THE COURT of Tax Appeals (CTA) partially granted Retiro Golden Foods, Inc.’s petition against the Bureau of Internal Revenue (BIR), ordering the cancelation of over P175 million worth of deficiency income tax, value-added tax (VAT), and compromise penalties.
The CTA Second Division partially granted Retiro’s petition for review, upholding the deficiency expanded withholding tax (EWT) and withholding tax on compensation (WTC) assessments but canceling the deficiency income tax, VAT, and compromise penalties.
The assessments for deficiency income tax, VAT, and compromise penalties, totaling P175,650,029.17, were declared null and void, and the BIR was prohibited from collecting these amounts.
The tribunal ordered the firm to pay the BIR the basic amount of P40,226.21 and P31,394.72 plus surcharges and interest under the National Internal Revenue Code (NIRC) for its deficiency EWT and WTC for 2017.
“It is notable in the Administrative Protest that while [Retiro] provided the applicable law, rules, and regulations, or jurisprudence on which its protest was based, these were only against the deficiency income tax and VAT assessments, and compromise penalties,” the nine-page ruling released on Jan. 2 read.
“[Retiro] is painfully silent as far as the deficiency EWT and WTC assessments are concerned,” it added in the decision penned by Justice Maria Rowena Modesto-San Pedro.
The tax court found that the formal letter of demand (FLD) was a valid demand for payment as it indicated a due date and clearly stated that penalties would accrue if the deficiency taxes remained unpaid.
While the court acknowledged that the company’s administrative protest against the FLD was valid despite not being signed, it noted that the protest only addressed the deficiency income tax and VAT assessments and compromise penalties, but not the EWT and WTC.
However, the court determined the BIR failed to properly consider the company’s arguments and evidence submitted in response to the preliminary assessment notice (PAN) for the deficiency income tax and VAT assessments and compromise penalties, violating the company’s right to due process.
The court noted the BIR merely made a general statement that the company failed to provide sufficient documentary evidence without specifying which documents were needed to conduct a fair investigation.
It cited the case, Commissioner of Internal Revenue versus Avon Products Manufacturing, Inc., saying the BIR must provide reasons for rejecting a taxpayer’s explanations and cannot ignore evidence without reason.
The case stemmed when Retiro was assessed deficiency income tax, VAT, EWT, WTC, and compromise penalties for 2017.
The total initial assessment was P173,230,046.62, which was later adjusted to P175,748,493.78, including interest.
The company received a letter of authority (LoA) on July 25, 2019, followed by a PAN on Dec. 22, 2020.
It filed a reply to the PAN on Jan. 5, 2021, but received an FLD on Jan. 18, 2021, reiterating the assessments. It filed an administrative protest against the FLD on Feb. 17, 2021, which was denied by the BIR on March 22, 2021.
Retiro then filed a petition for review with the CTA on May 19, 2021, seeking the cancellation of the tax assessments. — Chloe Mari A. Hufana
