Tax appeals court upholds cancellation of P160-M tax assessment against FPIC

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Court of Tax Appeals-CTA

THE Court of Tax Appeals (CTA) has affirmed the cancellation of more than P160 million worth of tax assessments against First Philippine Industrial Corp. (FPIC).

In a nine-page resolution dated Oct. 9, the court’s second division denied for lack of merit the motion for reconsideration of the Bureau of Internal Revenue (BIR).

“At the onset, the arguments in the instant Motion (are) a mere rehash of the same facts and issues which have already been passed upon extensively in the Decision it assails,” according to the ruling.

The court in February cancelled the deficiency tax assessment against FPIC for being issued beyond the prescriptive period by law and for not indicating a definite amount of tax liability.

The bureau claimed that the court mistakenly granted relief not sought by the petitioner, after it found that prescription had set in due to invalid waivers for the extension of the assessment period.

It also claimed that the court mistakenly ruled that the formal letter of demand (FLD) and final assessment notice (FAN) were void because they did not indicate demand for payment within a specific period.

The court found that the demand and the notice state that the interest will have to be adjusted if paid beyond the date specified.

It noted a Supreme Court decision which ruled that a final assessment notice was not a valid assessment as it lacks a definite amount of tax liability because it said that the interest and total amount due have to be adjusted if paid beyond the stated date.

“Moreover, the subject FLD-FAN also failed to clearly indicate a specific date or prescribed period within which to pay the tax liabilities. Hence, the absence of the specific period in the FLO-FAN negates respondent’s demand for payment and renders the assessment void,” it said.

“Verily, an invalid assessment bears no valid fruit,” it added.

The court also said it found no merit in the bureau’s claim that its constitutional right to due process was violated as the validity of the demand letter was not raised by the company.

The tax appellate court is not prevented from examining defects in assessment notices even if they are not raised, it said, citing an SC decision.

The CTA also rejected the bureau’s claim that the court relied on Revenue Memorandum Order (RMO) No. 20-90, the rules on execution of waiver, as the rules are for the internal use of the BIR, saying the court “adheres to the principle that administrative issuances, such as the subject RMO, have the force and effect of law.”

The company claimed that the court has jurisdiction to rule on the validity of waivers on tax assessments and that the waivers are invalid for not containing the nature and amount due as required under the RMO. — Vann Marlo M. Villegas