Asian Transmission Corporation vs. Commissioner of Internal Revenue,
G.R. No. 230861, February 14, 2022
Facts:
1. On the strength of a Letter of Authority dated August 9, 2004, the BIR commenced its audit and investigation of ATC's books of account and other accounting records pertaining to taxable year 2002,
2. CIR right to assess ATC for the relevant taxes was due to prescribe in the first quarter of 2006. However, the Waivers' execution extended until December 31, 2018.
3. In its administrative protest, ATC raised only two main objections: first, the BIR violated ATC's right to due process and second, the BIR's details of discrepancies in the Formal Letter of Demand.
4. Subsequently, the ATC proceeded to file a judicial protest before the CTA where it introduced the following arguments: first, the LOA became invalid due to lack of revalidation; and second, the first, second, and third Waivers were defective; thus, these did not validly extend the assessment period.
5. CTA Second Division: ruled in ATC's favor and canceled the tax assessments on account of prescription.
6. CTA En Banc reinstated the assessments and remanded the case to the CTA Division for further proceedings to determine ATC's tax liability.
7. SC: The Court explained that ATC benefited from the Waivers. They are estopped from assailing its validity. Thus, the CTA En Banc was correct in applying the equitable principles of in pari delicto, unclean hands, and estoppel.
8. Hence, this present motion for reconsideration.
Issue:
Whether or not taxpayer's belated action on questioning the waivers validity will render effective an otherwise flawed waiver
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Ruling:
Yes. If a waiver suffers from defects on account of both parties, the waiver's validity in relation to the timeliness of the CIR's subsequent issuance of a tax assessment is not determined by a mere plurality of the defects committed between the BIR and the taxpayer.
Relevant jurisprudence reveals that the taxpayer's contributory fault or negligence coupled with estoppel will render effective an otherwise flawed waiver, regardless of the physical number of mistakes attributable to a party.
In other words, while a waiver may have been deficient in formalities, the taxpayer's belated action on questioning its validity tilts the scales in favor of the tax authorities.
It is no longer disputed that the subject defects were the result of both parties failure to observe diligence in performing what is incumbent upon them, respectively, relative to the execution of a valid waiver, particularly the requirements outlined in applicable BIR issuances. That the defects attributable to one party had been greater in number cannot diminish the seriousness of the counter-party's fault or negligence.
ATC issued eight successive Waivers over the course of four years (2004-2008). The Waivers had always been marred by defects and, yet, ATC continued to correspond with the tax authorities and allowed them to proceed with their investigation, as extended by the Waivers in question.
When the CIR issued the FLD, ATC did not question the Waivers' validity. It raised this argument for the first time in its appeal to the CTA, after obtaining an unfavorable CIR decision on their administrative protest.
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