Case Summary (G.R. No. 99301)
Determination of Applicable Prescriptive Period
Under Section 203, the CIR has three years from the last day for filing the return to assess and collect taxes. Section 222(a) provides an exception—ten years—when a false or fraudulent return is filed with intent to evade tax or when no return is filed. The phrases “false or fraudulent return” and “with intent to evade tax” are read together, requiring deliberate misstatement or fraud. The ordinary three-year period benefits the taxpayer by ensuring prompt assessment and preventing harassment through protracted investigations.
Requirements for Invoking the Ten-Year Period
Following the Supreme Court en banc ruling in McDonald’s Philippines Realty Corp., to extend the prescriptive period to ten years the CIR must satisfy:
- Clear and convincing proof that the taxpayer filed a false or fraudulent return with intent to evade tax (or failed to file a return).
- Compliance with due process by explicitly informing the taxpayer in the assessment notice that the ten-year period is being applied and providing the factual and legal basis (including any 30% under-declaration computation under Section 248(B)).
Application to the Present Case
- The FAN/FLD were issued on January 24, 2011—beyond the three-year deadlines—and the CIR failed to prove actual receipt, violating due process.
- The CIR did not demonstrate any deliberate under-declaration or fraud. Respondent’s returns consistently reflected gross income of ₱31.16 million, and no evidence established intent to evade tax. The assessment notices did not reference the ten-year period or set forth any computation justifying its use, and the C
Case Syllabus (G.R. No. 99301)
Facts
- Respondent Arturo E. Villanueva, Jr. operates hauling services under Producers Connection Logistics, Tondo, Manila, and filed his Annual ITR and Quarterly VAT Returns for 2006 on time.
- BIR issued Letter Notice (June 20, 2008), Tax Reconciliation System letter (May 14, 2009), Letter of Authority (June 8, 2009), First Request for Records (June 15, 2009), 1st Call-Up (May 23, 2011), and Final Notice Before Seizure (June 6, 2011) through RDO No. 29, all received by respondent.
- Respondent sought clarification and reinvestigation (July 13, 2011); BIR denied revocation of Collection Notice (December 2012) and later denied reconsideration (October 14, 2014).
- On November 25, 2014, respondent filed a Petition for Review with the CTA First Division; CIR answered and claimed a 10-year prescriptive period due to alleged fraud.
Procedural History
- CTA First Division (Decision August 18, 2017; Resolution January 10, 2018) held the PAN, FAN, and FLD validly issued but canceled the deficiency assessments for 2006 on prescription grounds, finding no substantial under-declaration or fraud.
- CTA En Banc (Decision March 13, 2019; Resolution September 16, 2019) affirmed the CTA Division: registry receipts were unauthenticated and failed to prove service; applied three-year prescriptive period.
- CIR filed Petition for Review on Certiorari under Rule 45 before the Supreme Court, raising service validity and prescription issues; respondent did not file a Comment.
Issues
- Whether the Preliminary Assessment Notice (PAN) and Final Assessment Notice (FAN) with Formal Letter of Demand (FLD) were validly served on respondent.
- Whether the BIR’s right to assess respondent for deficiency income tax and VAT for 2006 had already prescribed.
CTA First Division Ruling
- Confirmed proper issuance and service of PAN, FAN, and FLD via registered mail to respondent’s registered address.
- Found CIR failed to establish substantial under-declaration or fraud;