PAROLI, ANA CLARISA D.

AUF-JD4

CIR VS LUQUIGAZ PHILIPPINES INC. GR 215534

LUQUIGAZ PHILIPPINES
APRIL 18, 2016

COPRPORATION

VS

CIR

GR

215557

FACTS:

Luquigaz Philippines Corporation, LCP for brevity, a domestic

corporation, received an LOA from the CIR authorizing the
investigation of all internal revenue taxes for 2005.
Thereafter, it received a Notice of Informal Conference, a detailed
computation of its tax liabilities and a PAN on May 20, 2008.
It was assessed with a Deficiency Withholding Tax liabilities in the
amount of P23,931,708.72
On June 25, 2008, it received FLD/FAN, together with the details of
the discrepancies in the amount of 24,332,347.20.
LCP filed its protest with supporting document. Thereafter, it
received FDDA which reflected its deficiency withholding tax
liabilities in the amount of 22,380,025.19
LCP then filed a Petition for Review before the CTA assailing the
validity of the FDDA.

CTA DIVISION RULING

Partially granted LCPs petition. It cancelled the EWT and FBT

assessments but affirmed the WTC assessment.
It ruled that a portion of the FDDA relating to the EWT and FBT was
void pursuant to Section 228 of the NIRC.
It said that unlike the PAN and the FLD/FAN, the FDDA issued did
not provide details so LCP had no way of knowing what items were
considered by the CIR in arriving at the deficiency assessments.
This was especially true because the FDDA amount is different
from the amount stated in the FLD/FAN.
It stated that even though the legal bases were stated for the EWT
and FBT, in the FDDA was devoid of factual bases as required by
Sec 228 of the NIRC.
However, it upheld the WTC assessment because the factual bases
used in the FLD and FDDA were the same and the amount merely
resulted in the use of a different tax rate.

CTA EN BANC: Affirmed CTA division. Hence, this petition for review.
LCP CONTENTION:

Like its assessment for EWT and FBT, the WTC should have been
invalidated because the FDDA did not provide for the facts on
which the assessment was based.
It argued that it was deprived of due process because in not stating
the factual basis of the assessment, the CIR did not consider the
defenses and supporting documents it presented.
Even if the FDDA were to be upheld, it should not be liable for WTC
because the CIR erred in comparing its ITR and Alphalist to
determine possible discrepancies.
It explained that the salaries of its employees in the ITR does not
reflect the total taxable income paid and received by the
employees because it refers to gross salaries which included
amounts not subject to WTC.

CIRs CONTENTION

The assessment for EWT and FBT should be upheld because the
FDDA must be taken together with the PAN and FAN. Therefore,
LCP was fully apprised of the law and the factual basis of the
assessments
If the FDDA were to be declared void, it should not result in
automatic abatement of tax liability especially because RR 12-99
merely states that a void decision of the CIR shall not be
considered a decision on the assessment.

ISSUE(S):
1.) When may a Final Decision on Disputed Assessment be declared
void?
2.) In the event that the FDDA is found void, what would be the effect
on the tax assessment?
HELD:
1.) An FDDA is void when it does not reflect the factual basis upon
which the assessment was made.
2.) A void FDDA does not ipso facto render the assessment void.
RATIO:

Under Sec 228 of NIRC, the taxpayer shall be informed in writing of

the law and the facts on which the assessment is made.
RR No. 12-99 reiterates that the requirement that a taxpayer must
be informed in writing of the law and the facts on which his liability
was based.
Sec 3.1.6 thereof requires that the decision of the CIR shall state
the facts, law, and rules and regulations, or jurisprudence on which
the decision is based. Failure to do so would invalidate the FDDA.

The use of the word shall in Sec 229 and RR 12-99 indicates that
this requirement is mandatory and it applies to both the FLD/FAN
and the FDDA.
To rule otherwise would tolerate abuse and prejudice.
Taxpayers will be unable to file an intelligent appeal before the CTA
as they would be unaware on how the CIR or his authorized
representative appreciated the defense raised in connection with
the assessment but raises the possibility that the amounts
reflected in the FDDA were arbitrarily made if the factual and legal
bases thereof are not shown.
Moreover, the fact that the amount in the FDDA is different, it
becomes more imprerative for the basis to be indicated therein.
Failure to do so would deprive LCp the opportunity to prepare an
intelligent appeal as it would have no way of determining what
were considered by the CIR.
Also, it would open the possibility that the reduction of the
assessment could have been arbitrarily or capriciously arrived at

A VOID FDDA does not ipso facto render the assessment void.

An assessment is different from a decision.

What is appealable to the CTA is the decision of the CIR on the
disputed assessment and not the assessment itself.

Hence, the invalidity of the other does not necessarily result in the
invalidity of the other unless the law or regulations otherwise
provides.

ON THE EWT AND FBT

CTA erred in concluding that the assessment on the EWT and FBT
was void because the FDDA covering the same was void.
The assessment remains valid notwithstanding the invalidity of the
FDDA because the assessment itself is different form a decision on
the disputed assessment.
LCP was also substantially informed of the WTC assessment
because the basis fot he assessment was the same for the FLD and
FDDA.

WHEREFORE, the CTA en banc decision is partially affirmed in that the

assessment on deficiency Withholding Tax in Compensation is upheld.
The case is REMANDED to the CTA for assessment on deficiency Expanded
Withholding Tax and Fringe Benefits Tax.