GONZALO P. NAVA, PETITIONER, VS. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Gonzalo P. Nava prosecuted this appeal against a decision dated September 25,
1961 by the Court of Tax Appeals (C.T.A. Case No. 568) holding him liable in the
amount of P3,052.00 as deficiency income tax for the year 1950, as well as from
its order dated February 10, 1962 denying a motion to reconsider said
decision.

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,
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 respondent refused the offer. On July 28, 1953, ho requested
the respondent 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 January 5, 1954. This rejection was followed by two more letters or
notices demanding payment of the balance thereof, the last of which was dated
February 22, 1955.

On March 30, 1955, after investigation of petitioner’s 1950 income tax
return, respondent Collector issued a deficiency income tax assessment notice
(Exhibit “4”) requiring petitioner to pay not later than April 30, 1955 the sum
of P9,421.50, that included the balance of P2.491.00, still unpaid under the
original assessment, plus a 50% sur-charge. 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, more than five years
since the original tax return was filed, and testified to that effect in the
court below. In a letter of January 10, 1957, Nava called attention to the fact
that more than six 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 (registered letter of March 25, 1957, Exh. “5”). Nava asked
for reconsideration, and on June 16, 1958 was informed that reinvestigation
would be granted provided the taxpayer waived the statute of limitations (Exh.
“7”), a condition that was rejected (Exh. “8”). Thereupon, the reconsideration
of the assessment was denied by the Collector’s letter of July 22, 1958 (Exh.
“9”), and on August 8, 1958, Nava filed a petition for review with the Court of
Tax Appeals. The latter reduced the deficiency to P3,052.00, and cancelled the
50% surcharge. The petitioner appealed to this Court.

The principal issue in this appeal is whether the enforcement of the tax
assessment has prescribed. The Court of Tax Appeals ruled that it had not,
stating that:

“The duplicate copy of the income tax assessment notice indicates that it was
issued on March 30, 11)55 (Exh. 4, page 7, B.I.R, records). ‘Call-up’ letters
were sent to petitioner reminding him of the obligation. Thee call-up letters or
notices were recorded in Exh. C for petitioner (Exh. 2 for respondent, page 6,
BIR. records), to wit:

1st notice 4/10/56

2nd notice 7/3/56

Final-9/25/56

“In addition to the written notice sent to petitioner, he was also personally
interviewed. A report on these written notices and personal interviews appears
in the memorandum of an agent of the bureau of Internal Revenue dated December
10, 1956, the pertinent portion of which rends as follows:

“Several call up letters and repeated demands have been made to subject
taxpayers but in ppite of the considerable length of time that has elapsed the
above accounts still remain unsettled. The wanant assemblies of the above-stated
tax cases were assigned to Agent A. H. Aguilar and an interview with Mr. G.P.
Nava revevded that the letter refuse to pay alleging that these cases comes
within the purview of the Avelino case, hence, the BIR has no more right to
collect from him. (Exh. 1), page 8, B.I.R. records)”

“Petitioner’s claim that he came to know of the assessment only on or about
December 19, 1956, can not be given much credence. We are inclined to believe
that the assessment notice dated March 30, 1955 and the several call-up 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 conclusion finds
support in a note sent or delivered by petitioner to 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; Italics ours)

“The fact that petitioner admitted receipt of the ‘second final notice’
without protest is an indication that he received the previous notices.

“Assuming that petitioner received the income tax assessment notice dated
March 30, 1955 in due course of mail, that is, not later than April 10, 1955,
the assessment was made within the five-year period since he filed his income
tax return on May 15, 1951, even granting that the ten-year period applicable to
fraud cases does not apply to this case. (The assessment includes the fraud
penalty.) Since the deficiency income tax was assessed on or about April 10,
1955, the Government is authorized to collect the same by distraint or levy or
by judicial action within five years from that date, or not later than April 10,
1960. Judicial action was instituted in 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 five-year 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 “Q”, petition, pp. 134-137, records).

It is to be noted that in its decision the Court of Tax Appeals relied mainly
on the duplicate copy of the deficiency income tax notice found in the Bureau of
Internal Revenue file of petitioner Nava (Exhibit “4”, page 7, B.l.R. records).
On the corresponding blank space for the date of issue of said duplicate copy
was typed “3/30/55”. Petitioner Nava denied having received the original copy of
said notice. The Revenue Commissioner, on the other hand, presented a witness
(Mr. Pablo Sangil, an employee (clerk) of the B.l.R.) who attempted to establish
that the original copy thereof was actually issued or sent on March 30, 1955.
This witness, however, 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 Bureau of Internal Revenue
in October, 1956 only. Sangil also declared that there is no notation whatsoever
in said file copy (Exhibit “4”), nor evon 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. He even admitted that he had no hand in the preparation
or sending of written notices or demand letters of the Bureau of Internal
Revenue to the taxpayers, his duties being merely to keep the dockets of
taxpayers pertaining to income tax, to post and transmit papers to the other
branches of the Bureau for action; and to keep letters of taxpayers, memorandum
and other oflicial 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 (already past the limitation period of
this case), are to 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 there appears in his record book a note
(Exhibit “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 such entry in the record book. What was the nature of the
letter does not appear; at any rate, it was mailed beyond the 5-year limitation
period.

The lower court also relied on the supposed notices noted 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 “call-up”
or demand letters referred to in a memorandum of an agent (Mrs. Canlas) of the
Bureau of Internal Revenue (Exhibit “D’,page 8, B.I.R. records). No witness for
the respondent 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 petitioner Nava’s 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
notices were sent on or before August 25, 1956 at the latest, and, as
hereinabove pointed out, the witness was assigned in the income tax section of
the Bureau of Internal Revenue since October, 1956 only.

Thus, contrary to the finding of the Court of Tax Appeal, 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 mailed was received in the regular course of mail (Sec.
5(v), Rule 131, revised Rules of Court) cannot be applied to the case at
bar.

“The facts to be proved to raise this presumption are (a) that the letter was
properly addressed with postage prepaid, and 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) (Italics supplied)

Since none of these requirements have been shown, there has been no valid and
effective issuance or release of said deficiency income tax assessment notice
dated March 30, 1955 and of tho other demand letters or notices subsequent
thereto, the latest of which was purportedly sent on August 25, 1956, and these
dates cannot be reckoned with in computing tho period of prescription within
which a court action to collect the same may be brought.

The fact that in Exhibit “K” 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.

It being undisputed that an original assessment of Nava’s 1950 income tax
return was made on May 15, 1951, and no valid and effective notice of the
re-assessment having been made against the petitioner after that date (May 15,
1951), it is evident that the period under Section 331 of the Tax Code within
which to make a re-assessment expired on May 15,1956. Since the notice of said
deficiency income tax was effectively made on December 19, 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.

While we have held that 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, G.R. Nos. L-12250 and L-12259, May 27, 1959), this ruling
makes it the more 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.

Having reached the conclusion that the action to collect said deficiency
income tax has already prescribed, it is unnecessary to discuss the other issues
raised by petitioner Nava in the instant appeal.

WHEREFORE, the decision of the Court of Tax Appeals under review is reversed,
without costs.

Bengzon, C. J., Concepcion, Barrera, Paredes, Dizon, Regala, Makalintal,
Bengzon, J. P. and Zaldivar, JJ. concur.