REPUBLIC OF THE PHILIPPINES

COURT OF TAX APPEALS

QUEZON CITY

THIRD DIVISION
*********

JONES LANG LASALLE CTA Case No. 9590

(PHILIPPINES), INC.,
Petitioner,
Members:

-versus- UY, Chairperson ,

RINGPIS-LIBAN, and
MODESTO-SAN PEDRO, JJ

COMMISSIONER OF INTERNAL Promulgated:

REVENUE,
Respondent. MAR
~ 1' ? 2020
.--s : P(f. 7 · - ·

X- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - X

DECISION
UY, J.:

Before this Court is a Petition for Review (With Urgent Motion

for the Issuance of an Order to Suspend the Collection of Tax)"1
filed on May 15, 2017 by Jones Lang Lasalle (Philippines), Inc.
(JLL), petitioner, against the Commissioner of Internal Revenue
(CIR), respondent, praying to issue an order suspending the
collection of the assessed deficiency tax, and setting aside any
garnishments, distraints, or levies already effected by the Bureau of
Internal Revenue (BIR); annul , reverse and set aside the 8 May
2017 Final Notice Before Seizure; cancel the deficiency value-
added tax (VAT) assessment against JLL; and issue an order
directing respondent to issue the corresponding Authority to Cancel
Assessment.

THE FACTS

Culled from the records and the evidence presented in this

case , these are the facts of the case.

1
Docket - Vol. 1. pp. 10 to 32.,0
DECISION
CTA Case No. 9590
Page 2 of22

Petitioner Jones Lang Lasalle (Philippines), Inc. is a

corporation duly organized and existing under Philippine Laws to
engage in, among others, local and international property
consultancy and advisory, agency, project development, and all
other real estate services in connection with the real estate
property business. 2 Its principal office address is at the 5th Floor
BOO Equitable Tower, 8751 Paseo de Roxas, Makati City. 3
Presently, its principal office address is at 191h Floor, NEX Tower,
6786 Ayala Avenue, 1223 Makati City. 4

On the other hand, respondent is the Chief of the Bureau of

Internal Revenue (BIR), the government agency charged with,
among other powers and duties, the responsibility of collecting all
national internal revenue taxes, acting through Teresita M. Angeles
of the Large Taxpayers Collection Enforcement Division of the
Large Taxpayers Service, BIR, Quezon City. He may be served
with orders and processes of this Court at BIR National Office
Building, BIR Road, Diliman, Quezon City. 5

On September 3, 2009, respondents issued a Letter Notice

No. 047-TRS-07-00-00038, 6 informing petitioner that a
computerized matching conducted by respondent on the
information/data provided by third-party sources against its
declarations per income/ VAT/ percentage/ withholding tax returns,
disclosed discrepancies for CY 2007.

Thereafter, respondent issued a Letter of Authority (LOA) No.

00016964 on May 11, 20107 , authorizing Revenue Officer Mario H.
Eleda and Team Head Amelita A. Escober to examine petitioner's
books of accounts and other accounting records for income tax,
VAT, and withholding tax issues based on LN No. 047-TRS-07-00-
00038 and other corresponding preprocessed data under RELIEF
for taxable year 2007.

An undated Notice for Informal Conference8 was issued by

respondent, which was received by petitioner on May 31, 2010,

2
Par 5, The Parties, Petition/or Review, Docket- Vol. I, p. 12.
3
Par 5, The Parties, Petition for Review, Docket- Vol. I, p. 12.
4
Par 1.1, The Parties, Memorandum, Docket- Vol. 2, p. 824.
5
Stipulation of Facts, JSFI, Docket, Vol. 2, p. 736.
6
Exhibit "P-16", BIR Records, p. 70.
7
BIR Records, p. 83.
8
Exhibit "P-8", Docket, Vol I, p. 270. pA
DECISION
CTA Case No. 9590
Page 3 of22

requesting petitioner or its duly authorized representative to appear

for an informal conference.

On October 8, 2010, respondent issued the Preliminary

Assessment Notice (PAN)9 with attached Details of Discrepancies
assessing petitioner for deficiency VAT for CY 2007 in the amount
of P7,078,289.04.

Subsequently, respondent issued a Final Assessment Notice

(FAN) dated October 19, 2011 10 with Details of Discrepancies and
Assessment Notice 11 assessing petitioner for deficiency VAT for CY
2007, in the aggregate amount of P7,507,045.30.

A Collection Letter12 dated August 2, 2016 was thereafter

issued by respondent against petitioner for the unpaid deficiency
VAT in the amount of P7,507,045.30.

In response to the Collection Letter, petitioner filed a Letter

dated August 23, 2016 13 , requesting copies of relevant documents
supporting the deficiency VAT assessment.

On September 7, 2016, petitioner filed another Letter14

reiterating its request for copies of the relevant and necessary
documents in support of the Collection Letter.

Thereafter, petitioner filed a Letter15 on September 19, 2016,

stating that the deficiency VAT assessment for CY 2007 and
Collection Letter should be cancelled.

Respondent then issued the FNBS 16 dated February 28,

2017, which was received by petitioner on May 8, 2017.

Thus, on May 15, 2017, petitioner filed the instant "Petition for
Review (With Urgent Motion for the Issuance of an Order to

9
Exhibit "P-7", BIR Records, pp. 90 to 91.
10
Exhibit "P-6", Docket- Vol. I, p 269.
11
BIR Records, pp. 94 to 96.
12
Exhibit "P-I, Docket, Vol. I, pp.ll9 to 120;
13
Exhibit "P-9, Docket, Vol. I, p.134.
14
Exhibit "P-10, Docket, Vol. I, p.l35 to 136.
15
16
r
Exhibit "P-29, Docket, Vol. I, pp. 205 to 222.
Exhibit "P-21", Docket, Vol. I, p. 38.
DECISION
CTA Case No. 9590
Page 4 of22

Suspend the Collection of Tax)". In said urgent motion, petitioner

contends that in view of the alleged jeopardy faced by petitioner's
business, and the prejudice to the government owing to the
illegality of the BIR's collection efforts, the collection attempt of the
BIR, through the FNBS, should be enjoined without necessity of
depositing the assessed deficiency nor posting a bond, and all of
BIR's actions made in furtherance of its collection attempt should
be invalidated.

Petitioner's Urgent Motion was set for hearing on May 24,

2017 wherein petitioner presented its witness Katrina Urbano in
support of said motion.

Respondent filed his Opposition (Re: Urgent Motion for the

Issuance of an Order to Suspend the Collection of Tax) on May 26,
2017 alleging among others, that petitioner miserably failed to
establish the essential requirements for the issuance of preliminary
injunction; and that respondent's resort to summary collection
remedies is a procedure provided by law. Allegedly, there is no
urgent and paramount necessity for a suspension order to issue as
there is no real jeopardy upon petitioner's interest as to warrant the
issuance of a suspension order.

Subsequently, respondent filed his Answer on June 16,

17
2017, interposing among others, the following affirmative
defenses to wit: that the Court has no jurisdiction over the instant
Petition since the assessment has already become final, executory
and demandable; and that the FNBS is not the disputed
assessment contemplated by law. Allegedly, all presumptions are
in favor of the correctness of tax assessments; and failure to
present proof of error in the assessment will justify judicial
affirmation of said assessment.

On July 7, 2017, petitioner filed a Rep/y 18 stating that the

assessment could not have become final, executory and
demandable; and that there was no proper service of the PAN and
FAN. Petitioner further argues that the Court has jurisdiction over
the present case; while the presumption of correctness of tax
assessment does not apply to this case as the subject assessment
was issued beyond the ordinary prescriptive period. Petitioner also
claims that there was no falsity, fraud, or omission that warrants the
application of the extra-ordinary prescriptive period.
17
Docket- Vol. l,pp.451 to464.
18
Docket- Vol. 2, pp. 528 to 542. ~
DECISION
CTA Case No. 9590
Page 5 of22

In the Resolution dated August 07, 2017 19 , the Court denied

petitioner's Urgent Motion for the Issuance of an Order to Suspend
the Collection of Tax for lack of merit. The Court, without
prejudging the case, found that petitioner was merely threatened by
the sending of the SIR of the Final Notice Before Seizure, but that a
Warrant of Distraint and Levy had not been issued by the SIR.

Thus, the Pre-Trial Conference was set on August 29,

20
2017. By agreement of both parties' counsel, they filed their
Joint Stipulation of Facts and Issues (JSFI) on September 13,
2017 21 and the Court issued its Pre-Trial Order on October 19,
2017_22

During trial, petitioner presented its Treasurer and Head of

Finance, Katrina Urbano. 23 On February 26, 2018, petitioner
submitted its Formal Offer of Evidence, 24 to which respondent filed
his Comment (Re: Petitioner's Formal Offer of Evidence) on
February 28, 2018?5

In the Resolution dated May 22, 2018 26 , the Court admitted

most of petitioner's evidence, except for exhibits "P-12", "P-13", "P-
14" "P-17" "P-18" "P-18-1" "P-19" and "P-19-1" for failure to
' ' ' '
present the original for comparison. On June 13, 2018, petitioner
filed an Omnibus Motion for (A) Partial Reconsideration of the
Resolution dated 22 May 2018; and (B) Admission of Exhibits "P-
12" "P-13" "P-14" "P-18" "P-18-1" "P-19" and "P-19-1" as
' ' ' ' J

Secondary Evidence. 27

On July 12, 2018, respondent filed an Opposition (Re: Motion

for Reconsideration/8 stating that before secondary evidence will
be introduced, petitioner should establish the former existence of
the said exhibits. Allegedly, petitioner failed to prove that the
originals of the documents were eventually lost or destroyed,
hence, the supposed secondary evidence must not be admitted.

19
Docket- Vol. 2, pp. 549 to 556.
20
Notice of Pre-Trial Conference, Docket- Vol. 2, pp. 526 to 527.
21
JSFI, Docket- Vol. 2, pp. 736 to 742.
22
Docket- Vol. 2, pp. 744 to 751.
23
Exhibit "P-34", Docket- Vol. 2, pp. 577 to 603.
24
Docket- Vol. 2, pp. 759 to 776.
25
Docket- Vol. 2, p. 777 to 778.
26
Docket- Vol. 2, pp. 783 to 784.
27
Docket- Vol. 2, pp. 785 to 796.
28
Docket- Vol. 2, pp. 8oo to 805r
DECISION
CTA Case No. 9590
Page 6 of22

In the Resolution 29 dated October 17, 2018, the Court

granted petitioner's Omnibus Motion. Accordingly, the Court
admitted exhibits "P-12" "P-13" "P-14" "P-18" "P-18-1" "P-19"
I l I l I

and "P-19-1" subject to this Court's final evaluation and/or

appreciation of their purposes, materiality, relevancy and probative
value to issues involved in this case.

During the hearing for the presentation of respondent's

evidence on February 21, 2019, respondent's counsel manifested
that respondent will not be presenting evidence in the instant case.
Thus, the parties were given thirty (30) days to file their respective
Memoranda.

With the filing of petitioner's Memorandum on March 25,

30
2019 and respondent's Memorandum on March 27, 2019 3 \ the
case was submitted for decision in the Resolution dated April 1,
2019 32 . Hence, this Decision.

THE ISSUES

The parties stipulated on the following issues33 for this

Court's resolution, to wit:

"II. STIPULATION OF ISSUES

2.1 Whether or not the Honorable Court has jurisdiction

to act on the Petition for Review;

2.2 Whether the period to assess JLL for CY 2007 has

already prescribed;

2.3 Whether the BIR complied with the due process

requirements under the National Internal Revenue
Code ("NIRC") and its own regulations, viz;

29
Docket- Vol. 2, pp. 809 to 815.
30
Docket- Vol. 2, pp. 824 to 857.
31
Docket- Vol. 2, pp. 860 to 873.
32
Docket- Vol. 2, p. 876.
33
Stipulation of the Issues, JSFI, Docket- Vol. 2, p. 737j/O
DECISION
CTA Case No. 9590
Page 7 of22

a. Whether due notice was given by the BIR to

Jones Lang Lasalle (Philippines) Inc.;

b. Whether Jones Lang Lasalle (Philippines) Inc.

was given by the BIR every opportunity to be
heard;

2.4 Whether the BIR can still assess JLL additional VAT,
after it has already paid its deficiency tax
assessments (including VAT) pursuant to SIR's
regular comprehensive audit; and

2.5 Whether or not JLL is liable for deficiency VAT in the

amount of P7,507,045.30 for the taxable year 2007."

Petitioner's arguments:

Petitioner argues that the Court has jurisdiction over the

instant case considering that the CTA is empowered to review the
petition pursuant to its "other matters" jurisdiction.

According to petitioner, the subject deficiency VAT

assessment was issued beyond the prescriptive period; that the
same was plagued with procedural defects; and that respondent
failed to follow the due process requirements under the NIRC.

Allegedly, the deficiency VAT assessment did not follow

proper procedures laid down in Revenue Memorandum Order
(RMO) No. 30-03 (On the Relief Program), RMO 28-07 (On the
TRS Program), and RMO 13-12 (On the TRS and Relief
Programs).

Finally, petitioner claims that based on the aforementioned

arguments, it cannot be held liable for deficiency VAT in the
amount of P7,507,045.30. To reiterate, the PAN and FAN are
allegedly void for being issued beyond the three-year prescriptive
period; that the same are not properly addressed to petitioner, as in
fact, were not received by petitioner in the regular course of mail as
these were returned to sender for the reason that addressee has
already moved out. Moreover, respondent did not offer in evidence
any LOA for the Special VAT Assessment, hence, the PAN and
FAN are void for being issued only pursuant to a Letter Notice andJl
DECISION
CT A Case No. 9590
Page 8 of22

that proper procedures under various BIR Relief and TRS

Programs were not followed.

Respondent's counter-arguments:

Respondent counter-argues that the Honorable Court has no

jurisdiction over the instant petition due to petitioner's failure to file
its protest to the FAN within the period provided by law. As such,
the assessment has already become final, executory and
demandable; and that the said assessment is not subject to judicial
scrutiny.

Further, respondent claims that petitioner is liable for

deficiency VAT since the assessment was issued within the
reglementary period. Allegedly after investigation pursuant to Letter
of Authority No. 2009 00016964 dated May 11, 2010 and Letter
Notice No. 047-TRS-00-0038 dated November 3, 2009, there has
been found due from petitioner deficiency income tax and VAT for
calendar year 2007. A preliminary review disclosed that petitioner
failed to declare its correct sales in its Income and VAT Returns
resulting in the total discrepancy of P28, 725,540.40 undeclared
sales as provided by third party sources.

Since the correct sales of petitioner did not appear in its VAT
return, there can only be one inevitable conclusion -that there was
a substantial under-declaration of sales in its VAT returns.

The discrepancy in petitioner's return manifests an evident

substantial under-declaration which eloquently demonstrate the
falsity or fraudulence of the VAT returns with an intent to evade the
payment of tax. Thus, respondent could rightfully invoke Section
222 of the NIRC of 199734 because his right to assess has not
prescribed.

34
Sec. 222. Exceptions to Period of Limitation of Assessment and Collection of Taxes.
(a) In the case of a false or fraudulent return with intent to evade tax or of failure
to file a return, the tax may be assessed, or a proceeding in court for the
collection of such tax may be filed without assessment, at any time within ten
(I 0) years after the discovery of the falsity, fraud or omission: Provided, That
in a fraud assessment which has become final and executory, the fact of fraud
shall be judicially taken cognizance of in the civil or criminal action for the
collection thereof.
XXX XXX XXX~
DECISION
CTA Case No. 9590
Page 9 of22

Lastly, all presumption are in favor of the correctness of tax

assessments. The good faith of tax assessors and the validity of
their actions are presumed. And it is incumbent upon the taxpayer
to prove the contrary and failure to do so shall vest legality on
respondent's actions and assessments. Thus, failure to present
proof of error in the assessment will justify judicial affirmation of
said assessment.

THE COURT'S RULING

We find merit in the instant Petition for Review.

The Court has jurisdiction

over the present case.

Respondent argues that the Court has no jurisdiction over the

instant Petition considering that the subject assessment has
already become final, executory and demandable. Further,
respondent alleges that the FNBS is not the disputed assessment
contemplated by law.

We disagree.

Jurisdiction over the subject matter or nature of an action is

fundamental for a court to act on a given controversy. 35 The CTA,
being a court of special jurisdiction, can take cognizance
only of matters that are clearly within its jurisdiction. 36

This Court's jurisdiction are mentioned under RA 1125, as

amended by RA 9282, and the provisions pertinent to the
jurisdictional issue raised by respondent in the instant case, are
found in Section 7 paragraph (a) (1) thereof, read as follows:

"SEC. 7. Jurisdiction. The CT A shall

exercise:

35
Nippon Express (Philippines) Corporation vs. Commissioner of Internal Revenue,
G.R. 185666, February 4, 2015, citing Commissioner of Internal Revenue v. Villa, et
a!., 130 Phil. 3, 4 (1968).
36
Commissioner of Internal Revenue v. V. Y Domingo Jewellers, Inc., G.R. No.
221780, March 25, 2019, citing CIR V. Burmeister and Wain Scandinavian
Contractor Mindanao, Inc., 146 Phil. 139, 152 (2014).to
DECISION
CTA Case No. 9590
Page 10of22

(a) Exclusive appellate jurisdiction to review by

appeal, as herein provided:

(1) Decisions of the Commissioner of Internal

Revenue in cases involving disputed assessments,
refunds of internal revenue taxes, fees or other
charges, penalties in relation thereto, or other matters
arising under the National Internal Revenue Code or
other laws administered by the Bureau of Internal
Revenue;" (Emphasis supplied)

Relative thereto, Section 3 (a) (1 ). Rule 4 of the Revised

Rules of the CTA likewise states:

"SEC. 3. Cases within the jurisdiction of the

Court in Division. - The Court in Division shall
exercise:

(a) Exclusive original over or appellate

jurisdiction to review by appeal the following:

(1) Decisions of the Commissioner of Internal

Revenue in cases involving disputed assessments,
refunds of internal revenue taxes, fees or other
charges, penalties in relation thereto, or other matters
arising under the National Internal Revenue Code or
other laws administered by the Bureau of Internal
Revenue;" (Emphasis supplied)

Based on the foregoing provisions, the jurisdiction of the CTA

is not limited to decisions of the CIR involving disputed
assessments. The second part thereof also includes "other
matters" arising under the NIRC or other laws administered by the
BIR.

In Commissioner of Internal Revenue v. Hambrecht & Quist

Philippines, Inc. 37 , the Supreme Court clarified the jurisdiction of the
CTA over "other matters", as follows:

". . . we have previously ruled that the appellate

jurisdiction of the CTA is not limited to cases which
involve decisions of the CIR on matters relating to

37
G.R. No.169225, November 17,2010., (Cl
DECISION
CTA Case No. 9590
Page II of22

assessments or refunds. The second part of the

provision covers other cases that arise out of the
National Internal Revenue Code (NIRC) or related
laws administered by the Bureau of Internal
Revenue (SIR).

XXX XXX XXX

Furthermore, the phraseology of Section 7, number ( 1),

denotes an intent to view the CTA's jurisdiction over
disputed assessments and over 'other matters' arising
under the NIRC or other laws administered by the BIR
as separate and independent of each other. This runs
counter to petitioner's theory that the latter is qualified
by the status of the former, i.e., an 'other matter' must
not be a final and unappealable tax assessment or,
alternatively, must be a disputed assessment."
(Emphasis and underscoring supplied).

Further, in Commissioner of Internal Revenue v. Court of Tax

Appeals (Second Division) and Petron Corporation 38 , the Supreme
Court explained the term "other matters arising under this
Code", as follows:

As the CIR aptly pointed out, the phrase "other

matters arising under this Code," as stated in the
second paragraph of Section 4 of the NIRC, should be
understood as pertaining to those matters directly
related to the preceding phrase "disputed
assessments, refunds of internal revenue taxes,
fees or other charges, penalties imposed in relation
thereto" and must therefore not be taken in isolation to
invoke the jurisdiction of the CTA. In other words, the
subject phrase should be used only in reference to
cases that are, to begin with, subject to the exclusive
appellate jurisdiction of the CTA, i.e., those
controversies over which the CIR had exercised her
quasi-judicial functions or her power to decide disputed
assessments, refunds or internal revenue taxes, fees or
other charges, penalties imposed in relation thereto, not
to those that involved the CIR's exercise of quasi-
legislative powers." (Emphasis and underscoring
supplied)

G.R. No. 207843, July 15,2015 ~

38
DECISION
CTA Case No. 9590
Page 12 of22

It is clear from the foregoing jurisprudential pronouncements

that the jurisdiction of the CTA to rule on "other matters arising
under the NIRC or other laws administered by the BIR", include
among others, the validity of the warrant of distraint and levy and
waiver of statute of limitations. Moreover, the term "other
matters" pertain to matters directly related to the disputed
assessments or refunds or internal revenue taxes, fees or other
charges, penalties imposed in relation thereto.

In the instant case, petitioner questions the issuance of the

FNBS and prays that the same be annulled and set aside.
Considering that the subject FNBS is directly related to the subject
assessment issued by respondent, and that the issuance thereof is
one of the remedies for the collection of delinquent taxes
sanctioned under Section 206 of the NIRC of 1997 and BIR rules
and regulations, this Court is therefore clothed with jurisdiction to
determine the validity of said FNBS under the phrase "other
matters arising under the NIRC or other laws administered by
the BIR".

Finally, in the case of Commissioner of Internal Revenue v.

lsabela Cultural Corporation, 39 the Supreme Court held that the
FNBS which indicates that the taxpayer was being given "this LAST
OPPORTUNITY" to pay, otherwise, its properties would be
subjected to distraint and levy, constitutes the CIR's final decision.

In light of the foregoing, it is evident that the issuance of the

subject FNBS constitutes the final decision of respondent that is
appealable before this Court.

Timeliness of the instant

Petition for Review

As regards to the timeliness of the subject Petition for

Review, Section 11 of RA No. 1125, as amended, provides that
any party adversely affected by a decision or ruling of the CIR may
file an appeal with the CTA within thirty (30) days after the receipt
of such decision or ruling.

In this case, considering that the subject FNBS was received

by petitioner on May 8, 2017, it had thirty (30) days therefrom or

39
G.R. No. 135210, July II, 2001./J
DECISION
CTA Case No. 9590
Page 13 of22

until June 7, 2017, to appeal and challenge its validity with the
CTA.

Clearly, the filing of the instant Petition for Review on May 15,
2017 was within the thirty (30) day period.

Respondent failed to prove

that the PAN and the FLDIFAN
were actually received by
petitioner.

Petitioner denies receiving the PAN and the FAN for the
subject deficiency VAT assessment. It argues that since due
process was not observed in this case, the subject assessment is
void. On the other hand, respondent insists that the assessment
notices were validly served to petitioner at its business address.

We find for petitioner.

Section 228 of the NIRC of 1997, as amended, lays down the

procedure in the issuance of tax deficiency assessment, viz:

"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:

(a) When the finding for any deficiency tax is the

result of mathematical error in the computation of the
tax as appearing on the face of the return; or

(b) When a discrepancy has been determined

between the tax withheld and the amount actually
remitted by the withholding agent; or

(c) When a taxpayer who opted to claim a refund

or tax credit of excess creditable withholding tax for a
taxable period was determined to have carried over and
automatically applied the same amount claimed against
the estimated tax liabilities for the taxable quarter or
quarters of the succeeding taxable year; or,0
DECISION
CTA Case No. 9590
Page 14 of22

(d) When the excise tax due on excisable articles

has not been paid; or

(e) When the article locally purchased or imported

by an exempt person, such as, but not limited to,
vehicles, capital equipment, machineries and spare
parts, has been sold, traded or transferred to non-
exempt persons.

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."
(Emphasis supplied)

To implement the foregoing provisions, Revenue Regulation

(RR) No. 12-99 was issued which specify the due process
requirement to be observed in issuing deficiency tax assessments.
Pertinent portions of Section 3 of RR No. 12-99 reads:

"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:

XXX XXX XXX

3.1.2 Preliminary Assessment Notice (PAN). - If

after review and evaluation by the Assessment Division
or 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, at least by registered mail, a
Preliminary Assessment Notice (PAN) for the
proposed assessment, showing in detail, the facts
and the law, rules and regulations, or jurisprudence on
which the proposed assessment is based (see
illustration in ANNEX 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 assessment notice
shall be caused to be issued by the said Office, calling
for payment of the taxpayer's deficiency tax liability,
fo
inclusive of the applicable penalties."
DECISION
CTA Case No. 9590
Page 15 of22

XXX XXX XXX

3.1.4 Formal Letter of Demand and Assessment

Notice. - The formal letter of demand and
assessment notice shall be issued by the
Commissioner or his duly authorized
representative. The letter of demand calling for
payment of the taxpayer's deficiency tax or taxes shall
state the facts, the law, rules and regulations, or
jurisprudence on which the assessment is based,
otherwise, the formal letter of demand and assessment
notice shall be void (see illustration in ANNEX B
hereof). The same shall be sent to the taxpaver only
by registered mail or by personal delivery. If sent by
personal delivery, the taxpayer or his duly authorized
representative shall acknowledge receipt thereof in the
duplicate copy of the letter of demand, showing the
following: (a) His name; (b) signature; (c) designation
and authority to act for and in behalf of the taxpayer, if
acknowledged received by a person other than the
taxpayer himself; and (d) date of receipt thereof."
(Emphasis and underscoring supplied)

Based on the foregoing, if there exists sufficient basis to

assess the taxpayer, the CIR or his authorized representative is
mandated to issue a PAN. Thereafter, a formal letter of demand
and an assessment notice shall be issued by the CIR or his duly
authorized representative. The use of the word "shall" in these
legal provisions indicates the mandatory nature of the requirements
laid down therein. Thus, it is essential for respondent to establish
and prove that the requisite assessment notices were duly served
to the taxpayer within the prescriptive period.

Further, in tax assessment, due process requires that the

taxpayer must actually receive the assessment. The case of
Barcelon Roxas Securities, Inc. (now known as UBP Securities,
Inc.) v. Commissioner of Internal Revenue, 40 is instructive, viz.:

"Jurisprudence is replete with cases holding

that if the taxpayer denies ever having received an
assessment from the BIR, it is incumbent upon the
latter to prove by competent evidence that such

40
G.R. No. 157064, August 7, 2006. /J
DECISION
CTA Case No. 9590
Page 16 of22

notice was indeed received by the addressee. The

onus probandi was shifted to respondent to prove by
contrary evidence that the Petitioner received the
assessment in the due course of mail. The Supreme
Court has consistently held 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 and a direct denial thereof shifts the
burden to the party favored by the presumption to prove
that the mailed letter was indeed received by the
addressee."

Applying the foregoing case, if the taxpayer denies having

received the assessment notices, it is incumbent upon respondent
to prove by competent evidence that the assessment notices were
indeed received by the taxpayer. In this case, respondent notably
failed to do so. 41 Clearly, respondent's failure to present or offer
any evidence is fatal to its assertion that the PAN and FAN were
validly served to petitioner.

It is basic in the rule of evidence that bare allegations,

unsubstantiated by evidence, are not equivalent to proof. 42

Nonetheless, even if this Court takes into account the

documents found in the SIR records, a perusal thereof fails to
convince this Court that the PAN and FAN were actually received
by petitioner.

Petitioner claims that at the time when the PAN and FAN
were issued by respondent, it already transferred offices to its new
address at the "51h Floor Equitable Bank Tower. Paseo de Roxas
Avenue. Makati City". It likewise alleges that the SIR was fully
informed of the said change in address.

The provisions of Section 11 of RR No. 12-8531 are

instructive and read as follows:

"SECTION 11. Change of Address. - In case of

change of address, the taxpayer must give written
notice thereof to the Revenue District Officer or the
district having jurisdiction over his former legal
41
Order dated February 21,20119, Docket- Vol2, pp. 817
42
f.'
Real vs. Belo, G.R. No. 146224, January 26, 2007
DECISION
CTA Case No. 9590
Page 17 of22

residence and/or place of business, copy furnished

the Revenue District Officer having jurisdiction over his
new legal residence or place of business, the Revenue
Computer Center and the Receivable Accounts
Division, BIR, National Office, Quezon City, and in
case of failure to do so, any communication
referred to in these regulations previously sent to
his former legal residence or business address as
appearing in his tax return for the period involved
shall be considered valid and binding for purposes
of the period within which to reply." (Emphasis
supplied)

Based on the foregoing provision, any taxpayer intending to

change his address must give a written notice to the ROO having
jurisdiction over his former legal residence and/or place of
business; otherwise, any communication previously sent to the said
former legal residence or place of business shall be considered
valid and binding for purposes of the period within which to reply.

In this case, it is clear that petitioner complied with the above-

quoted provision, as shown in the following documents presented
as evidence by petitioner:

1. An accomplished BIR Form No. 1905 (Application for

Registration Information Update), indicating the new
registered address of petitioner at "5th Floor
Equitable Bank Tower, Paseo de Roxas, Makati
City. n43

2. Transfer Commitment Form executed by petitioner's

Finance Controller, Maris Cristina Carino, indicating
the new address of petitioner at "5th Fir Equitable
Bank Tower, Paseo de Roxas Avenue, Makati
City"; 44

3. Verification Slip issued by ROO No. 47, showing the

date of verification on December 9, 2009 and
indicating the new address of petitioner at "5th Floor

43
Exhibit "P-12", Docket - Vol. I, p.l49; admitted as Secondary Evidence in the
Resolution dated October 17, 2018, Docket- Vol. 2, pp. 809 to 815.
44
Exhibit "P-13", Docket- Vol. I, p.l50; admitted as Secondary Evidence in the
Resolution dated October 17,2018, Docket- Vol. 2, pp. 809 to 815.1\
DECISION
CTA Case No. 9590
Page 18 of22

Equitable Bank Tower, Paseo de Roxas Avenue,

Makati City"45; and

4. Certificate of Registration No. 8RC0000020385,

showing petitioner's registered address as "5th Floor
Equitable Bank Tower, Paseo de Roxas Avenue,
Makati City 1229" with the following notations:
"March 11, 2011 Changed address" and "NEWLY
ENLISTED EFFECTIVE 01-01-2011" 46 .

The foregoing documents which were received or issued by

respondent indicate that petitioner's new address is at "5th Floor
Equitable Bank Tower, Paseo de Roxas, Makati City". It must be
emphasized further that the foregoing documents presented by
petitioner, were not denied nor controverted by respondent.

Interestingly, the Court notes that the new address of

petitioner was likewise indicated in the following documents found
in the BIR records:

1. Letter dated September 22, 200947 issued by petitioner and

received by respondent on September 23, 2009, contesting
the findings contained in the Letter Notice;

2. Memorandum dated May 14, 201048 issued by Elenita B.

Quimosing, Head, LN Task Force to Nelson M. Aspe, Deputy
Commissioner, Operations Group; and

3. Assessment Notice dated October 19, 2011, 49 attached to the

FAN.

Evidently, respondent had knowledge of petitioner's change

of address and should have sent the PAN and FAN to its new
address.

However, based on the BIR records, the PAN dated October

8, 201050 and FAN dated October 19, 2011 51 , were sent to
45
Exhibit "P-14", Docket- Vol. I, p.l51; admitted as Secondary Evidence in the
Resolution dated October 17, 2018, Docket- Vol. 2, pp. 809 to 815.
46
Exhibit "P-15", Docket- Vol. I, p. 282.
47
BIR Records, pp. 74 to 76.
48
BIR Records, p. 78.
49
BIR Records, p. 94.
50
BIR Records, pp. 88 to 91.
51
-I'
BIR Records, pp. 94 to 96.
DECISION
CTA Case No. 9590
Page 19 of22

petitioner's old address at "BF Tower 2 Enterprise Ctr., 6766 Ayala

Ave.. San Lorenzo. Makati City". Consequently, the said notices
were returned to sender, with a note on their respective letter
envelope which read: "RTS MOVED 1125/11 " 52 for the PAN; and
"RTS MOVED 12/5/11"53 for the FAN.

While it appears that respondent did indeed issue the

assessment notices, respondent failed to present evidence to
refute petitioner's claim that it did not receive said assessment
notices. Consequently, there was no valid service of assessment
notices to petitioner.

In Commissioner of Internal Revenue vs. Metro Star

Superama, lnc} 4 the Supreme Court ruled that failure to strictly
comply with the notice requirements prescribed under Section 228
of the NIRC of 1997, as amended, and RR No. 12-99 is tantamount
to denial of due process.

Further, in Commissioner of Internal Revenue vs. Pilipinas

Shell Petroleum Corporation, 55 the Supreme Court held as follows:

Verily, pursuant to the lifeblood doctrine, the Court

has allowed tax authorities ample discretion to avail
themselves of the most expeditious way to collect the
taxes, including summary processes, with as little
interference as possible. However, the Court, at the
same time, has not hesitated to strike down these
processes in cases wherein tax authorities
disregarded due process. The SIR's power to
collect taxes must yield to the fundamental rule that
no person shall be deprived of his/her property
without due process of law. The rule is that taxes
must be collected reasonably and in accordance
with the prescribed procedure.

In the normal course of tax administration and

enforcement, the BIR must first make an assessment
then enforce the collection of the amounts so assessed.
'An assessment is not an action or proceeding for the

52
Exhibit "P-36", letter envelope attached to the PAN, BIR Records, p. 88.
53
Exhibit "P-35", BIR Records, p. 93.
54
G.R. No. 185371, December 8, 2010.
55
G.R. No. 197945 & G.R. Nos. 204119-20, July 9, 2018t>
DECISION
CTA Case No. 9590
Page 20 of22

collection of taxes. x x x It is a step preliminary, but

essential to warrant of distraint, if still feasible, and,
also, to establish a cause for judicial action.' The BIR
may summarily enforce collection only when it has
accorded the taxpayer administrative due process ..
which vitally includes the issuance of a valid
assessment. A valid assessment sufficiently informs
the taxpayer in writing of the legal and factual bases of
the said assessment, thereby allowing the taxpayer to
effectively protest the assessment and adduce
supporting evidence in its behalf." (Underscoring
supplied)

Based on the foregoing jurisprudential pronouncements,

failure to strictly comply with the notice requirements prescribed
under Section 228 of the NIRC of 1997, as amended, and RR No.
12-99 is tantamount to denial of due process. Further, SIR may
summarily enforce collection, only when it has accorded the
taxpayer administrative due process, which vitally includes the
issuance of a valid assessment; and that absent a valid
assessment, the Court should not afford validity and effect to the
SIR's collection efforts.

Hence, when there is no valid assessment, the SIR cannot

validly proceed to enforce collection process as provided by law.
While the government has an interest in the swift collection of
taxes, the SIR and its officers and agents cannot be overreaching
in their efforts, but must perform their duties in accordance with
law, with their own rules of procedure, and always with regard to
the basic tenets of due process. 56

Taking the foregoing into consideration, the Court finds that

no competent evidence was presented by respondent to prove
actual receipt of petitioner of the PAN and the FAN. Having failed
to prove compliance therewith, respondent denied petitioner of its
right to due process.

Accordingly, the deficiency VAT assessment against

petitioner is null and void for having been issued in violation of the
due process requirements embodied in the afore-cited Section 228
of the NIRC and RR No. 12-99. Consequently, absent a valid

56
Commissioner ofInternal Revenue vs Avon Products Manufacturing Inc., G.R. Nos.
201398-99 & G.R. Nos. 201418-19, October 3, 2018. ~
DECISION
CTA Case No. 9590
Page 21 of22

assessment, the issuance of the subject FNBS is likewise void and

ineffectual.

With the foregoing ruling, it becomes unnecessary to address

the remaining arguments raised by the parties in this case.

WHEREFORE, in light of the foregoing considerations, the

instant Petition for Review is hereby GRANTED. Accordingly, the
deficiency VAT assessment in the total amount of P7,507,045.30,
for CY 2007 and the Final Notice Before Seizure, issued against
petitioner, are hereby CANCELLED and SET ASIDE.

SO ORDERED.

ER~P.UY
Associate Justice

WE CONCUR:

~- ~~.(,.-- ~- <...
MA. BELEN M. RINGPIS-LIBAN
Associate Justice

MARIA

ATTESTATION

I attest 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's Division.

E~P.UY
Associate Justice
Chairperson, 3'd Division
DECISION
CTA Case No. 9590
Page 22 of22

CERTIFICATION

Pursuant to Article VIII, Section 13 of the Constitution and the

Division Chairperson's Attestation, 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