RATIONALE:
Gr: Statutes are prospective.
Etr: Remedial statutes that do no create new or take away vested rights can be retroactive.
Administrative rule interpretative of a statute, not declarative of certain rights and corresponding obligations, is given retroactive effect as of the date of the effectivity of the statute.
Should the old regulation be upheld? NO.
- R.R. 12-99 passed in September 6, 1999 can retroact to Jan 01 1998, R.A. 8424's date of effectivity. Replaced RR 12-85 that requires mere notice.
FACTS:
1. 08 July 1993, Maria Tancinco died leaving 1,292 sqm of residential house.
2. Azucena Reyes is one of her heirs who received a Letter of Authority for the investigation of estate tax.
3. 10 May 1998, the heirs received a final estate tax assessment notice and a demand letter, both dated 22 April 1998, for the amount of P14,912,205.47.
4. 01 June 1998, F.M. Sumbillo, in thr behalf of the heirs, protested the assessment since the property had already been sold by Maria Tancinco 1990.
5. CIR issued a preliminary collection letter followed by a final notice of seizure dated 04 December 1998. It also issued a warrant of distraint and/or levy served upon the estate followed by Notices of Levy on Real property and tax lien against it.
6. Reyes protested the notice yet proposed a compromise settlement of P1,000,000.00 and proposed to pay 50% of basic tax.
7. CIR rejected this and pointed out the the gross value of estate amounts to P32,420,360.00, more than enough to settle the tax liability.
8. CIR demanded P18,034,382.13 on or before 15 April 2000. Otherwise, notice of sale would be published.
9. Reyes proposed 100% payment of basic tax amounting to P5,313,891.00 but it was not acted upon and the property is to be auctioned on 08 August 2000.
10. Reyes appealed before the BIR appellate court saying that the assessment, letter of demand, and the whole tax proceedings are void ab initio. The CIR still instructed the Collection Enforcement Division to proceed with the auction.
11. Reyes filed a petition for review with the Court of Tax Appeals(CTA).
12. 17 July 2000: Reyes motioned for a Writ of Preliminary Injunction or Status Quo Order which was granted by CTA on 26 July 2000 which was granted. CIR also issued an order mandating CIR to desist and refrain from proceeding with the auction sale.
13. 19 June 2002, CTA rendered a decision in favor of CIR ordering Reyes to pay the deficient estate tax of P19,524,909.78. It also ruled that the heirs knew very well of the law and the facts on which the same were based.
14. CA ruled that Sec. 228 of Tax Code and RR 12-99 were mandatory and unequivocal in their requirement. Without explaining the facts and citing the law on which the assessment notice and demand letter were based, they would be deemed void. It noted, however, that it was premature to declare the compromise of the estate tax liability as perfected since the National Evaluation Board's evaluation and approval, sine qua non requirement, were not yet obtained.
ISSUE:
W/N the assessment against the estate is VALID.
RULING:
NO. It is not valid.
R.A. 8424 (Tax Reform Act) has already amended the provision of Section 228 on protesting an assessment. The old requirement of merely 'notifying' the taxpayer was changed in 1998 to 'INFORMING' the taxpayer of not only the law, but also of the facts on which an assessment would be made. Otherwise, the assessment would be invalid.
During the preliminary assessment on 12 February 1998 and the issuance of final estate tax assessment notice and demand letter on 22 April 1998, R.A. 8424 was already in effect; mere notice is no longer sufficient.
Amended Sec. 228 can be applied retroactively since it is clearly remedial and provides for the procedure in case an assessment is protested. It does not create a new or take away a vested right.
Also, Revenue Regulation No. 12-99 being merely interpretative of the Tax Code can retroact to 01 January 1998, a date prior to the issuance of the preliminary assessment notice and demand letter, eventhough the R.R. was only issued on 06 September 1999.
Reyes was not informed in writing of the law and the facts on which the assessment of estate taxes had been made. She was merely notified of the findings by the CIR, who had simply relied upon the provisions of former Section 229 prior to its amendment by Republic Act (RA) No. 8424, otherwise known as the Tax Reform Act of 1997
Since the BIR did not follow the clear mandate of the new law of informing Reyes and other heirs of their basis (facts/law) of their issuances, the assessment is void and find no validation in any Tax Code provision.
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LECTURE:
essence of notice of assessment: to ensure that taxpayers are duly appraised
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REFERENCE:
R.A. 8424. amended Sec. 229 with
"Sec. 228. Protesting of Assessment. --
x x x x x x x x x
"The taxpayers shall be informed in writing of the law and the facts on which the assessment is
made: otherwise, the assessment shall be void."
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