The Supreme Court has recently made a significant ruling in a case involving a petitioner-firm and the Court of Tax Appeals (CTA) regarding the process of “tax deficiency assessment”. The decision, penned by Associate Justice Japar Dimaampao, grants the petition for review on certiorari filed by Mannasoft Technology Corp. (Mannasoft), challenging the ruling of the Court of Tax Appeals en banc, which upheld the deficiency tax assessments issued against Mannasoft.
The case began when the Commissioner of Internal Revenue (CIR) conducted a tax investigation on Mannasoft for the calendar year 2008. This investigation led to the issuance of a Notice of Informal Conference (NIC) and a Preliminary Assessment Notice (PAN), which were personally served to Mannasoft through Gladys Badocdoc, the company’s Client Service Assistant.
Following these notices, the CIR issued a Formal Assessment Notice (FAN) to Mannasoft, determining the company’s liability for deficiency income tax, deficiency value-added tax, and expanded withholding tax. The FAN was personally served to Angelo Pineda, Mannasoft’s reliever security guard.
In response to the FAN, Mannasoft filed a petition for review before the CTA. The CTA Third Division granted Mannasoft’s petition and ordered the cancellation of the NIC, PAN, FAN, and Warrant of Distraint and/or Levy (WDL). However, the CTA en banc reversed this decision, leading to the present petition before the Supreme Court.
In its ruling, the Supreme Court emphasized the importance of proper notification when the CIR determines that proper taxes should be assessed, as stated in Section 228 of the Tax Code. The Court also referred to Section 3.1.4 of Revenue Regulations (RR) 12-99, which requires personal delivery of the formal letter of demand and assessment notice, with acknowledgment from the taxpayer or their authorized representative. The signee-recipient is also required to indicate their designation and authority to act on behalf of the taxpayer.
The Court justified these requirements by stating that without them, the recipient may not fully comprehend the significance of receiving an assessment notice and the potential impact it may have on the taxpayer they represent. This is particularly true for juridical entity taxpayers, who can only act through their officers and employees, and may be disadvantaged by a recipient’s lack of knowledge.
This ruling by the Supreme Court serves as a reminder of the importance of proper notification and adherence to established procedures in tax deficiency assessment cases. It highlights the need for clear communication between tax authorities and taxpayers to ensure a fair and just process.
In conclusion, the Supreme Court’s decision in favor of Mannasoft Technology Corp. brings clarity to the requirements for proper notification in tax deficiency assessment cases. By emphasizing the importance of clear communication and adherence to established procedures, the Court ensures a fair and just process for taxpayers. This ruling serves as a precedent for future cases and reinforces the principles of transparency and accountability in tax administration.
Source: The Manila Times
