CIR v. ASALUS

COMMISSIONER OF INTERNAL REVENUE vs. ASALUS CORPORATION 

February 22, 2017

GR No. 221590

FACTS:

On December 16, 2010, respondent Asalus Corporation (Asalus) received a Notice of Informal Conference from Revenue District Office No. 47 of the Bureau of Internal Revenue (BIR). It was in connection with the investigation conducted by Revenue Officer Fidel M. Bañares II on the Value-Added Tax transactions of Asalus for the taxable year 2007. Asalus filed its Letter-Reply, dated December 29, 2010, questioning the basis of Bañares' computation for its VAT liability.

On January 10, 2011, petitioner Commissioner of Internal Revenue issued the Preliminary Assessment Notice finding Asalus liable for deficiency VAT for 2007 in the aggregate amount of P413,378,058.11.

On August 26, 2011, Asalus received the Formal Assessment Notice stating that it was liable for deficiency VAT for 2007 in the total amount of P95,681,988.64, inclusive of surcharge and interest. Consequently, it filed its protest against the FAN, dated September 6, 2011.

On October 16, 2012, Asalus received the Final Decision on Disputed Assessment showing VAT deficiency for 2007 in the aggregate amount of P106,761,025.17, inclusive of surcharge and interest and P25,000.00 as compromise penalty. As a result, it filed a petition for review before the CTA Division.

In its April 2, 2014 Decision, the CTA Division ruled that the VAT assessment issued on August 26, 2011 had prescribed and consequently deemed invalid.

ISSUE:

WHETHER OR NOT the CTA erred in the decision and that the petition be granted in favor of the petitioner.

HELD:

The statement given by the CTA were correct in a way, and it was given due respect for they found it partly correct but, after a review of the records and applicable laws and jurisprudence, the Court finds that the CTA erred in concluding that the assessment against Asalus had prescribed. Internal revenue taxes shall be assessed within three years after the last day prescribed by law for the filing of the return, or where the return is filed beyond the period, from the day the return was actually filed. Section 222 of the NIRC, however, provides for exceptions to the general rule. It states that in the case of a false or fraudulent return with intent to evade tax or of failure to file a return, the assessment may be made within ten years from the discovery of the falsity, fraud or omission.

In the oft-cited Aznar v. CTA, the Court compared a false return to a fraudulent return in relation to the applicable prescriptive periods for assessments, to wit:

Petitioner argues that Sec. 332 of the NIRC does not apply because the taxpayer did not file false and fraudulent returns with intent to evade tax, while respondent Commissioner of Internal Revenue insists contrariwise, with respondent Court of Tax Appeals concluding that the very "substantial under declarations of income for six consecutive years eloquently demonstrate the falsity or fraudulence of the income tax returns with an intent to evade the payment of tax."

WHEREFORE, petition is GRANTED. The July 30, 2015 Decision and the November 6, 2015 Resolution of the Court of Tax Appeals En Banc are REVERSED and SET ASIDE. The case is ordered REMANDED to the Court of Tax Appeals for the determination of the Value Added Tax liabilities of the Asalus Corporation.