Republic v. Velarde

[CA No. 42502-R. August 29, 1974.] * REPUBLIC OF THE PHILIPPINES , plaintiff and appellee , vs . HOSPICIO M. VELARDE , defendant and appellant . Silverio B . De Leon for defendant and appellant. Solicitor General Felix Q . Antonio, Acting Assistant Solicitor General Dominador L . Quiroz, Solicitor Lolita O . Gal-lang and Special Attorneys Benito Q . Diaz and Benjamin E . Martinez for plaintiff and appellee. SYLLABUS TAXES AND ASSESSMENTS; INCOME TAX; ASSESSMENT NOTICE; MAILING OR SENDING MUST BE DULY PROVED. The ruling that assessment is deemed made when notice to this effect is released, mailed or sent by the Collector of Internal Revenue to the taxpayer and it is not required that the notice be received by the taxpayer within the five (5)-year period (Collector of Internal Revenue vs . Bautista, L-12250 and L-12259, May 27, 1959; Basilan Estate vs . Commissioner of Internal Revenue, G.R. No. 22492, September 5, 1967) requires that the release, mailing or sending of the deficiency assessment notice be clearly and satisfactorily proved. Here notations made without the taxpayer's intervention, notice or control, without adequate supporting evidence, cannot suffice or otherwise, the taxpayer would be at the mercy of the revenue offices, without adequate protection or defense (Nava vs . Commissioner of Internal Revenue, 13 SCRA 104). D E C I S I O N DOMONDON , J p : This is an appeal from a decision of the Court of First Instance of Rizal (Pasig) in Civil Case No. 9771 for collection of taxes, ordering the defendant to pay the plaintiff the sum of P8,965.64 as deficiency income tax for the year 1956, the additional sum of P448.28 as surcharge and the further sum of P3,227.63 as interest thereon or a total sum of P12,641.55, with costs. On March 1, 1957, defendant-appellant, Hospicio M. Velarde filed his income tax returns for the calendar year 1956, indicating a net income of P9,359.81 (Exhibit "A"). In accordance with said returns, appellant paid his tax assessment corresponding thereto in the amount of P284.00. Upon investigation however, by plaintiff-appellee, Commissioner of Internal Revenue, on the above 1956 income tax returns, it was found out that the defendant was deficient in the sum of P8,965.64, excluding delinquency penalties and interests. On January 23, 1962, the plaintiff allegedly issued and sent a deficiency income tax assessment notice to the defendant at his business address at 406 Chaco Building, Manila requiring the latter to pay the amount indicated therein as due (Exhibit "B"-2). On January 18, 1967, upon failure of defendant, Hospicio M. Velarde, to pay the deficiency tax liability, the plaintiff herein issued a Warrant of Distraint and Levy against the former (Exhibit "B"). A copy thereof was served to the defendant on January 23, 1967 which was received under protest. Immediately the following day, January 24, 1967, the present action for collection of taxes was filed in the Court below. Before trial on the merits, a pre-trial conference was held wherein the parties thru their respective counsel, made the following admissions: "1. That the defendant filed his return for his income tax for 1956 on March 1, 1957; 2. That defendant received a tax assessment in accordance with his return sometime in May, 1957; 3. That in accordance with said assessment the defendant had paid the taxes due in full, per assessment of May, 1957; 4. That subsequently an investigation was conducted by the plaintiff of the return submitted by the defendant for said year, together with the financial statement attached thereto; 5. That as a result of the said investigation the plaintiff disallowed certain deductions made by the defendant in his income tax, more particularly (a) Purchase of logs amounting to one-half of P61,600.00; (b) Inspection fee of P2,100.00; and (c) Withdrawal during the year from the capital of the defendant amounting to P4,200.00 in consequence of which disallowance, a deficiency tax of P8,965.64 resulted; 6. That plaintiff sent an assessment to the defendant but addressed the same at 406 Chaco Building, Manila, which was the business address of the defendant at the same time he filed his income tax return for said year; 7. That the said deficiency tax assessment was sent by ordinary mail to the above address and that at this time the defendant had already been ejected from Chaco Building and consequently he did not receive the said deficiency assessment notice; and 8. That the given address of the defendant in his income tax return is 251 Joeffrey Street, San Juan, Rizal, although it also appears in the same return that his business appears to be at 408 Chaco Building, Manila." (Pre-trial Order, R. A., pp. 9-11). cdtech After due trial, the parties having presented their evidence, both testimonial and documentary, in support of their claims, the Court a quo rendered its decision on December 26, 1967, the dispositive portion of which is adverted to above. From said decision, the defendant has taken the present appeal to this Court claiming that the trial Court erred "1. In declaring the assessment notice (Exh. "B" plaintiff appellee) and Exh. "2", defendant-appellant as legally issued; 2. In holding that the assessment notice above-mentioned was regularly and validly sent to office of the appellant; 3. That considering that attendant facts and circumstances surrounding the case, the honorable trial court erred in holding that the issuance of the assessment notice and the filing of the complaint have not prescribed; and 4. In ordering the appellant, to pay the plaintiff-appellee the alleged deficiency income tax, surcharge and interest under its decision rendered on December 26, 1967." (Appellant's Brief, p. 6). The only issue to be determined in this appeal is whether a notice of deficiency tax assessment was validly sent to defendant taxpayer, Hospicio M. Velarde, within the five (5) year period required by Section 331 of the tax Code. The lower Court concluded that a notice had been effectively sent to the defendant-appellant on January 23, 1962, stating thus: "After going over the admissions and evidence presented by the parties, the Court is of the opinion and so holds that the assessment notice (Exhibit "B") was regularly and validly sent. It may be noted that although on the face of the income tax return of the defendant for the year 1956, he placed therein his residence as 251 Joeffrey, San Juan, Rizal (Exhibit "1"); he had likewise reported as his business address in said return 406 Chaco Building, Manila (page 2 of Exhibit "A"). The Court is convinced that the assessment notice could be sent either of the two (2) addresses as indicated by the taxpayer. The fact that at the time the notice was sent, defendant was no longer occupying the premises indicated in said notice is not fatal to the regularity and validity of the notice for the reason that the five-year prescriptive period is not counted from receipt of the notice but from sending out of the same by the Commissioner of Internal Revenue. At any rate, this Court is satisfied with the evidence presented by the plaintiff and the presumption of regularity in the performance of official function that the assessment notice in question (Exhibit "B") was sent to the defendant at his business address and that the same was not returned to the sender. It is possible that the same was forwarded to him at his residence as it was never returned. Assuming, however, that he did not really received the said assessment notice, this Court nevertheless still believes on ground of public policy that it is not necessary for the government to prove receipt of the notice by a taxpayer of the assessment notice for to do so would weaken and practically tie the hands of the tax collection agency of the government from collecting revenues as it would be easy to evade the receipt thereof. In the case of Basilan Estate vs . Commissioner of Internal Revenue, G.R. No. 22492, promulgated September 5, 1967, it was held that: 'Besides, even granting that the notice had been received by the petitioner late, as alleged, under Section 331 of the Tax Code requiring five years within which to assess deficiency taxes, the assessment is deemed made when notice to this effect is released, mailed or sent by the Collector to the taxpayer and it is not required that the notice be received by the taxpayer within the aforementioned five-year period.'" (Decision, R. A., pp. 19-21). In its decision the trial Court relied principally on the duplicate copy of the deficiency income tax notice found in the BIR file of appellant, Hospicio M. Velarde (Exhs. "B" & "2") which was issued on January 23, 1962 and the original allegedly sent to the appellant at his business address at 408 Chaco Building, Manila. Taxpayer Velarde vehemently denied having received the original copy of said notice. To support his claim, the Commissioner of Internal Revenue presented Mr. Pablo Sangil, a record custodian of his office, who tried to establish that the original copy of said assessment notice was issued and sent to the taxpayer, appellant herein, on January 23, 1962 by ordinary course of mail. This witness claimed that the releasing clerk, Rebecca Gonzales recorded the release of said notice in page 53 of the book of the BIR (Exh. "C" and that the same was turned over to the mailing clerk, Juan Querubin who sent it by ordinary mail. However, his testimony on the matter of issuance of the assessment in question was ruled out by the Court a quo as incompetent, thus: "Q Now, going back to my question, how do you know that this assessment was issued? Atty. DE LEON: Already answered; Your Honor. The original did not return according to him. And besides, he is incompetent on that assessment. He is not the one who prepared that assessment. He said this fellow is only in-charge of that book. COURT: He is incompetent about the issuance." (T.s.n., Oct. 25, 1967, p. 14 emphasis supplied). with respect to the actual mailing of the same, he stated on direct examination that: "Q. Mr. Sangil, you stated that Mr. Querubin was the one who mailed this assessment notice, do you know whether Mr. Querubin actually mailed this? A. I know Mr. Querubin mailed the assessment notice because I witnessed him putting the assessment notice in the envelope. Q. About the actual mailing? A. I saw him went to the Post Office. Q. But you did not actually see him mail it in the Post Office? A. I saw him put it in the envelope and I saw him left our office to mail the assessment notices." (t.s.n., Oct. 25, 1967, pp. 18-20). but, on cross-examination, he qualified the foregoing testimony, to quote: "Q. Mr. Sangil, do I got you right that this assessment notice alleged assessment notice was put in an envelope and then Mr. Querubin left your office together with this assessment notice in the envelope? A. Yes, I saw him do that. Q. That is all you know about this assessment notice because Mr. Querubin went to the Post Office allegedly to mail several mails? A. Yes, sir. Q. And you did not actually accompany him to see him actually put this in a deposit box? A. No more, sir. Q. So whatever your testimony is only presumption that it was by mail in ordinary course of business? A. That is all what I am testifying here." (t.s.n., October 25, 1967, pp. 22-24). which means that said witness only presumed that the notice has been mailed. This presumption however, was overcome by the fact that appellant has not received the same. The mere fact that the record custodian, Mr. Sangil witnessed the mailing clerk, Mr. Querubin put the assessment notice in the envelope and saw the latter went to the Post Office, is not sufficient proof that same notice had reached the addressee, especially when he denies having received it (Pampanga Sugar Mills vs . Chong Tiaopoc, 49 Phil. 1003). No other witness was presented by the plaintiff to collaborate the testimony on the actual issuance and mailing of said notice of assessment to the appellant. Neither the employee who prepared the assessment nor the mailing clerk, Mr. Querubin who could best testify on this point was availed of at the witness stand. The lone testimony of Mr. Sangil on these issues cannot be given credence because he was not an employee concerned and/or performing the issuance and mailing of said notice. His duty is confined to the safekeeping of records only. The entries made in the assessment notice are not his and the mailing of the same are beyond the scope of his duties, hence, he is incompetent to testify on these facts. LexLib Consequently, contrary to the conclusion reached by the trial Court, plaintiff-appellee failed to prove by satisfactory evidence that the assessment notice dated January 23, 1962 was in fact issued or sent to taxpayer Velarde. The presumption that a letter duly directed and mailed was received in the regular course of mail. (Sec. 5 (v), Rule 131, Revised Rules of Court) cannot be applied to the case at bar. "The facts to be proved to raised this presumption are (a) that the letter was properly addressed with postage pre-paid, and (b) that it was mailed. Once these facts are proved, the presumption is that the letter was received by the addressee as soon as it could have been transmitted to him in the ordinary course of the mail. But if one of the said facts fails to appear, the presumption does not lie." (VI Moran, Comments on the Rules of Court, 1970 ed., p. 55, citing Enriquez vs . Sun Life Insurance Co. of Canada, 41 Phil. 269). Since the second requirement has not been proved, there has been no valid and effective issuance or release of said deficiency income tax assessment notice dated January 23, 1962 and said date cannot be considered in computing the period of prescription within which a Court action to collect the same may be brought. Having been admitted that an original assessment of Velarde's 1956 income tax returns was made on March 1, 1957 and no valid notice of deficiency tax assessment having been made against the appellant after that date, it is evident that the period under Section 331 of the Tax Code within which to make a re-assessment expired on March 1, 1962. Since the appellant was served with a copy of the Warrant of Distraint and Levy (Exh. "D") on January 23, 1967 only, and a copy of the instant complaint on February 8, 1967 which are both addressed at his residence at 251 Joffrey St., San Juan, Rizal, the judicial action to collect any deficiency tax on Velarde's 1956 income tax returns has already prescribed. While it has been held in the case of Basilan Estate vs . Commissioner of Internal Revenue, supra , that "assessment is deemed made when notice to this effect is released, mailed or sent by the Collector to the taxpayer and it is not required that the notice be received by the taxpayer within the five (5) year period," said ruling which is a mere reproduction of that laid down in the case of Collector of Internal Revenue vs . Bautista, L-12250 and L-12259, May 27, 1959 requires, however, that the release, mailing or sending of the notice be clearly and satisfactorily proved. Mere notations made without the taxpayer's intervention, notice or control, without adequate supporting evidence, cannot suffice or otherwise, the taxpayer would be at the mercy of the revenue offices, without adequate protection or defense (Nava vs . Commissioner of Internal Revenue, 13 SCRA 104). LibLex IN VIEW OF THE FOREGOING, the decision appealed from is hereby reversed, without pronouncement as to costs. SO ORDERED. Concepcion, Jr. and Santos, JJ . , concur.