CTA voids P849-M tax case vs Eastern Petroleum

THE Court of Tax Appeals (CTA) has canceled deficiency tax assessments totaling P849.14 million against Eastern Petroleum Corp., citing a breach of the company’s right to due process.

In a 16-page decision dated March 18, the CTA special second division ruled that the formal assessment notices issued by the Bureau of Internal Revenue for the 2014 taxable year were void because they lacked definite due dates.

The court found that the final assessment notice issued on Oct. 22, 2019, set a payment deadline of Sept. 30, 2019 — a date that had already lapsed before the company received the notice on Oct. 24, 2019. Similarly, the final decision on disputed assessment was issued on June 29, 2020, yet it set a payment deadline of Feb. 15, 2020, making it impossible for the company to comply.

“If a taxpayer only receives the demand for payment past the due date, then clearly the written demand does not give the taxpayer any time to consider the demand and prepare for payment when it falls due,” the decision penned by Presiding Justice Ma. Belen M. Ringpis-Liban read.

“The purpose of prior notice is negated. The taxpayer’s right to due process is clearly breached,” it added.

The decision reversed claims for deficiency income tax, value-added tax, and other miscellaneous levies. The court also set aside P267,000 in compromise penalties because the firm did not consent to them.

“Compromise penalties are only amounts suggested in settlement of criminal liability and may not be imposed or exacted on the taxpayer in the event of refusal to pay the suggested amount,” the tax court said. — Erika Mae P. Sinaking