Commissioner of Internal Revenue vs. Fort 1 Global City Center, Inc.

A tax assessment is void if the BIR fails to strictly comply with the procedural due process requirements for serving assessment notices, specifically by delivering them to the taxpayer's registered or known address and to the taxpayer or its duly authorized representative whose name, signature, designation, and authority are indicated. The taxpayer's act of protesting the assessment does not ratify or cure the defective service.

The Bureau of Internal Revenue (BIR) conducted investigations into the tax liabilities of Fort 1 Global City Center, Inc. (FGCCI) for the taxable years 2009 and 2012. This led to the issuance of Preliminary Assessment Notices (PANs), Final Assessment Notices (FANs), and a Final Decision on Disputed Assessment (FDDA) for 2009, collectively assessing deficiency income tax, value-added tax, withholding tax, and documentary stamp tax totaling approximately ₱1.732 billion. FGCCI contested these assessments, primarily arguing that the BIR served the notices at incorrect addresses and to unauthorized persons, thereby violating its right to due process.

• Nature of the Action: The case involves a petition for review on certiorari seeking to reverse the CTA's cancellation of deficiency tax assessments against FGCCI.
• Issuance of Assessments for 2009: The BIR issued a PAN (Jan. 24, 2012), FAN, and FDDA (Oct. 13, 2016) against FGCCI for deficiency taxes totaling ₱1,598,860,663.45.
• Issuance of Assessments for 2012: The BIR issued a PAN (Feb. 3, 2016) and a FAN (Mar. 15, 2016) for deficiency taxes totaling ₱134,099,378.74.
• FGCCI's Protest and Appeal: FGCCI protested the 2009 FAN and the 2012 FAN. Due to the BIR's inaction on the 2012 protest and the issuance of the 2009 FDDA, FGCCI appealed to the CTA.
• Core Factual Dispute on Service: FGCCI alleged the notices were served at incorrect addresses (30th St., Bonifacio Blvd. and 32nd St., cor. Boni Ave.) not matching its registered address in its 2016 GIS (Unit 2C-B, FPS Building, 1st Ave., cor. 30th St.). The BIR countered that the addresses used were those reflected in the BIR-Integrated Tax System (BIR-ITS).
• Deficiencies in Personal Service: Evidence showed that the PAN for 2009 was received by "Grizel Patanao" (position not indicated), the FAN by "Lauron Airen" (Lobby Receptionist), and the FDDA by "Arnel Santos" (position not indicated). For 2012, the LOA, PAN, and FAN were received by "Ramirez James" and "Arnel Santos," with no positions indicated. The serving Revenue Officers admitted they did not verify the recipients' authority.
• CTA Proceedings: The CTA Division and, ultimately, the CTA En Banc (by operation of law due to a lack of votes) ruled in favor of FGCCI, cancelling the assessments for violation of due process.

• Proper Service at Registered Address: The CIR argued that the notices were sent to FGCCI's address as registered in the BIR-ITS, which is the controlling record for the BIR. The taxpayer's General Information Sheet (GIS) is not the proper basis for determining the address for BIR service.
• Estoppel by Conduct: The CIR maintained that FGCCI is estopped from questioning the service because it received the notices (admittedly via a third party) and actively protested them, thereby participating in the administrative process.
• Substantive Liability: The CIR argued on the merits that FGCCI was indeed liable for the deficiency taxes assessed.

• Violation of Due Process: FGCCI countered that the BIR violated Section 228 of the Tax Code and Revenue Regulations No. 12-99 and 18-13 by serving notices at the wrong address and to unauthorized persons.
• Defective Service Not Cured by Protest: FGCCI argued that its filing of protests did not cure the fundamental defect in the initial service of the assessment notices, which is a prerequisite for a valid assessment.
• Burden of Proof on BIR: FGCCI insisted that the burden was on the BIR to prove proper and lawful service, which it failed to discharge.

• Due Process in Service: Whether the BIR's service of the PAN, FAN, and FDDA at addresses not registered with the BIR and to persons whose authority was not indicated violated FGCCI's right to procedural due process, rendering the assessments void.
• Effect of Protest on Defective Service: Whether FGCCI's act of filing protests to the FANs cured the defect in the service of the assessment notices.

• Due Process in Service: The assessments are void. The BIR failed to comply with the mandatory due process requirements under Section 228 of the Tax Code and its implementing regulations. The notices were not served at FGCCI's registered address with the BIR, and more critically, they were not received by FGCCI or its duly authorized representative. The serving officers did not ascertain the recipients' names, designations, or authority, as explicitly required by RR No. 12-99 and RR No. 18-13. This failure is a fatal procedural flaw.
• Effect of Protest on Defective Service: The filing of a protest does not ratify or cure the defective service of an assessment notice. The right to due process in the issuance of an assessment is distinct from the right to protest it. The BIR's negligence in complying with its own rules cannot be rewarded by applying the doctrine of estoppel against the taxpayer.

• Strict Compliance with Procedural Due Process in Tax Assessment — The issuance of a valid deficiency tax assessment requires strict compliance with the procedural due process safeguards mandated by law and regulation. This includes serving the formal letter of demand and assessment notice to the taxpayer's registered or known address and ensuring it is received by the taxpayer or its duly authorized representative, whose identity and authority must be indicated. Failure to comply renders the assessment void ab initio.
• The "Duly Authorized Representative" Requirement for Personal Service — When assessment notices are personally served, the recipient must be the taxpayer or a person with a certain degree of authority or discretion to grasp the gravity and financial impact of the document. For juridical entities, this means an officer or authorized employee. Service upon a mere receptionist, security guard, or unverified individual is insufficient.

• "Well-settled is the rule that an assessment that fails to strictly comply with the due process requirements outlined in Section 228 of the Tax Code and its implementing rules is void and produces no effect. This is because while it is true that taxation is the lifeblood of the government, the power of the State to collect tax must be balanced with the taxpayer's right to substantial and procedural due process."
• "The BIR is not expected to refer to the taxpayer's GIS to determine the correct address for sending tax assessments and BIR notices. As far as the BIR is concerned, the address in its BIR-ITS remains true and correct until FGCCI informs it of the new address..."
• "Revenue Officer Usman cannot blame the security guard who allegedly refused to tell him who the authorized representatives of FGCCI are. RR No. 18-13 provides for the process to be done if no person can be found at the taxpayer's known address... Despite this, he proceeded to merely rely on the representations of the security guard."

• Mannasoft Technology Corp. v. Commissioner of Internal Revenue, G.R. No. 244202, July 10, 2023 — Applied and followed. This case established that the strict personal delivery requirements for an FAN under RR No. 12-99 also apply to the PAN and Notice of Informal Conference, and that a defective service is not cured by the taxpayer's filing of a protest.
• Commissioner of Internal Revenue v. BASF Coating + Inks Phils., Inc., 748 Phil. 760 (2014) — Distinguished. In BASF, the BIR was deemed sufficiently aware of the taxpayer's new address through various documents in its possession. In the present case, no such evidence existed that the BIR was informed of the address in the GIS.
• Prime Steel Mill, Inc. v. Commissioner of Internal Revenue, 929 Phil. 644 (2022) — Cited for the principle that a void assessment produces no effect.

• Section 228, National Internal Revenue Code of 1997 (Republic Act No. 8424) — Mandates that the taxpayer must be informed in writing of the law and facts on which an assessment is made; otherwise, the assessment is void.
• Section 3.1.4, Revenue Regulations No. 12-99 — Requires that if a formal letter of demand and assessment notice is served by personal delivery, the taxpayer or its duly authorized representative must acknowledge receipt, indicating name, signature, designation, authority, and date of receipt.
• Section 3.1.6, Revenue Regulations No. 18-13 (amending RR No. 12-99) — Prescribes the modes of service (personal, substituted, by mail) and the specific procedures to be followed if the taxpayer is absent or refuses receipt.
• Section 2, Republic Act No. 1125, as amended by Republic Act No. 9503, in relation to Section 3, Rule 2 of the Revised Rules of the Court of Tax Appeals — Provides that the affirmative vote of four justices of the CTA En Banc is necessary for the rendition of a decision. If the majority vote cannot be had, the judgment appealed from stands affirmed.

• Alfredo D. Lopez, J. (Ponente)
• Henri Jean Paul B. Inting
• Japar B. Dimaampao
• Justice Lazaro-Javier (per list)
• Justice Lopez (per list)
• Justice Kho, Jr. (per list)

• Justice Marvic M.V.F. Leonen (Chairperson) — The dissent argued that FGCCI's right to due process was not violated. It emphasized that FGCCI actually received the notices and actively protested them, thereby participating fully in the administrative process. The dissent would have given more weight to the principle that the taxpayer has the duty to update its address with the BIR and that the BIR's reliance on its own records (the BIR-ITS) was justified. The dissent viewed the technical defects in service as non-fatal given the actual notice and participation of the taxpayer.