REPUBLIC OF THE PHILIPPINES
COURT OF TAX APPEALS
QUEZON CITY
ENBANC
COMMISSIONER OF CTA EB No. 2551
INTERNAL REVENUE, (CTA Case No. 9360)
Petitioner,
Present:
DEL ROSARIO, fl
RINGPIS-LIBAN,
MANAHAN,
-versus- BACORRO-VILLENA,
MODESTO-SAN PEDRO,
REYES-FAJARDO,
CUI-DAVID, and
FERRER-FLORES, JJ.
LINDEN SUITES, INC., as
represented by EUGENE U. Promulgated:
BALCOS,
Respondent.
)(- - - -- - - - --- - - --- -- - -- - - - - - - - - -- - -- - --
DECISION
REYES-FAJARDO, J.:
We are called upon to rule on the Petition for Review dated
December 22, 2021,1 challen ging the Decision2 d ated May 20, 2021
and Resolution3 d ated November 4, 2021, rendered by the Court in
Div ision in CTA Case N o. 9360. The challen ged Decision and
Resolution nullified the d eficiency ta)( assessments issued by the
Rollo, pp. 47-52.
2 l d. at pp. 54-76.
3 /d. at pp. 78-82.
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DECISION
CIA EB No. 2551
Page 2 of 10
Commissioner of Internal Revenue against Linden Suites, Inc.
covering fiscal year (FY) ending September 30, 2012.
The facts follow.
Petitioner is the duly appointed Commissioner of Internal
Revenue (CIR) who holds office at the 5th Floor, Bureau of Internal
Revenue (BIR) National Office Building, Agham Road, Diliman,
Quezon City. He is vested with authority to administer and enforce
all laws pertaining to internal revenue taxes and has jurisdiction to
decide on disputed tax assessments in accordance with law and the
rules and regulations related thereto.
Respondent Linden Suites, Inc. is a domestic corporation duly
organized and existing under and by virtue of the laws of the
Republic of the Philippines, with registered address at No. 37 San
Miguel Avenue, Ortigas Center, Pasig City.
On October 2, 2013, respondent received a Letter of Authority
No. LOA-43A-213-00000719 dated September 26, 2013, authorizing
Revenue Officer (RO) Carmencita Villanueva (Villanueva), under the
supervision of Group Supervisor (GS) Antonino Hagan (Hagan), of
Revenue District No. 43A-East Pasig to examine/ audit respondent's
internal revenue taxes for the period from October 1, 2011 to
September 30, 2012.
As a result of the audit and examination of respondent's
records, petitioner allegedly issued on December 4, 2015, a
Preliminary Assessment Notice (PAN), with attached Details of
Discrepancies, which proposed to assess respondent for deficiency
income tax, value-added tax (VAT), and documentary stamp tax
(DST) for the fiscal year ending September 30, 2012, in the aggregate
amount of Eleven Million Seventy Thousand Nine Hundred Ninety-
Seven Pesos and 50/100 (P11,070,997.50), inclusive of interest and
penalties. Petitioner claims that respondent received the aforesaid
PAN on December 4, 2015.
On December 22, 2015, respondent received a Formal Letter of
Demand (FLD), with attached Details of Discrepancies, and
Assessment Notices, all dated December 22, 2015, which requested
respondent to pay the alleged deficiency income tax, VAT, and DST
QV
DECISION
CTA EB No. 2551
Page 3 of 10
for fiscal year ending September 30, 2012, in the total amount of
Eleven Million One Hundred Eighty-Five Thousand Eighty-Two
Pesos and 78/100 (P11,185,082.78), inclusive of interest and
surcharge, broken down as follows:
Tax Type Amount
Income Tax 1."6,044,231.19
VAT 2,712,863.43
DST 2,427,988.16
Total: P11,185,082.78
On January 8, 2016, respondent filed a Letter Protest to the FLD,
requesting Officer-in-Charge/ Assistant Chief of the Assessment
Division, Analyn S. Chu, to re-investigate the assessment issued
against it.
On February 5, 2016, respondent received a Letter from
Regional Director Alfredo V. Misajon (Misajon) of Revenue Region
No. 7, stating that its failure to state the applicable laws, rules and
regulations, or jurisprudence on which its administrative protest is
based rendered the assessment final, executory and demandable.
On February 29, 2016, respondent sent a Letter addressed to
then CIR, Kim S. Jacinto-Henares, requesting her to reconsider the
denial of its protest, and to strike out the FLD she issued on
December 22, 2015.
On April 28, 2016, respondent received a Letter from Regional
Director Misajon, reiterating that the assessment against respondent
had become final, executory and demandable, and notifying
respondent that the entire tax docket of the case together with its
Letter will be forwarded to the Collection Division.
On May 27, 2016, respondent filed a Petition for Review before
the Court in Division, docketed as CT A Case No. 9360.
On May 20, 2022, the Court in Division rendered the challenged
Decision,4 the dispositive portion of which reads:
4 Supra note 2.
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DECISION
CTA EB No. 2551
Page 4 of10
WHEREFORE, premises considered, the Petition for Review
filed on May 27, 2016 by [respondent] Linden Suites, Inc., as
represented by Eugene U. Balcos is hereby GRANTED.
Accordingly, the Letter dated January 27, 2016 and the Letter dated
April 28, 2016, both signed by Regional Director Alfredo V. Misajon
of Revenue Region No. 7 are hereby SET ASIDE. The Formal Letter
of Demand with attached Details of Discrepancies dated December
22, 2015, and the Assessment Notices assessing petitioner for
deficiency income tax, value-added tax, and documentary stamp
tax for fiscal year ending September 30, 2012 in the total amount of
ELEVEN MILLION ONE HUNDRED EIGHTY-FIVE
THOUSAND EIGHTY-TWO PESOS AND SEVENTY-EIGHT
CENTAVOS (P11,185,082.78), inclusive of interest and surcharge
are CANCELLED and WITHDRAWN.
[Petitioner] Commissioner of Internal Revenue or any
person acting on his behalf is ENJOINED from proceeding with the
collection of the taxes subject of the present case.
SO ORDERED.
Petitioner moved,s but failed6 to secure a reversal of the
challenged Decision; hence, the present recourse.
Petitioner maintains that the Court in Division lacks jurisdiction
over CTA Case No. 9360. According to him, before the Court in
Division may entertain his decisions involving disputed assessment,
the taxpayer must file an administrative protest against the final
assessment. Among the conditions for the validity thereof is that the
taxpayer must state in his administrative protest the applicable law,
rules and regulations, or jurisprudence on which said protest was
based. Since respondent's protest-letter to the final assessment, filed
with the BIR on January 8, 2016 failed to specify the legal basis why
said assessment was erroneous or illegal, the effect is that no valid
protest was filed before the Bureau of Internal Revenue, rendering
the final assessment immutable; hence, the Court in Division lacks
jurisdiction over respondent's appeal.
Granting the Court in Division has jurisdiction, petitioner
asserts that the PAN was served to, and received by a certain Aeo-
Jean Tanyag (Tanyag), respondent's alleged staff; thus, due process
on the service of PAN under Section 228 of the 1997 National Internal
Revenue Code (NIRC), as amended, was duly complied with.
Respondent (now petitioner)'s Motion for Reconsideration (Decision dated May 26,
2021). Docket (CTA Case No. 9360), pp. 1071-1074.
6 Supra note 3.
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DECISION
CTA EB No. 2551
Page 5 of 10
Petitioner as well insists that the PAN was validly served upon
respondent via registered mail.
All these points lead petitioner to conclude that respondent
must be held liable for the deficiency tax assessment covering FY
ending September 30, 2012.
On the other hand, respondent counters that it validly filed an
administrative protest on the final assessment. Specifically, it
received the FLD/FAN on December 29, 2015; hence, the timely filing
of an administrative protest on January 8, 2016 converted such
assessment to a disputed assessment. As petitioner's authorized
representative denied its protest through a Letter it received on
February 5, 2016, it timely filed an administrative appeal before
petitioner, which the latter denied. In turn, petitioner's decision on
the disputed assessment was also timely appealed before the Court in
Division. As such, the Court in Division has jurisdiction over this
case.
Respondent, too, mirrors the Court in Division's finding that no
PAN was validly served to, and received by it, offensive of its right to
due process on assessments under Section 228 of the NIRC, as
amended, as implemented by Revenue Regulations (RR) No. 18-2013;
thus, the nullification of petitioner's deficiency tax assessments
issued against respondent for FY ending September 30, 2012 is in
order.
RULING
We deny the Petition.
Section 228 of the NIRC, as amended,? as implemented by
Section 38 of RR No. 12-99,9 as amended by RR No. 18-2013 govern
7 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: ..
The taxpayers shall be informed in writing of the law and the facts on which the
assessment is made; otherwise, the assessment shall be void.
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DECISION
CTA EB No. 2551
Page 6 of10
the due process requirement on assessment. Among the components
thereof is that the taxpayer must be afforded the opportunity to
ventilate its defenses on the PAN, within fifteen (15) days from
receipt thereof, by way of a reply or response thereto.1o Contrariwise,
the taxpayer's non-receipt of the PAN would be transgressive of its
right to due process on assessment. Prime Steel Mill, Incorporated v.
Commissioner of Internal Revenue11 elucidated on the rationale thereof in
this wise:
The importance of the PAN stage of the assessment process
cannot be discounted as it presents an opportunity for both the
taxpayer and the BIR to settle the case at the earliest possible time
without need for the issuance of the FAN.
Within a period to be prescribed by implementing rules and regulations, the taxpayer
shall be required to respond to said notice. If the taxpayer fails to respond, the
Commissioner or his duly authorized representative shall issue an assessment based on
his findings ....
. . . (Boldfacing supplied)
8 SECTION 3. Due Process Requirement in the Issuance of a Deficiency Tax
Assessment. -
3.1 Mode of procedures in the issuance of a deficiency tax assessment:
3.1.1 Preliminary Assessment Notice (PAN). - If after review and evaluation by the
Commissioner or his duly authorized representative, as the case may be, it is determined
that there exists sufficient basis to assess the taxpayer for any deficiency tax or taxes, the
said Office shall issue to the taxpayer a Preliminary Assessment Notice (PAN) for the
proposed assessment. It shall show in detail the facts and the law, rules and regulations,
or jurisprudence on which the proposed assessment is based (see illustration in ANNEX
11
A'' hereof).
If the taxpayer fails to respond within fifteen (15) days from date of receipt of the PAN,
he shall be considered in default, in which case, a Formal Letter of Demand and Final
Assessment Notice (FLO/FAN) shall be issued calling for payment of the taxpayer's
deficiency tax liability, inclusive of the applicable penalties.
If the taxpayer, within fifteen (15) days from date of receipt of the PAN, responds that
he/it disagrees with the findings of deficiency tax or taxes, an FLO/FAN shall be issued
within fifteen (15) days from filing/ submission of the taxpayer's response, calling for
payment of the taxpayer's deficiency tax liability, inclusive of the applicable penalties.
SUBJECT: Implementing the Provisions of the National Internal Revenue Code of 1997
Governing the Rules on Assessment of National Internal Revenue Taxes, Civil Penalties
and Interest and the Extra-Judicial Settlement of a Taxpayer's Criminal Violation of the
Code Through Payment of a Suggested Compromise Penalty.
10 See Commissioner of Internal Revenue v. Yumex Philippines Corporation, G.R. No. 222476,
May 5, 2021, whereby the Supreme Court ruled that the service of the PAN, as well as the
taxpayer's opportunity to file a reply/response thereto within fifteen (15) days from
receipt thereof is mandatory.
11 G.R. No. 249153, September 12, 2022.
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DECISION
CTA EB No. 2551
Page 7 of10
Petitioner claims that the PAN was served upon respondent
through: one, personal service, and received by the latter's alleged
staff, Tanyag; and two, registered mail; precisely, due process on
assessment was duly complied with. Respondent says otherwise,
asserting that it never received the PAN, issued by the BIR; hence,
there was violation of its right to due process.
We share respondent's view.
Ei incumbit probatio qui dicit, non que negat. He [or she] who
asserts, not he [or she] who denies, must prove,12 since, by the nature
of things, he [or she] who denies a fact cannot produce any proof of
it. 13 Given that respondent disclaimed receipt of the PAN, petitioner
must prove that there was actual receipt thereof, by the former or its
duly authorized representative .
To prove valid personal service and actual receipt of the PAN
by respondent or its duly authorized representative , petitioner
proffered: one, PAN received by a certain Tanyag on December 4,
2015, with a receiving stamp thereon; and two, Affidavit of Service of
PAN, executed by RO Villanueva and GS Hagan, attesting that they
personally served the PAN to respondent at its business address.
Glaringly, RO Villanueva and GS Hagan are the persons clothed
with personal knowledge on the events regarding the BIR's
purported service of, and respondent's receipt of the PAN. These
individuals failed to take the witness stand. Instead, petitioner picked
RO Wilhelmina Rosario D. Padit (RO Padit) to identify and testify on
the contents of said PAN and Affidavit of Service. RO Padit is without
personal knowledge on the circumstances surrounding the purported
service of and receipt by respondent of the PAN. Such being the case,
the pieces of evidence adduced by petitioner to demonstrate service
and receipt of the PAN are hearsay evidence. Dela Llana v. Biong14
confirmed:
However, even if we consider the medical certificate in the
disposition of this case, the medical certificate has no probative
value for being hearsay. It is a basic rule that evidence, whether
12 See Franco v. People, G.R. No. 191185, February 1, 2016, citing People v. Masalihit, G.R. No.
124329, December 14, 1998.
13 See MOF Company, Inc. v. Shin Yang Brokerage Corporation, G.R. No. 172822, December 18,
2009.
14 G.R. No. 182356, December 4, 2013.
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DECISION
CTA EB No. 2551
Page 8 of 10
oral or documentary, is hearsay if its probative value is not based
on the personal knowledge of the witness but on the knowledge
of another person who is not on the witness stand ... ,15
Being hearsay, petitioner's evidence, though admitted, has no
credence for it has no probative value.1 6 Evidence, to establish a fact
in issue, must not only be admissible-it must be able to convinceY
Through his presentation of hearsay evidence, petitioner failed to
persuade us that there was valid personal service by the BIR, and
receipt by respondent of the PAN.
The BIR, too, failed to validly serve the PAN, through
registered mail, to respondent.
Under Section 3(v), Rule 131 of the Rules of Court, there is a
disputable presumption that "a letter duly directed and mailed was
received in the regular course of the mail." However, the
presumption is subject to controversion and direct denial, in which
case the burden is shifted to the party favored by the presumption to
establish that the subject mailed letter was actually received by the
addressee.1s
Commissioner of Internal Revenue v. T-Shuttle Services, Inc. (T-
Shuttle)19 further held that when a taxpayer denies having received
the notices mailed by the BIR, the latter is required to identify and
authenticate the signatures appearing on the registry receipt to
determine whether the signatories thereon are the authorized
representatives of the taxpayer concerned. Significantly, the Court in
Division found that:
In the present case, while [petitioner] formally offered the
Registry Return Receipt for the Service of the PAN as evidence, he
failed to offer as evidence the testimony of the person who mailed
the PAN. No witness was presented to identify the Registry Receipt
15 Boldfacing supplied.
16 Republic v. Galena, G.R. No. 215009, January 23, 2017.
17 People v. Ansano, G.R. No. 232455, December 2, 2020.
18 See Commissioner of Internal Revenue v. Bank of the Philippine Islands, G.R. No. 224327, June
11, 2018; Commissioner of Internal Revenue v. GJM Philippines Manufacturing, Inc., G.R. No.
202695, February 29, 2016; Commissioner of lntemal Revenue u. Metro Star Superama, Inc.,
G.R. No. 185371, December 8, 2010; and Barcelon, Roxas Securities, Inc. (now known as UBP
Secun·a·es, Inc.) v. Commissioner of Internal Revenue, G.R. No. 150764, August 7, 2006.
19 G.R. No. 240729, August 24, 2020.
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DECISION
CTA EB No. 2551
Page 9 of 10
and even authenticate the signature appearing thereon. Even a
certification from the postmaster was neither offered as evidence. 20
Therefore, we reject petitioner's assertion that there was valid
service through registered mail of the PAN on respondent.
Finally, on the assumption that respondent failed to validly file
an administrative protest on the FLD/FAN, said assessment never
attained finality, because the BIR trampled respondent's right to due
process. T-Shuttle pronounced:
Additionally, the argument of the CIR that the deficiency tax
assessments have already become final, executory, and demandable
should be premised on the validity of the assessments themselves.
As it was established that the deficiency IT and VAT assessments
for CY 2007 are void for failure to accord [the taxpayer] due process
in their issuance, the CIR's argument necessarily fails.
WHEREFORE, the Petition for Review dated December 22,
2021, in CTA EB No. 2551, is DENIED. The Decision dated May 20,
2021 and Resolution dated November 4, 2021, rendered by the Court
in Division, in CTA Case No. 9360, are AFFIRMED.
SO ORDERED.
~~ r.~-J=~~
MARIAN IVY~. REYES-FAJARDO
Associate Justice
We Concur:
Presiding Justice
~. ~ -1'----
MA. BELEN M. RINGPIS-LIBAN
Associate Justice
20 Page 19, Decision dated May 20, 2021 in CTA Case No. 9360. Rollo, p. 72.
DECISION
CTA EB No. 2551
Page 10 of 10
~0~
CATHERINE T. MANAHAN
Associate Justice
JEAN !Vl.tuvr: 'KC6R~VILLENA
~tim~
LANEE S. CUI-'i:fAVID
Associate Justice
RES
CERTIFICATION
Pursuant to Article VIII, Section 13 of the Constitution, it is
hereby certified that the conclusions in the above Decision were
reached in consultation before the case was assigned to the writer of
the opinion of the Court.
Presiding Justice
