THE Court of Tax Appeals (CTA) affirmed the cancellation of the alleged tax deficiency of Manila Medical Services, Inc. (Manila Doctors Hospital) for 2009 worth P127.6 million.
In a 12-page ruling dated Oct. 29, the court, sitting en banc, affirmed the decision of its special third division and denied for lack of merit the appeal of the Bureau of Internal Revenue (BIR).
The court’s division in January last year granted the petition of Manila Doctor Hospital to nullify the Warrant of Distraint and/or Levy issued in July 2014 over its alleged tax deficiencies for violation of due process requirements.
It ruled that there was not as there was no sufficient evidence to prove that the company received the preliminary assessment notice (PAN) and final assessment notice (FAN).
“After a careful review of the records of the case, the Court En Banc finds no cogent reason to deviate from the Special Third Division’s assailed 30 January 2019 Decision and its 09 May 2019 Resolution, respectively,” the court said.
The court said that on the PAN that the bureau claimed to have personally served the hospital, there was not receiving copy found in the BIR records.
The court also said that the BIR failed to prove that the hospital received the FAN sent through registered mail, noting the declaration of a witness that no action was taken to ensure that the company received the assessment notice.
Even if there was valid issuance of the notices, the assessment for deficiency taxes will be “struck down as void for failing to comply with due process requirements,” the court said. The court noted that the division found that the FAN was issued before the lapse of the 15-day period for the company to respond to the preliminary assessment.
“Tax assessments issued in violation of the due process rights of a taxpayer are null and void,” the ruling read.
“While the government has an interest in the swift collection of taxes, the BIR and its officers and agents cannot be overreaching in their efforts, but must perform their duties in accordance with law, with their own rules of procedure, always with regard to the basic tenets of due process,” the court said.
The BIR in its petition claimed that a valid PAN and FAN were issued and received by the respondent. It also claimed that pharmacy sales to in-patients are not included in “hospital services”, which are exempt from value-added tax (VAT). It also said that valid waivers extended the prescribed period for three years, and its right to assess the company has not yet prescribed.
Manila Medical Services, on the other hand, said the claims of the bureau were “mere rehash” and were already resolved by the division. It cited the division’s ruling that there was no valid service and receipt of the notices and the assessment should be cancelled due to denial of due process. It also claimed that sales to in-patients are exempt from VAT.
Due to void assessment, the court said it deem “unnecessary to delve” into the validity or invalidity of the waiver executed and the VAT treatment of its sales to in-patients. — Vann Marlo M. Villegas
