THE Court of Tax Appeals (CTA) cancelled the P29.8 million tax assessment against Lotte Confectionery Pilipinas, Inc. due to violation of its rights to due process.
In a 15-page decision on Jan. 15, the court’s second division said the tax deficiency assessments by the Bureau of Internal Revenue against Lotte Confectionery are “null and void” due to violation of the taxpayer’s right to due process.
The court said that Lotte denied receiving a copy of a preliminary assessment notice (PAN), which is a requirement for due process.
Revenue Regulations No. 12-99 said that a PAN should be issued to a taxpayer for the proposed assessment, a part of due process requirement in the issuance of deficiency tax assessment. A formal letter of demand is to be issued if the taxpayer failed to respond to the PAN within 15 days.
A Supreme Court ruling also recognized that failure to send the PAN as required by Section 228 of the Tax Code makes the assessment void.
The court also cited a previous ruling of the high court that said to prove fact of mailing, the BIR must present a registry receipt or registry return card signed by the taxpayer or an authorized representative.
While a registry receipt proved the fact of mailing, the memorandum transmittal and the preliminary assessment notice were insufficient to establish that the assessment was received by the petitioner, the court said.
It also said the BIR did not present the person who prepared the memorandum transmittal despite the denial of Lotte that it received the preliminary assessment notice.
“Thus, respondent failed to discharge his burden to show that petitioner actually received the PAN,” the court said.
“Consequently, a tax assessment issued in violation of the due process rights of a taxpayer is null and void, and bears no valid fruit. Considering that the subject tax assessment is void for violation of due process, the other matters raised by petitioner shall no longer be addressed,” it added.
“Wherefore, the instant Petition for Review is granted. Accordingly, the Formal Letter of Demand dated January 13, 2014 and the Assessment Notice No. 043A-B144-10 issued by respondent against petitioner for deficiency income tax, Value-Added Tax, Expanded Withholding Tax, Final Withholding Tax, Withholding Tax on Compensation and compromise penalty for CY 2010, in the aggregate amount of P29,838,011.46, are cancelled and set aside,” the court ruled.
The decision was written by Associate Justice Juanito C. Castañeda, Jr. and concurred in by Associate Justices Cielito N. Mindaro-Grulla and Jean Marie A. Bacorro-Villena. — Vann Marlo Villegas
