104

SUPREMECOURTREPORTSANNOTATED Nava vs. Commissioner of Internal Revenue No.L19470.January30,1965.

GONZALOP.NAVA,petitioner, vs.COMMISSIONER OF INTERNALREVENUE,respondent.

Taxation; Income Tax; Prescription; Prescription of enforcement of assessment.Deficiency income tax assessments cannot be enforcedwherethetaxcollectorcannotprovethatsaidassessments were served on the taxpayer within the period of prescription providedbylaw. Same; Same; Same; Where presumption that letter didv mailed was received cannot apply.Thepresumptionthatalet
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ter duly directed and mailed was received in the regular course of mail cannot apply where none of the required facts to raise this presumption, i.e., that the letter was properly addressed with postageprepaidandthatitwasmailed,havebeenshown. Same; Same; Same; Same; Mere notations on records of tax collector not sufficient proof of mailing.Mere notations on the recordsofthetaxcollectorofthemailingofanoticeofadeficiency tax assessment to a taxpayer, made without .the taxpayers intervention, notice, or control, and without adequate supporting evidence, cannot suffice to prove that such notice was sent and received; otherwise, the taxpayer would be at the mercy of the revenueofficers,withoutadequateprotectionordefense.

APPEALfromadecisionandanorderoftheCourtofTax

Appeals. ThefactsarestatedintheopinionoftheCourt. E. P. Villar & A. Tordesillasforpetitioner. Solicitor Generalforrespondent. REYES,J.B.L.,J.: GonzaloP.Navaprosecutedthisappealagainstadecision dated September 25, 1961 by the Court of Tax Appeals (C.T.A. Case No. 568) holding him liable in the amount of P3,052.00asdeficiencyincometaxfortheyear1950,aswell asfromitsorderdatedFebruary10,1962denyingamotion toreconsidersaiddecision. The undisputed facts are: that on May 15, 1951, Nava filed his income tax return for the year 1950, and, on the same date, he was assessed by respondent Commissioner (formerly Collector) of Internal Revenue in the sum of P4,952.00,basedsolelyonsaidreturn.Navapaidonehalfof thetaxdue,leavingabalanceofP2,491.00.Subsequently, Navaofferedhisbackpaycertificatetopaysaidbalance,but respondentrefusedtheoffer.OnJuly28,1953,herequested the respondent to hold in abeyance the collection of said balanceuntilthequestionofwhetherornothewasentitled topaythesameoutofhisbackpayshallhavebeendecided, butthiswasalsorejectedbythelatterinareplyletterdated January 5, 1954. This rejection was followed by two more lettersornoticesdemand
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ing payment of the balance thereof, the last of which was datedFebruary22,1955. On March 30, 1955, after investigation of petitioners 1950 income tax return, respondent Collector issued a deficiency income tax assessment notice (Exhibit 4) requiringpetitionertopaynotlaterthanApril30,1955the sum of P9,124.50, that included the balance of P2,491.00, still unpaid under the original assessment, plus a 50% surcharge. Several notices of this revised assessment are alleged to have been issued to the taxpayer, but Nava claims to have learned of it for the first time on December

19,1956,morethanfiveyearssincetheoriginaltaxreturn wasfiled,andtestifiedtothateffectinthecourtbelow,Ina letterofJanuary10,1957,Navacalledattentiontothefact that more than six years had elapsed, protested the assessment, and contended that it was a closed issue. The Directorinsisteduponhisdemandthatthenewassessment be paid (registered letter of March 25, 1957, Exhibit 5). Navaaskedforreconsideration,andonJune16,1958was informed that reinvestigation would be granted provided thetaxpayerwaivedthestatuteoflimitations(Exh.7),a condition that was rejected (Exh. 8). Thereupon, the reconsideration of the assessment was denied by the CollectorsletterofJuly22,1958(Exh.9),andonAugust 8, 1958 Nava filed a petition for review with the Court of TaxAppeals.ThelatterreducedthedeficiencytoP3,052.00, andcancelledthe50%surcharge.Thepetitionerappealedto thisCourt. The principal issue in this appeal is whether the enforcement of the tax assessment has prescribed. The CourtofTaxAppealsruledthatithadnot,statingthat:
The duplicate copy of the income tax assessment notice indicates that it was issued on March 30, 1955 (Exh. 4, page 7, B.I.R. records). Callup letters were sent to petitioner reminding him of theobligation.ThesecalluplettersornoticeswererecordedinExh. C for petitioner (Exh. 3 for respondent, page 6, B.I.R. records), to wit:

1stnotice 2ndnotice Final

4/10/56 7/3/56 9/25/56

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In addition to the written notice sent to petitioner, he was also personally interviewed. A report on these written notices and personalinterviewsappearsinthememorandumofanagentofthe Bureau of Internal Revenue dated December 10, 1956, the pertinentportionofwhichreadsasfollows.
Several callup letters and repeated demands have been made to

subjecttaxpayersbutinspiteoftheconsiderablelengthoftimethathas elapsed the above accounts still remain unsettled. The warrant assemblies of the abovestated tax cases were assigned to Agent A. H. Aguilar and an interview with Mr. G. P. Nava revealed that the latter refusedtopayallegingthatthesecasescomewithinthepurviewofthe Avelino case, hence, the B.I.R. has no more right to collect from him. (Exh.D,page8,B.I.R,records).

Petitioners claim that he came to know of the assessment only onoraboutDecember19,1956cannotbegivenmuchcredence.We are inclined to believe that the assessment notice dated March 30, 1955 and the several callup letters sent to him were received by him in due course of mail but that he ignored them because of his belief that the right of the Government to collect the tax had prescribed in view of the decision in the Avelino case. This conclusionfindssupportinanotesentordeliveredbypetitionerto an employee of the Bureau who interviewed him, wherein he stated:
This is to certify that I have received today, second final notice from the Bureau of Internal Revenue delivered by Mrs. Canlas. My reply to your said final notice, as per your request, will be sent to you on or before January 3, 1957, in view of the fact that I may not be able to contact right away my Accountant. (Exh. E, page 9, B.I.R. records; Italicsours.)

Thefactthatpetitioneradmittedreceiptofthesecondfinal noticewithoutprotestisanindicationthathereceivedthe previousnotices.

Assumingthatpetitionerreceivedtheincometaxassessmentnotice datedMarch30,1955induecourseofmail,thatis,notlaterthan April10,1955,theassessmentwasmadewithinthefiveyearperiod sincehefiledhisincometaxreturnonMay15,1951,evengranting thatthetenyearperiodapplicabletofraudcasesdoesnotapplyto this case. (The assessment includes the fraud penalty.) Since the deficiencyincometaxwasassessedonoraboutApril10,1955,the Governmentisauthorizedtocollectthesamebydistraintorlevyor byjudicialactionwithinfiveyearsfromthatdate,ornotlaterthan April10,1960.Judicialactionwasinstitutedin
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the Court of First Instance of Manila in Civil Case No. 32796 for collection of said amount, followed by the institution of the instant appeal in this Court by petitioner himself on August 8, 1958, both within the fiveyear period. Therefore, we are of the opinion that the right of the Government to assess and collect said deficiency income tax has not prescribed. (Annex O, petition, pp. 134137, records).

ItistobenotedthatinitsdecisiontheCourtofTaxAppeals reliedmainlyontheduplicatecopyofthedeficiencyincome tax notice found in the Bureau of Internal Revenue file of petitionerNava(Exhibit4,page7,B.I.R.records).Onthe corresponding blank space for the date of issue of said duplicatecopywastyped3/30/55.PetitionerNavadenied having received the original copy of said notice. The Revenue Commissioner, on the other hand, presented a witness(Mr.PabloSangil,anemployee[clerk]oftheB.I.R.) who attempted to establish that the original copy thereof wasactuallyissuedorsentonMarch30,1955.Thiswitness, however, disclaimed having personal knowledge of its issuanceorreleaseonsaiddateeitherbymailorpersonal deliverybecause,accordingtohim,hewasassignedinthe income tax section of the Bureau of Internal Revenue in October, 1956 only. Sangil also declared that there is no notationwhatsoeverinsaidfilecopy(Exhibit4),noreven a slip of paper attached to the records, to show that the originalcopyofsaidexhibitwaseveractuallyissuedorsent tothetaxpayer.Heevenadmittedthathehadnohandin the preparation or sending of written notices or demand lettersoftheBureauofInternalRevenuetothetaxpayers, his duties being merely to keep the dockets of taxpayers pertainingtoincometax,topostandtransmitpaperstothe otherbranchesoftheBureauforaction,andtokeepletters of taxpayers, memorandum and other official matters. Respondent presented another witness, Mr. Eliseo B. Fernandez, whose duties, as record clerk of the Records Control Section of the Bureau of Internal Revenue since 1957(alreadypastthelimitationperiodofthiscase),areto send mail and to keep a record book of letters which are mailed to the taxpayers. Insofar as the testimony of this witness is concerned, he only declared as to the fact that thereappearsinhisrecordbookanote(Exhibit
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Nava vs. Commissioner of Internal Revenue

10) that a letter dated March 15, 1957 was mailed by special delivery with return card to Gonzalo P. Nava. He admitted, however, that he was not the one who prepared suchentryintherecordbook.Whatwasthenatureofthe letterdoesnotappear;atanyrate,itwasmailedbeyondthe 5yearlimitationperiod. Thelowercourtalsoreliedonthesupposednoticesnoted in ink (followed by an illegible initial) in Exhibit 3 for respondent (page 6, B.I.R. records), the first of which was purportedly sent on April 10, 1956, the second on July 3, 1956, and the final one on August 25, 1956, as well as on the. supposed callup or demand letters referred to in a memorandum of an agent (Mrs. Canlas) of the Bureau of InternalRevenue.(ExhibitD,page8,B.I.R.records).No witness for the respondent testified to the issuance or sendingofanyofthesesupposedwrittendemandlettersor notices,norwasthereanyduplicateorevenasimplecopy thereof found in petitioner Navas Bureau of Internal Revenue file. Although witness Sangil testified as to the meaning of the dates noted in Exhibit 3, his testimony cannot be given much credence because those supposed noticesweresentonorbeforeAugust25,1956atthelatest, and, as hereinabove pointed out, the witness was assigned intheincometaxsectionoftheBureauofInternalRevenue sinceOctober,1956only. Thus,contrarytothefindingoftheCourtofTaxAppeals, respondent utterly failed to prove by substantial evidence that the assessment notice dated March 30, 1955 and the other supposed written demand letters or notices subsequent thereto were in fact issued or sent to taxpayer Nava. The presumption that a letter duly directed and mailedwasreceivedintheregularcourseofmail(Sec.5[v], Rule 131, revised Rules of Court) cannot be applied to the caseatbar.
The facts to be proved to raise this presumption are (a) that the letter was properly addressed with postage prepaid, and (b) that it was mailed. Once these facts are proved, the presumption is that the letter was received by the addressee as soon as it could have been transmitted to him in the ordinary course of the mail. But if one of the said facts fails to appear, the presumption does not lie. (VI,Moran,Comments

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on the Rules of Court,1963ed.,5657;citing Enriquez vs. Sun Life Assurance of Canada,41Phil.269)(Italicssupplied).

Since none of these requirements have been shown, there hasbeennovalidandeffectiveissuanceorreleaseofsaid deficiency income tax assessment notice dated March 30, 1955andoftheotherdemandlettersornoticessubsequent thereto,thelatestofwhichwaspurportedlysentonAugust 25, 1956, and these dates cannot be reckoned with in computing the period of prescription within which a court actiontocollectthesamemaybebrought. ThefactthatinExhibitENavaacknowledgedreceipt ofthe second final notice personally delivered to him is no proof that he received the first notice by mail. There is a difference between receiving a second final notice and receivingafinalnoticeforthesecondtime. It being undisputed that an original assessment of Navas1950incometaxreturnwasmadeonMay15,1951, and no valid and effective notice of the reassessment having been made against the petitioner after that date (May15,1951),itisevidentthattheperiodunderSection 331oftheTaxCodewithinwhichtomakeareassessment expiredonMay15,1956.Sincethenoticeofsaiddeficiency income tax was effectively made on December 19, 1956 at theearliest,thejudicialactiontocollectanydeficiencytax on Navas 1950 income tax return has already prescribed underSection332(c)oftheTaxCode,ithavingbeenfound bytheTaxAppealscourtthatsaidreturnwasnotfalseor fraudulent. While we have held that an assessment is made when sent within the prescribed period, even if received by the taxpayerafteritsexpiration(Coll. of Int. Rev. vs. Bautista, L12250andL12259, May 27, 1959), this ruling makes it themoreimperativethattherelease,mailing,orsendingof the notice be clearly and satisfactorily proved. Mere notationsmadewithoutthetaxpayersintervention,notice, or control, without adequate supporting evidence, cannot suffice;otherwise,thetaxpayerwouldbeatthemercyofthe revenueoffices,withoutadequateprotectionordefense.
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Havingreachedtheconclusionthattheactiontocollectsaid deficiency income tax has already prescribed, it is unnecessarytodiscusstheotherissuesraisedbypetitioner Navaintheinstantappeal. WHEREFORE,thedecisionoftheCourtofTaxAppeals underreviewisreversed,withoutcosts. Bengzon, C.J., Concepcion, Barrera, Paredes, Dizon, Regala, Makalintal, Bengzon, J.P., and Zaldivar, JJ., concur. Bautista Angelo, J.,tooknopart. Decision reversed. Notes.Theinterestondeficiencyisimposableincaseof nonpaymentofthetaxinduetime,notonlyonthebasictax but also on the deficiency tax, since the deficiency is part and parcel of the basic tax liability. Under the old Section 51(a) the Commissioner of Internal Revenue was required to assess the tax due, based on the taxpayers return, and yet under the old Section 51(b) the time for payment was fixed,whetherornotanoticeofassessmentwasgiventhe taxpayer.Underthenewprovisionsthetimeforpaymentis also fixed and predetermined (usually coinciding with the filingofthereturn)andwithoutthenecessityofgivingthe taxpayer notice of the assessment. Under the old section 51(e) the interest or deficiency was imposed from the time the tax became due; whereas under the new section 51(d) the interest is imposed on the deficiency from the date prescribed for payment of the tax. (See Central Azucarera Don Pedro vs. Court of Tax Ap peals,20SCRA344,andthe notesthereunder.) _______________

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