Monday, May 11, 2020

SVI INFORMATION vs. CIR (Tax 2)

SVI INFORMATION SERVICES CORPORATION vs. COMMISSIONER OF INTERNAL REVENUE
CTA Case No. 8496

FACTS:
Petitioner  received  Letter of Authority  (LOA) No. 000087833 dated September  11, 2008  from  the BIR, authorizing  the examination of petitioner's  books of accounts and other  financial  records  for all internal revenue taxes for taxable year 2007. On October  20,  2009,  petitioner received  a Post Reporting  Notice from BIR Revenue District Office (ROO) No. 43A. Said notice,  pursuant to the LOA, informed petitioner of the tentative findings for deficiency income tax, VAT, EWT, and withholding  tax on compensation liabilities for taxable year  2007 and directed petitioner  to  attend an informal conference  or  to submit documentary evidence to refute said findings.

On October 28,  2009,  petitioner replied  to the Post Reporting  Notice through  a  letter dated  October 26, 2009  addressed  to Mr. Wilfreda M. Pantino, the Revenue  Officer of BIR ROO No. 43A. Thereafter, on November  11,  2010,  petitioner  received  from respondent Assessment  Notices (FAN) and a Formal  Letter of Demand with attached  Details of Discrepancies  dated October  18,  2010.

Petitioner protested  the FAN through  a letter  dated  December  10, 2010, addressed  to Ms. Lorna Tobias,  Chief of the Assessment  Division of BIR RDO No. 43A. Subsequently,  petitioner  received  a Preliminary  Collection  Letter8 on April 26, 2012,  finding  petitioner  liable  for deficiency  taxes in the  total amount of P14,513,761.44, inclusive of interest. On May 24, 2012,  petitioner  received  a Final Notice  Before  Seizure (Final  Notice) dated May 10,  2012  from BIR RDO No. 43A, reiterating the demand  for  payment of the alleged  deficiency  income  tax, VAT and EWT for  taxable  year  2007. Hence, petitioner  filed  the  instant  Petition  for Review on May 25,  2012.

ISSUE:
Whether or not the FAN and the PCL are  null and void since  petitioner never received  a Preliminary Assessment Notice from  respondent.

RULING:
Yes, the law and the regulations are clear on the requirements for procedural due process on the issuance of assessment for deficiency taxes. Full and complete compliance with these requirements is mandatory to ensure the validity of the assessment. Consequently, a void assessment bears no valid fruit. The issuance of PAN is an integral part of procedural due process. The PAN lays down the factual and legal basis for the assessment. We reiterate the Assailed Decision's discussion on the indispensable nature of the PAN in the issuance of assessments and give emphasis to the fact that the 1997 NIRC provided that the issuance of PAN in assessments is mandatory in tax assessments except in a few instances, specifically enumerated by law, where it is not required.

In the instant case, respondent failed to prove that the PAN was delivered to petitioner. Records show that respondent did not formally offer as her evidence any document, such as a copy of a registry return receipt in case of service through registered mail or the alleged request for certification addressed to the Pasig City Post Office, which will prove that petitioner did in fact receive the disputed PAN. Respondent also failed to convince this Court that the PAN was personally received by petitioner.

Accordingly, in the absence of proof of actual receipt by petitioner of a PAN in violation of Section 228 of the NIRC of 1997 and RR No. 12-99, as amended by RR No. 18-2013, this Court finds that petitioner was not accorded procedural due process in the issuance of the assessment.

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