COMMISSIONER OF INTERNAL REVENUE v. JOLLIBEE WORLDWIDE PTE. LTD.,

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY ENBANC COMMISSIONER OF CTA EB NO. 2447 INTERNAL REVENUE, (CTA Case No. 9005) Petitioner, Present: -versus- DEL ROSARIO, P.J., UY, RINGPIS-LIBAN, MANAHAN, BACORRO-VILLENA, MODESTO-SAN PEDRO, R E Y E S -F A J A R D O , CUI-DAVID, and FERRER-FLORES, JJ. JOLLIBEE WORLDWIDE PTE. Promulgated: LTD., JAN 10 2023 Respondent. )(- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - DECISION MANAHAN, J .: Before the Court En Bane is a Petition for Review1 filed by the Commissioner of Internal Revenue (CIR) assailing the Decision and Resolution of the Court of Ta)( Appeals (CTA) Third Division in CTA Case No. 9005, which cancelled the deficiency assessments for income ta)(, withholding ta)( on compensation, and e)(panded withholding ta)( for ta)(able year 2009 against Jollibee Worldwide Pte. Ltd. (Jollibee), and further granting the refund or issuance of a ta)( credit certificate to Jollibee, in the amount of Php18,483,928.77, representing erroneously collected ta)(es. FACTS The CTA Third Division narrated the antecedents, as follows: 1 EB docket, pp. 1- 12. ~

DECISION CTA EB No. 2447 (C.T.A. Case No. 9005) Petitioner [now, respondent] Jollibee Worldwide Pte. Ltd. is a multinational company organized and existing under the laws of Singapore, with license to operate in the Philippines as regional operating headquarters granted by the Securities and Exchange Commission (SEC) on November 29, 2005 with license and registration no. FS200519494. It is registered with the Bureau of Internal Revenue (BIR) under Taxpayer Identification Number 243- 204-387-000 with BIR Certificate of Registration No. 3RC0000732181 dated January 30, 2006. Its registered address is at Jollibee Center Building, San Miguel Avenue, San Antonio, Ortigas Center, Pasig City. On the other hand, respondent is the duly appointed Commissioner of Internal Revenue (CIR) vested under the appropriate laws with the authority to carry out the functions, duties and responsibilities of his office, including inter alia, the power to decide disputed assessments, cancel and abate tax liabilities pursuant to the provisions of the National Internal Revenue Code (NIRC) of 1997 and other tax laws, rules and regulations. On September 22, 2011, Letter of Authority No. LOA- 43A-2011-00000579 was issued by Jonas DP. Amora, OIC- Regional Director of BIR Revenue Region No. 007, Revenue District No. 43A East Pasig, authorizing Revenue Officer (RO) Lilibeth Nazario and Group Supervisor (GS) Maricar Favis to examine the petitioner's books of accounts and other accounting records for all internal revenue taxes for the period from January 1, 2009 to December 31, 2009 pursuant to Audit Criteria for Taxable Years 2009 and 2010. Subsequently, a Notice of Informal Conference was issued by Revenue District Office[r] Florante R. Aninag of BIR Revenue District No. 43A East Pasig informing petitioner of the report of investigation on all its internal revenue tax liabilities for CY 2009. On December 28, 2012, a Preliminary Assessment Notice (PAN) was issued by OIC Regional Director Jonas DP. Amora, informing the latter of its deficiency tax liabilities including increments for the year 2009, xxx XXX Thereafter, petitioner received the Formal Letter of Demand FLO No. 043A-B158-09 with Assessment Notices on January 15, 2013, requesting payment of the tax liabilities including interest in the total amount of P18,483,928.77, broken down as follows: TaxTvoe Basic Amount Interest Total Income Tax 5,338,828. 72 3,030,699.48 8,369,528.20 Withholding Tax on Compensation 5,479,773.23 3,380,945.02 8,860,718.25 Exoanded 775,320.31 478,362.01 1,253,682.32 ~

DECISION CTA EB No. 2447 (C.T.A. Case No. 9005) Withholdin 11,593,922.26 1 6,890,006.51 18,483,928.77 TOTAL On January 25, 2013, petitioner filed a Reply to the PAN stating its disagreement with the findings of the BIR in the PAN and the related deficiency tax assessment against petitioner covering TY 2009. On February 14, 2013, petitioner filed its Protest Letter to the FAN, disagreeing with the findings to the deficiency tax assessments of the BIR and requesting for reconsideration and re-investigation of the results of the BIR audit covering the taxable year 2009. On September 3, 2013, petitioner received the Final Decision dated August 28, 2013 issued by Regional Director Jonas DP. Amara, requesting [from] petitioner the payment of the alleged tax deficiency in FLO I FAN No. 043A-B 158-09. Thus, petitioner elevated its administrative appeal to the CIR praying for the cancellation of the deficiency tax assessment for the TY 2009 on October 3, 2013. On February 4, 2015, petitioner received a Final Decision dated January 23, 2015 from respondent denying its appeal against Assessment Notice No. 043A-B158-09 and ordering it to pay the deficiency taxes due plus increments that have accrued thereon until the date of actual payment. Aggrieved, petitioner filed the instant Petition for Review on March 5, 2015. On March 18, 2015, Revenue Officer Michael R. Nitafan served a Warrant of Distraint and/ or Levy (WDL) dated March 18, 2015 to petitioner seeking to enforce the collection of the alleged deficiency taxes amounting to P18,483,928.77. XXX On August 24, 2015, petitioner filed a Motion for Leave to Admit Attached Supplemental Petition for Review (with Motion to Defer Pre-Trial Conference) alleging, among others, that respondent, by way of garnishment, collected from petitioner the amount of P18,483,928.77 on June 4, 2015, xxx. Thus, on August 20, 2015, petitioner filed a letter- request to claim the refund of or issuance of tax credit certificate (TCC) in the amount of P18,483,928.77 representing the taxes collection (sic) from petitioner by way of garnishment. XXX During the hearing held on August 25, 2015, petitioner's counsel manifested that she received the <Po,..1oc..__

DECISION CTA EB No. 2447 (C.T.A. Case No. 9005) Resolution dated August 13, 2015 denying petitioner's motion for reconsideration assailing the WDL. However, in view of an intervening event, the alleged garnishment of bank deposit undertaken by the BIR on June 4, 2015, the Court allowed petitioner to file an Amended Petition for Review xxx.2 After trial, the CTA Third Division rendered a Decision, dated August 26, 2020, cancelling the assessments and granting the refund of the amounts garnished, as follows: WHEREFORE, in light of the foregoing considerations, the instant Amended Petition for Review is hereby GRANTED. Accordingly, the Final Assessment Notices, Formal Letter of Demand dated January 15, 2013 for deficiency income tax, withholding tax, and expanded withholding tax for taxable year 2009 issued against petitioner is hereby CANCELLED and SET ASIDE. The Warrant of Distraint and/or Levy issued by respondent on March 18, 2015 is declared NULL and VOID. Respondent is hereby ORDERED to refund or issue a tax credit certificate to petitioner the amount of P18,483,928.77, representing illegally assessed and erroneously collected income tax, withholding tax on compensation and expanded withholding tax for taxable year 2009. SO ORDERED.3 The CIR's Motion for Reconsideration was later denied in the Resolution dated January 29, 2021, as follows: WHEREFORE, in light of the foregoing considerations, respondent's Motion for Reconsideration is DENIED for being filed beyond the reglementary period. On the other hand, petitioner's prayer for the issuance of a writ of execution is GRANTED. Accordingly, let entry of judgment be made in due course, and thereafter, the corresponding Writ of Execution be issued to enforce the Decision dated August 26, 2020. SO ORDERED.4 2 Division Decision dated August 26, 2020, EB docket, pp. 13-18. 3 Division Decision dated August 26, 2020, EB docket, p. 28. � EB docket, p. 44. ~

DECISION CTA EB No. 2447 (C.T.A. Case No. 9005) On March 4, 2021, the CIR filed the instant Petition for Review with the Court En Bane praying that the Decision and Resolution of the CTA Third Division be reversed and set aside, and also praying that a writ of execution not be issued and that no entry ofjudgment be made. On July 23, 2021, respondent Jollibee filed its Comment/ Opposition (Re: Petition for Review dated March 4, 2021).5 On October 26, 2021, the Court received the parties' No Agreement to Mediate,6 thus, the instant case was submitted for decision on January 10, 2022.7 ISSUES The CIR states the following grounds for his Petition for Review: I. With all due respect, the Honorable Court in Division erred in ruling that provisions on reglementary periods are strictly applied. II. The Honorable Court in Division erred in ruling that respondent Jollibee was denied due process.8 CIR's arguments The CIR states that the CTA, in the exercise of its equity jurisdiction, has the prerogative to relax the application of procedural rules where strong considerations of substantive justice are manifest. The CIR also states that the delayed filing of the Motion for Reconsideration before the CTA Third Division was not meant to be frivolous or dilatory and that the cause of the delay was not entirely attributable to his fault or negligence, and that the relaxation of the rules on reglementary periods would not unjustly prejudice respondent Jollibee. s EB docket, pp. 59-77. 6 EB docket, p. 81. 7 EB docket, pp. 83-84. s Petition for Review, EB docket, p. 4. ~

DECISION CTA EB No. 2447 (C.T.A. Case No. 9005) The CIR also argues that the issuarice of the Formal Letter of Demarid arid Assessment Notices (FLD/FAN) did not violate respondent Jollibee's right to due process. The Preliminary Assessment Notice (PAN) arid FLD /FAN were duly served arid received, arid respondent Jollibee was notified of the assessment arid was given ample time arid opportunity to protest the findings of the assessment against it. In addition, petitioner CIR argues that despite the slight infirmity regarding the date of issuarice of the FLD/FAN, this does not necessarily result to a violation of due process considering that respondent Jollibee was able to intelligently contest the PAN arid FAN, was informed of the factual arid legal bases of the assessment arid was afforded opportunity to defend itself. In view of the foregoing, the CIR states that respondent Jollibee should be liable to pay the assessed deficiency taxes arid the examiner's assessment should be given full weight arid credit as there was no violation of due process. Jollibee's arguments Respondent Jollibee states that the CIR failed to timely file his Motion for Reconsideration of the CTA Third Division's Decision dated August 26, 2020, thus, said Decision has already become final arid executory. Respondent also states that there exists no justifiable arid meritorious reason for petitioner CIR's belated filing of his/her Motion for Reconsideration. Respondent also disagrees with petitioner's contention that respondent Jollibee will not be unjustly prejudiced if the rules on reglementary periods will be relaxed. Respondent Jollibee avers that since petitioner CIR filed the Petition for Review before the CTA En Bane, respondent is now constrained to await the En Bane's decision to finally settle the issues in this case, instead of being able to receive the refund or TCC grarited by the CTA Third Division. Even assuming that the CIR's Motion for Reconsideration was timely filed, the instarit Petition for Review deserves scarit consideration because the CTA Third Division did not err in holding that the assessments are void because of violation of respondent Jollibee's right to due process. ~

DECISION CTA EB No. 2447 (C.T.A. Case No. 9005) Respondent also states that it is entitled to its claim for refund in the amount of Php18,483,928.77, representing payment for illegally assessed and collected tax. RULING OF THE COURT The Petition for Review is denied. The CTA Third Division correctly denied CIR's Motion for Reconsideration for being filed beyond the reglementary period. The Revised Rules of the Court of Tax Appeals (RRCTA) provides for the period within which to file a motion for reconsideration or new trial, as follows: Rule 15 Motion for Reconsideration or New Trial Section 1. Who may and when to file motion. - Any aggrieved party may seek reconsideration or new trial of any decision, resolution or order of the Court by filing a motion for reconsideration or new trial within fifteen days from the date of receipt of notice of the decision, resolution or order of the Court in question. Thus, the reckoning point of the fifteen (15)-day period to file the motion for reconsideration is from the date of receipt of the notice of the decision. The Supreme Court has emphasized the significance of the rules of procedures and the rules prescribing the time to do specific acts: Procedural rules, we must stress, should be treated with utmost respect and due regard since they are designed to facilitate the adjudication of cases to remedy the worsening problem of delay in the resolution of rival claims and in the administration of justice. The requirement is in pursuance to the bill of rights inscribed in the Constitution which guarantees that all persons shall have a right to the speedy disposition of their cases before all judicial, quasi- judicial and administrative bodies, the adjudicatory bodies and the parties to a case are thus enjoined to abide strictly by the rules. Corolarilly, "rules prescribing the time for doing specific acts or for taking certain proceedings are considered ~

DECISION CTA EB No. 2447 (C.T.A. Case No. 9005) absolutely indispensable to prevent needless delays and to orderly and promptly discharge judicial business. By their very nature, these rules are regarded as mandatory." 9 (Emphasis in the originaQ The CIR alleged in his Motion for Reconsideration before the CTA Third Division that the Decision dated August 26, 2020 was received on October 10, 2020 10 , which was a Saturday. The CTA Third Division disregarded this allegation in view of the evidence on record, to wit: A perusal of the records of the case shows that the Notice of Decision issued by the Court on September 3, 2020 and the assailed Decision attached thereto were received by respondent [CIRJ on October 7, 2020. Thus, counting fifteen (15) days therefrom, respondent [CIR] had until October 22, 2022, within which to seek reconsideration of the assailed Decision dated August 26, 2020. However, respondent [CIR] belatedly filed the instant Motion for Reconsideration on October 26, 2020, or four (4) days after the last date prescribed by the rules for filing the same, or until October 22, 2020.11 Indeed, the Notice of Decision12 clearly shows that it was received by the Legal Division of Revenue Region No. 7B East NCR on October 7, 2020. Thus, the CTA Third Division correctly ruled that the CIR's motion for reconsideration was filed out time. In the subject Petition for Review, the CIR now prays for the relaxation of the application of procedural rules in view of strong considerations of substantive justice. 13 While it is true that the Supreme Court may relax the application of procedural rules for the greater interest of substantial justice, it must be pointed out that: ...resort to a liberal application, or suspension of the application of procedural rules remains the exception to the well-settled principle that rules must be complied with for the orderly administration of justice. It can only be upheld 9 Ng Ching Ting v. Philippine Business Bank, Inc., G.R. No. 224972, July 9, 2018, citing Fortich v. Corona, G.R. No. 131457, November 17, 1998, and Laguna Metts Corporation v. Court of Appeals, et al., G.R. 185220, July 27, 2009 Resolution. 10 Division docket, CTA Case No. 9005, Vol. 3, p. 1283. 11 Division Resolution dated January 29, 2021, EB Docket, p. 41. 12 Division docket, CTA Case No. 9005, Vol. 3, p. 1265. 13 Petition for Review, EB docket, pp. 4-7. ~ -----

DECISION CTA EB No. 2447 (C.T.A. Case No. 9005) "in proper cases and under justifiable causes and circumstances."l4 In the Petition for Review, petitioner CIR states that the Court "in the exercise of its equity jurisdiction, has the prerogative to relax the application of procedural rules where strong considerations of substantive justice are manifest". 15 Petitioner further states that "the delayed filing of the Motion for Reconsideration was not meant to be frivolous or dilatory and that the cause of the delay was not entirely attributable to the fault or negligence of the petitioner." 16 Unfortunately, these are not compelling or justifiable causes and circumstances which would warrant the relaxation of the rules on reglementary periods. The Supreme Court has held that while rules of procedure are liberally construed, the provisions on reglementary periods are strictly applied, indispensable as they are for the prevention of needless delays and are necessary to the orderly and speedy discharge of judicial business. 17 After all, rules of procedure do not exist for the convenience of litigants, and they are not to be trifled with lightly or overlooked by the mere expedience of invoking "substantial justice."18 Considering that the CIR's motion for reconsideration was filed out of time, the Decision dated August 26, 2020 and Resolution dated January 29, 2021 in CTA Case No. 9005, have become final and executory. Finality of judgment becomes a fact upon the lapse of the reglementary period to appeal if no appeal is perfected. 19 The failure of a party to perfect an appeal within the period fixed by law renders final the decision sought to be appealed. Even if we brush aside the procedural lapse in the motion for reconsideration before the CTA Third Division, the subject Petition for Review is still denied. We affirm the findings of the CTA Third Division that the FLD/FAN were issued in violation of respondent Jollibee's right to due process, as follows: 14 Ng Ching Ting v. Philippine Business Bank, Inc., G.R. No. 224972, July 9, 2018. 15 Petition for Review, EB docket, pp. 4�5. 16 Petition for Review, EB docket, p. 7. 17 Dr. Lorna Villa v. Heirs ofEnrique Altavas, G.R. No. 162028, July 14, 2008. 18 Heirs of Antonio Feraren v. Court ofAppeals, G.R. No. 159328, October 5, 2011. 19 City of Manila represented by Mayor Gemiliano C. Lopez, Jr. v. Han. Court of Appeals, G.R. No. 100626, November 29, 1991. ~

DECISION CTA EB No. 2447 (C.T.A. Case No. 9005) In the instant case, petitioner [Jollibee] received a copy of the PAN on January 10, 2013. Therefore, respondent [CIR] should have granted petitioner [Jollibee] a period of fifteen (15) days from said date or until January 25, 2013 to protest or respond to the PAN. As a corollary, it is only after the lapse of the said period that respondent [CIR] may issue the FLD or FAN. Contrary to respondent [CIR]'s stand, the said 15-day period is reckoned from the date of actual receipt of the PAN by petitioner [Jollibee], and not the date of issuance of the PAN. Therefore, the Court finds that the FAN and FLD were prematurely issued and received by petitioner [Jollibee] on January 15, 2013, or five days after petitioner [Jollibee] received the PAN. Respondent [CIR], in failing to await the lapse of the fifteen (15) day period, correspondingly disregarded the mandatory due process requirement laid down under RR No. 12-99. As a consequence, petitioner [Jollibee] was denied of its right to due process. It is well-settled that failure to strictly comply with the notice requirements prescribed under Section 228 of the NIRC of 1997, as amended, and RR No. 12-99 is tantamount to denial of due process. As a result, the assessments issued in this case are void, and all the proceedings and order emanating from there are likewise void. As a rule, a void assessment bears no valid fruit.2o Thus, the Warrant of Distraint and/or Levy issued by petitioner CIR on March 18, 2015 is null and void. Likewise, the amount of Php18,483,928.77 garnished by petitioner CIR from respondent Jollibee's bank account was not legally due to the government. Hence, the refund of the amount of Php18,483,928.77 is in order. WHEREFORE, the Petition for Review is DENIED. The Decision dated August 26, 2020 and Resolution dated January 29, 2021 in CTA Case No. 9005 are AFFIRMED. SO ORDERED. /1-,~ \1'.~ 6\Sfii:E:Ri:NE T. MANAHAN Associate Justice 2o Decision dated August 26, 2020, EB docket, p. 25.

DECISION CTA EB No. 2447 (C.T.A. Case No. 9005) Page II ofl2 WE CONCUR: Presiding Justice AEsRs~L!~~s.tUicYe ~ ~ -t~~ MA. BELEN M. RINGPIS-LIBAN Associate Justice '1: Justice ~~r.~.~ MARIAN ~. RE\fts-F.AiJARDO Associate Justice 114uu~ LANEE S. CUI-DAVID Associate Justice (ON OFFICIAL BUSINESS) CORAZON G. FERRER-FLORES Associate Justice C�?,)

DECISION CTA EB No. 2447 (C.T.A. Case No. 9005) Page 12of12 CERTIFICATION Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court. Presiding Justice Cln---