CASE DIGEST: CIR vs. BASF Coating (G.R. No. 198677; November 26, 2014)
CASE DIGEST: COMMISSIONER OF INTERNAL REVENUE, Petitioner, vs. BASF COATING + INKS PHILS., INC., Respondent. (G.R. No. 198677; November 26, 2014)
2/3 of BC's board members and stockholders decided to dissolve the corporation by cutting its 50-year term of existence (from 1990) short (only until March 31, 2001). Subsequently, BC moved out of its address in Las Piñas City and transferred to Carmelray Industrial Park, Canlubang, Calamba, Laguna
On June 26, 2001, BC submitted 2 letters to BIR. The first was a notice of dissolution. The send was a manifestation with documents supporting said dissolution such as BIR Form 1905 which refers to an update of information contained in its tax registration. Thereafter, a FAN was sent to BC's former address in Las Piñas City. The FAN indicated an amount of 18 million pesos representing income tax, VAT, WTC, EWT and DST for the taxable year of 1999.
On March 5, 2004, BIR's RDO No. 39, South Quezon City, issued a First Notice Before Issuance of Warrant of Distraint and Levy (FNB), which was sent to the residence of one of BC's directors.
On March 19, 2004, BC filed a protest letter citing lack of due process and prescription as grounds.
After 180 days without action on the part of the CIR, BC filed a petition for review with the CTA. Trial ensued.
The CTA 1D ruled that since the CIR was actually aware of BC's new address and such error in sending should not be taken against BC. According to the CTA 1D, since there are no valid notices sent to BC, the subsequent assessments against it are considered void.
CIR filed an MR. It was denied. So, it went to CTA en banc. The CTA En Banc held that CIR's right to assess respondent for deficiency taxes for the taxable year 1999 has already prescribed and that the FAN issued to respondent never attained finality because BC did not receive it.
CIR filed an MR. Denied.
ISSUE #1: Was the running of the 3-year prescriptive period to assess suspended when BC failed to notify the CIR of its change of address?
No, the 3-year prescriptive period to assess was not suspended in favor of the CIR even if BC failed notify regarding its change of address.
It is true that, under the Tax Code, the running of the Statute of Limitations shall be suspended when the taxpayer cannot be located in the address given in the return filed upon which a tax is being assessed or collected. In addition, Section 11 of RR 12-85 states that, in case of change of address, the taxpayer is required to give a written notice thereof to the RDO or the district having jurisdiction over his former legal residence and/or place of business.
However, the Supreme Court ruled that the above-mentioned provisions on the suspension of the 3-year period to assess apply only if the CIR is not aware of the whereabouts of the taxpayer.
In the present case, the CIR, by all indications, was well aware that BC had moved to its new address in Calamba, Laguna, as shown by the documents which formed part of respondent's records with the BIR.
Moreover, before the FAN was sent to BC's old address, the RDO sent BC a letter regarding the results of its investigation and an invitation to an information conference. This could not have been done without being aware of BC's new address. Finally, the PAN was "returned to sender" before the FAN was sent.
Hence, despite the absence of a formal written notice of Bc's change of address, the fact remains that petitioner became aware of respondent's new address as shown by documents replete in its records. As a consequence, the running of the three-year period to assess respondent was not suspended and has already prescribed.
ISSUE #2: Section 3.1.7 of BIR Revenue Regulation No. 12-99 allows "constructive service" if the assessment notice is served by registered mail. This constructive service rule was upheld in Nava v. Commissioner of Internal Revenue. Isn't there constructive service in BC's case?
No there is none.
The CIR's reliance on the provisions of Section 3.1.7 of BIR RR No. 12-9944 as well as on the case of Nava v. Commissioner of Internal Revenue is misplaced, because in the said case, one of the requirements of a valid assessment notice is that the letter or notice must be properly addressed. It is not enough that the notice is sent by registered mail as provided under the said RR. In the instant case, the FAN was sent to the wrong address. Thus, the CTA is correct in holding that the FAN never attained finality because BC never received it, either actually or constructively.
2/3 of BC's board members and stockholders decided to dissolve the corporation by cutting its 50-year term of existence (from 1990) short (only until March 31, 2001). Subsequently, BC moved out of its address in Las Piñas City and transferred to Carmelray Industrial Park, Canlubang, Calamba, Laguna
On June 26, 2001, BC submitted 2 letters to BIR. The first was a notice of dissolution. The send was a manifestation with documents supporting said dissolution such as BIR Form 1905 which refers to an update of information contained in its tax registration. Thereafter, a FAN was sent to BC's former address in Las Piñas City. The FAN indicated an amount of 18 million pesos representing income tax, VAT, WTC, EWT and DST for the taxable year of 1999.
On March 5, 2004, BIR's RDO No. 39, South Quezon City, issued a First Notice Before Issuance of Warrant of Distraint and Levy (FNB), which was sent to the residence of one of BC's directors.
On March 19, 2004, BC filed a protest letter citing lack of due process and prescription as grounds.
After 180 days without action on the part of the CIR, BC filed a petition for review with the CTA. Trial ensued.
The CTA 1D ruled that since the CIR was actually aware of BC's new address and such error in sending should not be taken against BC. According to the CTA 1D, since there are no valid notices sent to BC, the subsequent assessments against it are considered void.
CIR filed an MR. It was denied. So, it went to CTA en banc. The CTA En Banc held that CIR's right to assess respondent for deficiency taxes for the taxable year 1999 has already prescribed and that the FAN issued to respondent never attained finality because BC did not receive it.
CIR filed an MR. Denied.
ISSUE #1: Was the running of the 3-year prescriptive period to assess suspended when BC failed to notify the CIR of its change of address?
No, the 3-year prescriptive period to assess was not suspended in favor of the CIR even if BC failed notify regarding its change of address.
It is true that, under the Tax Code, the running of the Statute of Limitations shall be suspended when the taxpayer cannot be located in the address given in the return filed upon which a tax is being assessed or collected. In addition, Section 11 of RR 12-85 states that, in case of change of address, the taxpayer is required to give a written notice thereof to the RDO or the district having jurisdiction over his former legal residence and/or place of business.
However, the Supreme Court ruled that the above-mentioned provisions on the suspension of the 3-year period to assess apply only if the CIR is not aware of the whereabouts of the taxpayer.
In the present case, the CIR, by all indications, was well aware that BC had moved to its new address in Calamba, Laguna, as shown by the documents which formed part of respondent's records with the BIR.
Moreover, before the FAN was sent to BC's old address, the RDO sent BC a letter regarding the results of its investigation and an invitation to an information conference. This could not have been done without being aware of BC's new address. Finally, the PAN was "returned to sender" before the FAN was sent.
Hence, despite the absence of a formal written notice of Bc's change of address, the fact remains that petitioner became aware of respondent's new address as shown by documents replete in its records. As a consequence, the running of the three-year period to assess respondent was not suspended and has already prescribed.
ISSUE #2: Section 3.1.7 of BIR Revenue Regulation No. 12-99 allows "constructive service" if the assessment notice is served by registered mail. This constructive service rule was upheld in Nava v. Commissioner of Internal Revenue. Isn't there constructive service in BC's case?
No there is none.
The CIR's reliance on the provisions of Section 3.1.7 of BIR RR No. 12-9944 as well as on the case of Nava v. Commissioner of Internal Revenue is misplaced, because in the said case, one of the requirements of a valid assessment notice is that the letter or notice must be properly addressed. It is not enough that the notice is sent by registered mail as provided under the said RR. In the instant case, the FAN was sent to the wrong address. Thus, the CTA is correct in holding that the FAN never attained finality because BC never received it, either actually or constructively.