CIR v. Yumex Philippines

CIR v.
Yumex Philippines
On March 4, 2010, a Notice of Informal Conference was issued by the Revenue District Officer
(RDO) to respondent informing the latter that the investigation of its accounting records for the
taxable year 2007 resulted in a preliminary assessment of income tax, value-added tax, expanded
withholding tax, fringe benefits tax, IAET, and compromise penalty.
Replying to the preliminary audit findings, respondent wrote petitioner regarding its status as a
corporation registered under the Philippine Economic Zone Authority (PEZA) which allows it to
enjoy payment of a special rate on registered activities; hence, it is not subject to IAET.
Subsequently, petitioner sent the letter6 dated August 12, 2010 and a Summary of Deficiencies
to respondent, which were received by the latter on August 20, 2010 and August 25, 2010,
respectively. Respondent thereafter sent its reply letter dated August 25, 2010. A Preliminary
Assessment Notice (PAN) dated December 16, 2010, with attached Details of Discrepancies, was
issued by the Bureau of Internal Revenue (BIR) Regional Director (RD), finding respondent
liable to pay deficiency income tax, fringe benefits tax, IAET, and compromise penalty. A
Formal Letter of Demand {FLD) dated January 10, 2011, was likewise issued by the RD, finding
respondent liable to pay: deficiency income tax (P589,961.46), fringe benefits tax
(Pl,097,855.50), IAET (P9,077,695.05), and compromise penalty (P25,000.00). On January 20,
2011, respondent filed a protest on the FLD asserting its status as a PEZA-registered entity; and
that since all of its activities are registered under PEZA, it is therefore fully exempt from the
IAET.
On February 4, 2011, petitioner received a letter dated February 2, 2011 from respondent, stating
that the latter is paying a total amount of P981,461.83, consisting of the basic deficiency income
tax (P372,106.45), basic deficiency fringe benefits tax (P584,355.38), and compromise penalty
(P25,000.00). However, respondent contested the amounts of interest and penalty on its
deficiency income and fringe benefit taxes and expressed its hope that petitioner will waive the
same. Respondent still did not pay its deficiency IAET.
After a reinvestigation, the RDO issued a letter dated July 25, 2011, acknowledging payment by
respondent of the basic deficiency taxes on income and fringe benefits, plus compromise penalty;
and informing respondent that its request for cancellation of the civil increments and penalties
thereon is subject to the approval of petitioner or the Deputy Commissioner/ Assistant
Commissioner/RD, pursuant to Section III( 6) of Revenue Memorandum Order (RMO) No. 19-
2007. The RDO reiterated her position and stood by the assessment of the IAET and its
corresponding civil increments. She advised respondent that the whole docket of the case will be
forwarded to the Regional Office for pursuance of collection. Respondent considered the above-
mentioned letter as petitioner's Final Decision on Disputed Assessment, and appealed the same
by filing a Petition for Review before the CTA Division on September 7, 2011.
Issue:
W/N the PAN and FAN were invalid as they were issued without due process
Held:
Yes. Sec. 228 of the NIRC mandates petitioner to inform the taxpayer in writing of the law and
the facts on which the assessment is made; otherwise, the assessment is void.
To implement the procedural and substantive rules on assessment of national internal revenue
taxes, the BIR issued RR No. 12-99 which provides that “If the taxpayer fails to respond within
fifteen (15) days from date of receipt of the PAN, he shall be considered in default, in which
case, a formal letter of demand and assessment notice shall be caused to be issued by the said
Office, calling for payment of the taxpayer's deficiency tax liability, inclusive of the applicable
penalties”
Clearly from the aforequoted provision, the taxpayer has fifteen ( 15) days from date of receipt
of the PAN to respond to the said notice. Only after receiving the taxpayer's response or in case
of the taxpayer's default can respondent issue the FLD/F AN. Per the evidence on record, the
BIR issued a PAN dated December 16, 2010, which it posted by registered mail the next day,
December 17, 2010. It then issued and mailed the FLD/FAN on January 10, 2011. Although
posted on different dates, the PAN and FLD/F AN were both received by the Post Office of
Dasmarinas, Cavite, on January 17, 2011, and served upon and received by respondent on
January 18, 2011. Under the circumstances, respondent was not given any notice of the
preliminary assessment at all and was deprived of the opportunity to respond to the same before
being given the final assessment.

CIR v. Yumex Philippines

Uploaded by

Copyright:

Available Formats

CIR v. Yumex Philippines

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

CIR v. Yumex Philippines

Uploaded by

Copyright:

Available Formats

CIR v.

You might also like