THE Court of Tax Appeals (CTA) has nullified the tax deficiencies and compromise penalties totaling P264.67 million that the Commissioner of Internal Revenue (CIR) issued to Grand Union Supermarket, Inc., owner of the supermarket chain South Supermarket, for the taxable year 2010.
In a 17-page decision dated Oct. 25, the CTA Special Third Division ruled the tax assessment void because the CIR documents were undated.
The Formal Letter of Demand and Final Decision on Disputed Assessment received by the petitioner, Grand Union Supermarket, Inc., on June 15, 2015, and June 2, 2020, respectively, lacked a specific demand date for payment, the ruling said.
“For it [valid formal assessment] contains not only a computation of tax liabilities but also a demand for payment within a prescribed period, thereby signaling the time when penalties and interests begin to accrue against the taxpayer,” according to the ruling penned by Associate Justice Maria Rowena Modesto-San Pedro.
The ruling also said that taxpayers must be informed in writing of the law and the facts upon which a tax assessment is based, citing Section 228 of the Tax Code.
“To proceed heedlessly with tax collection without first establishing a valid assessment is evidently violative of the cardinal principle in administrative investigations,” the ruling added.
The appellate court also upheld its decision to rule on issues not raised at the administrative level after the respondent CIR argued that the petitioner could not challenge the validity of the assessment for the first time during the appeals process.
“This Court is not barred from resolving the issue on the alleged invalidity of assessment even if this was not raised by petitioner at the administrative level,” the ruling said, citing the court’s jurisprudence.
The tax deficiency assessment imposed on the petitioner comprised income tax, value-added tax, expanded withholding tax, withholding tax on compensation, improperly accumulated earnings tax, and documentary stamp tax, along with corresponding surcharges, interest, and penalties.
The petitioner owns and operates the supermarket chain South Supermarket. — Jomel R. Paguian
