FIRST TELECOM PHILIPPINES, INC. v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY THIRD DIVISION FIRST TELECOM PHILIPPINES, CTA Case No. 10486 INC., Petitioner, Members: -versus- MANAHAN, Chairperson, REYES-FAJARDO, and ANGELES, JJ. COMMISSIONER OF INTERNAL Promulgated: REVENUE, Respondent. JAN 2 12025 X - - - - - - - - - - - - - - - - - - - - - - - - ~ - - - --:: t ~ ~ 't t '- ~ '- - - - X RESOLUTION MANAHAN,J.: For resolution of the Court is respondent's Motion for Reconsideration (of the Decision dated August 14, 2024) filed on September 12, 2024, with petitioner's Comment (on Respondent's Motion for Reconsideration dated September 12, 2024) filed on October 7, 2024. For easy reference, the dispositive portion of the assailed Decision1 reads, as follows: "ACCORDINGLY, the instant Petition for Review (With urgent Motion to Suspend Collection of tax and Dispense with Payment of Bond) is GRANTED . Consequently, the Fina l Decision on Disputed Assessm ent received by petitioner on February 16, 2021 is WITHDRAWN and the Formal Letter of Dem a nd a nd Audit Re sult/ Assessment Notices received by petitioner on December 28, 2017 a re CANCELLED a nd SET ASIDE. Respondent Commissioner of Internal Revenue or a ny person duly acting on his b eh a lf is ENJOINED from proceeding with the collection of the taxes a rising therefrom. l Docket, Vo. 3, pp. 1330-1342. ~

RESOLUTION CTA Case No. 10486 S O ORDE RED."2 Respondent asserts the following in the present motion: (1) the Court erred in ruling on matters that were never substantiated in the administrative level; (2) the Court erred in ruling that the suQiect assessments are void due to lack of authority of the Revenue Officers (RO); and (3) the Court erred in enjoining the collection of taxes. On the other hand, petitioner counters that: (1) petitioner is not estopped from raising the issue on the validity of the Letter of Authority (LOA) ; (2) the assessment is void for lack of authority of the ROs; and (3) the Court is correct in enjoining the collection of taxes. Based on the foregoing, the issues to be resolved by the Court are: (1) Whether the Court's power of review is limited to the pieces of evidence submitted before the Bureau of Internal Revenue (BIR); (2) Whether the subject assessment is invalid due to the invalidity of the LOA; and (3) Whether respondent should be enjoined from collecting the subject taxes. After careful consideration of the assertions of both parties, the Court finds the instant motion bereft of merit. The Court of Tax Appeals (CTA) is a Court of record. As such, the Court's review is not limited to the pieces of evidence presented before the BIR Respondent argues that in view of the issuance of a Final Decision on Disputed Assessment in this case, the nature of this Court's ju dicial function shifts from a trial court to a court exercising judicial review. On the other hand, petitioner argues that the CTA is not limited by the evidence presented in the administrative claim before the BIR. Parties may present new and additional evidence to support its case. 2 Jd., p. 1341. ~

RESOLUTION CTA Case No. 10486 The Court agrees with petitioner. Section 8 of Republic Act (RA) No . 1125, as amended, provides: "Section 8 . Court of record; seal; proceedings. - The Court of Tax Appea ls shall be a court of record and shall have a seal which shall be judicially n oticed. It s h all prescribe the form of its writs and other processes. It shall have the power to promulgate rules a nd regulations for the conduct of the business of the Court, and as may be needful for the uniformity of decisions within its jurisdiction a s conferred by law, but such proceedings shall n ot be governed strictly by technical rules of evidence ." In Commissioner of Internal Revenue v. Manila Mining Corp.,3 the Supreme Cou rt explained the above-quoted provision, as follows: "Under Section 8 of RA 11 25, the CTA is described as a court of record. As cases filed before it are litigated de novo, party litigants should prove every minute aspect of their cases. No eviden tiary value can be given th e purchase invoices or receipts submitted to the BIR as t h e rules on documentary evidence require that these documents must be formally offered before the CTA. This Court thus notes with approval the following findings of the CTA: XXX Section 8 of Republic Act 1125 (An Act Creating t h e Court of Tax Appeals) provides categorically that the Court of Tax Appeals shall be a court of record and as such it is required to conduct a formal trial (trial de novo) where the parties must present the ir evidence accordingly if they desire the Court to take such eviden ce into consideration." Further, in Commiss ioner of Internal Revenue v. Lancaster Philippines, Inc.,4 the Supreme Court affirmed the authority of the CTA to rule on issues not raised by the parties: "Th e above section is clearly worded. On the basis th ereof, the CTA Division was, t h erefore, well within its 3 G.R. No. 153204, (31 August 2005), 505 Phil 650-672. 4 G.R. No. 183408, July 12, 2017. di'JL-

RESOLUTION CTA Case No. 10486 authority to consider in its decision the question on the scope of authority of th e revenue officers who were n a med in the LOA even though the parties had not raised the same in their pleadings or memoranda. The CTA En Bane was likewise correct in su s taining the CTA Division's vtew concerning such matter ."(Emphasis supplied) Applying Section 8 ofRA No . 1125, as amended, in relation to th e doctrine laid down by the Su preme Court in Manila Mininq and Lancaster, the Court rules that its power of review is not limited to the pieces of evidence submitted by petitioner before t h e BIR . As a Court of record, the CTA is required to conduct a formal trial where parties must present their evidence accordingly, if they desire to take such evidence into consid eration. Moreso , even novel issues raised only at the level of j u dicial review may be entertained by the Cou rt if they are relevant and integral to the main case. Hen ce , t h e Court may determin e issues or p1eces of evid ence, i.e., the authority of ROs to conduct audit investigation , even if they are not raised in the administrative level. Considering the foregoing, the Court finds respondent's argument u ntenable. The subject assessment is invalid due to the invalidity ofthe LOA Respondent is correctly enjoined from collecting the subject taxes due to the invalidity of the assessment On th is score, respondent argues that RO Oradia and RO Zamora merelu assisted RO Abellera and RO Galicia - t h e ROs au th orized in t h e LOA to conduct t h e audit investigation. As su ch, the LOA shou ld be consid ered valid . The Court disagrees with respondent. Based on the foregoing, the Cou rt observes th at respondent unwittingly admitted in the instant motion that RO Cii4~�---

RESOLUTION CTA Case No. 10486 Oradia and RO Zamora were not properly armed with authority, through a valid LOA, to conduct or even assist in the subject a u dit investigation. Thus, t h e Court finds no reason to d eviate from its earlier findin gs that: "Here, RO Ruby Ann B. Oradia and RO Aurelio Agustin T. Zamora were authorized to conduct the examination of FTPI's books and accounting records only through a letter issued by Chief of RLTAD-1 Cesar D. Escalada on February 6, 2015. Considering that the said ROs' authority did not emanate from a new or amended LOA, the subject assessments are void. Consequently, a void assessment bears no fruit. Considering the invalidity of the assessment, the Court need not belabor on the other issues raised by the parties." Consequently, since the subject assessment is invalid, the Court likewise finds no reason to deviate from its earlier ruling to enjoin respondent from collecting the subject taxes. To end, respon dent failed to raise meritorious arguments to j ustify th e reversal of t h e assailed decision . As such, the denial of the instant motion is in order. For these reasons, respondent's Motion for Reconsideration (of the Decision dated August 14, 2024) is DENIED, for lack of merit. SO ORDERED. , WE CONCUR: c~ 7-~ ... ..L......._ _ CATHERINE T. MANAHAN Associate Justice ~ 9;,. f ~ - FC1�~ MARIAN 1v'/ F. RE~-FXJARDO Associate Justice HENRY J~GELES Associate Justice