Case Summary (G.R. No. 202695)
Applicable Law
This case is governed by the 1997 National Internal Revenue Code (NIRC), particularly Section 203, which outlines the period of limitation for the assessment of internal revenue taxes.
Facts of the Case
GJM filed its Annual Income Tax Return for 1999 on April 12, 2000. Following a bankruptcy proceeding involving its parent company, Warnaco (ITK) Ltd., ownership of GJM transitioned to Luen Thai Overseas Limited in December 2001. GJM informed the BIR of its new registered address in Rosario, Cavite, on August 26, 2002. Consequently, the BIR sent a letter indicating a pending investigation into GJM's tax liabilities for 1999, revealing that the company had not settled its income tax obligations amounting to ₱1,192,541.51, due to various disallowances and understatements in expenses.
Proceedings with the BIR
On October 24, 2002, GJM contested the BIR's findings. Despite this, the BIR issued a Pre-Assessment Notice on February 12, 2003, and subsequently an Assessment Notice on April 14, 2003. Although the BIR attempted to communicate with GJM regarding its tax obligations through a Preliminary Collection Letter and a Final Notice Before Seizure, GJM claimed to have not received these notifications. GJM ultimately received a Warrant of Distraint and/or Levy dated December 8, 2003, prompting them to file a protest that was later denied by the BIR.
Tax Court Proceedings
GJM filed a Petition for Review before the Court of Tax Appeals (CTA), which ruled in GJM's favor on January 26, 2010. The CTA cancelled the deficiency income tax assessment and affirmed GJM's claim of lack of proper notification regarding the assessment. The CIR's subsequent motions for reconsideration were denied, leading the CIR to appeal to the CTA En Banc.
Issues on Appeal
On appeal, the CIR raised two primary issues: (1) whether the Formal Assessment Notice (FAN) for deficiency income tax was issued within the three-year prescriptive period as mandated by the NIRC; and (2) whether the BIR's right to assess GJM had already prescribed.
Court's Analysis
The Supreme Court affirmed the CTA’s ruling, stating that the assessment must occur within three years from the date the tax return was filed or the last date prescribed by law for filing, which in GJM's case was April 15, 2003. The BIR sent the FAN within this period, but the critical question remained whether GJM actually received it.
The Court noted that while assessments can be considered timely based on mailing, the presumption of receipt is rebuttable. GJM's denial of receipt shifted the burden
...continue readingCase Syllabus (G.R. No. 202695)
Case Overview
- The case involves a Petition for Review under Rule 45 of the Rules of Court filed by the Commissioner of Internal Revenue (CIR) against GJM Philippines Manufacturing, Inc. (GJM).
- The CIR seeks to reverse the Decision of the Court of Tax Appeals (CTA) En Banc dated March 6, 2012, which affirmed the earlier Decision of the CTA First Division dated January 26, 2010, in favor of GJM.
Background Facts
- GJM filed its Annual Income Tax Return for the year 1999 on April 12, 2000.
- The parent company, Warnaco (ITK) Ltd., declared bankruptcy, leading to a change in ownership of GJM to Luen Thai Overseas Limited in December 2001.
- GJM informed the Revenue District Officer (RDO) of its address change from Makati to Rosario, Cavite on August 26, 2002, and received confirmation of the tax registration transfer.
- On October 18, 2002, the Bureau of Internal Revenue (BIR) informed GJM of an income tax deficiency with a total liability of P1,192,541.51.
- The alleged deficiencies included disallowed expenses such as Loading and Shipment, Packing Expense, Salaries and Wages, Staff Employee Benefits, and Fringe Benefits Tax.
Assessment and Notices
- GJM contested the findings on October 24, 2002.
- The BIR issued a Pre-Assessment Notice on February 12, 2003, followed by an undated Assessment Notice on April 14, 2003, resulting in a deficiency income tax assessment of P1,480,099.29.
- A Preliminary Collection Letter was sent on July 25, 2003, requesting payment of the deficiency, addressed to GJM's former address in Makati.
- GJM claimed it did not re