Commissioner of Internal Revenue v. Paseo Insurance Agency, Inc.

FOURTH DIVISION [CA-G.R. SP No. 33526. February 24, 1995.] (C.T.A. Case No. 4651) COMMISSIONER OF INTERNAL REVENUE , petitioner , vs . PASEO INSURANCE AGENCY, INC. and the COURT OF TAX APPEALS , respondents . D E C I S I O N PARAS , J p : The instant petition is for review of the decision dated December 21, 1993 of the Court of Tax Appeals in CTA Case No. 4651, entitled "Paseo Insurance Agency, Inc. vs. Commissioner of Internal Revenue", declaring null and void the assessments issued against the private respondent for deficiency income and business taxes for Fiscal Years 1985 and 1986 in the total amount of P51,175.92, since they were already issued beyond the prescriptive period. The respondent court also permanently lifted the Warrant of distraint and Levy and the Warrant of Garnishment issued against the said respondent. It appears that on August 23, 1991, a Warrant of Distraint and/or Levy dated June 21, 1991 was served by the petitioner upon the herein private respondent to secure the payment of the sum of P51,175.92 for alleged deficiency income and business taxes for the years 1985 and 1986; that the private respondent, in a letter dated August 27, 1991 informed the Bureau of Internal Revenue (BIR for short) that it had never received and had no knowledge of the assessments until the warrant was served and thus requested and secured copies of the same only on the same date August 27, 1991; and that having secured the copies of the said assessment, stating, among others, that the warrant was void since the three-year prescriptive period provided for under Section 223 of the National Internal Revenue Code had already lapsed, when the private respondent was given copy of the assessment only on August 27, 1991. The petitioner could not prove that it really mailed the assessments on January 19, 1989. While the alleged mailing was supposed to be registered, the said court found no registry number therefor. There was no registry return card and neither was there a showing in the petitioner's docket that the private respondent received the subject assessments. On two occasions granted by the said court, the petitioner failed to present evidence to prove such service of the assessment on the private respondent. Thus, the respondent court held that there was failure of service on private respondent of the assessments in question and had no other recourse but to consider the actual receipt of both the 1985 and 1986 assessments by the taxpayer only on August 27, 1991 as the point of reference in the computation of the prescriptive period, which date was already well beyond the three-year prescription period under the tax code. The said court declared the said assessments null and void and lifted permanently the warrant of Distraint and/or Levy and the Warrant of Garnishment issued against the private respondent. In the present petition, the BIR Commissioner seeks a reversal of the respondent court's decision on the ground that in the absence of material proofs, tax assessments by tax examiners are presumed correct and made in good faith (Sy Po vs. Court of Tax Appeals, 164 SCRA 524). All presumptions are in favor of the correctness of the assessment made by the Commissioner of Internal Revenue, and it behooves the taxpayer to prove the contrary (Commissioner of Internal Revenue vs. Antonio Tuazon, Inc., 173 SCRA 397). Stress should be made that the issue in the case at bar is not in regard to the amount of the assessments of the private respondent's deficiency income and business taxes for FY 1985 and 1986, the issue raised here is whether or not the period for such assessments had already prescribed. Anent the time of filing the income tax return and period of limitation upon assessment and collection, Section 80 and 268, respectively of the 1986 Tax Code provide: "Sec. 80. (a) . . . (b) Time of filing the income tax return . The corporate quarterly declaration shall be filed within sixty (60) days following the close of each of the first three quarters of the taxable year. The final adjustment return shall be filled on or before the 15th day of April or on or before the 15th of the 4th month following the close of the fiscal year, as the case may be ( Emphasis supplied ). (c) . . . Sec. 268. Period of limitation upon assessment and collection . Except as provided in the succeeding section, internal revenue taxes shall be assessed within three years after the last day prescribed by law for the filing of the return , and no proceeding in court without assessment for the collection of such taxes shall be begun after the expiration of such period.; PROVIDED, That in a case where a return is filed beyond the period prescribed by law, the three-year period shall be counted from the day the return was filed. For the purposes of this section, a return filed before the last day prescribed by law for the filing thereon shall be considered as filed on such last day. (As amended by BP 700) (Emphasis supplied)." The Court is in full accord with the following findings of the Tax Court that the assessments had been issued beyond the three-year prescriptive period under the aforequoted Sections 80 and 268 of the National Internal Revenue Code: "xxx xxx xxx Applying the foregoing sections (Sections 80 and 268 of the 1986TaxCode) in the instant petition, it can be gleaned that the prescriptive period for the assessment for the alleged deficiency income and business taxes for FY 1985 and 1986 commenced on January 15, 1986 and January 15, 1987, respectively. The law speaks that the three-year period for assessment commences to run "after the last day prescribed by law for the filing of the return" which means that if the return is filed before such due date, the prescriptive period begins only after said due date . Hence, contrary to the belief of the petitioner that the deadline for the prescriptive period to lapse were on 13 November 1988 and 17 December 1989, respectively, the correct prescriptive period ended on January 15, 1989 and January 15, 1989 and January 15, 1990. This should be the case, since, although the income tax returns were filed on November 13, 1985 and December 17, 1986 respectively, (see Exhs. A, A-1, B & B-1) and the point of reference in the commencement of the three-year period should be January 15, 1986 and January 15, 1987 respectively which is the "15th day of the 4th month following the close of the fiscal year" which in this case was on September 30, 1986 and 1987 respectively. Therefore, when the assessment was allegedly mailed on January 19, 1989, the assessment for FY 1985 has already lapsed. But the assessment for FY 1986 was well within the prescriptive period. The problems is, it cannot be proven by evidence that the respondent really mailed the assessments on January 19, 1989. The alleged mailing was supposed to be registered, yet the registry number was left blank, neither was there a registry return card which would prove service of assessment nor the respondent's docket revealed that the petitioner received the subject assessments. In fact on two occasions granted by this Court the respondent failed to present evidence to support her case. This only shows that there was really failure of service, of the assessments in question; hence, even the 1986 assessment has been sent out of time and this Court has no other recourse but to consider the actual receipt of both assessments by the petitioner only on August 27, 1991 as the point of reference in the computation of the prescriptive period which is already well beyond the three-year prescriptive period under the TaxCode." In the case of Republic vs. Court of Appeals (149 SCRA 351), when the BIR's demand letter for deficiency taxes was released and mailed by ordinary mail to the taxpayer who however denied having received said demand letter, the Supreme Court held that while a mailed letter is deemed received by the addressee in the course of mail, this is merely a disputable presumption, subject to controversion and a direct denial of the receipt thereof shifts the burden on the party favored by the presumption to prove that the mailed letter was indeed received by the addressee. Inasmuch as in the case at bar, the herein petitioner could not prove that service of the assessment for the FY 1985 and 1986 deficiency taxes was made on the private respondent within the three year prescriptive period, the respondent court as well as this Court has no other choice but to consider the date of service of the assessments on the private respondent on August 27, 1991 (when it secured copies of the assessment), which date was well beyond the three year prescriptive period provided in the Tax Code. WHEREFORE, the decision appealed from is AFFIRMED, No pronouncement as to costs. SO ORDERED. Montoya and Hofilena , JJ ., concur.