Commissioner of Internal Revenue v. Eco Leisure and Hospitality Holding Co., Inc.

EN BANC [C.T.A. EB CASE NO. 1013. July 17, 2014.] (C.T.A. Case No. 8347) COMMISSIONER OF INTERNAL REVENUE , petitioner, vs . ECO LEISURE AND HOSPITALITY HOLDING COMPANY, INC. , respondent. RESOLUTION DEL ROSARIO , P.J p : This resolves petitioner's "MOTION FOR RECONSIDERATION" posted on February 12, 2014, with respondent's "COMMENT (On Motion for Reconsideration dated [ 10 February 2014 ])" filed on April 7, 2014. In her motion, petitioner prays for the reconsideration of the Court En Banc's Decision promulgated on January 14, 2014, the dispositive portion of which reads: " WHEREFORE , in light of the foregoing principles, the Petition for Review filed by the Commissioner of Internal Revenue is hereby DENIED for lack of merit. Accordingly, the Court in Division's Decision dated January 4, 2013 and its Resolution dated May 2, 2013 in CTA Case No. 8347, entitled Eco Leisure and Hospitality Holding Company, Inc. vs. Commissioner of Internal Revenue , which granted Eco Leisure and Hospitality Holding[ sic ] Company, Inc.'s claim for refund representing its erroneously paid Documentary Stamp Tax in the total amount of THREE MILLION SIXTY-SIX THOUSAND EIGHT HUNDRED TWENTY-THREE and 75/100 PESOS (Php3,066,823.75) is hereby AFFIRMED ." EcDTIH Petitioner maintains that respondent is not entitled to a tax refund of the Documentary Stamp Tax (DST) paid on the sale by Biscom, Inc. of 93,727 common shares of stock of Hotel Enterprises of the Philippines, Inc. (HEPI) to respondent as the tax base should be computed based on their gross selling price and not on the par value of the shares of stock, pursuant to Revenue Regulations (RR) No. 02-82, as amended. Petitioner further avers that respondent paid the subject DST only on October 8, 2009 when it should have been paid the same on October 5, 2009. According to petitioner, respondent is not entitled to a tax refund but it is instead liable for twenty-five percent (25%) surcharge and twenty percent (20%) interest per annum for the late payment of DST. In its Comment, respondent counters that the DST on sale of shares should be computed based on the par value of the shares of stock as provided in Section 175 of the National Internal Revenue Code of 1997 (1997 NIRC), as amended by Republic Act (RA) No. 9243. With regard to the late payment of DST, respondent contends that petitioner belatedly asserted that the former is liable for the payment of the 25% surcharge and interest at the rate of 20% per annum as this matter was not raised in petitioner's Answer or in her Memorandum filed with the Court in Division. Respondent posits that to deny its claim for refund due to alleged late payment of DST is tantamount to violating its right to due process. aSHAIC After carefully considering the grounds raised by petitioner in her motion as well as respondent's comment thereon, the Court finds no compelling reason that justifies a reconsideration or setting aside of the assailed Decision. To reiterate, Section 175 of the 1997 NIRC, as amended as well as Section 4 of Revenue Regulations No. 13-04 are clear and unequivocal that DST on sale of shares shall be computed based on the par value of the shares of stock . Thus, in computing the DST due on the sale of HEPI shares of stock acquired by respondent from Biscom, Inc., the correct tax base is the total par value of the shares, and not their gross purchase price. Anent petitioner's contention that respondent is not entitled to a tax refund but it is instead liable to 25% surcharge and 20% interest per annum for the late payment of DST, the Court finds that there is nothing in the records which shows that a Preliminary Assessment Notice (PAN) and a Formal Assessment Notice (FAN) were issued by petitioner assessing respondent for 25% surcharge and 20% interest on account of the alleged late payment of the DST due on the subject sale of shares of stock. In Commissioner of Internal Revenue vs. Azucena T. Reyes , 1 the Supreme Court declared that if there is no valid notice sent, the assessment is void, and the reason is that the "law imposes a substantive, not merely a formal, requirement. To proceed heedlessly with tax collection without first establishing a valid assessment is evidently violative of the cardinal principle in administrative investigations: that taxpayers should be able to present their case and adduce supporting evidence." IcAaSD Indeed, there is a violation of due process where there is no PAN 2 and FAN issued by the Bureau of Internal Revenue (BIR) to the taxpayer as the taxpayer is deprived of its right to be heard and contest the assessment through the filing of a protest letter. In the present case, records do not show that the BIR conducted the required audit and examination in connection with respondent's claim for refund. Truth to tell, petitioner waived her right to present evidence and submitted the case for decision based on the pleadings as no final report of investigation was submitted by Revenue District Office No. 50. 3 Petitioner failed to offer in evidence a copy of a PAN and FAN assessing respondent for 25% surcharge and 20% interest for late payment of DST. In the absence of a PAN and FAN assessing petitioner for deficiency surcharge and interest, there is no basis for petitioner to demand the payment of the same. WHEREFORE , premises considered, petitioner's "MOTION FOR RECONSIDERATION" posted on February 12, 2014 is hereby DENIED for lack of merit. SO ORDERED. (SGD.) ROMAN G. DEL ROSARIO Presiding Justice Juanito C. Castaeda, Jr., Lovell R. Bautista, Erlinda P. Uy, Caesar A. Casanova, Esperanza R. Fabon-Victorino and Cielito N. Mindaro-Grulla, JJ., concur. Amelia R. Cotangco-Manalastas and Ma. Belen M. Ringpis-Liban, JJ., are on official business . Footnotes 1. G.R. Nos. 159694 and 163581, January 27, 2006. 2. Commissioner of Internal Revenue vs. Metro Star Superama, Inc. , G.R. No. 185371, December 8, 2010. 3. Minutes of the Hearing dated June 21, 2012, Division Docket , p. 354.