The Residences at Greenbelt Condominium Corp. v. Commissioner of Internal Revenue

SPECIAL FIRST DIVISION [C.T.A. CASE NO. 9942. September 27, 2023.] THE RESIDENCES AT GREENBELT CONDOMINIUM CORPORATION , petitioner , vs. COMMISSIONER OF INTERNAL REVENUE , respondent . RESOLUTION REYES-FAJARDO , J p : In the Decision dated May 26, 2023, the deficiency tax assessments issued by the Bureau of Internal Revenue against petitioner for Taxable Year (TY) 2017 were nullified because the former failed to address in its Final Assessment Notice and Formal Letter of Demand (FLD/FAN), the defenses articulated by the latter in its reply or response on the Preliminary Assessment Notice (PAN). We decreed: HTcADC WHEREFORE , the Petition for Review dated October 1, 2018, filed by The Residences at Greenbelt Condominium Corporation, is GRANTED . Accordingly, the Final Assessment Notice dated December 27, 2017, embodying the deficiency income tax, value-added tax, expanded withholding tax, and documentary stamp tax assessments for taxable year 2014 in the total amount of P13,184,036.64, is CANCELLED and WITHDRAWN . Respondent, his representatives, agents, or other persons acting in his behalf are ENJOINED from implementing the collection of deficiency income tax, value-added tax, expanded withholding tax, and documentary stamp tax assessments for taxable year 2014, in the total amount of P13,184,036.64 against petitioner. SO ORDERED . In his Motion for Reconsideration filed on June 16, 2023, 1 respondent argues: (1) Revenue Memorandum Order (RMO) No. 26-2016 2 permits the issuance of the FLD/FAN within fifteen (15) days from date of receipt of the PAN; and (2) the BIR may still address the taxpayer's defenses raised in the PAN, in the Final Decision on Disputed Assessment (FDDA). On these accounts, respondent concludes that the BIR did not offend petitioner's right to due process on assessment, for failure to consider petitioner's defenses in its reply to the PAN, in the FLD/FAN. By way of Comment-Opposition [To the Motion for Reconsideration dated 13 June 2023], 3 filed on July 11, 2023, petitioner ripostes that the BIR's failure to answer in the Formal Letter of Demand and Final Assessment Notice (FLD/FAN), the defenses embodied in its reply to the PAN, equates to violation of petitioner's right to due process, following Commissioner of Internal Revenue v. Avon Products Manufacturing, Inc. (Avon) . 4 Additionally, it is allowed by law to appeal before the Court, respondent's inaction on disputed assessment. CAIHTE The Motion lacks merit. First . True, item II (3) 5 of RMO No. 26-2016 allows the BIR to issue the FLD/FAN against the taxpayer, irrespective of whether the latter replied on the PAN. However, when the taxpayer puts forward its defenses, through a reply or response on the PAN, Avon 6 commands that the BIR must give reason why said defenses are lacking in merit. The BIR's FLD/FAN issued against petitioner failed to satisfy said dictum laid down in Avon , resulting in transgression of the latter's right to due process. Second . The defenses posed by petitioner in its reply or response on the PAN, must be answered by the BIR in the FLD/FAN, and not in the FDDA. For one , the FDDA 7 is issued by the BIR in ruling on the taxpayer's administrative protest on the FLD/FAN . 8 The FDDA is not meant as the answer to the taxpayer's reply or response on the PAN. For another , should the BIR find the taxpayer's explanation in its reply or response on the PAN unsatisfactory, the BIR would issue the FLD/FAN. 9 Necessarily, the duty to give reason as to why the taxpayer's defenses against the PAN, must be immediately explained in the FLD/FAN. Besides , to subscribe with respondent's reasoning that the taxpayer's defenses in its response or reply on the PAN, may still be belatedly addressed in the FDDA would defeat the very purpose for which the mechanism on the PAN and the chance to respond thereto were made an opportunity for both the taxpayer and the BIR to settle the case at the earliest possible time without need for the issuance of the FAN, 10 much more, the FDDA. WHEREFORE , respondent's Motion for Reconsideration, filed on June 16, 2023, is DENIED , for lack of merit. The Decision dated May 26, 2023, is AFFIRMED . (SGD.) MARIAN IVY F. REYES-FAJARDO Associate Justice Roman G. del Rosario, P.J. and Catherine T. Manahan, J. , concur. Footnotes 1. Docket, pp. 1042-1047. 2. SUBJECT: Policies and Guidelines in Handling Disputed Assessments. 3. Docket, unpaginated. 4. G.R. Nos. 201398-99, October 3, 2018. 5. II. Policies and Guidelines xxx xxx xxx 3. Formal Letter of Demand and Final Assessment Notice (FLD)/(FAN) shall be issued fifteen (15) days from date of receipt by the taxpayer of the PAN, whether the same was protested or not. 6. Supra note 4. 7. Subsection 3.1.6. of Revenue Regulations No. 18-2013 describes FDDA as follows: "3.1.6 Administrative Decision on a Disputed Assessment . The decision of the Commissioner or his duly authorized representative shall (a) state the facts, the applicable law, rules and regulations, or jurisprudence on which such decision is based, otherwise, the decision shall be void (see illustration in ANNEX C hereof), in which case, the same shall not be considered a decision on a disputed assessment; and (b) that the same is his final decision." 8. See Commissioner of Internal Revenue v. Liquigaz Philippines Corporation , G.R. No. 215534, April 18, 2016. 9. See last paragraph, Section 3.1.1. of RR No. 18-2013. 10. See Prime Steel Mill, Incorporated v. Commissioner of Internal Revenue , G.R. No. 249153, September 12, 2022.