CTA voids P54-M BIR tax assessment vs Konica Minolta

By Mark Joseph M. Sanchez

THE Court of Tax Appeals (CTA) has canceled a P54.42-million deficiency tax assessment issued by the Bureau of Internal Revenue (BIR) against Konica Minolta Marketing Services (Philippines), Inc., ruling that the tax agency violated the company’s right to administrative due process.

In a 29-page decision promulgated on May 26, the CTA Special First Division granted the petition filed by Konica Minolta, formerly E. Work Flow Solutions, Inc., and voided deficiency tax assessments for 2012.

The disputed assessment involved deficiency income tax worth P24 million, value-added tax (VAT) amounting to P18.6 million, expanded withholding tax of P11.8 million and a compromise penalty of P16,000.

The company elevated the case to the CTA after the BIR denied its protest and upheld a final decision on disputed assessment directing the company to pay the deficiency taxes.

Konica Minolta argued that it had been denied due process because the BIR merely repeated the findings stated in earlier notices without addressing the explanations and supporting documents it had submitted.

The CTA agreed, citing Section 228 of the National Internal Revenue Code and Revenue Regulations No. 12-99, which require tax assessments and disputed assessment decisions to clearly state their factual and legal bases.

The tax court also cited the Supreme Court ruling in BIR vs Avon Products Manufacturing, Inc., which stressed that tax authorities must meaningfully address taxpayers’ defenses and supporting evidence.

Konica Minolta had reconciled the discrepancies raised by the BIR involving income tax, VAT and expanded withholding tax in its reply to the preliminary assessment notice. The company also informed the tax agency that a deficiency documentary stamp tax assessment had been settled.

Despite this, the CTA said the BIR issued the formal assessment notice by merely reiterating the findings in the earlier notice without discussing the company’s explanations.

The tribunal also rejected the BIR’s claim that Konica Minolta had failed to submit supporting documents for its request for reinvestigation.

The court noted that the company presented a March 14, 2016 letter with attached supporting documents bearing a BIR “received” stamp, which proved that the records had been submitted.

Still, the BIR repeated the findings in the final assessment notice on the ground that no documents had been provided.

The CTA described this as “a patent violation” of the taxpayer’s right to due process.

“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 law, with their own rules of procedure, and always with regard to the basic tenets of due process,” the court said.