CASE NO.

1 - CIR VS ERON SUBIC CORPORATION

FACTS:
1997, Enron Subic Power Corporation received a pre-assessment notice from the Bureau of
Internal Revenue (BIR). Enron allegedly had a tax deficiency of P2.8 million for the year 1996.
Enron filed a protest. In 1999, Enron received a final assessment notice (FAN) from the BIR for
the same amount of tax deficiency.

Enron however assailed the FAN  because according to Enron the FAN is not compliant with
Section 228 of the National Internal Revenue Code (NIRC) which provides that the legal and
factual bases of the assessment must be contained in the FAN. The FAN issued to Enron only
contained the computation of its alleged tax liability.

The Commissioner of Internal Revenue (CIR) admitted that the FAN did not contain the legal
and factual bases of the assessment however, the CIR insisted that the same has been
substantially complied with already because during the pre-assessment stage, the
representative of Enron has been advised of the said factual and legal bases of the
assessment.

ISSUE:
Whether or not there is a valid final assessment notice issued to Enron.

HELD:
No. The wording of Section 228 of the NIRC provides:

The taxpayer shall be informed in writing of the law and the facts on which the assessment is
made; otherwise the assessment shall be void.

The word “shall” is mandatory. The law requires that the legal and factual bases of the
assessment be stated in the formal letter of demand and assessment notice. It cannot be
substituted by other notices or advisories issued or delivered to the taxpayer during the
preliminary stage.