Government loses P1.7-B tax case, sends notices to wrong addresses —CTA ruling

Due to negligence, the Court of Tax Appeals ruled against the Bureau of Internal Revenue (BIR) in favor of real estate firm Fort 1 Global City Center Inc. in a P1.7-billion tax case.

In a 31-page decision on Fort 1 Global City’s two petitions for review, the Court of Tax Appeals (CTA) junked the case against Fort 1 Global City since the addresses in BIR notices were not of Fort 1 Global City.

The notices include a letter of authority (LOA), preliminary assessment notice (PAN), formal assessment notice (FAN), and final decision on disputed assessment (FDDA) issued in 2009 and 2012.

“Without proof of due receipt, i.e., receipt by a person duly authorized to receive the BIR documents, the Court En Banc is constrained to conclude that petitioner failed to satisfactorily prove that it observed respondent’s right to due process when it served the FDDA through personal service. The conclusion can be made that no valid assessment was issued by respondent as petitioner did not receive the same,” the CTA said.

“An invalid assessment bears no valid fruit. Wherefore, premises considered, the instant Petitions for Review are granted. The PAN and FAN for taxable years 2009 and 2012, are cancelled,” the court noted.

“Accordingly, the deficiency tax assessments against petitioner amounting to P134,099,378.74 and P1,598,860,663.45, for taxable years 2012 and 2009 mentioned in the said assessment notices, as well as the FDDA dated October 13, 2016, are likewise cancelled and set aside,” it added.

The notices in 2009 were sent to 30th St., Bonifacio Global City, Taguig City. In 2012, the notices were set to 32nd Street of Bonifacio Global City, Taguig City. Both addresses were wrong.

As indicated on its general information sheet, Fort 1 Global City was holding office at Unit 2C-B, FPS Building, 1st Avenue corner 30th Street, Global City, Taguig City.

The CTA ruled that the government—through the BIR—failed to show evidence proving that the addresses indicated in the notices were the registered address or known address of the Fort 1 Global City.

While the BIR’s witnesses testified by way of Judicial Affidavit that the notices were duly served to petitioner Fort 1 Global City Center, their testimonies during cross examination revealed that they were not able to verify whether the individuals receiving the notices were authorized persons or employees of the petitioner.

“While it is true that the FAN dated January 24, 2012 shows that the same was received by a person named Grizel Patanao on January 26, 2012; the FAN dated July 20, 2012 reflects that the same was received by Lauron Airen, Lobby Reception, on July 31, 2012 and the FDDA dated October 13, 2016 indicates that the same was received by Arnel Santos on November 9, 2016, however, no statement regarding their designation and authority to act for and in behalf of petitioner were mentioned,” the CTA said.

“Respondent’s witnesses themselves clearly admitted that they have not confirmed or even inquired into the authority of the persons who allegedly received the notices,” the CTA added, referring to witnesses for the BIR.

In addition, the CTA pointed out that Abdulhalim Usman of the BIR’s Regional Office testified that tax notices for Fort 1 Global City in 2012 were handed to the security guard—an action that is not considered a proper service of notice to the taxpayer or his authorized representative.

“The CTA, sitting En Banc, held that the BIR failed to satisfactorily prove that it observed the taxpayer’s right to due process when it personally served the notice to a security guard. The receipt by the security guard of the notices and the FDDA issued by the BIR shows the repeated mistake or negligence of petitioner in delivering the BIR documents to the same wrong person,” the CTA said.

“While it is on record that the same security guard received the various documents sent by respondent, the same factual premises created an impression contrary to what was sought to be proven by petitioner,” it said.

“The repeated receipt of the various documents by respondent’s security guard does not prove that he had authority or semblance of authority to receive the same but reflects the repeated mistake or negligence of petitioner’s representative in sending the BIR documents to the same wrong person.”

Even if the same security guard may have received the subject notices and the FDDA, and the BIR was not permitted to enter respondent’s premises, it did not necessarily mean that the security guard had the authority to receive the documents, the tax court noted.

Considering the important nature of the BIR documents, the CTA said the BIR’s messenger should have at least verified the authority of the person who received the documents as an essential part of the due process. —VDS, GMA News