ESS MANUFACTURING vs. CIR (Tax 2)

ESS MANUFACTURING COMPANY, INC., vs. COMMISSIONER OF INTERNAL REVENUE

CTA CASE NO. 7958 

FACTS:

ESS filed a Petition for Review on August 10, 2009, as well as an application for a Temporary Restraining Order and/ or Temporary Preliminary Injunction, praying that a TRO be issued and such be converted into a writ of preliminary injunction and that the assessments amounting to Php35,101,455.74 be declared null and void, and that the same be cancelled.

ISSUES:

(1) Whether or not the Letter of Authority No. 00039017 dated September 5, 2006 issued by respondent to petitioner was valid;

(2) Whether or not the assessments for deficiency expanded withholding tax, withholding tax on compensation, and fringe benefits issued by respondent to petitioner for taxable year 2005 had already prescribed;

(3) Whether the assessments for taxable year 2005 have not become final and executory, thus the Court has jurisdiction over the present petition.

RULING:

(1) Yes, the presumption of regularity in the performance of official duties prevails. As for the said erasure, respondent was correct in pointing out that it was merely a clerical/ typographical error which would not affect the substantial rights of the taxpayer. The said error of correcting the name of the Revenue Officer from "NUESTRE" to "NUESTRO" is not the erasure contemplated under the law. Thus, the Court finds the Letter of Authority issued by BIR valid.

(2) Court finds that the assessments covering January to November for deficiency expanded withholding tax, withholding tax on compensation, as well as the first three quarters for fringe benefits tax were made beyond the prescribed period. Applying the earlier discussion, that there being no false return, the prescriptive period of three (3)-years must be applied. 

(3) Yes, petitioner in this case filed an administrative protest to the assessment when it filed a "Motion for Reconsideration of FAN received on December 15, 2008" on January 13, 2009.

It is very clear to the Court t at there was no need for a submission of documents, as claimed by respondent, since petitioner is asking respondent to review or re-evaluate the assessment based on all the existing records which was already provided in the audit and during the communication between the parties prior to the issuance of the FAN. 

Thus, respondent had 180 days from January 13, 2009, or until July 12, 2009 to decide on the "Moti n for Reconsideration of FAN received on December 15, 2008." Upon respondent's inaction after the 180 days, petitioner has 30 days, or nntil August 11, 2009 to file a petition before this Court. Petitioner filed the present Petition for 

Review on August 10, 2009, which was clearly within the period provided by law. 

Clearly, petitioner complied with the requirements of the law in disputing a tax assessment, pursuant to Section 228 of the Tax Code. Hence, the tax assessment cannot be considered as final, executory and demandable.