G.R. No. 198677 - Commissioner of Internal Revenue vs. BASF Coating + Inks Phils., Inc.

Case Summary (G.R. No. 198677)

Petitioner

Commissioner of Internal Revenue of the Philippines.

Respondent

BASF Coating & Inks Phils., Inc., a Philippine corporation organized on August 1, 1990, originally located at 101 Marcos Alvarez Avenue, Barrio Talon, Las Piñas City; shortened its corporate term to March 31, 2001, and relocated to Carmelray Industrial Park, Canlubang, Calamba, Laguna.

Key Dates

August 1, 1990: Incorporation
March 19, 2001: Board and stockholders resolve to dissolve; shorten term
April 26 & June 22, 2001: Notices to BIR of dissolution and address update
January 17, 2003: Formal Assessment Notice (FAN) for 1999 issued
March 19, 2004: Protest filed; supplemental protest April 16; supporting documents June 14
January 10, 2005: Petition for review filed with CTA
February 17, 2010: CTA Special First Division decision favorable to respondent
June 16, 2011: CTA En Banc decision affirming prescription and invalid notice
November 26, 2014: Supreme Court decision

Applicable Law

1987 Philippine Constitution: due-process and property safeguards
National Internal Revenue Code (Tax Reform Act of 1997): Sections 203 (three-year assessment period), 222 (exceptions), 223 (suspension of prescriptive period)
BIR Revenue Regulation No. 12-85, Section 11: written notice requirement for address change
BIR Revenue Regulation No. 12-99, Section 3.1.7: constructive service of assessment notices

Corporate Organization and Dissolution

Respondent was duly incorporated in 1990 for a 50-year term. In March 2001, its board and shareholders shortened that term to effect dissolution by March 31, 2001. Respondent then vacated its Las Piñas address and established operations in Calamba, Laguna.

Change of Address and Notice Requirements

Pursuant to R.R. 12-85 § 11 and NIRC § 223, respondent submitted a notice of dissolution on April 26, 2001, and a manifestation with BIR Form 1905 on June 22, 2001, updating its registration and reflecting its new Laguna address.

Assessment and Protest

On January 17, 2003, the Commissioner issued a FAN assessing P18,671,343.14 in various 1999 taxes. The FAN was mailed to the old Las Piñas address on January 24, 2003. After receiving no valid notice, respondent’s director was served a distraint notice on March 5, 2004. Respondent protested on March 19 and April 16, 2004, and submitted supporting documents on June 14, 2004.

CTA Proceedings and Decisions

When the BIR did not act within 180 days, respondent filed a petition before the CTA on January 10, 2005. On February 17, 2010, the CTA Special First Division canceled the assessments for lack of valid notice. Its denial of the Commissioner’s motion for reconsideration was affirmed by the CTA En Banc on June 16, 2011, which held that the right to assess had prescribed and the FAN never became final.

Issues on Prescription and Validity of FAN

The Commissioner’s assignments of error challenged: (1) the CTA En Banc’s finding that the three-year assessment period under NIRC §§ 203 and 222 had prescribed; and (2) its ruling that the FAN was not final and executory because it was sent to the wrong address.

Statutory Framework on Prescription

NIRC § 203 prescribes a three-year period to assess taxes from the filing deadline. Section 222 enumerates exceptions allowing longer assessment periods for fraud or written agreements. Section 223 suspends prescription when the taxpayer cannot be located at the return address unless a written address change is given.

Court’s Interpretation of Suspension Provisions

The Supreme Court agreed with the CTA that the suspension under § 223 only applies if the Commissioner is genuinely unaware of the taxpayer’s whereabouts. A mere formal requirement of written notice does not shield a taxpayer whose new address is known to the BIR.

Evidence of BIR’s Knowledge of Respondent’s Address

Records demonstrated that BIR officers conducted audits, sent correspondence (September 2001 and March 2002 letters), and received reports at the Laguna address. A Preliminary Assessment Notice returned undelivered to Las Piñas further alerted the BIR to use the new address.

Prescriptive Period Not Suspended and Has Prescribed

Because the Commissioner had actual knowledge of respondent’s

Case Syllabus (G.R. No. 198677)

Facts and Corporate Background

BASF Coating + Inks Phils., Inc. was organized on August 1, 1990, with a fifty-year corporate term and BIR-registered address at 101 Marcos Alvarez Avenue, Barrio Talon, Las Piñas City.
On March 19, 2001, its board of directors and stockholders, representing more than two-thirds of its subscribed capital stock, resolved to dissolve the corporation effective March 31, 2001.
The corporation then vacated its Las Piñas address and relocated to Carmelray Industrial Park, Canlubang, Calamba, Laguna.

Change of Address and Notice to BIR

On April 26, 2001, respondent sent a written notice of dissolution to the BIR Revenue District Officer of RDO No. 53 (Alabang), complying with Section 52(c) of the National Internal Revenue Code.
On June 22, 2001, it submitted a manifestation and supporting documents, including BIR Form No. 1905 updating its tax registration details.

Assessment of Deficiency Taxes

On January 17, 2003, the BIR issued a Formal Assessment Notice (FAN) totaling ₱18,671,343.14 for deficiencies in 1999 income tax, value-added tax, withholding tax on compensation, expanded withholding tax, and documentary stamp tax, including increments.
The FAN was sent by registered mail on January 24, 2003 to the corporation’s former Las Piñas address.
On March 5, 2004, a First Notice Before Issuance of Warrant of Distraint and Levy was issued and sent to a director’s residence.
Respondent filed a letter of protest on March 19, 2004 (citing lack of due process and prescription) and a supplemental protest on April 16, 2004, followed by documentary evidence on June 14, 2004.
With no action by the BIR within 180 days, respondent filed a Petition for Review with the Court of Tax Appeals (CTA) on January 10, 2005.

Procedural History Before the Court of Tax Appeals

On February 17, 2010, the CTA Special First Division granted the petition for review, cancelling all assessments for lack of valid notice, and denied reconsideration on July 13, 2010.
Petitioner elevated the case to the CTA En Banc, which, on June 16, 2011, denied the petition for review, ruling that the right to assess had prescribed and the FAN never bec