Court grants Sereno’s petition to junk tax liabilities

MANILA, Philippines — The Court of Tax Appeals (CTA) has granted the petition of former chief justice Maria Lourdes Sereno seeking to nullify the Bureau of Internal Revenue (BIR)’s assessment of her supposed tax liabilities from 2011 to 2016 amounting to P8.8 million.

In a 45-page decision promulgated on May 14, the CTA’s Special Second Division granted the petition for review filed by Sereno assailing the validity of an undated Final Decision on Disputed Assessment (FDDA) and a Formal Letter of Demand (FLD) dated Nov. 5, 2018 with an accompanying Final Assessment Notice (FAN) issued against her by the BIR.

In the FDDA and FLD/FAN, the BIR said Sereno had P8,846,769.12 in unpaid income tax, inclusive of surcharges and interests for taxable years 2011 to 2016.

The CTA said the BIR violated Sereno’s right to due process when it issued the FLD/FAN, demanding that the then chief justice pay her supposed tax liabilities, without informing her of how it arrived with its tax assessment.

The CTA cited Section 3 of Revenue Regulations No. 12-99 as amended by RR No. 18-13, which states that “the FLD/FAN calling for payment of taxpayer’s deficiency tax or taxes shall state the facts, the law, rules and regulations or jurisprudence on which the assessment is based, otherwise, the assessment shall be void.”

The tax court said that while the BIR sent a Preliminary Assessment Notice to Sereno on Sept. 27, 2018, to which the latter replied on Oct. 12, 2018, the BIR did not bother to discuss her appeal nor did it amend its original assessment.

The CTA said this was even if Sereno refuted with supporting evidence the tax assessment against her, insisting that her only source of income at that time was the government, specifically the Supreme Court (SC).

“The right to be heard, which includes the right to present evidence, is meaningless if respondent (BIR) can ignore the evidence without reason,” the CTA said.

“Indeed, while the government has an interest in the swift collection of taxes, the BIR and its officers and agents cannot be overreaching in their efforts, but must perform their duties in accordance with the law, with their own rules of procedure, and always with regard to the basic tenets of due process,” it added.

The CTA sided with Sereno’s argument that the period to examine and assess her supposed income tax deficiencies from 2011 to 2014 has prescribed when the BIR issued the tax assessment as well as the demand letter in 2018.

The CTA cited Section 203 of the National Internal Revenue Code (NIRC), which states that internal revenue taxes shall be assessed within three years after the last day of the deadline of the filing of the Income Tax Return.

“Clearly, the assessment for taxable years 2011 to 2014 had prescribed on Nov. 20, 2018 thus, the corresponding FLD/FANs are void as they were issued and served after the last day to assess or beyond the three-year prescriptive period,” the court decision read.

As to the BIR’s assessment of Sereno’s supposed tax deficiency from 2015 to 2016, the CTA said that while the assessment has not yet prescribed, the period to enforce the collection has lapsed.

As stated under Section 203 of the NIRC, the CTA said after the issuance of the tax assessment, the BIR has another three years to collect the tax dues by distraint, levy or through court proceedings.

The tax court pointed out that since the FLD/FAN against Sereno was dated Nov. 5, 2018 the BIR only had until Nov. 5, 2021 to enforce the collection of the assessed tax deficiency.

The CTA noted that the BIR initiated a collection enforcement effort only May 10, 2022 when it filed a response to Sereno’s petition for review. Thus, the court said, the BIR’s “right to collect the assessed deficiency taxes for 2011 to 2016 has already prescribed.”

The CTA decision was penned by Associate Justice Lanee Cui-David with the concurrence of Associate Justice Jean Marie Bacorro-Villena.

The SC ousted Sereno in May 2018 by granting the quo warranto petition filed by then solicitor general Jose Calida.

The SC magistrates who voted in favor of her removal from office said Sereno violated requirements on proper disclosure of her assets in her Statement of Assets, Liabilities and Net Worth.