CTA junks Sanyo's petition vs P51.9M deficiency tax assessment issued by BIR

The Court of Tax Appeals (CTA) has affirmed its division's ruling that denied the petition of Sanyo Seiki Stainless Steel Corporation against the Bureau of Internal Revenue's (BIR) P51.99 million deficiency income tax assessment issued in 2006.

The BIR sent a Letter Notice to Sanyo on Oct. 23, 2007.  It said the company underdeclared its importations by P585,068,575 and, thus, yielding an unpaid VAT in the amount of P70,208,229.

In response, Sanyo maintained that its records were correct as it pointed out that the discrepancy found by the BIR was caused by its previous accountant who incorrectly classified its "ordinary goods for resale and use for production" as "capital goods."

The BIR then issued a preliminary assessment notice (PAN) amounting to P51,394,791.24 and mailed the notice to Sanyo on Feb. 8, 2010.  The final assessment notice (FAN) was issued later on April 14, 2010 and increased the amount to P51,997,555.34 due to interest.

Since the BIR did not receive any protest from Sanyo, it issued a preliminary collection letter (PCL) on Oct. 8, 2010 asking it to pay its alleged tax liability. It was on Oct. 22, 2010 that Sanyo filed a letter asking for a copy of the Report of Investigation, PAN, FAN, and PCL. However, the BIR issued the Final Notice Before Seizure (FNBS) in Nov. 17, 2010.

Sanyo argued that it did not receive the subject documents, while the BIR explained that Sanyo's security guards refused to receive the documents it mailed because they were instructed that only the Plant Operations Manager has the authority to receive it.

Sanyo then filed the Petition for Review with Urgent Motion to Suspend Collection of Tax before the CTA's Third Division on Feb. 19, 2016. The CTA granted the Urgent Motion to Suspend Collection of Tax on Sept. 13, 2016, under the condition that it should deposit a cash or surety bond worth P25,118,424.84.

However, Sanyo's petition was eventually denied for lack of jurisdiction. Sanyo then filed on Jan. 19, 2023 another Petition for Review before the CTA En Banc (full court), arguing that the CTA Third Division has jurisdiction to rule on the validity of the collection proceedings, and if declared void, effectively nullifies the deficiency assessment upon which it is based.

However, the CTA En Banc found Sanyo's petition bereft of merit. "The instant petition before this Court essentially raised the same issues. We find no cogent reason to disturb the findings of the Court Third Division," the decision read.

The 18-page decision dated May 20, 2024 was written by Associate Justice Corazon G. Ferrer-Flores with the concurrence of Presiding Justice Roman G. Del Rosario and Associate Justices Ma. Belen M. Ringpis-Liban, Catherine T. Manahan, Jean Marie A. Bacorro-Villena, Maria Rowena Modesto-San Pedro, Marian Ivy F. Reyes-Fajardo, Lanee S. Cui David, and Henry S. Angeles.