G.R. No. 155541 – 465 Phil. 986 – 421 SCRA 275 – Taxation Law – NIRC Rules of Procedure – Assessment Must Be Sent To The Right Party (Taxpayer)
Juliana Gabriel entered into a contract of agency with the Philippine Trust Company (PhilTrust) for the latter to manager her business affairs. In April 1979, Gabriel died. Two days after her death, PhilTrust filed the income tax return (ITR) of Gabriel. PhilTrust however did not mention therein that Gabriel already died. PhilTrust petitioned to be appointed as administrator of her estate but the probate court assigned an heir instead. Meanwhile, the Bureau of Internal Revenue (BIR) found that Gabriel has a tax deficiency in the amount of P318k. Eventually in November 1982, a final assessment notice (FAN) addressed to Gabriel was sent via registered mail to PhilTrust. At this point, the BIR was still uninformed about Gabriel’s death. PhilTrust did not answer the FAN and so a warrant of distraint and levy was issued against the property of Gabriel. The administrator of the estate protested the warrant on the ground that there was an invalid service of assessment. The Commissioner of Internal Revenue (CIR) maintained that there was a valid service because a) PhilTrust was the agent of Gabriel, and b) the tax code (of 1977) does not require that the assessment be actually received by the taxpayer; that all it requires is that the assessment be released, mailed, and sent to the taxpayer at the address stated in the ITR filed.
ISSUE: Whether or not the CIR is correct.
HELD: No. PhilTrust was no longer the agent of Gabriel when the FAN was issued in 1982. The contract of agency ceased when Gabriel died in 1979. Since the agency was extinguished, the estate of Gabriel cannot be bound by the mistakes and omission of PhilTrust i.e., failure to notify BIR of Gabriel’s death and failure to file an answer for the FAN issued.
Anent the second argument of the CIR, although there is really no statutory requirement that the FAN should be actually received by the taxpayer, the same should be sent to the taxpayer. In this case, it was sent to PhilTrust. Also, although there is no specific requirement that the taxpayer should receive the notice within the prescriptive period (so long as the FAN was made within such period), due process requires at the very least that such notice actually be received. An assessment contains not only a computation of tax liabilities, but also a demand for payment within a prescribed period. It also signals the time when penalties and interests begin to accrue against the taxpayer. To enable the taxpayer to determine his remedies thereon, due process requires that it must be served on and received by the taxpayer.
