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BARCELON v. CIR

FACTS:

Petitioner Barcelon, Roxas Securities Inc. filed its Annual Income Tax Return for the year 1987. After an audit investigation, the Commissioner of Internal Revenue (CIR) issued an assessment for deficiency income tax. The assessment was based on the disallowance of the item on salaries, bonuses, and allowances as part of the deductible business expense due to the failure of petitioner to withhold taxes. The assessment notice was allegedly sent to petitioner through registered mail, but petitioner denies receiving it. A Warrant of Distraint and/or Levy was then served on petitioner to enforce collection of the deficiency income tax. Petitioner filed a formal protest, which was denied by the CIR. Petitioner then filed a petition for review with the Court of Tax Appeals (CTA), which ruled in favor of petitioner and cancelled the deficiency tax assessment. The CTA found that the burden was on the respondent to prove that the assessment notice was received by the petitioner, but no substantial evidence was presented to prove such. The CIR appealed to the Court of Appeals, which reversed the CTA's decision and ordered petitioner to pay the deficiency income tax, surcharge, and interest. Petitioner filed a petition for review with the Supreme Court, challenging the decision of the Court of Appeals.

ISSUES:

  1. Whether the assessment notice was properly mailed and received by the taxpayer.

  2. Whether the failure to prove receipt of the assessment by the taxpayer leads to the conclusion that no assessment was issued.

  3. Whether the government's right to issue an assessment for the said period has already prescribed.

  4. Whether the evidence presented by the respondent, consisting of the entry in the BIR record book and the testimony of its record custodian, qualifies as an exception to the rule against hearsay evidence.

RULING:

  1. The assessment notice was not properly mailed and received by the taxpayer. The respondent failed to present substantial evidence that the notice was mailed or sent before the prescriptive period and that it was received by the taxpayer.

  2. The failure to prove receipt of the assessment by the taxpayer leads to the conclusion that no assessment was issued. The burden of proof was not met by the respondent.

  3. The government's right to issue an assessment for the said period has already prescribed.

  4. No, the evidence presented by the respondent does not qualify as an exception to the rule against hearsay evidence. The entries made in the BIR record book were not based on the personal knowledge of the record custodian, and there was no testimony regarding how the custodian obtained the pertinent information or whether it was acquired from persons under a legal duty to submit the same. Therefore, the evidence offered does not meet the requisites for admissibility under Rule 130, Section 44 of the Rules of Court. Additionally, the respondent failed to present independent evidence, such as the registry receipt of the assessment notice or a certification from the Bureau of Posts, to prove the release, mailing, or sending of the notice. Hence, the right of the government to assess and collect the alleged deficiency tax is barred by prescription.

PRINCIPLES:

  • The release, mailing, or sending of an assessment notice must be clearly and satisfactorily proved. Mere notations made without the taxpayer's intervention, notice, or control, without adequate supporting evidence, are insufficient. (Nava vs. CIR, 13 SCRA 104)

  • An assessment is made within the prescriptive period if notice to this effect is released, mailed, or sent by the CIR to the taxpayer within said period. Receipt thereof by the taxpayer within the prescriptive period is not necessary. However, the taxpayer should still actually receive, even beyond the prescriptive period, the assessment notice which was timely released, mailed, and sent. (Collector of Internal Revenue v. Bautista)

  • When a mail matter is sent by registered mail, there exists a presumption that it was received in the regular course of mail. However, this is a disputable presumption subject to controversion, and a direct denial of receipt shifts the burden to the party favored by the presumption to prove that the mailed letter was indeed received by the addressee. (Protector's Services, Inc. v. Court of Appeals)

  • Entries in official records made by a public officer or another person specially enjoined by law are prima facie evidence of the facts stated, but the entrant must have personal knowledge of the facts or must have acquired them from reports made by persons under a legal duty to submit the same.

  • The release, mailing, or sending of an assessment notice must be clearly and satisfactorily proven, and mere notations made without the taxpayer's intervention, notice, or control, without adequate supporting evidence, cannot suffice.

  • Even if an assessment is sent within the prescribed period and received by the taxpayer after its expiration, the release, mailing, or sending of the notice must still be proved.