Gateway Rural Bank v. Commissioner of Internal Revenue

SECOND DIVISION [C.T.A. CASE NO. 9547. June 22, 2021.] GATEWAY RURAL BANK , petitioner , vs. COMMISSIONER OF INTERNAL REVENUE , respondent . DECISION CASTAEDA, JR. , J p : THE CASE The Petition for Review filed through registered mail on February 27, 2010, and received by this Court on March 8, 2019, prays for the setting aside of the issuances made by respondent Commissioner of Internal Revenue, which assessed petitioner of alleged deficiency income tax for taxable year 2012 in the total amount of P258,013,907.77, inclusive of surcharge and legal interest, for being null and void. 1 THE PARTIES Petitioner Gateway Rural Bank, Inc. is a rural bank organized in accordance with Republic Act (RA) No. 7353, 2 and is regulated and governed by the rules and regulations issued by the Bangko Sentral ng Pilipinas (BSP). 3 Its current address is at McArthur Highway, Wawa, Balagtas, Bulacan. 4 Petitioner is primarily engaged in the business of extending rural credit to small farmers and tenants and to deserving rural industries and enterprises; to have and exercise all the authority and powers, to do and perform all acts, and to transact all business which may be legally had or done by a rural bank organized under and in accordance with RA No. 7353 as it exists or may be amended; and to do all other things incidental thereto and necessary and proper connection with said purposes within such territory, as may be determined by the Monetary Board of the BSP. 5 On the other hand, respondent Commissioner of Internal Revenue is the officer duly appointed and empowered by law to act on national internal revenue assessments, with office address at the Bureau of Internal Revenue (BIR), National Office Building, Diliman, Quezon City. 6 CAIHTE THE FACTS On April 15, 2013, petitioner paid and remitted, among others, its income tax for the year 2012 to the BIR. 7 An electronic Letter of Authority (eLOA) No. 25A-2014-00000074 dated March 26, 2014 was issued by Mr. Gerardo R. Florendino, the OIC-Regional Director of Revenue Region No. 005-Caloocan City, giving authority to Revenue Officer (RO) Victorio San Antonio and Group Supervisor (GS) Marita Pateriori of Revenue District Office (RDO) No. 25A-Plaridel, Bulacan, to examine the books and accounting records for all internal revenue taxes, including documentary stamp tax, other taxes (miscellaneous tax) for the period covering January 1 to December 31, 2012. 8 On April 29, 2016, petitioner received the Preliminary Assessment Notice (PAN) dated April 12, 2016, assessing it with deficiency income tax with interests and surcharge penalties, in the aggregate amount of P244,047,206.19. 9 The PAN was served to Mr. Francisco Cruz. 10 Petitioner then filed its Reply to PAN on May 13, 2016. 11 Respondent, through Revenue Region No. 5, sent the letter dated May 30, 2016 to petitioner directly, and not through its external lawyers, confirming its receipt of the Reply to PAN , 12 and further informing petitioner that a Final Assessment Notice/Formal Letter of Demand (FAN/FLD) would be sent to it. 13 On January 26, 2017, petitioner received the Preliminary Collection Letter (PCL) dated January 23, 2017, demanding payment of the assessed tax. 14 Petitioner wrote a letter on January 31, 2017, addressed to Ms. Maria Zorahaida S. Dela Cruz, the OIC-Chief, Collection Division, Ms. Jeserie F. Dela Cueva, RO, and Ms. Teresita Origen, GS, all from Revenue Region No. 5. 15 Another letter was sent by petitioner to Revenue Region No. 5 on February 6, 2017. 16 On February 21, 2017, petitioner received a Final Notice Before Seizure (FNBS) dated February 8, 2017. 17 Petitioner posted the present Petition for Review on February 27, 2017. 18 On March 1, 2017, petitioner filed a Manifestation , 19 stating that it reserves its right to amend or supplement the Petition for Review , notwithstanding the filing thereof on February 27, 2017. The said Manifestation was noted by the Court in the Resolution dated March 17, 2017. 20 Petitioner then filed its Urgent Motion to Suspend Collection of Tax on March 24, 2017. 21 During the hearing on the motion to suspend collection of tax held on March 30, 2017, 22 petitioner presented the following witnesses, namely: (1) Ms. Roselyn dela Cruz, 23 a loan clerk in its loan department; (2) Mr. Francisco Cruz, a staff in the Internal Audit Department of petitioner; 24 and (3) Ms. Rosario San Pedro, its General Manager. 25 DETACa Petitioner then filed its Formal Offer of Evidence on April 3, 2017, 26 in support of its Urgent Motion to Suspend Collection of Tax . On April 7, 2017, respondent filed his Answer with Special Affirmative Defenses , 27 raising the following arguments, to wit: (1) the filing of the instant Petition for Review by petitioner is premature, hence, should not be given any scant consideration; (2) petitioner utterly failed to exhaust available administrative remedies prior to the filing of this Petition for Review , hence, should be dismissed for failure to comply with the condition precedent as required under Section 1 (j) of Rule 16 of the 1997 Revised Rules of Court; and (3) the Petition for Review should also be dismissed for lack of cause of action and/or failure to state a cause of action. On April 24, 2017, respondent filed his Memorandum (Re: Urgent Motion to Suspend Collection of Tax) and his Comment/Opposition on Formal Offer of Exhibits . 28 On the other hand, petitioner filed its Memorandum on April 27, 2017. 29 Thereafter, on May 16, 2017, petitioner filed its Reply and Comment [To the Answer with Special Affirmative Defenses dated 6 April 2017] . 30 Petitioner then filed its Motion For Leave To File and Admit Amended Petition for Review , 31 with the attached Amended Petition for Review , on May 22, 2017. 32 Respondent filed his Comment/Opposition (Re: Motion for Leave and Admit Amended Petition for Review) on May 31, 2017. 33 On July 6, 2017, petitioner filed its Motion For Leave To File and Admit Attached Reply [To Respondent's Comment/Opposition (Re: Motion for Leave to File and Admit Amended Petition for Review)] . 34 On the same date, petitioner also filed an Interrogatories to Parties , which were directed to respondent, RO Victorio San Antonio, GS Marita Panteriori; and/or any other officer competent to testify on their behalf. 35 Thereafter, the Court issued the Resolution dated October 6, 2017, 36 the dispositive portion of which reads: " WHEREFORE , premises considered, the Court hereby RESOLVES , as follows: 1. petitioner's Urgent Motion to Suspend Collection of Tax , is DENIED ; 2. respondent's Motion to Dismiss incorporated in his Answer with Special Affirmative Defense is DENIED ; 3. the resolution of petitioner's Motion for Extension of Time to File Reply and Comment [to Answer with Special Affirmative Defenses dated 6 April 2017] , considered MOOT ; while petitioner's Reply and Comment [To the Answer with Special and Affirmative Defenses dated 6 April 2017] , is ADMITTED ; 4. petitioner's Motion for Leave to File and Admit Attached Reply [To Respondent's Comment/Opposition (Re: Motion for Leave to File and Admit Amended Petition for Review)] , is GRANTED , and the attached Reply is ADMITTED ; 5. petitioner's Interrogatories to Parties , is NOTED ; and 6. petitioner's Motion for Leave to File and Admit Amended Petition for Review , is GRANTED and the attached Amended Petition is ADMITTED . Accordingly, respondent is GIVEN a period of ten (10) days from receipt hereof within which to file his Amended Answer to the Amended Petition for Review. SO ORDERED ." On November 2, 2017, petitioner filed its Motion for Judgment by Default , 37 and its Motion for Partial Reconsideration (with Motion for Comparison Original Duplicate of Evidence) . 38 Respondent filed an Omnibus Motion on November 7, 2017; 39 while petitioner filed its Comment/Opposition (to the Omnibus Motion dated 6 November 2017) on December 18, 2017. 40 ATICcS In the Resolution dated March 20, 2018, 41 the Court, inter alia : (1) denied petitioner's Motion for Judgment by Default ; (2) partially granted respondent's Omnibus Motion; (3) petitioner's Motion for Comparison Original Duplicate of Evidence ; and (4) held in abeyance petitioner's Motion for Partial Reconsideration . Thereafter, in the Resolution dated October 4, 2018, 42 the Court: (1) denied petitioner's Motion for Partial Reconsideration ; (2) admitted petitioner's Exhibits "P-1", "P-1-a" to "P-1-d", "P-2", "P-2-a", "P-3", "P-5", "P-5-a", "P-6", "P-6-a" to "P-6-h"; and (3) denied petitioner's Exhibit "P-3-a", for failure to have the exhibit identified, and Exhibit "P-5-b", for failure to have the exhibit identified and for failure to submit the duly marked exhibit. The Pre-Trial Conference was initially set on November 22, 2018. 43 However an Urgent Ex-Parte Motion to Reset Preliminary Conference was filed by respondent on November 8, 2018, 44 and a Motion to Reset Pre-Trial was filed by petitioner on November 16, 2016. 45 Thus, the Pre-Trial Conference was reset to January 17, 2019. 46 In the meantime, the Pre-Trial Brief for the Respondent was filed on November 13, 2018, 47 while petitioner's Pre-Trial Brief (for Petitioner Gateway Rural Bank, Inc.) was filed on November 19, 2018. 48 Petitioner filed an Amended Pre-Trial Brief (for Petitioner Gateway Rural Bank, Inc.) or January 14, 2019. 49 Furthermore, on November 16, 2018, another Interrogatories to Parties was filed by petitioner which was again directed to respondent, RO San Antonio, GS Panteriori, and/or any other officer competent to testify on their behalf. 50 During the hearing held on January 17, 2019, the Court ordered the parties to appear before the Philippine Mediation Center-Court of Tax Appeals (PMC-CTA) for mediation proceedings on February 6, 2019. 51 On March 18, 2019, the parties requested for an extension of thirty (30) days or until April 23, 2019, from the Court for additional time within which to reach an amicable settlement. 52 The Court was granted the said request in the Resolution dated March 22, 2019. 53 On March 29, 2019, the Court received the mediator's report that the parties failed to reach an agreement to settle out of court. 54 The parties filed their Joint Stipulation of Facts & Issues (JSFI) on May 24, 2019. 55 Thereafter, the Pre-Trial Order dated June 6, 2019 was issued approving and adopting the said JSFI, and deeming the termination of the Pre-Trial. 56 Trial of the case then ensued. Petitioner presented its documentary and testimonial evidence. It offered the testimonies of the following individuals, namely: (1) Mr. Romeo G. Torno, 57 petitioner's external auditor; (2) Mr. Romeo Y. Fabros, 58 consultant of petitioner from year 2011 up to the present; (3) Ms. Abigail Palma Carillo, 59 petitioner's Chief Accountant; and (4) Mr. Rodrigo R. Mang-Ayam, 60 the Court-commissioned Independent Certified Public Accountant (ICPA). 61 TIADCc Respondent submitted the BIR Records of the case on September 25, 2019. 62 Petitioner filed its Formal Offer of Evidence on October 4, 2019. 63 Respondent filed his Comment/Opposition on Formal Offer of Exhibits on October 15, 2019. 64 In the Resolution dated November 22, 2019, 65 the Court, inter alia , admitted petitioner's exhibits, except for Exhibit "P-14", for failure to identify and to submit the duly marked exhibit, and Exhibits "P-15", "P-16", "P-16-a", "P-17", "P-17-a", "P-63", "P-63-a", for failure to submit the documents duly marked exhibits. Subsequently, respondent presented the following witnesses, namely: (1) RO Victorio V. San Antonio; 66 (2) Seizure Agent Jeserie F. Dela Cueva; 67 and (3) RO Magsaysay R. Bacay. 68 Respondent filed his Formal Offer of Exhibits on January 23, 2020. 69 On February 3, 2020, petitioner filed its Comment/Objections (to Respondent's Formal Offer of Evidence dated 23 January 2020) . 70 In the Resolution dated June 8, 2020, 71 the Court admitted all of respondent's exhibits. On July 29, 2020, respondent filed his Memorandum ; 72 and on September 11, 2020, petitioner submitted its Memorandum . 73 The present case was considered submitted for decision on September 28, 2020. 74 THE ISSUES The issues stipulated by the parties for this Court's resolution are the following: "A. Factual Issues: 1. Whether or not respondent CIR served the FAN/FLD to a mere receptionist; 2. Whether or not the audit conducted was properly conducted in accordance with the nature of the business of petitioner Gateway Bank as a rural bank. B. Legal Issues: 1. Whether or not there was improper service of the FAN/FLD on petitioner Gateway Rural Bank; 2. Whether or not the assessment is void on the ground that there was no FAN/FLD; 3. Whether or not the period to assess petitioner Gateway Bank for taxes for year 2012 has already prescribed; 4. Whether or not documentary stamp taxes are part of the income of petitioner Gateway Bank; 5. Whether or not petitioner Gateway Bank is liable for deficiency income tax." 75 Petitioner's arguments: Petitioner argues that the assessment, PCL and FNBS are null and void for violating its right to due process; that the assessment, PCL and FNBS were not preceded by a validly served FAN/FLD; that the alleged FLD dated October 14, 2016 is null and void, and should be set aside as it was improperly served to a supposed receptionist last November 4, 2016; that the assessment for deficiency income taxes for taxable year 2012 should be reversed and set aside, considering that the same has already prescribed; that respondent did not allege nor prove the circumstances constituting fraud; that the assessment cannot form the basis for claiming fraud as it was erroneously, haphazardly, and unintelligently; that the examiner did not observe proper procedure for the audit of banks, nor study the documents of petitioner in order to come up with a reasonable assessment, and thus, the exception to the three (3)-year prescriptive period cannot apply herein; that there is no basis to assess petitioner for deficiency taxes; that the assessed accounts related to loans released by petitioner are not entirely taxable income as it includes both principal and interest; that the assessed undeclared collection loans were derived from an inaccurate comparison of related accounts in the Audited Financial Statements (AFS) and the ledger; that the assessed over declaration of past due per Financial Statements Note 6 was based on an erroneous report in the AFS of petitioner; that the examiner incorrectly compared two (2) accounts covering two (2) different kinds of properties to assess taxable income; and that the documentary stamp tax is not income on the part of petitioner, as it is an amount it hold in trust for the Government and it is mandated to remit the same. AIDSTE Respondent's counter-arguments: On the other hand, respondent insists that the assessment against petitioner have already become final, executory and demandable and which may no longer be contested due to its utter failure to interpose a valid protest against the assessment, within thirty (30) days from receipt thereof; that petitioner's witness' denial of the receipt of the FAN/FLD was merely an alibi; and that petitioner was afforded due process and the assessment against it remained undisturbed nor refuted. THE COURT'S RULING The instant Petition for Review is meritorious. Respondent failed to convince this Court that the subject FAN/FLD was properly served to petitioner. Thus, the assessments are void. Relative to the service of the FAN/FLD, respondent contends as follows: "10. The petitioner assails the validity of the service to Roselyn De La Cruz considering that Revenue Officer Magsaysay R. Bacay perceived her to [be] a 'Receptionist,' while then wearing an employee ID of [petitioner] Gateway, as she was the one pointed by the petitioner's security guard as the petitioner's authorized representative to receive the FAN/FLD. Nevertheless, Roselyn Dela Cruz AFFIRMED that she is an employee of the petitioner as a loan clerk but denies that there was a 'receptionists' in the petitioner's premises. Regardless of Roselyn Dela Cruz' designation/position, the fact remains that she is employed by the petitioner and she is a person of sufficient age and discretion to receive the FAN/FLD." 76 This Court, however, finds the foregoing contention untenable. Section 3.1.6 of Revenue Regulations (RR) No. 12-99, 77 as amended by RR No. 18-2013, 78 clearly states the modes of services of, inter alia , the FAN/FLD, to wit: "SECTION 3. Due Process Requirement in the Issuance of a Deficiency Tax Assessment . 3.1 Mode of procedure in the issuance of a deficiency tax assessment: xxx xxx xxx 3.1.6 Modes of Service . The notice ( PAN /FLD/FAN/ FDDA ) to the taxpayer herein required may be served by the Commissioner or his duly authorized representative through the following modes : (i) The notice shall be served through personal service by delivering personally a copy thereof to the party at his registered or known address or wherever he may be found . A known address shall mean a place other than the registered address where business activities of the party are conducted or his place of residence. In case of personal service is not practicable, the notice shall be served by substituted service or by mail. (ii) Substituted service can be resorted to when the party is not present at the registered or known address under the following circumstances: The notice may be left at the party's registered address, with his clerk or with a person having charge thereof. If the known address is a place where business activities of the party are conducted, the notice may be left with his clerk or with a person having charge thereof. AaCTcI If the known address is the place of residence, substituted service can be made by leaving the copy with a person of legal age residing therein. If no person is found in the party's registered or known address , the revenue officers concerned shall bring a barangay official and two (2) disinterested witnesses to the address so that they may personally observe and attest to such absence. The notice shall then be given to said barangay official . Such facts shall be contained in the bottom portion of the notice, as well as the names, official position and signature of the witnesses. Should the party be found at his registered or known address of any other place but refuse to receive the notice , the revenue officers concerned shall bring a barangay official and two (2) disinterested witnesses in the presence of the party so that they may personally observe and attest to such act of refusal. The notice shall then be given to said barangay official . Such facts shall be contained in the bottom portion of the notice, as well as the names, official position and signatures of the witnesses. 'Disinterested witnesses' refers to persons of legal age other than employees of the Bureau of Internal Revenue. (iii) Service by mail is done by sending a copy of the notice by registered mail to the registered or known address of the party with instruction to the Postmaster to return the mail to the sender after ten (10) days, if undelivered . A copy of the notice may also be sent through reputable professional courier service. If no registry or reputable professional courier service is available in the locality of the addressee, service may be done by ordinary mail. The server shall accomplish the bottom portion of the notice. He shall also make a written report under oath before a Notary Public or any person authorized to administer oath under Section 14 of the NIRC, as amended, setting forth the manner, place and date of service, the name of the person /barangay official/professional courier service company who received the same and such other relevant information. The registry receipt issued by the post office or the official receipt issued by the professional courier company containing sufficiently identifiable details of the transaction shall constitute sufficient proof of mailing and shall be attached to the case docket. xxx xxx xxx." (Emphases and underscoring added) Based on the foregoing provisions, the service of a FAN/FLD, among others, may be made through: (1) personal service to the concerned party; (2) substituted service, in specific instances; or (3) service by mail. Anent the mode of personal service, the above-quoted provision requires that such service should be done " by delivering personally a copy thereof to the party at his registered or known address or wherever he may be found ." With regard to substituted service, the same can be availed of only in specific instances depending on whether the concerned party is present or not, or in case the said party is present, but the same party refuses to receive the notice. If the party is not present , the notice may be left at the party's registered or known address, with his/her/its clerk or with a person having charged thereof. If no person is found in the party's registered or known address , the revenue officers concerned shall bring a barangay official and two (2) disinterested witnesses to the address so that they may personally observe and attest to such absence. Should the party be found at the registered or known address but refuses to receive the notice , the concerned revenue officers shall bring a barangay official and two (2) disinterested witnesses to the address so that they may personally observe and attest to such refusal. In the latter two (2) cases, the notice shall be given to the said barangay official. EcTCAD As for the service through registered mail, the same must be made by sending the notice " with instruction to the Postmaster to return the mail to the sender after ten (10) days, if undelivered ." The registry receipt issued by the post office containing sufficiently identifiable details of the transaction shall constitute sufficient proof of mailing and shall be attached to the case docket. In any of the above-stated modes of services, "[t] he server shall accomplish the bottom portion of the notice " and " shall also make a written report under oath before a Notary Public or any person authorized to administer oath [s] under Section 14 of the NIRC, as amended, setting forth the manner, place and date of service, the name of the person . . . who received the same and such other relevant information ." Based on the Affidavit of Service of Final Assessment Notice executed by RO Magsaysay R. Bacay, 79 it is clear that the BIR availed of "SUBSTITUTED SERVICE" in view of the supposed absence of the concerned party, i.e. , the petitioner, by serving the subject notices to a certain Ms. Roselyn Dela Cruz. However, as already pointed out, substituted service can be resorted to only: (1) when the party is not present at the registered or known address; (2) when the party is found therein, but refuses to receive the notice; and (3) if no person is found in the party's registered or known address. Undoubtedly, the concerned party for the subject FAN/FLD is petitioner, which is indisputably a corporation. 80 Needless to state, a corporation is an artificial being created by operation of law. 81 To be precise, a corporation is an artificial being, invisible, intangible, and existing only in contemplation of law . 82 Such being the case, as a corporation, petitioner should always be considered present or found at its current address, i.e. , at McArthur Highway, Wawa, Balagtas, Bulacan the address used by the BIR in serving the said FAN/FLD. Thus, since it is deemed to be found therein, the said notice may not be validly left at petitioner's current or registered address, with its clerk or with a person having charge thereof. Furthermore, Section 23, in relation to Section 25, both of the Corporation Code (Batas Pambansa Bilang 68), clearly enunciates that all corporate powers are exercised, all business conducted , and all properties controlled by the board of directors . 83 And just as a natural person may authorize another to do certain acts for and on his behalf, the board of directors may validly delegate some of its functions and powers to officers, committees or agents. The authority of such individuals to bind the corporation is generally derived from law, corporate by-laws or authorization from the board, either expressly or impliedly by habit, custom or acquiescence in the general course of business. 84 Correspondingly, the service of the subject FAN/FLD shall bind petitioner, when such service was done to its board of directors; or to certain officers, committees or agents, pursuant to law or its corporate by-laws, or if there is a showing that the said board has authorized the said individuals, or has delegated the function or power of receiving the said FAN/FLD to the latter, either expressly or impliedly by habit, custom or acquiescence in the general course of business. As a corollary, from the said board or individuals, as the case may be, will a refusal to receive the said notices should come, to justify the substituted service contemplated under the aforequoted Section 3.1.6 (ii) of RR No. 12-99, as amended by RR No. 18-2013, wherein the BIR would need to bring a barangay official and two (2) disinterested witnesses to personally observe the service of the same notices and to attest to such refusal. HSAcaE In this case, it is clear that the service of the subject FAN/FLD was not done to petitioner's board of directors. Rather, it was served to Ms. Roselyn Dela Cruz. The crux of the controversy then is the determination of whether Ms. Roselyn Dela Cruz has been validly delegated or authorized to receive the said FAN/FLD for and on behalf of petitioner. We rule in the negative. Respondent has not shown any provision of law or of petitioner's by-laws that Ms. Roselyn Dela Cruz was authorized to receive the subject FAN/FLD for and/or behalf of petitioner. Neither is there any showing that the board of directors of petitioner has authorized her for such function or power, either expressly or implied by habit, custom or acquiescence. Specifically, respondent has not presented any written resolution issued by the board of directors of petitioner, authorizing Ms. Dela Cruz to receive the subject FAN/FLD, or any BIR notice for that matter, for and/or behalf of petitioner. Moreover, there is likewise no implied authorization coming from the same board of directors by habit, custom or acquiescence, insofar as Ms. Dela Cruz is concerned. Relative thereto, it is noteworthy that RO Magsaysay R. Bacay, the BIR personnel who served the subject FAN/FLD, had earlier served the PAN dated April 12, 2016 to petitioner's Internal Accountant, Mr. Francisco Cruz. 85 This fact was admitted by RO Bacay himself, on his cross-examination, viz. : "Q: Mr. Witness, I am going to [point] to you the Affidavit of Service of Preliminary Assessment Notice received by the RDO 25 on May 2, 2016 which you stated on the first page of page 129 of the said Bureau of Internal Revenue records that made part of the records of the Court in paragraph here, Mr. Witness. May I read that [a]loud to you, Mr. Witness, 'On April 29, 2016, I served the copy of Preliminary Assessment Notice on Income tax dated April 12, 2016 to Regional Director Jose M. Tan, Gateway Rural Bank with TIN etc. by substituted service, if the individual tax payer or responsible officer of the Judicial Tax during the tax payer was not present and/or not available at the time of the copy or copies of Preliminary Assessment Notice was served by the giving the copy/copies of the Preliminary Assessment Notice to Mr. Francisco V. Cruz in his capacity as Internal Accountant, a person having in-charge in receiving of said Preliminary Assessment Notice at the tax payer's registered address at Mc Arthur Hi-way, Balagtas Bulacan.' This is a two-page Affidavit of Service, Mr. Witness, can you confirm that on the second page herein page 128 of the Bureau of Internal Revenue records made part of the Court of Tax Appeals records that on the bottom half page of this Affidavit of Service of Preliminary Assessment Notice, is this your signature, Mr. Witness? HESIcT A: Yes. Q: So, Mr. Witness, I would like to ask you again, when you went to Gateway Rural Bank to serve the Final Assessment Notice, was this the first time you went into the bank? A: This is my first time I went to the bank. Q: So it was when you served the Preliminary Assessment Notice? A: Yes . Q: So, it is correct to say that you've been to the Gateway Rural Bank at least twice? A: It's the second time ." 86 (Emphases added) Thus, if at all, notwithstanding the absence of any provision of law or of petitioner's by-laws, or any board resolution, the service of the said PAN to petitioner's Internal Accountant, Mr. Francisco Cruz, and considering that petitioner was able to file a Reply to PAN on May 13, 2016, 87 it can be said that his authority to receive the said PAN was impliedly established by acquiescence of petitioner. However, We cannot say the same thing with regard to the case of Ms. Roselyn Dela Cruz. It is not acceptable for RO Bacay to simply rely on what the security guard on duty have said as to Ms. Dela Cruz's authority. Neither is the wearing of an identification card of Ms. Dela Cruz sufficient. At best, it only proves that she is an employee of petitioner, but not necessarily indicative that she is its authorized representative to receive the subject FAN/FLD. What is also not acceptable is that RO Bacay never inquired, at all, as to whether any authorized person or officer of petitioner is present to receive the subject FAN/FLD, considering that he has previously served the aforesaid PAN. This fact was also admitted by RO Bacay himself, on his cross-examination, viz. : "Q: So you stated that you served the documents to a certain Roselyn Dela Cruz, is that correct? A: Yes. Q: At the time that you served the documents, did you look for the branch manager? A: No Mam . Q: Did you look for the General Manager? A: No Mam . Q: Did you look for the president? A: No Mam. Q: Did you look for the treasurer? A: No Mam. Q: Did you look for the Internal Auditor? A: No Mam. xxx xxx xxx Q: Do you have proof that [Ms. Dela Cruz] is their receptionist? A: That is my perception . xxx xxx xxx Q: Did you ask her if she has [a] Special Power of Attorney authorizing her to receive the Final Assessment Notice of the FLD? A: No, Mam , I just asked her if she is authorized and she answered affirmative so I allowed her to receive that documents. Q: Mr. Witness, let's turn to your Exhibit 'R-9'. At the bottom half of Exhibit 'R-9', you identified the signature of the printed name of the signature of Roselyn Dela Cruz. Mr. Witness, can you confirm for me that the hand writing stating receptionist? A: It's mine. Q: That's your handwriting. You wrote that. So, you only wrote the word 'receptionist', is that correct? A: Yes ." 88 (Emphases added) It is clear that RO Magsaysay R. Bacay merely relied on his perception that Ms. Roselyn Dela Cruz is petitioner's "receptionist" or loan clerk, without further inquiry. TAIaHE Apropos , RO Bacay should have critically inquired as to Ms. Dela Cruz's authority to receive the subject FAN/FLD to the point of asking for a legal or factual basis ( i.e. , a provision of law or petitioner's by-laws or a board resolution) to show the same, since the determination of which is very crucial, as it depends on whether the service to her would bind petitioner. At that time, the BIR is not without recourse in case Ms. Dela Cruz cannot provide such proper authority or point to a person sufficiently furnished with the same authority. In such situation, the BIR may treat the failure to provide a valid authority as a refusal to receive the subject FAN/FLD, in which case, the BIR is justified to bring a barangay official and two (2) disinterested witnesses to the address so that they may personally observe and attest to such refusal. Based on the aforequoted Section 3.1.6 of RR No. 12-99, as amended by RR No. 18-2013, the proper service of the FLD/FAN is part and parcel of the due process requirements in the issuance of a deficiency tax assessment. Thus, there must be a proper service of the said notices; otherwise, the due process requirement is not met. Tax assessments issued in violation of the due process rights of a taxpayer are null and void. While the government has an interest in the swift collection of taxes, the BIR 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. 89 In sum, there was an improper service of the subject FAN/FLD to petitioner, and thus, the same is not binding on the latter. More importantly, the same FAN/FLD is void for violation of petitioner's right to due process. Being void, the subject income tax assessment could not have become final, executory and demandable, and cannot be the basis for the collection of income tax from petitioner, since it bears no valid fruit. 90 Finding that the subject income tax assessment invalid, it becomes unnecessary to address the other issues and matters raised by the parties. WHEREFORE , in light of the foregoing considerations, the instant Petition for Review is GRANTED . Accordingly, the subject the deficiency assessment for income tax for taxable year 2012 in the amount of P258,013,907.77, inclusive of surcharge and legal interest, is void, and thus, is hereby CANCELLED and SET ASIDE . Consequently, the PCL dated January 23, 2017 and the FNBS dated February 8, 2017 covering the said assessed deficiency income tax liability are likewise CANCELLED and SET ASIDE . SO ORDERED. (SGD.) JUANITO C. CASTAEDA, JR. Associate Justice Jean Marie A. Bacorro-Villena, J. , concurs. Footnotes 1. Summary of the Case, Pre-Trial Order dated June 6, 2019, Docket Vol. IV, p. 1637. 2. Par. 1, Summary of Admitted Facts, Joint Stipulation of Facts and Issues (JSFI), Docket Vol. IV, p. 1625. 3. Pars. 2 and 3, Summary of Admitted Facts, JSFI, Docket Vol. IV, p. 1625. 4. Par. 8, Petition for Review vis--vis Par. 7, Answer with Special Affirmative Defenses , Docket Vol. I, pp. 26 and 412, respectively. 5. Par. 10, Petition for Review vis--vis Par. 7, Answer with Special Affirmative Defenses , Docket Vol. I, pp. 26 and 412, respectively. 6. Par. 9, Petition for Review vis--vis Par. 7, Answer With Special Affirmative Defenses , Docket Vol. I, pp. 160 and 412, respectively. 7. Par. 5, Summary of Admitted Facts, JSFI, Docket Vol. IV, p. 1626. 8. Par. 6, Summary of Admitted Facts, JSFI, Docket Vol. IV, p. 1626. 9. Par. 7, Summary of Admitted Facts, JSFI, Docket Vol. IV, p. 1626. 10. Par. 8, Summary of Admitted Facts, JSFI, Docket Vol. IV, p. 1626. 11. Par. 9, Summary of Admitted Facts, JSFI, Docket Vol. IV, p. 1626. 12. Par. 10, Summary of Admitted Facts, JSFI, Docket Vol. IV, p. 1626. 13. Par. 11, Summary of Admitted Facts, JSFI, Docket Vol. IV, p. 1626. 14. Par. 12, Summary of Admitted Facts, JSFI, Docket Vol. IV, p. 1626; Exhibit "R-12", Docket Vol. V, p. 2322. 15. Par. 13, Summary of Admitted Facts, JSFI, Docket Vol. IV, p. 1626. 16. Par. 14, Summary of Admitted Facts, JSFI, Docket Vol. IV, p. 1627. 17. Par. 15, Summary of Admitted Facts, JSFI, Docket Vol. IV, p. 1627; Exhibit "R-13", Docket Vol. V, p. 2322. 18. Docket Vol. I, pp. 155 to 204. 19. Docket Vol. I, pp. 16 to 19. 20. Docket Vol. I, pp. 291 to 292. 21. Docket Vol. I, pp. 295 to 304. 22. Minutes of the hearing held on, and Order dated, March 30, 2017, Docket Vol. I, pp. 354 to 356. 23. Judicial Affidavit, Docket Vol. I, pp. 333 to 337. 24. Judicial Affidavit, Docket Vol. I, pp. 310 to 319. 25. Judicial Affidavit, Docket Vol. I, pp. 305 to 309. 26. Docket Vol. I, pp. 357 to 363. 27. Docket Vol. I, pp. 411 to 421. 28. Docket Vol. I, pp. 451 to 454, and 457, respectively. 29. Docket Vol. I, pp. 458 to 474. 30. Docket Vol. I, pp. 487 to 519. 31. Docket Vol. II, pp. 522 to 527. 32. Docket Vol. II, pp. 528 to 582. 33. Docket Vol. II, pp. 781 to 783. 34. Docket Vol. II, pp. 785 to 802. 35. Docket Vol. II, pp. 805 to 814. 36. Docket Vol. II, pp. 818 to 832. 37. Docket Vol. II, pp. 833 to 840. 38. Docket Vol. II, pp. 847 to 863. 39. Docket Vol. II, pp. 866 to 870. 40. Docket Vol. II, pp. 877 to 892. 41. Docket Vol. II, pp. 896 to 907. 42. Docket Vol. II, pp. 912 to 914. 43. Notice of Pre-Trial Conference dated October 5, 2018 Docket Vol. II, pp. 915 to 916. 44. Docket Vol. II, pp. 917 to 918. 45. Docket Vol. II, pp. 1032 to 1035. 46. Minutes of the hearing held on, and Order dated, November 22, 2018, Docket Vol. III, pp. 1055 to 1056. 47. Docket Vol. II, pp. 925 to 928. 48. Docket Vol. II, pp. 1037 to 1058. 49. Docket Vol. III, pp. 1424 to 1438. 50. Docket Vol. II, pp. 1021 to 1028. 51. Minutes of the hearing held on, and Order dated January 17, 2019, Docket Vol. IV, pp. 1554 and 1556, respectively; Resolution dated January 17, 2019, Docket Vol. IV, p. 1556. 52. Docket Vol. IV, p. 1557. 53. Docket Vol. IV, p. 1558. 54. Docket Vol. IV, p. 1559. 55. Docket Vol. IV, pp. 1625 to 1630. 56. Docket Vol. IV, pp. 1637 to 1642. 57. Exhibit "P-62", Docket Vol. IV, pp. 1647 to 1651; Minutes of the hearing held on, and Resolution dated, June 26, 2019, Docket Vol. IV, pp. 1661 to 1662, and 1956, respectively. 58. Exhibit "P-12", Docket Vol. III, pp. 1291 to 1301; Minutes of the hearing held on, and Order dated, June 26, 2019, Docket Vol. IV, pp. 1661 to 1662, and 1956, respectively. 59. Exhibit "P-13", Docket Vol. III, pp. 1058 to 1066; Minutes of the hearing held on, and Order dated, June 26, 2019, Docket Vol. IV, pp. 1661 to 1662, and 1956, respectively. 60. Exhibit "P-65", Docket Vol. IV, pp. 1962 to 1970; Minutes of the hearing held on, and Order dated, September 25, 2019, Docket Vol. IV, pp. 1972 to 1973. 61. Oath of Commission dated June 26, 2019; Minutes of the hearing held on June 26, 2019, Docket Vol. IV, pp. 1663, and 1661 to 1662, and 1956, respectively. 62. Ex-Parte Manifestation & Compliance dated September 24, 2019, Docket Vol. IV, p. 1974. 63. Docket Vol. V, pp. 1984 to 1998. 64. Docket Vol. V, p. 2004. 65. Resolution dated November 22, 2019, Docket Vol. V, pp. 2006 to 2009; and Minutes of the hearing held on, and Order dated, January 20, 2020, Docket Vol. V, pp. 2213 and 2214 to 2215, respectively. 66. Exhibit "R-14", Docket Vol. V, pp. 2323 to 2328; Minutes of the hearing held on, and Order dated, November 25, 2019, Docket Vol. V, pp. 2010 to 2012. 67. Exhibit "R-16", Docket Vol. V, pp. 2017 to 2022; Minutes of the hearing held on, and Order dated, December 4, 2019, Docket Vol. V, pp. 2059 to 2060. 68. Exhibit "R-15", Docket Vol. V, pp. 2329 to 2333; Minutes of the hearing held on, and Order dated, January 20, 2020, Docket Vol. V, pp. 2213 to 2215. 69. Docket Vol. V, pp. 2216 to 2219. 70. Docket Vol. V, pp. 2343 to 2348. 71. Docket Vol. V, pp. 2352 to 2353. 72. Docket Vol. V, pp. 2354 to 2365. 73. Docket Vol. V, pp. 2370 to 2454. 74. Resolution dated September 28, 2020, Docket Vol. V, p. 2455. 75. Statement of the Issues, Legal and Factual, JSFI, Docket Vol. IV, p. 1627. 76. Par. 10, respondent's Memorandum , Docket Vol. V, at pp. 2359 to 2360. 77. SUBJECT: Implementing the Provisions of the National Internal Revenue Code of 1997 Governing the Rules on Assessment of National Internal Revenue Taxes, Civil Penalties and Interest and the Extra-Judicial Settlement of a Taxpayer's Criminal Violation of the Code Through Payment of a Suggested Compromise Penalty. 78. SUBJECT: Amending Certain Sections of Revenue Regulations No. 12-99 Relative to the Due Process Requirement in the Issuance of a Deficiency Tax Assessment. 79. Exhibit "R-11", Docket Vol. V, pp. 2318 to 2319. 80. Refer to Par. 8, Petition for Review vis--vis Par. 7, Answer with Special Affirmative Defenses , Docket Vol. I, pp. 26 and 412, respectively. 81. Zambrano, et al. vs. Philippine Carpet Manufacturing Corporation/Pacific Carpet Manufacturing Corporation, et al. , G.R. No. 224099, June 21, 2017. 82. Testate Estate of Idonah Slade Perkins vs. Benguet Consolidated, Inc. , G.R. No. L-23145, November 29, 1968. 83. Philippine Numismatic Ad Antiquarian Society vs. Aquino, et al. , G.R. No. 206617, January 30, 2017. 84. Cebu Mactan Members Center, Inc. vs. Masahiro Tsukahara , G.R. No. 159624, July 17, 2009. 85. Cf: Par. 8, Summary of Admitted Facts, JSFI, Docket Vol. IV, p. 1626. 86. Transcript of Stenographic Notes (TSN) at the hearing held on January 20, 2020, pp. 8 to 10. 87. Par. 9, Summary of Admitted Facts, JSFI, Docket Vol. IV, p. 1626. 88. TSN at the hearing held on January 20, 2020, pp. 11 to 12, and 14 to 15. 89. Commissioner of Internal Revenue vs. Avon Products Manufacturing, Inc., et seq. , G.R. Nos. 201398-99 and 201418-19, October 3, 2018. 90. Refer to Commissioner of Internal Revenue vs. Pilipinas Shell Petroleum Corporation , G.R. Nos. 197945 and 204119-20, July 9, 2018, G.R. No. 197945, citing Commissioner of Internal Revenue vs. Reyes , G.R. Nos. 159694 and 163581, January 27, 2006.