Rule of Law 

By: Atty. Gregorio B. Austral, CPA

Due process requirements in the service of tax assessments

Section 228 of the 1997 NIRC, as implemented by Revenue Regulations No. 12-99, 25 outlines the due process requirements for the issuance of deficiency tax assessments. In the case of Commissioner of Internal Revenue v. Avon Products Manufacturing, Inc. (Avon), the Court summarized these requirements as follows:

. . . Under Section 228, it is explicitly required that the taxpayer be informed in writing of the law and of the facts on which the assessment is made; otherwise, the assessment shall be void. Section 3.1.2 of Revenue Regulations No. 12-99 requires the Preliminary Assessment Notice to show in detail the facts and law, rules and regulations, or jurisprudence on which the proposed assessment is based. Further, Section 3.1.4 requires that the Final Letter of Demand must state the facts and law on which it is based; otherwise, the Final Letter of Demand and Final Assessment Notices themselves shall be void. Finally, Section 3.1.6 specifically requires that the decision of the Commissioner or of his or her duly authorized representative on a disputed assessment shall state the facts and law, rules and regulations, or jurisprudence on which the decision is based. Failure to do so would invalidate the Final Decision on Disputed Assessment.

On the other hand, the taxpayer is explicitly given the opportunity to explain or present his or her side throughout the process, from tax investigation through tax assessment. Under Section 3.1.1 of Revenue Regulations No. 12-99, the taxpayer is given 15 days from receipt of the Notice for Informal Conference to respond; otherwise, he or she will be considered in default and the case will be referred to the Assessment Division for appropriate review and issuance of deficiency tax assessment, if warranted. Again, under Section 228 of the Tax Code and Section 3.1.2 of Revenue Regulations No. 12-99, the taxpayer is required to respond within 15 days from receipt of the Preliminary Assessment Notice; otherwise, he or she will be considered in default and the Final Letter of Demand and Final Assessment Notices will be issued. After receipt of the Final Letter of Demand and Final Assessment Notices, the taxpayer is given 30 days to file a protest, and subsequently, to appeal his or her protest to the Court of Tax Appeals.

Essentially, to comply with the requirements of due process, the CIR is required to inform the taxpayer of the factual and legal bases of the deficiency tax assessment and provide him or her the opportunity to protest such assessment, present his or her case, and adduce supporting evidence. Avon further underscored that the CIR must give due consideration to the taxpayer’s evidence and explanation; otherwise, the right to be heard is rendered meaningless. Certainly, as “between the power of the State to tax and an individual’s right to due process, the scale favors the right of the taxpayer to due process.” 

Section 3 of Revenue Regulations No. 12-99 authorizes the CIR to serve the assessment notices to the taxpayer either personally or via registered mail. Relatedly, under Section 3 (v), Rule 131 of the Rules of Court, a presumption arises that a letter duly directed and mailed was received in the regular course of mail. This presumption is however disputable and a direct denial that the mail matter was received shifts the burden to the party favored by the presumption to prove actual receipt by the addressee. 

As applied to issuance of deficiency tax assessments, the Court, in Barcelon, Roxas Securities, Inc. v. Commissioner of Internal Revenue (Barcelon), ruled that if the taxpayer denies ever having received an assessment notice from the BIR, it becomes incumbent upon the latter to prove that such notice was, in fact, received by the addressee. To discharge this burden, it is essential for the BIR to present independent evidence, such as the registry receipt issued by the Bureau of Posts, or the registry return card which would have been signed by the taxpayer or the latter’s authorized representative, showing that the assessment notice was released, mailed, or sent to the taxpayer. If such document cannot be located, the BIR may submit a certification issued by the Bureau of Posts and other pertinent document which is executed with the latter’s intervention.  Thus, in Barcelon, the Court found the BIR record book showing the name of the taxpayer, the kind of tax assessed, the registry receipt number, and the date of mailing of the assessment as incompetent evidence to prove actual receipt by the taxpayer. 

In the more recent case of Commissioner of Internal Revenue v. T Shuttle Services, Inc. (T Shuttle) where the taxpayer also denied receipt of the PAN and FAN, the Court, reiterating the doctrine in Barcelon, clarified that mere presentation of registry receipts, absent any authentication or identification that the signature appearing therein is the taxpayer’s or his or her authorized representative’s, is insufficient to prove actual receipt by the taxpayer. ||| (Commissioner of Internal Revenue v. Villanueva, Jr., G.R. No. 249540, [February 28, 2024])