MANILA – The Court of Tax Appeals (CTA) has nullified a tax assessment of PHP9.6 million against an insurance brokerage firm, citing lapses made in the procedure for the assessment.
In an en banc decision dated June 20 penned by Associate Justice Roman del Rosario, the tax court affirmed an earlier decision by its Third Division voiding the tax assessment for deficiency income tax, value-added tax, and expanded withholding tax for the year ending in 2011 against Tektite Insurance Brokers Inc.
The tax court's third division in its June 25, 2020 decision had canceled the formal letter of demand (FLD) issued by officials of the Bureau of Internal Revenue (BIR) against the firm.
In nullifying the assessment, the tax court noted that the firm had been deprived of due process and there had been no opportunity for the firm to first contest the assessment before the issuance of the FLD.
The court noted that revenue officials issued the FLD or Final Assessment Notice (FAN) on Jan. 9, 2015, and Tektite received it on the same date or five days before the latter received the Preliminary Assessment Notice (PAN) on Jan. 13, 2015.
“The FAN/FLD was clearly issued prematurely, thereby depriving Tektite of the opportunity to be heard on the PAN, in complete violation of the due process requirement in issuing tax assessments. Needless to say, the PAN is an important part of due process. It gives both the taxpayer and respondent (BIR) the opportunity to settle the case at the earliest possible time without the need for the issuance of a FAN,” the court said.
The tribunal added that as part of procedural due process, the BIR must not only issue a PAN ahead of the FAN/FLD but must actually consider the taxpayer’s position on the proposed assessment in the PAN. (PNA)
