Haystack: Nava vs. Commissioner of Internal Revenue (GR L-19470, 30 January 1965)

Nava vs. Commissioner of Internal Revenue (GR L-19470, 30 January 1965)
En Banc, Reyes JBL (J): 9 concur, 1 took no part.

Facts: On 15 May 1951, Nava filed his income tax return for the year 1950, and, on the same date, he was assessed by the Commissioner (formerly Collector) of Internal Revenue in the sum of P4,952.00, based solely on said return. Nava paid one-half of the tax due, leaving a balance of P2,491.00. Subsequently, Nava offered his backpay certificate to pay said balance, but the Commissioner refused the offer. On 28 July 1953, he requested the Commissioner to hold in abeyance the collection of said balance until the question of whether or not he was entitled to pay the same out of his backpay shall have been decided, but this was also rejected by the latter in a reply letter dated 5 January 1954. This rejection was followed by two more letters or notices demanding payment of the balance thereof, the last of which was dated 22 February 1955. On 30 March 1955, after investigation of Nava’s 1950 income tax return, the Collector issued a deficiency income tax assessment notice requiring Nava to pay not later than 30 April 1955 the 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 19 December 1956, more than five years since the original tax return was filed. In a letter of 10 January 1957, Nava called attention to the fact that more than 6 years had elapsed, protested the assessment, and contended that it was a closed issue. The Director insisted upon his demand that the new assessment be paid. Nava asked for reconsideration, and on 16 June 1958 was informed that reinvestigation would be granted provided the taxpayer waived the statute of limitations, a condition that was rejected. Thereupon, the reconsideration of the assessment was denied by the Collector’s letter of 22 July 1958.

On 8 August 1958, Nava filed a petition for review with the Court of Tax Appeals. On 25 September 1961, the latter reduced the deficiency to P3,052.00, and cancelled the 50% surcharge. Nava’s motion for reconsideration was denied 10 February 1962. Nava appealed to the Supreme Court.

The Supreme Court reversed the decision of the Court of Tax Appeals under review, without costs.

1. Presumption that letter duly directed and mailed cannot be applied; No substantial evidence from Commissioner
Reliance was made mainly on the duplicate copy of the deficiency income tax notice found in the Bureau of Internal Revenue file of Nava. The Revenue Commissioner presented a witness (Mr. Pablo Sangil, an employee [clerk] of the B.I.R.) who attempted to establish that the original copy thereof was actually issued on 30 March 1955, but said witness disclaimed having personal knowledge of its issuance or release on said date either by mail or personal delivery because, according to him, he was assigned in the income tax section of the BIR in October 1956 only. The witness also declared that there is no notation whatsoever in said file copy, nor even a slip of paper attached to the records, to show that the original copy of said exhibit was ever actually issued or sent to the taxpayer. There was also reliance on the supposed notices, as well as on the supposed “call-up” or demand letters referred to in a memorandum of an agent (Mrs. Canlas) of the BIR. No witness for the Commissioner testified to the issuance or sending of any of these supposed written demand letters or notices, nor was there any duplicate or even a simple copy thereof found in Nava’s BIR file. Thus, the Commissioner utterly failed to prove by substantial evidence that the assessment notice dated 30 March 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 mailed was received in the regular course of mail cannot be applied to the present case.

2. Requisites for the presumption, that letter was duly directed and mailed in regular course of mail, to arise
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 mails. But if one of the said facts fails to appear, the presumption does not lie.” (VI Moran, Comments on the Rules of Court, 1963 Ed., 56-57; citing Enriquez vs. Sun Life Assurance of Canada, 41 Phil. 269)

3. Distinction between receiving a second final notice and receiving a final notice for second time
The fact that Nava acknowledged receipt of the 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 receiving a final notice for the second time.

4. Judicial action to collect deficiency tax for 1950 income tax has prescribed
As the original assessment of Nava’s 1950 income tax return was made on 15 May 1951, and no valid and effective notice of the re-assessment having been made against Nava after that date, it is evident that the period under Section 331 of the Tax Code within which to make a re-assessment expired on 15 May 1956. Since the notice of said deficiency income tax was effectively made on 19 December 1956 at the earliest, the judicial action to collect any deficiency tax on Nava’s 1950 income tax return has already prescribed under Section 332 (c) of the Tax Code, it having been found by the Tax Appeals court that said return was not false or fraudulent.

5. Mere notations on notice without taxpayer’s intervention, without adequate supporting evidence, cannot suffice
While an assessment is made when sent within the prescribed period, even if received by the taxpayer after its expiration (Coll. of Int. Rev. vs. Bautista, L-12250 and L-12259, May 27, 1959), it is imperative that the release, mailing, or sending of the notice be clearly and satisfactorily proved. Mere notations made without the taxpayer’s intervention, notice, or control, without adequate supporting evidence, cannot suffice; otherwise, the taxpayer would be at the mercy of the revenue offices, without adequate protection or defense.