REYES v CIR

GR No. 163581

FACTS: In 1997, The Regional District Office of South Makati conducted an investigation on the estate left by Maria C. Tancinco
who died in 1993. Based on the old Tax Code, a Letter of Authority was issued to Reyes, a heir, without the submission of
preliminary findings. In 1998, the CIR issued a Final Assessment Notice (FAN) demanding a payment of 14.9M of taxes including
surcharge and interest. The new Tax Reform Act was also made effective in 1998.

In 1999, a Warrant of Distraint was issued due to nonpayment. In 1999 and 2000, Reyes offered compromises but both were
rejected. Upon notification of the auction sale date, Reyes filed a petition in the Court of Tax Appeals (CTA). CTA then resolved
that the CIR should refrain from Distraint. Subsequently, CIR filed a motion stating that CTA has no jurisdiction in the case
because assessment were already final and executory and the petition of Reyes was out of time, which the CTA denied. Based
on BIR RR 6-2000 and RMO 42-2000, Reyes applied for compromise and paid 1M on Jan 29 2001.

In 2001, Reyes filed a motion that the assessment is settled through a perfected compromise. CTA favored the CIR declaring
that without the approval of NEB, the compromise cannot be perfected. Therefore, CTA denied the petition and ordered Reyes
to pay the deficiency estate tax of 19.5M plus delinquency interest.

Court of Appeals partly granted the petition in favor of Reyes. The Court ruled the petition as unmeritorious.

ISSUE: Whether or not the assessment against the estate is valid and whether the compromise entered into is valid.

HELD: No. It is made clear and mandatory under Section 228 of the new Tax Code that taxpayers shall be informed in writing of
the law and the facts on which the assessment is made, otherwise, the assessment is void. And a void assessment cannot be a
basis for a valid compromise.

The estate was not informed about the assessment in accordance with the requirement prescribed by Section 228 but merely
notified of the findings by the CIR, who relied on the provisions of the old Tax Code. At the time the PAN and FAN was issued to
Reyes, RA 8424 or Tax Reform Act of 1997 was already in effect. Although the investigation was started in 1997, the provision
regarding the procedure for protesting an assessment, being remedial in nature and which does not create new or take away
vested rights, can be applied retroactively. Lastly, any legal proceedings emanating from a void assessment, including distraint
and compromise, is invalid.