G.R. No. 203160 January 24, 2018
COMMISSIONER OF INTERNAL REVENUE, Petitioner, vs. COVANTA ENERGY PHILIPPINE HOLDINGS, INC., Respondent.

FACTS

The Commissioner of Internal Revenue (CIR) issued deficiency tax assessments against Covanta Energy Philippine Holdings, Inc. (CEPHI) for Value-Added Tax (VAT), Expanded Withholding Tax (EWT), and Minimum Corporate Income Tax (MCIT) for the taxable year 2001. CEPHI protested these assessments. While the protests were pending, CEPHI filed petitions before the Court of Tax Appeals (CTA) seeking the cancellation of the assessments. During the pendency of the CTA cases, CEPHI availed of the tax amnesty under Republic Act No. 9480 , submitting a Statement of Assets, Liabilities, and Net Worth (SALN) and paying the corresponding amnesty tax.
The CTA Second Division partially granted CEPHI’s petitions. It cancelled the deficiency VAT and MCIT assessments based on CEPHI’s valid availment of the tax amnesty. However, it upheld the EWT assessment, ruling that the amnesty under R.A. No. 9480 does not extend to the liabilities of a withholding agent. The CIR moved for reconsideration, arguing that CEPHI failed to comply with the amnesty requirements, specifically by not proving its net worth was not underdeclared by at least 30%. The CTA Second Division denied the motion, and the CTA En Banc affirmed the decision.

ISSUE

Whether the CTA En Banc erred in upholding the validity of CEPHI’s tax amnesty availment and consequently cancelling the deficiency VAT and MCIT assessments.

RULING

The Supreme Court denied the petition and affirmed the CTA En Banc’s decision. The Court held that CEPHI validly availed of the tax amnesty. R.A. No. 9480 is a remedial statute designed to grant a general pardon for past tax delinquencies, and its provisions must be construed liberally in favor of the taxpayer. The law requires the taxpayer to file a SALN and pay a two percent (2%) tax on the net worth declared therein. Upon compliance, the taxpayer is immediately entitled to the immunities and privileges of the amnesty.
The CIR’s argument that CEPHI must first prove its net worth was not underdeclared by 30% before enjoying the amnesty benefits was rejected. The Court ruled that the burden of proving fraud or a willful underdeclaration of net worth lies with the BIR. The presumption of regularity stands in favor of the taxpayer who has complied with the basic requirements of filing the SALN and paying the amnesty tax. The BIR cannot demand further proof of compliance as a precondition; to do so would negate the essence of an amnesty as an act of grace. Since the CIR failed to present clear evidence that CEPHI’s SALN contained a fraudulent underdeclaration, CEPHI’s entitlement to the amnesty for its VAT and MCIT liabilities stands. The EWT liability was correctly excluded from the amnesty coverage as expressly provided by the law.