COMMISSIONER OF INTERNAL REVENUE v. TITANIUM CORPORATION

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY ENBANC COMMISSIONER OF CTA EB NO. 2502 INTERNAL REVENUE, (CTA Case No. 9644) Petitioner, Present: -versus- DEL ROSARIO, PJ, RINGPIS-LIBAN, MANAHAN, BACORRO-VILLENA, MODESTO-SAN PEDRO, REYES-FAJARDO , CUI-DAVID, and FERRER-FLORES, JJ. Promulgated : TITANIUM CORPORATION, JUN 2 2 ~ Respondent. ~:tpp.4.~. X---------------- - -------------- - - - - - - - -X RESOLUTION CUI-DAVID, J.: Before the Cou rt En Bane is t h e Motion for Reconsideration (On the Decision promulgated on Feb ruary 13, 2023) 1 filed by petitioner through registered m ail on March 2, 2023. The dispositive portion of th e Decision 2 promulgated on February 13, 2023 (assailed D ecision) reads: WHEREFORE, premises considered, the Petition for Review filed by the Commissioner of Internal Revenue on July 14, 2021, is DENIED for lack of merit. Accordingly, the Decision and Resolution promulgated on November 11, 2020, and June 1, 2021, respectively, by the Court's Third Division, are AFFIRMED. SO ORDERED. 1 En Bane (EB) docket, pp. 735-739. ~ 2 EB docket, pp. 706-73 I.

RESOLUTION CTA EB No. 2502 (CTA Case No. 9644) Commissioner of Internal Revenue vs. Titanium Corporation Page 2 of6 x------------------------------------------------------------------------------------------x The assailed Decision sustained the ruling of the Court in Division ordering the cancellation and setting aside petitioner's deficiency tax assessments for having been issued in violation of respondent's right to due process of law. In his bid to reconsider the adverse Decision, petitioner maintains that there is substantial compliance with the due process requirements in issuing the deficiency tax assessments under Section 228 of the National Internal Revenue Code (NIRC) of 1997, as amended. He added that the facts and laws on which the 2011 deficiency tax assessments were based were clearly shown in the Details of Discrepancies attached to the Preliminary Assessment Notice (PAN) and Formal Letter of Demand/Final Assessment Notice (FLD /FAN). Hence, petitioner asserts that he substantially complied with the prescribed requisites of informing the taxpayer of the factual and legal bases on which the said deficiency tax assessments were based. Further, petitioner avers that respondent was able to protest the PAN and FLD/FAN. He emphasizes that the Bureau of Internal Revenue (BIR) acted on respondent's protest letters and, as a result thereof, the BIR reduced respondent's deficiency IT and EWT; cancelled the assessed deficiency WTC and DST but sustained the assessed VAT for the taxable year 20 11 for failure to substantiate the same. All these findings were stated in the Final Decision on Disputed Assessment (FDDA) with Amended Notices, dated June 29, 2017. Hence, petitioner submits that the ruling in Commissioner of Internal Revenue vs. Avon Products Manufacturing, Inc. 3 (Avon case) is not entirely applicable. In closing, petitioner submits that the deficiency tax assessments issued against respondent are prima facie presumed correct and made in good faith. Respondent must prove otherwise, and in the absence of any irregularities in the performance of official duties, the said deficiency tax assessments should be upheld. By way of Comment,4 respondent counters that petitioner's claim that there was substantial compliance with the requirement that the taxpayer shall be informed of the facts and the law on which the assessment is based is misplaced. According to respondent, petitioner is barking at the wrong tree 3 G.R. Nos. 201398-99 and 201418-19, October 3, 2018. ~ 4 EB docket, pp. 745-754.

RESOLUTION CTA EB No. 2502 (CTA Case No. 9644) Commissioner of Internal Revenue vs. Titanium Corporation Page 3 of6 X------------------------------------------------------------------------------------------X as there is nothing in the assailed Decision which states that petitioner's 2011 FLD/FAN is invalidated for failure to inform the taxpayer of the facts and the law on which the assessment is based. The deficiency tax assessments for 20 11 against respondent were invalidated for the failure of the BIR to relate its deficiency finding in the 2011 FLD /FAN to the documents and arguments submitted by respondent in its Reply to the 2011 PAN. Hence, contrary to petitioner's claim, the Avon case finds direct application in this case. Anent petitioner's argument that the BIR reduced the assessments under the 2011 FDDA and, as such, due process was accorded to it, respondent submits that this is a non sequitur. According to respondent, the tax audit process consists of distinct stages. The duty of the BIR to conduct a genuine tax investigation during the preliminary assessment notice stage is separate from its duty to do the same for the final assessment notice stage. Admittedly, as early as its Memorandum dated July 28, 2014, the investigating Revenue Officer already resolved to issue both the PAN and FLD/FAN, even though respondent's right to submit its Reply to the PAN has not lapsed.s Finally, respondent submits that tax assessments are prima facie presumed correct and made in good faith is a disputable presumption, which can be set aside based on evidence. In the instant case, this presumption was rebutted when the Court found that the 2011 FLD/FAN issued against respondent was void due to the violation of the latter's right to due process for the failure of the BIR to give a genuine evaluation of respondent's Reply to the 2011 PAN. Petitioner's motion must fail. A careful perusal of the arguments raised by petitioner in his Motion for Reconsideration shows that the same had been thoroughly discussed and passed upon, first by the Court in Division and subsequently on appeal by the Court En Bane in the assailed Decision, to wit: The Court in Division did not err in voiding the FLD/FAN as a consequence of the W violation of respondent's right to due process. 5 Transcript ofStenographic Notes during the hearing on June 13, 2019, pp. 16-19.

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RESOLUTION CTA EB No. 2502 (CTA Case No. 9644) Commissioner of Internal Revenue vs. Titanium Corporation Page 5 of6 x------------------------------------------------------------------------------------------x Notably, petitioner failed to consider respondent's arguments in its Reply to the PAN without any explanation, as the Details of Discrepancies attached to the FLD/FAN is a replica of the Details of Discrepancies attached to the PAN. Petitioner's disregard of respondent's due process right rendered the subject tax assessments null and void. As regards petitioner's protestation that the due process requirement in the issuance of deficiency tax assessments was complied with since respondent was able to file its protest letters to both PAN and FLD /FAN, the Court En Bane is not convinced. The fact that respondent was able to file its Reply to PAN and Protest to the FLD /FAN is of no moment and does not denigrate the fact that petitioner violated respondent's due process right. Indeed, petitioner failed to advance any new or substantial reason that will merit a reconsideration or modification of the assailed Decision. WHEREFORE, premises considered, petitioner's Motion for Reconsideration (On the Decision promulgated on February 13, 2023) is DENIED, for lack of merit. SO ORDERED. L~riEkviK-!~HAmA-JDnA~VID Associate Justice WE CONCUR: ROMAN G. DEL ROSARIO Presiding Justice

RESOLUTION CTA EB No. 2502 (CTA Case No. 9644) Commissioner of Internal Revenue vs. Titanium Corporation Page 6 of6 x------------------------------------------------------------------------------------------x I~' ~ -z- \...__ MA. BELEN RINGPIS-LIBAN Associate Justice (!l;v_,' ;:~ CATHERINE T. MANAHAN Associate Justice "'- JEAN MARia" MARIA ROWEl PEDRO ~ ~ If~:� fi&a~ MARIAN IVitJ. REYE~-FAJARDO Associate Justice co~$: ORES