G.R. No. 202105 , April 28, 2021
LA FLOR DELA ISABELA, INC., PETITIONER, VS. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

FACTS

The Commissioner of Internal Revenue (CIR) issued a Letter of Authority on September 6, 2000 to examine petitioner La Flor Dela Isabela, Inc.’s books for the period January 1 to December 31, 1999. La Flor executed five waivers of the statute of limitations to extend the CIR’s assessment period. On March 14, 2005, La Flor received a Formal Letter of Demand (FLD) with assessments for deficiency income tax, value-added tax, withholding tax on compensation, and compromise penalty. La Flor filed a protest and a supplemental protest. On July 9, 2007, it received the CIR’s Final Decision on Disputed Assessments (FDDA) dated June 1, 2007. On October 8, 2007, La Flor applied for tax amnesty under Republic Act No. 9480 . On November 23, 2007, it received an undated Warrant of Distraint and/or Levy (WDL), prompting it to file a Petition for Review with the Court of Tax Appeals (CTA) on November 29, 2007. The CTA Division dismissed the petition for being filed out of time, a ruling affirmed by the CTA En Banc. The CTA En Banc also found all waivers executed by La Flor to be valid.

ISSUE

1. Whether the CTA erred in not ruling that the assessment and WDL are null and void.
2. Whether the CTA erred in not ruling that La Flor’s obligation to pay income tax and VAT deficiency has been absolved by its availment of the tax amnesty.
3. Whether the CTA erred in ruling that petitioner is liable for compromise penalty.

RULING

1. On the validity of the assessments and WDL: The Supreme Court ruled that the CTA has jurisdiction to determine the validity of the WDL and the waivers of the statute of limitations under its exclusive appellate jurisdiction over “other matter[s] arising under the National Internal Revenue Code.” The Court found the waivers executed by La Flor to be invalid for failure to comply strictly with the requisites under Revenue Delegation Authority Order No. 05-01 and relevant jurisprudence. Specifically, the waivers lacked details such as the date of acceptance by the CIR, were signed by unauthorized representatives, and were executed beyond the original three-year prescriptive period without valid prior extensions. Consequently, the assessments issued after the expiration of the prescriptive period were void. The WDL, being based on these void assessments, was also null and void.
2. On the tax amnesty: The Supreme Court ruled that La Flor’s availment of the tax amnesty under R.A. No. 9480 was proper. The law grants immunity from payment of taxes and civil, criminal, and administrative penalties for taxable year 2005 and prior years. The exception under Section 8(f) for “tax cases subject of final and executory judgment by the courts” did not apply because the assessments against La Flor, being void, could not be considered a final and executory judgment. Therefore, La Flor was absolved from paying the deficiency income tax and VAT.
3. On the compromise penalty: The Supreme Court ruled that La Flor was not liable for the compromise penalty. A compromise penalty presupposes the existence of a tax liability. Since the underlying deficiency tax assessments were void and La Flor was absolved from paying them via the tax amnesty, the basis for the compromise penalty disappeared. Furthermore, the CIR failed to present proof that La Flor agreed to the P25,000 compromise penalty.
DISPOSITIVE PORTION: The Petition was GRANTED. The Decision and Resolution of the CTA En Banc were REVERSED and SET ASIDE. The assessments for deficiency taxes and the Warrant of Distraint and/or Levy were declared NULL and VOID.