FACTS:
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.
ISSUE(S):
Whether or not the assessment notice sent to respondent was valid.
HELD:
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.
