CIR v Enron Subic Power Corp.; G.R. No. 166387; 19 Jan 2009

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During the pre-assessment stage of the investigation of respondent for the year 1996, petitioner advised Enron’s representative of the latter’s tax deficiency, informed it of the proposed tax deficiency through a preliminary five-day letter and furnished Enron a copy of the audit working paper allegedly showing in detail the legal and factual bases of the assessment. On 26 May 1999, respondent received a formal assessment notice, itemizing therein the deductions disallowed and imposing the preferential rate of 5% on some items respondent categorized as costs. The legal and factual bases were, however, not indicated.

Whether or not the assessment notice sent to respondent was valid.

NO.¬†The advice of tax deficiency given by the CIR to an employee of Enron, 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. These steps were mere perfunctory discharges of the CIR’s duties in correctly assessing a taxpayer. The requirement of issuing a preliminary or final notice, as the case may be, informing a taxpayer of the existence of a deficiency tax assessment is markedly different from the requirement of what such notice must contain. Just because the CIR 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 Enron was informed of the law and facts on which the deficiency tax assessment was made.

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