Internal Revenue Commissioner Kim S. Jacinto-Henares has closed yet another loop-hole taxpayers use to invalidate tax-deficiency assessments against them that should have already become final and executory.
In issuing Revenue Memorandum Order (RMO) 26-2016, Henares outlined the new process to be followed in handling disputed assessments. The new process hardly changed the former process, but now has a measure against taxpayers invoking the defense that they did not receive any assessment notice from the Bureau of Internal Revenue (BIR), which is a requirement of due process.
Under the new RMO 26-2016, the lapse of the period to appeal an assessment that was mailed to the address on record of the taxpayer would be enough for such assessment to become final and executory.
This closes a loophole used by taxpayers in trying to appeal tax-deficiency assessments that have already become final, executory and demandable because of the lapse of the period to appeal.
Pacquiao case
In the P2-billion tax case against boxing icon and Senator-elect Emmanuel D. Pacquiao, one of the issues resolved by the Court of Tax Appeals (CTA) was whether the appeal filed by Pacquiao was filed on time.
The BIR had earlier moved to dismiss Pacquiao’s petition on the ground of prescription, arguing that the Final Decision on Disputed Assessment (FDDA) served by BIR agents to Pacquiao’s office at the House of Representatives was “constructive service” of such FDDA to Pacquiao himself, although he did not personally receive such notice but only through his staff.
Pacquiao’s defense in the BIR’s motion to dismiss his appeal before the CTA was that the 30-day period to appeal the FDDA to the CTA begun only after he had personally received the FDDA, and not when his staff at the House of Representatives received it from the BIR agents. The BIR served the FDDA at Pacquiao’s office in May 2013, while Pacquiao filed his appeal before the CTA only in August 2013, or more than two months after the FDDA’s “constructive service” through Pacquiao’s staff at the House of Representatives.
The CTA eventually denied the BIR’s motion to dismiss Pacquiao’s appeal, brushing aside the BIR’s argument that the FDDA had already attained the status of being final, executory and demandable after the lapse of the 30-day period to appeal.
Usual defense
The BIR’s lawyer in Pacquiao’s case said it was a usual defense for a taxpayer to say that he did not personally receive the FDDA so that he would still be able to appeal the assessment before the CTA even after the lapse of the 30-day period to appeal.
“When a taxpayer fails to appeal on time, yes, it’s common for them to give the excuse that they did not receive these documents,” lawyer Felix Velasco said in a text message to the BusinessMirror.
Velasco used to head the litigation department of the BIR, and is now connected with the BIR’s Enforcement and Advocacy Service.
And once this issue of whether the appeal was filed on time be resolved in favor of the taxpayer, it prevents the government from collecting on the tax deficiency assessment until the case is finally resolved by the courts.
Evidentiary rules
There is a presumption under the law that a letter duly directed and mailed was received in the regular course of the mail.
But under current jurisprudence, this presumption can easily be disproved by the mere denial by the taxpayer that he did actually receive such mail. Thus, the burden of proving the receipt of the mail shall fall upon the party asserting such fact.
However, under Henares’s new RMO 26-2016, she created another presumption that assessment notices sent to the address on record of the taxpayer is deemed received and shall ripen into a final, executory and demandable tax-deficiency assessment after the lapse of the period to appeal.
Under Section II, Paragraph 15 of RMO 26-2016, even the failure of the taxpayer to receive the assessment notices can be a ground for the assessment to become final and unappealable if the notices were sent to the taxpayer’s address on record.
The provision said that “failure of the taxpayer to receive any assessment notices because it was served in the address indicated in the BIR’s registration database and the taxpayer transferred to a new address or closed/ceased operations without updating and transferring its BIR registration or canceling its BIR registration as the case may be” is a ground for the assessment to become final, executory and demandable.
source: Business Mirror
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