Is it mandatory for the BIR to indicate the

legal and factual bases of their findings in the

assessment? Is the notice requirement
satisfied when the BIR advised the taxpayers
representative of the tax deficiency during the
pre-assessment stage, and furnished the
taxpayer of a copy of the audit woring
papers?
!n ron" a duly registered #ubic Bay $reeport
%one enterprise received a formal notice of
assessment from the &ommissioner of
Internal Revenue despite filing its
protest letter to the preliminary five-day letter"
'he &ompany filed a (etition for Review with
the &ourt of 'ax )ppeals since the &IR
failed to resolve its protest against the formal
notice of assessment within the mandated
*+,-day period" !n ron alleged that the BIR
failed to provide the legal and factual bases of
the assessment in violation of #ection -"*". of
Revenue Regulations /umber *0-11
$inding for !n ron, the &') held that the
assessment notice sent to the &ompany
failed to comply with the requirements of a
valid written notice set by the law" 'he &IR s
motion for reconsideration was liewise
denied"
2n appeal, the &ourt of )ppeals
affirmed the decision of the &') and held that
the audit woring papers presented to the
taxpayer by the BIR in support of the
assessment did not substantially comply with
#ection 00+ of the /IR& and RR /umber *0-11
because the aforementioned documents
failed to show the applicability of the law the
BIR cited to the facts of the assessment"
'he &IR then elevated the case to the #&
claiming that !n ron was informed of the legal
and factual bases of the deficiency
assessment against it"
In denying the &IRs petition for review, the
#& held that #ection -"*". of RR /umber *0-11 is
explicit that 3a taxpayer must be informed in
writing of the legal and factual bases of the
tax assessment made against it"4
'he &ourt said that the use of the word 3shall4
indicates the mandatory nature of the
requirements laid down therein"
!ven so, taing note of the &')s findings,
the #& held that 3the &IR merely issued a
formal assessment and indicated therein the
supposed tax, surcharge, interest and
compromise penalty due thereon" 'he
Revenue 2fficers of the &IR in the issuance
of the $inal )ssessment /otice did not
provide !nron with the written bases of the
law and facts on which the sub5ect
assessment is based" 'he &IR did not bother
to explain how it arrived at such an
assessment" 6oreso, he failed to mention the
specific provision of the 'ax &ode or rules
and regulations which were not complied with
by !n ron"
'he #& gave weight to the findings of the
&') and &) that the BIR failed to indicate the
factual and legal bases of the deficiency tax
assessment as the same merely itemi7ed the
deductions disallowed and included these in
the gross income, aside from imposing the
preferential rate of 89 on some items
categori7ed by !n ron as costs"
:ltimately, the &IR alleged that during the
pre-assessment stage, they supposedly have
advised and informed !n rons representative
of the proposed tax deficiency through a
preliminary five-day letter apart from
furnishing the latter a copy of the audit
woring paper"
;owever, the #& ruled that 3the advice of
tax deficiency, given by the &IR to an
employee of !n ron, as well as the preliminary
five-day letter, were not valid substitutes for
the mandatory notice in writing of the legal
and factual bases of the assessment"4
)ccording to the #&, 3the requirement for
issuing a preliminary or final notice, as the
case may be, informing a taxpayer of the
existence of a deficiency tax assessment is
maredly different from the requirement of
what such notice must contain" <ust because
the &IR issued an advice, a preliminary letter
during the pre-assessment stage and a final
notice, in the order required by law, does not
necessarily mean that !n ron was informed of
the law and facts on which the deficiency
assessment was made"4
;ence, the assessment against !n ron was
declared to be void by reason of the absence
of a fair opportunity for !n ron to be informed
of the aforesaid assessments legal and
factual bases"
COMMISSIONER OF INTERNAL
REVENUE vs. EN RON SUBIC POWER
CORPORATION (GR #16 63 68, January
19, 2009.)