Commissioner of Internal Revenue vs. Yumex Philippines Corp.

Facts:

The petitioner is the Commissioner of Internal Revenue (CIR); the respondent is Yumex Philippines Corporation, a corporation registered with the Philippine Economic Zone Authority (PEZA). The dispute arises from a BIR assessment for deficiency taxes, including the 10% improperly accumulated earnings tax (IAET) for taxable year 2007.

On March 4, 2010, the Revenue District Officer issued a Notice of Informal Conference to respondent after auditing its 2007 books. Respondent replied asserting its PEZA registration and attendant tax regime. The BIR sent further correspondence in August 2010. A Preliminary Assessment Notice (PAN) dated December 16, 2010 (mailed Dec. 17), and a Formal Letter of Demand with Final Assessment Notice (FLD/FAN) dated January 10, 2011 were issued, the latter assessing deficiency income tax, fringe benefits tax, IAET (P9,077,695.05) and compromise penalty. Respondent received both the PAN and FLD/FAN on January 18, 2011, filed a protest on January 20, 2011, and paid most assessed items except the IAET; a February 2, 2011 letter acknowledged partial payments. After reinvestigation, the RDO maintained the IAET assessment and forwarded the case to the Regional Office; respondent filed a petition for review with the Court of Tax Appeals (CTA) Special Second Division on September 7, 2011.

On November 28, 2013, the CTA Special Second Division granted respondent’s petition, cancelling the IAET assessment for procedural due process defects and for lack of factual basis. The Division found the BIR issued the FLD/FAN without giving respondent the opportunity to answer the PAN within the 15-day period under Sec. 228, National Internal Revenue Code (NIRC) and Revenue Regulations (RR) No. 12-99; it also found no specific showing that the taxed income derived from unregistered (non-PEZA) activities.

Petitioner’s motion for reconsideration to the Division was denied (Mar. 3, 2014). The CTA En Banc, in its August 11, 2015 Decision and January 19, 2016 Resolution denying petitioner’s petition for review, affirmed the Division: (1) the BIR violated due process by denying the opportunity to respond to the PAN because the PAN and FLD/FAN were received by respondent on the same day; (2) constructive service could not be invoked where actual receipt was shown and verification from the post office was not at...(Pro-only)

Issues:

• May the CTA Division take cognizance of the due-process objection to the BIR assessment even if respondent did not expressly raise that issue in its pleadings?
• Were the PAN and FLD/FAN invalid because they were issued in violation of respondent’s right to due process under Sec. 228, NIRC and RR No. 12-99?
• Could respondent properly be assessed for the improperly accumulated earni...(Pro-only)

Ruling:

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Ratio:

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Doctrine:

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