Primary Holding

The BIR’s right to assess deficiency taxes against BASF for 1999 prescribed under the three-year statutory period under the National Internal Revenue Code (NIRC). The Formal Assessment Notice (FAN) was invalid because it was sent to BASF’s former address despite the BIR’s documented awareness of its new location.

Background

BASF dissolved on March 31, 2001, and relocated to Calamba, Laguna. The BIR issued a FAN for 1999 tax deficiencies on January 17, 2003, but mailed it to BASF’s old Las Piñas address. BASF protested the assessment, arguing prescription and lack of valid notice. The CTA and CTA En Banc ruled in favor of BASF, prompting the BIR to appeal to the Supreme Court.

Facts

• 1. BASF dissolved in 2001 and submitted dissolution notices to the BIR, including Form 1905 updating its address to Calamba, Laguna.
• 2. The BIR conducted audits at BASF’s new Laguna address in 2001–2002 but sent the 2003 FAN to the old Las Piñas address.
• 3. Multiple BIR documents (e.g., audit reports, letters) listed BASF’s Laguna address, proving the agency’s awareness.
• 4. The BIR’s First Notice Before Issuance of Warrant of Distraint and Levy (March 2004) was sent to a director’s residence.

Arguments of the Petitioners

• 1. The three-year prescriptive period under NIRC Sections 203/222 was suspended because BASF failed to notify the BIR in writing of its address change under Section 223 and Revenue Regulation No. 12-85.
• 2. The FAN became final and executory under Revenue Regulation No. 12-99’s constructive service rules.

Arguments of the Respondents

• 1. The BIR had actual knowledge of the new address through audits, letters, and internal records, negating suspension of the prescriptive period.
• 2. The FAN was void for lack of valid service, violating due process.

Issues

• 1. Whether the BIR’s right to assess taxes for 1999 prescribed.
• 2. Whether the FAN attained finality.

Ruling

• 1. Prescription: The three-year period (April 15, 2000–April 15, 2003) expired. The BIR knew BASF’s new address through audits and correspondence, so the suspension under Section 223 did not apply. Prescription statutes protect taxpayers from delayed claims.
• 2. Invalid FAN: The FAN was mailed to the wrong address despite the BIR’s awareness of the new location. Constructive service rules under Revenue Regulation No. 12-99 require proper addressing, which was not met.

Doctrines

• 1. Strict Construction of Prescription Exceptions: Exceptions to tax assessment limitations must be narrowly interpreted in favor of taxpayers.
• 2. Due Process in Tax Assessments: Valid assessments require proper notice to enable taxpayers to contest liabilities.

Key Excerpts

• 1. “The statute of limitations is intended to protect taxpayers from prolonged uncertainty.” [Citing Commissioner v. B.F. Goodrich Phils.]
• 2. “Taxes are the lifeblood of the government, but their collection must comply with the law.”

Precedents Cited

• 1. Philippine Global Communication, Inc. v. CIR: Emphasized taxpayer protection from delayed assessments.
• 2. Bank of the Philippine Islands v. CIR: Highlighted the purpose of prescription statutes to prevent harassment.

Statutory and Constitutional Provisions

• 1. Philippine Global Communication, Inc. v. CIR: Emphasized taxpayer protection from delayed assessments.
• 2. Bank of the Philippine Islands v. CIR: Highlighted the purpose of prescription statutes to prevent harassment.