IT IS IMPROPER FOR THE CIR TO DISALLOW EXCESS INPUT VAT, MERELY ON THE GROUND THAT THE AMOUNT OF DEFICIENCY WAS CARRIED OVER TO THE SUCCEEDING RETURNS

Pag-Asa Steel Works, Inc. (PSWI) and Commissioner of Internal Revenue (CIR) filed their separate Petitions for Review assailing the CTA 1st Division’s earlier Decision and Resolution. Several issues were raised such as the disallowance of sales discount for failure to substantiate, disallowance of zero-rated sales for failure to provide proof of client’s entitlements, imposition of Value-Added Tax (VAT) on hauling income in the absence of proof that the same is purely reimbursement of cost, imposition of VAT on the debit memo as well as offsetting arrangement on receivables and payables to establish arm’s length, and disallowance of input tax due to invoicing defects. CIR argued that the CTA 1st Division erred in computing PSWI’s deficiency VAT assessment. Accordingly, the input VAT that should be deducted from the output VAT amounted only to Php 492,711,991.05 instead of Php 726,205,217.28. Likewise, the excess input tax of Php 233,493,226.23 (as of June 30, 2014) had been forwarded to succeeding returns after the period of audit, and thus, cannot be credited against PSWI's deficiency VAT assessment. In ruling, except for the issue of the imposition of VAT on hauling income in the absence of proof that the same is purely reimbursement of cost, the Court En Banc concurs with all the findings of the Court in Division in the Assailed Decision and Resolution and finds that there is no compelling reason to disturb those findings. The Court must uphold the correctness of the assessment since there is no evidence to support PSWI's claims regarding the hauling charges. Moreover, it is improper for the CIR to disallow PSWI's excess input tax, merely on the ground that the amount of deficiency was carried over to succeeding returns after the period of audit. PSWI has a total allowable input tax per return amounting to Php 726,205,217.28, the Court in Division correctly credited the said amount against PSWI's deficiency VAT liability. To be sure, any tax benefit derived by PSWI from the carry-over of excess input tax redounds to that succeeding period and not to the period covered by the subject VAT assessment. Logically, the assessment should be made in that succeeding period. Hence, the CIR’s Petition lacks merit. Consequently, the consolidated Petitions were DENIED, and the Assailed Decision and Resolution were AFFIRMED. [PAG-ASA STEEL WORKS, INC. VS. BUREAU OF INTERNAL REVENUE, COMMISSIONER OF INTERNAL REVENUE & ASSISTANT COMMISSIONER TERESITA M. ANGELES & COMMISSIONER OF INTERNAL REVENUE VS. PAG-ASA STEEL WORKS, INC., CTA CASE NO’s. 2410, 2412, 9506, SEPTEMBER 13, 2022]

AN ASSESSMENT IS NULL & VOID FOR LACK OF LOA

Petitioner Commissioner of Internal Revenue (CIR) filed a Petition for Review seeking the nullification of the CTA 2nd Division’s Decision and Resolution, cancelling the assessment of the Respondent Jed Marketing Corporation. Petitioner argued that Revenue Memorandum Order (RMO) No. 08-2006 states that only one Letter of Authority (LOA) should be issued to the same taxpayer, for the same tax type and period, and that RMO No. 69-2010 allows the issuance of a Memorandum of Assignment (MOA) for the continuation of audit or investigation of a case to another Revenue Officer (RO) due to resignation or retirement or transfer of the original RO. Further, the Respondent was duly afforded the opportunity to controvert the initial findings. On the other hand, the Respondent countered that the presumption of regularity of the assessments, in this case, is overturned by the evidence of the fact that the assessments are null and void based on the lack of LOA and violation of due process. In ruling, the Court cited Section 13 of the 1997 Tax Code, as amended, which provides that the authority of an RO to examine or to recommend the assessment of any deficiency tax due must be exercised pursuant to an LOA. Considering that the examination and assessment were issued without the requisite LOA, the assessments issued against Respondent are null and void. [COMMISSIONER OF INTERNAL REVENUE VS. JED MARKETING, CORPORATION, CTA EN BANC CASE NO. 2377, SEPTEMBER 12, 2022]

[PETITION FOR REVIEW OF A DECISION OR RESOLUTION OF THE COURT IN DIVISION MUST BE PRECEDED BY THE FILING OF A TIMELY MOTION FOR RECONSIDERATION BEFORE THE CTA EN BANC] [TO AVAIL OF THE PETITION FOR RELIEF FROM JUDGEMENT UNDER RULE 38 OF THE RULES OF COURT, THE PETITIONER'S RIGHT TO APPEAL MUST BE DEPRIVED THROUGH FRAUD, ACCIDENT, MISTAKE, OR EXCUSABLE NEGLIGENCE] [NON-OBSERVANCE OF THE 15-DAY PERIOD TO PROTEST THE PAN VIOLATES THE TAXPAYER’S RIGHT TO DUE PROCESS & RENDERS THE ASSESSMENT VOID]

Petitioner Commissioner of Internal Revenue (CIR) filed a Petition for Review seeking to reverse the CTA 2nd Division’s earlier Decisions and Resolutions cancelling the assessments of the Respondent Script2010, Inc. Petitioner argued that he complied both procedural and substantive due process in the issuance of the subject assessment; that the Court in Division erred in denying the Motion for Reconsideration (MR), and that the Court in Division could have treated the MR as a Petition for Relief from Judgment under Rule 38 of the Rules of Court. On the other hand, Respondent countered that the Petition should be dismissed for being filed out of time; that the MR cannot be treated as a Petition for Relief from Judgment under Rule 38 of the Rules of Court, and that the Court did not err in cancelling and setting aside the Petitioner's assessment for violation of due process. In ruling, the Court first held that the Petitioner failed to observe the condition precedent as required under Section 1, Rule 8 of the Revised Rules of CTA when he failed to timely file an MR of the original decision. The Amended Decision had already become final and executory with respect to the Petitioner and rendered his appeal before the Court En Banc invalid. Moreover, Petitioner cannot avail himself of the Petition for Relief from Judgment under Rule 38 of the Rules of Court because he was not deprived of his right to appeal through fraud, accident, mistake, or excusable negligence. Further, the Petitioner issued the subject Formal Letter of Demand/Final Assessment Notice (FLD/FAN) on 8 January 2015, which was five (5) days earlier than the Respondent's last day to file a Reply to the Preliminary Assessment Notice (PAN). Clearly, the Petitioner violated the Respondent's right to due process. Thus, the assessment is null and void. Consequently, the Petition was DENIED for lack of merit. [COMMISSIONER OF INTERNAL REVENUE VS. SCRIPT2010, INC., CTA CASE NO. 9415, AUGUST 25, 2022]