within three (3) 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 taxes
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
(3)-year period shall be counted from the day the return was tiled. For
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. 

Thus, the CIR has three (3) years from the date of the actual filing of the
return or from the last day prescribed by law for the filing of the return,
whichever is later, to assess internal revenue taxes. Here, GJM filed its
Annual Income Tax Return for the taxable year 1999 on April 12, 2000.
The three (3)-year prescriptive period was only until April 15, 2003. The
records reveal that the BIR sent the FAN through registered mail on April
14, 2003, well-within the required period. The Court has held that when
an assessment is made within the prescriptive period, receipt by the
taxpayer may or may not be within said period. But it must be clarified
that the rule does not dispense with the requirement that the taxpayer
should actually receive the assessment notice, even beyond the
prescriptive period. GJM, however, denies ever having received any
FAN. The BIR also failed to prove GJM's receipt of the assessment leads
to no other conclusion but that no assessment was issued. Consequently,
the government's right to issue an assessment for the said period has
already prescribed. 

2. Is the assessment valid? If the assessment is not valid, indicate the

reason why it is not.
Answer: No. The assessment is not valid.

Pursuant to Sec. 203 of the NIRC, the  internal revenue taxes shall be
assessed within three (3) 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 taxes shall be begun after the expiration of such period.

In this case, the BIR sent the Formal Assessment Notice (FAN) through
registered mail on April 14, 2003. Although, the  assessment is made
within the prescriptive period, GJM, however, denies ever having
received any FAN.And, if the taxpayer denies having received an
assessment from the BIR, it then becomes incumbent upon the latter to
prove by competent evidence that such notice was indeed received by the
addressee.Thus, the onus probandi has shifted to the BIR to show by
contrary evidence that GJM indeed received the assessment in the due
course of mail. It has been settled that while a mailed letter is deemed
received by the addressee in the course of mail, this is merely a disputable
presumption subject to controversion, the direct denial of which shifts the
burden to the sender to prove that the mailed letter was, in fact, received
by the addressee. Moreover, it is not necessary that the taxpayer will
receive the assessment within the 3 year period. What
is merely essential is that the assessment must be issued to the taxpayer
within this period. The BIR's failure to prove GJM's receipt of the
assessment leads to no other conclusion but that no assessment was
issued. Thus, the BIR can no longer issue an assessment for the said
period because it has already prescribed. 

3. Is the collection barred by prescription?

Answer: Yes. The collection is barred by the prescription.

As a rule, the BIR can then enforce collection by issuing a warrant of

distraint/garnishment. And, in the period to collect, it is necessary that the
taxpayer must have received the warrant of distraint or Levy within that
three year period from the date of assessment to collect the tax.
In this case, even if the warrant of distraint or Levy was received by the
taxpayer within that three year period from the date of assessment to
collect the tax, there having no valid assessment that was made, thus,
Warrant of Distraint or Levy is illegal pursuant to the Supreme Court
ruling, that “a void assessment bears no valid fruit.

4. Is the collection valid? If it is not, state the reasons why it is not

valid.
Answer: No. The collection is not valid.

As a rule, the BIR can then enforce collection by issuing a warrant of

distraint/garnishment. And, in the period to collect, it is necessary that the
taxpayer must have received the warrant of distraint or Levy within that
three year period from the date of assessment to collect the tax.Hence, a
warrant of Distraintor levy is illegal,puriuant to the Supreme Court ruling,
that “a void assessment bears no valid fruit.”Thus, the importance of due
process, particularly in the proper service of an assessment notice was not
complied with.