Taxation Law

Commissioner of Internal Revenue vs Enron Subic Power Corporation

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G.R. No. 166387 – 596 Phil. 229 – 576 SCRA 212 – Taxation Law – NIRC Remedies – Assessment – Assessment Notice – Content of Formal Assessment Notice

In 1997, Enron Subic Power Corporation received a pre-assessment notice from the Bureau of Internal Revenue (BIR). Enron allegedly had a tax deficiency of P2.8 million for the year 1996. Enron filed a protest. In 1999, Enron received a final assessment notice (FAN) from the BIR for the same amount of tax deficiency.

Enron however assailed the FAN  because according to Enron the FAN is not compliant with Section 228 of the National Internal Revenue Code (NIRC) which provides that the legal and factual bases of the assessment must be contained in the FAN. The FAN issued to Enron only contained the computation of its alleged tax liability.

The Commissioner of Internal Revenue (CIR) admitted that the FAN did not contain the legal and factual bases of the assessment however, the CIR insisted that the same has been substantially complied with already because during the pre-assessment stage, the representative of Enron has been advised of the said factual and legal bases of the assessment.

ISSUE: Whether or not there is a valid final assessment notice issued to Enron.

HELD: No. The wording of Section 228 of the NIRC provides:

The taxpayer shall be informed in writing of the law and the facts on which the assessment is made; otherwise the assessment shall be void.

The word “shall” is mandatory. The law requires that the legal and factual bases of the assessment be stated in the formal letter of demand and assessment notice. It cannot be substituted by other notices or advisories issued or delivered to the taxpayer during the preliminary stage.

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