[SERVICE ON A TAXPAYER'S DULY AUTHORIZED REPRESENTATIVE IS CONSIDERED VALID SERVICE TO THE TAXPAYER, REGARDLESS OF THE REPRESENTATIVE'S LOCATION, PROVIDED THEY ARE CLEARLY & PROPERLY AUTHORIZED BY THE TAXPAYER] [TAX ASSESSMENTS MUST CLEARLY INFORM TAXPAYERS OF BOTH THE FACTUAL & LEGAL BASES OF THE ASSESSMENT TO SATISFY DUE PROCESS REQUIREMENTS; ABSENCE OF SUCH CLARITY & SPECIFICITY IN THE ASSESSMENT NOTICE CONSTITUTES A VIOLATION OF THE TAXPAYER'S RIGHT TO DUE PROCESS]

Petitioner Commissioner of Internal Revenue (CIR) filed a Petition for Review seeking to reverse the earlier Decision of the Special Third Division of the Court of Tax Appeal (CTA) which canceled the deficiency Income Tax (IT) assessment for taxable years 2008 and 2009 and invalidated related collection actions against the Respondents Emmanuel D. Pacquiao and Jinkee J. Pacquiao. The Petitioner argued that due process in administrative proceedings was satisfied and that the Respondents did receive the Notice of Informal Conference contrary to their allegation. In addition, the law does not require source documents to be attached to the Formal Letter of Demand (FLD), and reliance on other sources, such as the boxing purse, pay-per-view share, and closed-circuit sales share was necessary contrary to the refutations of the Respondent. Also, an investigation was conducted, and information was obtained from third-party sources. Contrarily, the Respondents highlighted that the FLD is nearly a verbatim reproduction of the Preliminary Assessment Notice (PAN) and does not disclose the source of the BIR's data, which was given more weight than the documents submitted by the Respondent. Moreover, evidence is inadequate to support the fraud findings and the tax liabilities in the FLD and FDDA. In ruling, Section 3.1.1 of Revenue Regulations (RR) No. 12-99 mandates that the taxpayer must be informed in writing of any discrepancies and be allowed to explain and present evidence in an informal conference. In the case at bar, Respondents were deprived of this fundamental right, as the NIC was not properly served or acknowledged, and there is no evidence that the Respondents were given the opportunity for an informal conference. Further, Respondents were not properly informed of the basis for the deficiency tax assessment. The Supreme Court (SC), in the case of CIR vs. Fitness By Design, Inc., cited Section 228 of the Tax Code which requires taxpayers to be informed in writing of the law and facts behind the assessment. This requirement is mandatory, and failure to comply makes the assessment void. Considering that the FLD is silent with regard to the factual basis of the assessment and that Respondents were not duly informed of the source documents used as a basis in computing the assessed deficiency taxes, the subject assessment must be declared VOID for failure to comply with the due process requirements in the issuance of deficiency tax assessments. Thus, the Petition was DENIED for lack of merit, and the earlier Decision and Resolution were AFFIRMED. [COMMISSIONER OF INTERNAL REVENUE VS. SPOUSES EMMANUEL D. PACQUIAO & JINKEE J. PACQUIAO, CTA EN BANC CASE NO. 2737, JANUARY 23, 2025]

CLAIM FOR EXEMPTION FROM PAYMENT OF RPT DOES NOT ACTUALLY QUESTION THE ASSESSOR’S AUTHORITY TO ASSESS & COLLECT SUCH TAXES BUT PERTAINS TO THE REASONABLENESS OR CORRECTNESS OF THE ASSESSMENT. CONSEQUENTLY, IT IS A QUESTION OF FACT THAT SHOULD BE RESOLVED BY THE LBAA, AT THE VERY FIRST INSTANCE, & AFTER PAYMENT UNDER PROTEST

Petitioner Qualfon Philippines, Inc. filed a Petition for Review seeking the reversal of the Central Board of Assessment Appeals (CBAA)’s earlier Decision and Resolution affirming the Decision of the Local Board of Assessment Appeals (LBAA) holding the Petitioner liable for Real Property Tax (RPT) assessment of desktop computers issued by the Respondent City of Dumaguete.  Petitioner argued that under Sections 226 and 229 of the Local Government Code (LGC) of 1991, the LBAA and CBAA have jurisdiction over its appeal, and that the CBAA erred in ruling the Respondent’s authority to assess RPT is a purely a legal question beyond their jurisdiction. It claimed that its desktop computers are not real properties under Section 199 (o) of the LGC and, even if considered machinery for RPT tax purposes, they are exempt from RPT since these are considered as general-purpose equipment under Administrative Order No. 270 or the 1991 LGC Implementing Rules and Regulation (IRR). In addition, as a Philippine Economic Zone Authority (PEZA)-registered entity, it is exempt from RPT under Section 23 of R.A. No. 7916, or the PEZA Law, and Section 78(b) of Executive Order No. 226, as amended, otherwise known as the Omnibus Investment Code of 1987.  In ruling, the Court cited the Camp John Hay Development Corporation vs. Central Board of Assessment Appeals, which clarifies available remedies to a taxpayer who does not agree with the assessment of RPT. Firstly, Section 252 of LGC emphatically directs that the taxpayer questioning the assessment should first pay the tax due before his protest can be entertained. The words "paid under protest" shall be annotated on the tax receipts. Consequently, it is only after such payment has been made by the taxpayer that may he file a protest in writing within thirty (30) days from said payment of tax to the provincial, city, or municipal treasurer, who shall decide the protest within sixty (60) days from its receipt. In no case is the Local Treasurer obliged to entertain the protest unless the tax due has been paid. Secondly, within the period prescribed by law, any owner or person having legal interest in the property not satisfied with the action of the assessor in the assessment of his property may file an appeal with the LBAA of the province or city concerned. Thereafter, within thirty (30) days from receipt, he may elevate, by filing a Notice of Appeal, the adverse decision of the LBAA with the CBAA, which exercises exclusive jurisdiction to hear and decide all appeals from the decisions, orders, and resolutions of the Local Boards involving contested assessments of real properties, claims for tax refund and/or tax credits, or overpayments of taxes. Finally, under the Doctrine of Primary Administrative Remedies, an error in the assessment must be administratively pursued to the exclusion of ordinary court whose decisions would be void for lack of jurisdiction. In the case at bar, the Petitioner is claiming an exemption from the RPT payment, which is a factual question, thus, within the jurisdiction of the LBAA. For having failed to duly exhaust the administrative remedy available to it since the Petitioner asserts its formal written protest to the Respondent’s assessment considering that the Respondent deny the Petitioner’s protest letter which was made only two (2) weeks after the payment of the assessed taxes, thereby depriving Petitioner with the thirty-day period allegedly afforded to it under Section 252 of the LGC. However, a perusal of the case records reveals that “no formal protest” was submitted by the Petitioner. Thus, it cannot be deemed as Petitioner’s protest to the RPT assessment. It should be emphasized that the language of Section 252(a) of the LGC is clear and unequivocal, such that the period to file a written protest must be within thirty (30) days from payment of the assessed RPT, and the local assessor’s decision must be made within sixty (60) days from the receipt of the protest. Also, the provision did not require the thirty-day period to be fully utilized by the taxpayer before the local assessor can issue a decision on the protest. In this regard, the Respondent’s issuance of a decision was made in accordance with Section 252(a) of the LGC. Consequently, the assessment against the Petitioner has already attained finality. Thus, the Petition was DENIED due to lack of merit. [QUALFON PHILIPPINES, INC. VS. THE CITY OF DUMAGUETE, CTA EN BANC CASE NO. 2741, JANUARY 15, 2025]

DUE PROCESS REQUIRES THE BIR TO CONSIDER THE DEFENSES & EVIDENCE SUBMITTED BY THE TAXPAYER & TO RENDER A DECISION BASED ON THESE SUBMISSIONS. FAILURE TO ADHERE THESE REQUIREMENTS CONSTITUTES A DENIAL OF DUE PROCESS & TAINTS THE ADMINISTRATIVE PROCEEDINGS WITH INVALIDITY

Petitioner Levi Strauss (Phil.) Inc., II filed a Petition for Review praying that the 2012 Final Decision on Disputed Assessment (FDDA) issued by the Respondent Commissioner of Internal Revenue (CIR), be declared null and void. The Petitioner argued that the tax assessments are void due to procedural violations. Specifically, the Waivers lacked the required details, valid signatures, and a Board Resolution, while the assessment period expired before the first (1^st) Waiver. Additionally, the Respondent simply ignored the arguments of the Petitioner in its reply to the Final Assessment Notice (FAN), and that there were irregularities in the FDDA dates. On the other hand, the Respondent countered that the Court should not address new issues raised on appeal, including challenges to the Waivers. Even so, the ten (10)-year assessment period under Section 222 of the Tax Code applies, making the Waivers valid. In ruling, the Court held that tax assessments must clearly state the facts and laws on which they are based; otherwise, they are void. Citing “Commissioner of Internal Revenue v. Avon Products Manufacturing, Inc.,” the Supreme Court invalidated an assessment due to violations of due process, emphasizing that taxpayers must be allowed to submit defenses and evidence at each stage. If the Respondent rejects a taxpayer's explanation, the reasons must be stated. Tax assessments issued without due process are void and unenforceable. In the case at bar, the Formal Letter of Demand (FLD) and Details of Discrepancies merely copied what was written in the Preliminary Assessment Notice (PAN) without adding more by addressing any of Petitioner’s defenses in its Reply to the PAN. Therefore, the Respondent perfunctorily and hastily issued the FLD without considering the points raised by the Petitioner. Thus, the Court finds the subject tax assessments VOID in violation of the Petitioner’s right to administrative due process. Consequently, the assessment was CANCELLED. [LEVI STRAUSS (PHIL) INC. II, VS. COMMISSIONER OF INTERNAL REVENUE, CTA CASE NO. 10324, JANUARY 13, 2025]

[GOVERNMENT INSTRUMENTALITIES ARE GENERALLY EXEMPT FROM RPT IF THE PROPERTIES ARE USED FOR PUBLIC PURPOSES] [FOR AN AGENCY TO BE CLASSIFIED AS A GOVERNMENT INSTRUMENTALITY VESTED WITH CORPORATE POWERS, IT MUST PERFORM GOVERNMENTAL FUNCTIONS & ENJOY OPERATIONAL AUTONOMY] [UPHOLDING SUPREME COURT’S RULING ON GOVERNMENT INSTRUMENTALITIES; NFA IS EXEMPT FROM RPT]

Petitioner National Food Authority (NFA) filed a Motion for Reconsideration challenging the earlier decision of the Court of Tax Appeals (CTA), which initially ruled that the Petitioner was subject to Real Property Tax (RPT). The Petitioner contended that it is not a Government-Owned and Controlled Corporation (GOCC) but a government instrumentality tasked with ensuring rice buffer stocks under the Rice Tariffication Law or the Republic Act (R.A.) No. 11203. In addition, the Petitioner argued that its real properties, used exclusively for public service, are exempt from RPT under applicable laws. In ruling, the Supreme Court (SC), in the case of NFC vs. City Government of Tagum, held that the Petitioner, having met the criteria laid down in Philippine Heart Center vs. The Local Government of Quezon City, is a government instrumentality vested with special functions and corporate powers which administers special funds while enjoying operational autonomy. Moreover, under Section 8 of R.A. No. 11203, the Petitioner was mandated to maintain sufficient rice buffer stock to be sourced solely from local farmers for emergencies and to sustain the disaster relief programs of the government during natural or man-made calamities. However, for the RPT exemption to be operative, the question is whether the beneficial use of the subject real properties has been granted to a taxable person. In the case at bar, the Court found the Respondent bears the essential characteristics of a government instrumentality vested with corporate powers, and its real properties are being used for public service; hence, it is exempt from RPT. In view of this, the Motion for Reconsideration was GRANTED. The assailed Decision was REVERSED and SET ASIDE. As a result, the Notice of Delinquency issued to the Petitioner was declared NULL and VOID. [NATIONAL FOOD AUTHORITY VS. MUNICIPALITY OF SHARIFF AGUAK, TREASURER & MUNICIPAL ASSESSOR OF SHARIFF AGUAK MAGUINDANAO, CTA EN BANC CASE NO. 2465, DECEMBER 13, 2024]