Pertinent provisions of Revenue Regulations No.

12-85, implementing Section 319 of then Tax

Code are hereunder quoted for easy reference:
POST REPORTING NOTICE
Section 1. Post-reporting notice — Upon receipt of findings, the Division Chief, Revenue
District Officer of Chief Office Audit Section, as the case may be, shall send to the taxpayer a
notice for an informal conference before forwarding the report to higher authorities for approval.
The notice which is Annex "A" hereof shall be accompanied with a summary of findings as basis
for informal conference. (Annex "A" deleted).
In cases where the taxpayer has agreed in writing to the proposed assessment, or where such
proposed assessment has been paid, the required notice may be dispensed with.
PRE-ASSESSMENT NOTICE
Section 2. Notice for Proposed Assessment. — When the Commissioner or his duly
authorized representative finds that taxes should be assessed, he shall first notify the taxpayer of
his findings in the attached prescribed form as Annex "B" hereof. The notice shall be made in
writing and sent to the taxpayer at the address indicated in his return or at his last known address
as stated in his notice of change of address. (Annex "B" deleted).
In cases where the taxpayer has agreed in writing to the proposed assessment, or where such
proposed assessment has been paid, the required notice may be dispensed with.
Section 3. Time to Reply. — Venue for Filing Reply. —
(a) Regional Office cases. — . . .
(b) National Office cases. — The taxpayer shall reply within a period of fifteen (15) days
from receipt of the Pre-Assessment Notice. In meritorious cases and upon written request of the
taxpayer an extension exceed a total of ten (10) days.
The reply of the taxpayer shall be filed with the Section Audit Review Division or the National
Audit Review Division, as the case may be, which has jurisdiction over the case.
xxx xxx xxx
ISSUANCE OF ASSESSMENT
Section 5. Failure to Reply to Pre-Assessment Notices. Issuance of Assessment. — In the
event the taxpayer fails to respond to the Pre-Assessment Notice within the above-prescribed
period, or when the Commissioner or his duly authorized representative finds the response
without merit, he should be informed of such fact and the report of investigation shall be given
due course."

[C.T.A. CASE NO. 6344. June 23, 2005.]

AAPI REALTY CORPORATION, petitioner, vs. COMMISSIONER OF INTERNAL
REVENUE, respondent.

Section 228 of the NIRC of 1997, provides, among others, that "the taxpayer shall be informed in
writing of the law and the facts on which the assessment is made; otherwise, the assessment shall
be void". This is in consonance with the due process requirement of the 1997 Philippine
Constitution, which provides that "No person shall be deprived of his property without due
process of law." The taxpayer has to be informed in writing of the nature of the examiner's
findings in order to be able to properly contest the same and submit supporting documents. In the
Details of Discrepancy attached to the assessment notices, it was not indicated how the
respondent's examiner arrived at the alleged undeclared income of P300,011.52. As correctly
pointed out by petitioner, the respondent did not state in detail: a) whether the tenant-lessees of
petitioner were in fact delinquent in the payment of the monthly rentals to petitioner; b) the
period for which the tenant-lessees were delinquent in the payment of the monthly rentals for
purposes of computing the alleged undeclared interest income amounting to P300,011.52; and c)
whether petitioner in fact enforced the late payment clause under the lease contract and collected
from its tenant-lessees the amount of P300,011.52 representing the alleged penalty interest.
Petitioner cannot be expected to be able to determine and thereafter refute the examiner's findings
without the disclosure of the details of the assessment. Hence, the assessment corresponding to
the alleged undeclared income of P300,011.52 is void. CASaEc

[C.T.A. CASE NO. 6166. April 5, 2002.]

PHILIPPINE HEALTH CARE PROVIDERS, INC., petitioner, vs. THE COMMISSIONER OF
INTERNAL REVENUE, respondent.

Prescinding from the foregoing, it is evident that what is declared void by law, is the failure of the
Commissioner to state the facts, the law, rules and regulations or jurisprudence on which the
assessment is made. The law apparently is strict in requiring the Commissioner or his duly
authorized representative to give the taxpayer sufficient notice as to the factual and legal basis of
the assessment. If petitioner decides not to file a protest on the assessment within the period
prescribed by law, it is now the duty of the respondent to issue a formal demand and assessment
notice. If, on the other hand, petitioner decided to protest the assessment, respondent has two
options: he can either cancel the assessment if he finds the protest meritorious or, if he is not
satisfied with the protest, he may proceed to issue the necessary demand letter as well as the
assessment notice based on his findings. The latter option presupposes a ruling of denial on the
part of the respondent. Such that, in this case, the issuance of the Formal Letter of Demand as
well as the assessment notice by the respondent is tantamount to the denial of petitioner's protest
on the Pre-assessment notice. It is no longer necessary for the respondent to discuss in detail why
the protest of the petitioner was not given due course. By means of the pre-assessment notice, the
taxpayer is already made aware of how the assessment was arrived at. To require the BIR to
explain in detail why a protest was denied would result in unnecessary delay, as this would
impede the BIR's tax collecting system to the prejudice of the government. It is sufficient that
there is notice to the taxpayer of the legal and factual bases of the assessment and to our minds,
this is substantial compliance of what was mandated by Section 228 of the Tax Code, as
amended.