CIR vs.

Liquigaz Philippines Corporation

GR No. 215534/215557; April 18, 2016

[Assessment of internal revenue taxes > Procedural due process in tax assessments > Appeal from an administrative decision on disputed assessment]

FACTS: Liquigaz Philippines Corporation (Liquigaz) is a corporation duly organized and existing under
Philippine laws. After receiving a Letter of Authority from the CIR which authorized the investigation of all
its internal revenue taxes for taxable year 2005 and a Notice of Informal Conference, it received its
Preliminary Assessment Notice (PAN) where Liquigaz was initially assessed with deficiency withholding
tax liabilities. Thereafter, Liquigaz received a Formal Letter of Demand (FLD) or Formal Assessment
Notice (FAN) where the total deficiency withholding tax liabilities amounted to P24.3 Million.

Liquigaz filed its protest against the FAN. Years later, it received a copy of the Final Decision on Disputed
Assessment (FDDA) covering the LOA for the taxable year 2005. It stated that the CIR still found Liquigaz
liable for P22.3 Million.

Consequently, Liquigaz filed a Petition for Review before the CTA Division assailing the FDDA.

CTA Division: partially granted the petition cancelled the EWT and FBT assessment but affirmed with
modification the WTC; held that the portion relating to EWT and FBT were void in violation of Section 228,
NIRC, as implemented by RR 12-99. Moreover, unlike the PAN and FAN, the FDDA did not provide the
details thereof, hence, Liquigaz had no way of knowing what items were considered by CIR in arriving at
the deficiency assessments; and that while the legal bases for the EWT and FBT assessment were stated
in the FDDA, the taxpayer was not notified of the factual bases thereof, as required in Sec. 228.

CTA en banc: affirmed the decision of the CTA Division reiterating that the requirement that the taxpayer
should be informed in writing of the law and the facts on which the assessment was made applies to the
FDDA — otherwise the assessment would be void.

ISSUE/S: When may a Final Decision on Disputed Assessment (FDDA) be declared void, and in the
event that the FDDA is found void, what would be its effect on the tax assessment

RULING:
The use of the word "shall" in Section 228 of the NIRC and in RR No. 12-99 indicates that the
requirement of informing the taxpayer of the legal and factual bases of the assessment and the decision
made against him is mandatory. The requirement of providing the taxpayer with written notice of the
factual and legal bases applies both to the FLD/FAN and the FDDA.

A void FDDA does not ipso facto render the assessment void
A “decision” differs from an “assessment” and failure of the FDDA to state the facts and law on which it is
based renders the decision void, but not the assessment.

The FDDA must contain the facts, law and rules on which the assessment is based. This is the same rule
applied for the assessment itself although it is clear that the assessment and the decision are two distinct
documents. The rationale for the requirement imposed on the assessment is to accord due process to the
taxpayer to be able to file an intelligent protest. On the other hand, if the FDDA itself does not conform to
the requirements, the same is void and thus constitutes inaction or as if no decision was rendered. The
effect therefore is that what is appealable to the CTA is the inaction of the CIR, or his duly authorized
representative.