[IT IS THE CONTENTS OF THE NOTICE OF ASSESSMENT, NOT THE TIMING OF ISSUANCE, THAT DETERMINES ITS SUFFICIENCY FOR PURPOSES OF FILING A PROTEST] [FRAUD IN THE FILING OF A TAX RETURN IS NEVER PRESUMED; IT MUST BE ESTABLISHED BY CLEAR & CONVINCING EVIDENCE TO WARRANT THE APPLICATION OF THE TEN (10)-YEAR PRESCRIPTIVE PERIOD FOR ASSESSMENT OF LOCAL TAXES]

Petitioner O&S Trading and Construction Supply, Inc., filed a Petition for Review, seeking to reverse and set aside the decision of the Regional Trial Court (RTC) Las Piñas-Branch 254. The Petitioner argued that the Court erred in ruling that it failed to timely file a protest, rendering the assessment of the Respondent City Treasurer of Las Pinas final and executory. It maintains that the Tax Data Assessment Form issued by the Respondent does not constitute a valid notice of assessment as contemplated by law, and thus, there is no valid assessment. On the other hand, the Respondent asserted that a proper assessment notice, together with the attached Tax Data Assessment Form, has been issued to the Petitioner. Despite receipt of the assessment notice, the Petitioner failed to file any protest within the 60-day period, making the assessment final and executory. In ruling, the Court held that failure of the taxing authority, which in this case is the Local Treasurer, to sufficiently inform the taxpayer of the facts and the law used as bases for the assessment renders it void. Here, none of the letters sent by the Respondent to the Petitioner qualify as a valid Notice of Assessment, as the letters did not state the factual and legal basis of the assessment, thereby depriving the Petitioner of a meaningful opportunity to prepare an effective protest. The Court held that it is the contents of the document, not the timing of issuance thereof, that determines the sufficiency of a Notice of Assessment under the Local Government Code for purposes of filing a protest. In addition, the right to assess taxable years 2008-2013 has prescribed. The Court clarified that the application of the ten (10)-year prescriptive period for assessment of local taxes is grounded on fraud or intent to evade payment of taxes. However, fraud is never presumed or imputed, and the mere understatement of a tax is not, by itself, proof of fraud for purposes of tax evasion. Moreover, the burden of proof lies with the tax authorities to present clear and convincing evidence of fraudulent intent. Failure to prove the existence of fraud or intent to evade payment of taxes renders the 10-year prescriptive period inapplicable; thus, the period to assess taxable years 2008-2013 is deemed prescribed. Consequently, the Petition is GRANTED. [O & S TRADING & CONSTRUCTION SUPPLY, INC. VS OFFICE OF THE CITY TREASURER OF LAS PIÑAS CITY, CTA AC NO. 303, AUGUST 1, 2025]

[ISSUANCE OF LETTER OF AUTHORITY (LOA) PRIOR TO ANY EXAMINATION OR ASSESSMENT IS A REQUIREMENT OF DUE PROCESS] [UNATHORIZED PARTICIPATION OF ANOTHER REVENUE OFFICER SUPERVISING THE AUDIT UNDER A VALID LETTER OF AUTHORITY (LOA) LEADS TO A VOID ASSESSMENT] [LETTER OF AUTHORITY (LOA) IS REQUIRED TO CONDUCT THE REINVESTIGATION; ITS ABSENCE WOULD INVALIDATE THE RESULTING DECISION]

Petitioner O-Healthcare Solution Phil., Inc. filed a Petition for Review seeking the cancellation of the assessment issued by the Respondent Commissioner of Internal Revenue (CIR). The petitioner asserts that the audit of its accounting records was conducted without a valid Letter of Authority (LOA), and the belated issuance of second LOA did not cure this defect. Likewise, the Respondent disregarded its defenses; that the Preliminary Assessment Notice (PAN), Final Assessment Notice (FAN)/ Formal Letter of Demand (FLD), and FDDA were all identical despite its submission of supporting documents. Further, the issuance of Warrant of Distraint and Levy (WDL) was premature and constituted a gross violation of its right and due process. On the other hand, the Respondent contends that audit conducted was authorized by a valid LOA.  The Petitioner was accorded with due process, as the reinvestigation resulted in dropping of some of the findings in the FDDA. In ruling, the Court held that the unauthorized participation of Group Supervisor (GS) Nuestro, who also signed the revenue officer’s audit report under a valid LOA is in violation of Section 6(A) of the Tax Code, which provides that only the CIR or his duly authorized representative may authorize the examination of any taxpayer and issue an assessment against the latter. Thus, the issuance of LOA prior to any examination or assessment is a requirement of due process, which is lacking in this case. Consequently, the assessment is CANCELLED. [O-HEALTHCARE SOLUTION PHIL., INC., VS COMMISSIONER OF INTERNAL REVENUE, CTA CASE NO. 10951, JULY 30, 2025]

[VOID FDDA WILL LEAD TO A VOID ASSESSMENT BECAUSE THE FDDA ULTIMATELY DETERMINES THE FINAL TAX LIABILITY OF A TAXPAYER, WHICH MAY THEN BE APPEALED BEFORE THE CTA] [AN FDDA THAT DOES NOT INFORM THE TAXPAYER IN WRITING OF THE FACTS & LAW ON WHICH IT IS BASED RENDERS THE DECISION VOID THEREFORE, IT IS AS IF THERE WAS NO DECISION RENDERED BY THE CIR] [A CIRCUMSTANCE WHERE THE CIR OR HIS OR HER DULY AUTHORIZED REPRESENTATIVE, WITHOUT CATEGORICALLY DECIDING THE TAXPAYER'S PROTEST OR REQUEST FOR RECONSIDERATION, PROCEEDS WITH DISTRAINT & LEVY CONSTITUTES IMPLIED DENIAL]

Petitioner Myserv International, Inc., filed a Petition for Review assailing the Respondent Commissioner of Internal Revenue's (CIR) decision, ordering the issuance of a Warrant of Distraint and/or Levy (WDL) to enforce payment representing the Petitioner's deficiency taxes for the calendar year (CY) 2009. The Petitioner argued that the assessment had not attained finality since the Respondent failed to issue a valid Final Decision on Disputed Assessment (FDDA) and Regional Director (RD) Aguila's Letter, despite the indication that the same is the final decision, lacked a clear basis in fact and law. Moreover, the Respondent missed the three-year deadline to enforce collection, responding nearly seven (7) years after the FLD/FAN was issued on January 15, 2013. On the other hand, the Respondent maintained that the Petitioner is liable for deficiency taxes for failure to overturn the presumption of correctness and validity of the assessments. In ruling, the Supreme Court (SC), in the case of CIR v. Court of Tax Appeals-Third Division, emphasized that a valid protest is essential for the Court’s jurisdiction. To validly protest against an FLD/FAN, the said protest must state: (i) its nature (reconsideration or reinvestigation), with supporting evidence if reinvestigation is sought; (ii) the date of the assessment; and (iii) the legal basis. Non-compliance with these mandatory prerequisites renders the protest void and devoid of legal force and effect. Further, to have a valid FDDA, one must contain the facts and applicable law, rules and regulations, and that the same is the final decision. In the case at bar, RD Aguila's Letter does not meet these requirements and cannot be considered a valid FDDA under Section 228 of the Tax Code, as it fails to inform the Petitioner of its final tax liability after reviewing its arguments and documents. In the case of CIR v. Liquigaz Philippines Corporation, the SC emphasized that a void FDDA means that no decision was rendered by the CIR or his duly authorized representative. Similarly, the invalid final decision of RD Aguila amounts to an inaction of the Respondent’s duly authorized representative on the Petitioner's protest. Consequently, the subsequent WDL issued can be considered as an implied denial of the Petitioner's protest pending before the Respondent's duly authorized representative, as referenced to the SC case of CIR v. Algue, Inc., et al. Finally, after a careful and thorough evaluation of the parties' respective evidence and the applicable laws, rules and regulations, the Court found that the tax assessments were issued in violation of Petitioner's right to administrative due process, rendering the same null and void. Thus, the Petition was GRANTED, and the Respondent’s notices and assessments were declared VOID. Consequently, the WDL covering the assessed deficiency tax liabilities was also CANCELLED and SET ASIDE. [MYSERV INTERNATIONAL INC. VS. CESAR R. DULAY, COMMISSIONER OF INTERNAL REVENUE & DEOGRACIAS T. VILLAR, JR., REGIONAL DIRECTOR OF REVENUE DISTRICT OFFICE 43-B, CTA CASE NO. 10796, JULY 16, 2025]

[A FINAL ASSESSMENT MUST BE SENT TO & RECEIVED BY THE TAXPAYER & MUST DEMAND PAYMENT OF THE TAXES DESCRIBED THEREIN WITHIN A SPECIFIC PERIOD] [A VALID DEMAND FOR PAYMENT PRESUPPOSES THAT THE TAXPAYER IS GIVEN A REAL & FAIR OPPORTUNITY TO PAY WITHIN THE TIME PRESCRIBED, WHICH MUST BE A FUTURE DATE] [AN ASSESSMENT WHICH FAILS TO PROVIDE A DEFINITE AMOUNT, OR THAT IS BASED ON A DUE DATE THAT HAS ALREADY PASSED, DEPRIVES THE TAXPAYER OF THIS OPPORTUNITY & VIOLATES THE FUNDAMENTAL REQUIREMENTS OF DUE PROCESS]

Petitioner 1-Cyberworld Biz, Inc., filed a Petition for Review seeking to reverse and set aside the 2016 Final Decision on Disputed Assessment (FDDA) issued by the Respondent Commissioner of Internal Revenue (CIR). The Petitioner argued that the Formal Letter of Demand (FLD) and Final Assessment Notice (FAN) are void due to the Respondent's alleged violation of its right to due process by issuing the FLD/FAN after the indicated due date had already lapsed and without stating a fixed and determinate amount of taxes due. Contrarily, the Respondent countered that the tax assessment is based on fact and law, and that Petitioner failed to overcome the presumption of validity and correctness of the assessment. In ruling, Section 228 of the Tax Code, as implemented by Section 3 of Revenue Regulations (RR) No. 12-1999, as amended by RR Nos. 18-2013 and 7-2018 explicitly require that the FLD/FAN must state the factual and legal bases of the assessment; otherwise, it is void. The issuance of a valid formal assessment is a substantive prerequisite to the collection of taxes. As held in CIR v. Pascor Realty and Development Corporation and reaffirmed in CIR v. Fitness by Design, Inc. (Fitness by Design), an assessment must include both a computation of tax liabilities and a demand for payment within a prescribed period. Following this, the SC has consistently nullified assessments that do not contain a definite due date, as this renders the demand for payment legally ineffective. In the case at bar, the FAN was issued on January 3, 2019, and indicated a due date of January 31, 2019. The FLD, dated February 11, 2019, warned that failure to file a valid protest or pay the tax within the prescribed time would render the assessment final, executory and demandable. However, Petitioner received both the FLD and FAN only on February 12, 2019, after the stated due date had passed. It is worth noting that requiring payment on a date that has already passed at the time of receipt of the assessment notice renders compliance not only unreasonable but also legally impossible. Consequently, this does not constitute a valid demand for payment and renders the assessment invalid. In view of this, the Petition was GRANTED, and the Respondent's FDDA finding Petitioner liable for deficiency taxes was REVERSED and SET ASIDE. [1-CYBERWORLD BIZ, INC. VS. COMMISSIONER OF INTERNAL REVENUE CAESAR R. DULAY, CTA CASE NO. 10827, JULY 10, 2025]