CIR V BASF Coating Digest

CASE DIGEST: COMMISSIONER OF INTERNAL REVENUE, Petitioner,
vs. BASF COATING + INKS PHILS., INC., Respondent. (G.R. No.

198677; November 26, 2014)
2/3 of BC's board members and stockholders decided to dissolve the corporation
by cutting its 50-year term of existence (from 1990) short (only until March 31,
2001). Subsequently, BC moved out of its address in Las Piñas City and transferred
to Carmelray Industrial Park, Canlubang, Calamba, Laguna
On June 26, 2001, BC submitted 2 letters to BIR. The first was a notice of
dissolution. The send was a manifestation with documents supporting said
dissolution such as BIR Form 1905 which refers to an update of information
contained in its tax registration. Thereafter, a FAN was sent to BC's former address
in Las Piñas City. The FAN indicated an amount of 18 million pesos representing
income tax, VAT, WTC, EWT and DST for the taxable year of 1999.
On March 5, 2004, BIR's RDO No. 39, South Quezon City, issued a First Notice
Before Issuance of Warrant of Distraint and Levy (FNB), which was sent to the
residence of one of BC's directors.
On March 19, 2004, BC filed a protest letter citing lack of due process and
prescription as grounds.
After 180 days without action on the part of the CIR, BC filed a petition for review
with the CTA. Trial ensued.
The CTA 1D ruled that since the CIR was actually aware of BC's new address and
such error in sending should not be taken against BC. According to the CTA 1D,
since there are no valid notices sent to BC, the subsequent assessments against it
are considered void.
CIR filed an MR. It was denied. So, it went to CTA en banc. The CTA En Banc held
that CIR's right to assess respondent for deficiency taxes for the taxable year 1999
has already prescribed and that the FAN issued to respondent never attained
finality because BC did not receive it.
CIR filed an MR. Denied.

ISSUE #1: Was the running of the 3-year prescriptive period to assess
suspended when BC failed to notify the CIR of its change of address?
No, the 3-year prescriptive period to assess was not suspended in favor of the CIR
even if BC failed notify regarding its change of address.
It is true that, under the Tax Code, the running of the Statute of Limitations shall
be suspended when the taxpayer cannot be located in the address given in the
return filed upon which a tax is being assessed or collected. In addition, Section 11
of RR 12-85 states that, in case of change of address, the taxpayer is required to
give a written notice thereof to the RDO or the district having jurisdiction over his
former legal residence and/or place of business.
However, the Supreme Court ruled that the above-mentioned provisions on the
suspension of the 3-year period to assess apply only if the CIR is not aware of the
whereabouts of the taxpayer.
In the present case, the CIR, by all indications, was well aware that BC had moved
to its new address in Calamba, Laguna, as shown by the documents which formed
part of respondent's records with the BIR.
Moreover, before the FAN was sent to BC's old address, the RDO sent BC a letter
regarding the results of its investigation and an invitation to an information
conference. This could not have been done without being aware of BC's new
address. Finally, the PAN was "returned to sender" before the FAN was sent.
Hence, despite the absence of a formal written notice of Bc's change of address, the
fact remains that petitioner became aware of respondent's new address as shown
by documents replete in its records. As a consequence, the running of the three-
year period to assess respondent was not suspended and has already prescribed.
ISSUE #2: Section 3.1.7 of BIR Revenue Regulation No. 12-99 allows
"constructive service" if the assessment notice is served by registered
mail. This constructive service rule was upheld in Nava v.
Commissioner of Internal Revenue. Isn't there constructive service in
BC's case?
No there is none.
The CIR's reliance on the provisions of Section 3.1.7 of BIR RR No. 12-9944 as well
as on the case of Nava v. Commissioner of Internal Revenue is misplaced, because
in the said case, one of the requirements of a valid assessment notice is that the
letter or notice must be properly addressed. It is not enough that the notice is sent
by registered mail as provided under the said RR. In the instant case, the FAN was
sent to the wrong address. Thus, the CTA is correct in holding that the FAN never
attained finality because BC never received it, either actually or constructively.

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CASE DIGEST: COMMISSIONER OF INTERNAL REVENUE, Petitioner,

vs. BASF COATING + INKS PHILS., INC., Respondent. (G.R. No.

CIR filed an MR. Denied.

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