Due process requirement in tax assessments

The issuance of a PAN is part of the due process requirement in the assessment of taxes. Full compliance with the requirement is mandatory to ensure the validity of an assessment.

The requirement that a taxpayer must first be notified of its deficiency taxes through the issuance of a PAN is provided under Section 228 of the National Internal Revenue Code (NIRC).

This is confirmed under Section 3 of RR 12-99, which provides that if after review and evaluation, it is determined that there exists sufficient basis to assess a taxpayer for deficiency tax or taxes, a PAN showing in detail the facts and the law, rules and regulations, or jurisprudence on which the proposed assessment is based should be issued to the taxpayer.

In the instant case, since the taxpayer denied having received the PAN, it was thus incumbent upon the BIR to prove that the taxpayer received the PAN. However, for failure on the part of the BIR to prove that the taxpayer was served a copy of the PAN, the CTA held that the assessment made by the BIR was invalid, and thus, ordered its cancellation.

(Commissioner of Internal Revenue v. Unioil Corporation, CTA EB Case No. 857 re CTA Case No. 8000, November 13, 2012)

Tax Brief – December 2012

Punongbayan and Araullo