The Court of Tax Appeals (CTA) has cancelled the P105-million deficiency tax assessment slapped by the Bureau of Internal Revenue (BIR) against an Angeles City-based petroleum company for the failure of the former to observe the mandatory procedure for issuing tax assessments.
The decision, issued by the court en banc, affirmed the resolution of one of the CTA's division voiding the final letter of demand (FLD) or the final assessment notice (FAN) sent by BIR to Kokoloko Network Corporation.
In a 23-page resolution, the full court stated that the BIR cannot demand outright payment of deficiency taxes by issuing the FAN without first serving the preliminary assessment notice (PAN). This is meant to inform the taxpayer in writing about the facts and the law on which the assessment was based.
Associate Justice Ma. Belen M. Ringpis-Liban, ponente of the ruling, said this procedure is mandated under Section 218 of the Tax Code.
Court records showed the gas firm received the FAN on June 10, 2016 and the PAN 10 days later, on June 20, 2016.
The court said "while the government has an interest in the swift collection of taxes, the BIR must perform it's duties in accordance with law, always observing the tenets of due process."
"Due process right requires the BIR to consider the defenses and evidence submitted by taxpayers...and failure to adhere to this requirement constitutes the denial of due process," it added.
The BIR had sought to collect from the petroleum firm deficiency income, value-added, expanded withholding, and improperly accumulated earnings taxes for 2012.