MASTER SPORTS CORPORATION v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY THIRD DIVISION MASTER SPORTS CTA Case No. 10458 CORPORATION Mem bers: Pe titioner, REYES-FAJARDO, Acting Chairperson, - versus- and ANGELES, IL COMMISSIONER OF Promulgated : INTERNAL REVENUE, c -__-_Jt,;A=--N_ - -0----=8~ _~2_,0_::;2=-.s:6;_:;.r.-:-~-�:_~--_.----- ---- --x x - - - - - - - - - - - - Respondent. - - - - --------- R E SOLUTION REYES-FAJARDO, J.: For the Cour t's resolution is respon dent Commissioner of Internal Revenue (CIR)'s Motion for Reconsideration (to the Decision dated 02 May 2025),1 which seeks the reversal of the Court's Decision promulgated on May 2, 2025,2 gran tin g p etitioner Master Sports Corporation 's Petition for Review. The dispositive p ortion reads:3 "WHEREFORE, in light of the foregoing considerations, the Petition for Review is GRANTED. Accordingly, Formal Assessment Notice and Assessment da ted April 18, 2012, Final Decision on Disputed Assessment dated November 4, 2015, and Decision dated December 3, 2020 finding petitioner liable for deficiency income tax, value-added tax, and expanded withholding tax relative to calendar year 2007 are hereby CANCELLED and SET ASIDE for being void. Motion for Reconsideration, Docket, Volume III, pp. 1204 - 1216. Electronically filed on May 21, 2025 and personally filed on May 22, 2025 Decision, Docket, Volume III, pp. 1189-1202. ~ 3 !d. at p. 819.

RESOLUTION CTA CASE NO. 10458 Respondents, its representatives, agents, or other persons acting in its behalf are ENJOINED from enforcing against the petitioner the collection of deficiency income tax, value-added tax, and expanded w ithholding tax assessments for calendar year 2007. SO ORDERED." In ruling so, the Court found that there was no valid Letter of Authority in the name of Revenue Officer (RO) Nesel C. Hagan and Group Supervisor (GS) Praxedio F. Tulia It w ho concluded the audit and reported tax deficiencies that became the basis of the Notice of Informal Conference (NIC), Preliminary Assessment Notice (PAN), and Final Assessment Notice (FAN) - all of which were rendered void on due process grounds. Unfazed, respondent moves for reconsideration and submits that: 1) the Petition must be dismissed for lack of cause of action as there are no disputed assessments to speak of; 2) petitioner is liable for deficiency income tax (IT), value-added tax (VAT), and expanded w ithholding tax (EWT) for taxable year (TY) 2007; 3) respondent's right to collect deficiency taxes forTY 2007 has not prescribed; and 4) the period to collect petitioner's deficiency taxes for TY 2007 was suspended.4 Petitioner retorts that the lack of authority of the ROs results in a void assessment that bears no fruit. Petitioner also added that respondent's right to collect deficiency taxes forTY 2007 had already prescribed and that the Court correctly acquired jurisdiction over this case .5 After a careful study of the allegations and the records of this case, the Court finds no compelling reason to reverse or modify the assailed Decision. Respondent claims that petitioner's failure to file an administrative appeal to the FDDA rendered the assessment against petitioner already finat executory, and demandable. As such, the assessments are not subject to judicial scrutiny, as it is already beyond the Court in Division's jurisdiction. Motion fo r Reconside ration, Docket, Volume III, pp. 1204- 1216. 5 Opposition (to the Res pondent's Mo tion for Reconsideration dated May 21, 2025). Filed throu gh accredited courier service provider on Ju ne 2, 2025, rece ived by the Court on June 3, 2025, and electronically filed on June 2, 2025; Docket, Volu me III, pp. 1220 - 1235. ~

RESOLUTION CTA CASE NO. 10458 Respondent's argument, however, must fail in light of Section 7 (a)(1) of Republic Act (RA) No. 1125, as a1nended by RA No. 9282,6 w hich confers upon the Court of Tax Appeals (CTA) the jurisdiction to decide not only cases on disputed assessments and refunds of internal revenue taxes, but also II other matters" arising under the National Internal Revenue Code (NIRC) of 1997, as amended, viz:7 SEC. 7. Jurisdiction. - The CTA shall exercise: (a) Exclusive appellate jurisdiction to review by appeal, as herein provided: (1) Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refu nds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the National Internal Revenue [Code] or other laws administered by the Bureau of Internal Revenue.s In Commissioner ofInternal Revenue v. Court ofTax Appeals Second Division and QL Development, Inc. ("QLDI" ),9 the Supreme Court, citing Commissioner of Internal Revenue v. Hambrech.t & Quist Philippines, Inc. (11 Hambrecht"),10 held that the issue of prescription of the CIR's right to collect taxes is covered by the term IIother matters" over which the CTA has appellate jurisdiction. Hambrech.t also clarified that the validity of the final assessn1en t is a distinct matter from the issue of prescription of collection of taxes. For this reason, prescription of collection of taxes may be addressed separately, despite the incontestability of the final assess1nent: To be sure, the fact that an assessment has become final for failure of the taxpayer to file a protest w ithin the time allowed only means that the validity or correctness of the assessment may no longer be questioned on appeal. However, the validity of the assessment itself is a separate and distinct issue from the issue of whether the right of the CIR to collect the validly assessed tax has 6 An Act Expanding the Jurisdiction of the Court of Tax Ap peals, Elevating Its Rank to the Level of a Collegiate Court with Special Jurisdiction and Enlarging its Membership, Amending for the Purpose Certain Sections or Repu blic Act No. 1125, as amended, otherwise known as the Law Creating the Court of Tax Appeals, and for Other Purposes, March 30, 2004. 7 Commissioner of Intenznl Revenue v. Court of Tax Appeals Second Divisio11 n11d QL Development, Inc., G.R. No. 258947, March 29, 2022. Emphasis supplied. 9 G.R. No. 258947, March 29,2022. 10 G.R. No. 169225, November 17,2010. ttl

RESOLUTION CTA CASE NO. 10458 prescribed. This issue of prescription, being a matter provided for by the NIRC, is well within the jurisdiction of the CTA to d e c i d e .11 Consistent with Hambrecht and QLDI, we have the authority to adjudicate the matter of prescrip tion of collection of taxes in this case, despite the finality of the FDDA. Bank of the Philippine Islands v. Commissioner of Internal Revenue (BPI)12 elucidated the prescriptive period for the collection of internal revenue taxes, in the event a final assess1n ent, sans presence of intentional falsity, or fraud in the filing of tax returns, or omission to file a tax returns, was made by the BIR against the taxpayer, in the following fashion : When it validly issues an assessment within the three (3)- year period, it has another three (3) years within which to collect the tax due by distraint, levy, or court proceeding. The assessment of the tax is deemed made and the three (3)-year period for collection of the assessed tax begins to run on the date the assessment notice had been released, mailed or sent to the taxpayer. Taking our cue from BPI, the BIR lost their righ t to collect from petitioner: Date of receipt of Deadline to Date of issuance of Number of FAN enforce collection Notice/Order of days late Garnishment April 23, 201213 April ~?, 2015 2,115 days February 5, 202114 Jurisprudentially, the statute of lim itations on the assessment and collection of taxes is principally inten ded to afford protection to the taxpayer against unreasonable investigations as the indefinite extension of the period for assessment deprives the taxpayer of the 11 Emphasis s up plied. 12 G.R. No. 179942, March 7, 2008. 13 Decis ion, Docke t, Volume III, p. 1193. 14 After petitioner's filing of its Petition for Review on January 27, 2021, petitioner received separate le tters dated February 5, 2021 and February 15, 2021, from United Coconut Planters Bank and Bank of the Philippine Islands, respectively, informing petitioner tha t the BIR have served a Notice/Order of Garnishment directing the seizure, distraint, and garnishment of its bank accounts for purposes of covering its tax deficiencies; C.T.A. Case No. 10458, Exh ibit "P-1" (Re: Motion to Sus pend the Collection of Taxes and Lift the Warrant of Garnishment), Docket - Vol. 2, pp. 753-755. rrl

RESOLUTION CTA CASE NO. 10458 assurance to no longer be subjected to fur ther investigation for taxes after the expiration of a reasonable period of time_15 WHEREFORE, premises considered, respondent's Motion for Reconsideration (to the Decision dated 02 May 2025) is DENIED for lack of m erit. The Decision promulgated on May 2, 2025 is AFFIRMED. SO ORDERED. ~ ,C}~ F.~ .. !Oj~ MARIAN Iv�-vF. REYES-FAJARDO Associate Justice I CONCUR: HENRK~GELES Associate Jus tice 15 Commissioner of Internal Revenue v. Marily Development Corp., G.R. No. 263794, April 2, 2025; Commissioner of Intemnl Revemte v. BASF Conti11g + lltks Pl1ils., Inc., G.R. No. 198677, November 26, 2014; Bank of the Philippine Islands v. Commissioner of In ternal Revenue, G.R. No. 179942, March 7, 2008.