A call to dissent: The value of differing opinions

Stephen Covey, a famous author, once said “Strength lies in differences, not in similarities.” Different opinions allow us to look at an issue from different angles, and this usually results in arriving at the most just and appropriate solution. This may apply as well in the decision-making process of Philippine courts like the Court of Tax Appeals (CTA) and the Supreme Court (SC).

In a CTA En Banc (CTAEB) case, a taxpayer received a Letter of Authority (LOA) in 2016 authorizing the Bureau of Internal Revenue’s (BIR) officers to examine the taxpayer’s books of accounts and accounting records for all internal revenue taxes for 2014. The taxpayer submitted the requested documents and later received only a Final Notice Before Seizure (FNBS). The taxpayer immediately requested copies of the Preliminary Assessment Notice (PAN), Formal Letter of Demand and Final Assessment Notice (FLD/FAN), and the Preliminary Collection Letter (PCL) from which the FNBS stemmed. The taxpayer filed a Petition for Review with the CTA Division (CTAD) within 30 days.

The CTAD ruled in favor of the taxpayer and canceled the assessment. The BIR then filed a motion for reconsideration which was later denied. Hence, the BIR filed a Petition for Review with the CTAEB, questioning whether the CTAD had jurisdiction over the Petition for Review filed by the taxpayer, who in turn argued that the FNBS had a tenor of finality and thus was constrained to resort to the CTAD. The taxpayer also argued that the FNBS falls under “other matters” arising from the Tax Code.

The CTAEB, however, explained that whether the FNBS had a tenor of finality did not give the taxpayer a cause of action to disregard the procedure set forth by the law and act prematurely by filing a Petition for Review before the courts. Without a valid administrative protest, the FLD/FAN did not become a disputed assessment, thus, the CTAD did not acquire jurisdiction over the case. Further, the CTAEB provided examples of cases involving “other matters” arising from the Tax Code where the CTAD could exercise its jurisdiction. One of the cases involved questioning the validity of the Warrant of Distraint and/or Levy and the waiver involved. Another case involved resolving the validity of the action for collection initiated by the BIR. And in another case, the prescription of the authority of the BIR to collect was dealt with.

After citing different cases, the CTAEB ruled that the taxpayer, in its Petition for Review with the CTAD, was ultimately questioning the validity of the FAN, taking into consideration that, among others, the taxpayer was seeking to invalidate the FAN and that the Petition for Review was reckoned from its receipt of the copies of the PAN and FAN. Thus, the CTAEB concluded that the taxpayer’s case did not fall within the “other matters” clause of the CTAD’s appellate jurisdiction.

The CTAEB decision was, however, not unanimous. Some justices issued dissenting opinions and voted to cancel the assessment due to violation of due process:

First. The jurisdictional requirement of filing a protest to the FAN presupposes that all the procedural requirements of due process were complied with, which is not what happened in the taxpayer’s case. Only photocopies of the PAN and FAN were given to the taxpayer upon its request. As far as the taxpayer was concerned, “the procedure for the stages of assessment was already finished” when it was only given the FNBS. This case should have been treated as if no valid service of the PAN or FAN was made to the taxpayer. Additionally, the filing of a protest to the FAN would be unnecessary and idle as the BIR decided by issuing the FNBS. This suggests that any request for reconsideration or reinvestigation of the assessment is hopeless and will just be rejected.

Second. The case falls within the “other matters” clause because the issue to be resolved was not the propriety of the assessment, but that of the tax collection measure. Requiring the exhaustion of administrative remedies would be unreasonable as there was already a violation of due process.

Third. When the taxpayer directly denied receipt of the PAN, FLD, and FAN, it was upon the CIR to prove that the taxpayer received the same. The non-issuance of the FAN goes into the requirement of due process. It affects the assessment’s validity, and ultimately, the collection efforts of the CIR.

Dissent persuades. The differences between the majority and the dissenting opinions will help the SC render a just judgment should the parties decide to further elevate the case. Even if the majority opinion of the CTAEB is against the taxpayer, this will not necessarily mean that the result will be the same when the SC decides on the matter.

Christopher Lambert M. Fabros is a supervisor from the tax group of KPMG in the Philippines (R.G. Manabat & Co.), a Philippine partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. The firm has been recognized as a Tier 1 in transfer pricing practice and in general corporate tax practice by the International Tax Review. For more information, you may reach out to tax supervisor Christopher Lambert M. Fabros or tax principal Manuel P. Salvador III through [email protected], social media or visit www.home.kpmg/ph.

This article is for general information purposes only and should not be considered as professional advice to a specific issue or entity. The views and opinions expressed herein are those of the author and do not necessarily represent KPMG International or KPMG in the Philippines.