The Supreme Court ruled that First Express Pawnshop Company (FEPC) cannot be said to have failed to submit relevant supporting documents within 60 days of filing their protest against tax assessments issued by the Commissioner of Internal Revenue. FEPC timely submitted their protest along with supporting documents like a General Information Sheet and Balance Sheet. The Court found that FEPC complied with requirements under Section 228 of the Tax Code to dispute an assessment, so the assessment did not become final. Additionally, the Court ruled that FEPC's deposits on stock subscriptions were not subject to deficiency documentary stamp tax.
The Supreme Court ruled that First Express Pawnshop Company (FEPC) cannot be said to have failed to submit relevant supporting documents within 60 days of filing their protest against tax assessments issued by the Commissioner of Internal Revenue. FEPC timely submitted their protest along with supporting documents like a General Information Sheet and Balance Sheet. The Court found that FEPC complied with requirements under Section 228 of the Tax Code to dispute an assessment, so the assessment did not become final. Additionally, the Court ruled that FEPC's deposits on stock subscriptions were not subject to deficiency documentary stamp tax.
The Supreme Court ruled that First Express Pawnshop Company (FEPC) cannot be said to have failed to submit relevant supporting documents within 60 days of filing their protest against tax assessments issued by the Commissioner of Internal Revenue. FEPC timely submitted their protest along with supporting documents like a General Information Sheet and Balance Sheet. The Court found that FEPC complied with requirements under Section 228 of the Tax Code to dispute an assessment, so the assessment did not become final. Additionally, the Court ruled that FEPC's deposits on stock subscriptions were not subject to deficiency documentary stamp tax.
Submission of Relevant Documents/ 60-day period subscription but affirmed the VAT deficiency
assessment except the imposition of compromise
G.R. Nos. 172045-46 June 16, 2009 penalty in the absence of showing that petitioner consented thereto and ordered its payment. COMMISSIONER OF INTERNAL REVENUE, Petitioner, On Petition for Review, CTA En Banc vs. promulgated a Decision affirming respondent’s FIRST EXPRESS PAWNSHOP COMPANY, liability to pay the VAT and ordering it to pay INC., Respondent. DST on its pawnshop tickets. However, the CTA Facts: En Banc found that respondent’s deposit on subscription was not subject to DST. Petitioner issued assessment notices against First Express Pawnshop Company, Inc. for alleged Aggrieved by the CTA En Banc’s Decision which deficiency IT, VAT, DST on deposit on ruled that respondent’s deposit on subscription subscription and DST on pawn tickets. FEPC was not subject to DST, petitioner elevated the received the assessment notices and consequently case before the Supreme Court where it filed its written protest on the above assessments. contended that CTA erred in disregarding the Since petitioner did not act on the protest during rule on the finality of assessments prescribed the 180-day period, respondent filed a petition under Section 228 of the Tax Code. It averred before the CTA. among others, that respondent’s failure to submit supporting documents within 60 days from the FEPC contended that petitioner did not consider filing of its protest as required under Section 228 the supporting documents on the interest of the Tax Code caused the assessment of expenses and donations which resulted in the ₱12,328.45 for deposit on subscription to become deficiency income tax. It maintained that final and unassailable. pawnshops are not lending investors whose services are subject to VAT, hence it was not Issue: WON the alleged failure of FEPC to liable for deficiency VAT. It also alleged that no submit supporting documents within 60 days deficiency DST was due because Section 180 of from the filing of its protest render the the National Internal Revenue Code (Tax Code) assessment final and unappealable. does not cover any document or transaction Ruling: which relates to respondent. Respondent also argued that the issuance of a pawn ticket did not No. The Court ruled that respondent cannot be constitute a pledge under Section 195 of the Tax said to have failed in submitting the required Code. documents within 60 days that would render the assessment final because when respondent On the other side, Petitioner alleged that the submitted its protest, respondent attached the GIS assessment was valid and correct and the and Balance Sheet. taxpayer had the burden of proof to impugn its validity or correctness. Petitioner maintained that As part of ensuring due process is afforded to the respondent is subject to 10% VAT based on its taxpayer, Section 228 of the Tax Code provides gross receipts and that pawnshop tickets are the remedy to dispute a tax assessment within a subject to DST. certain period of time. He is given opportunity to protest the assessment administratively by filing On 1 July 2003, respondent paid ₱27,744.88 as a request for reconsideration or reinvestigation deficiency income tax inclusive of interest. within thirty (30) days from receipt of the After trial on the merits, the CTA First Division assessment in such form and manner as may be cancelled the assessments for deficiency DST on prescribed by implementing rules and both pawnshop tickets and deposits on regulations. Within sixty (60) days from filing of the protest, all relevant supporting documents shall have been submitted; otherwise, the assessment shall become final.
If the protest is denied in whole or in part, or is
not acted upon within one hundred eighty (180) days from submission of documents, the taxpayer adversely affected by the decision or inaction may appeal to the Court of Tax Appeals within thirty (30) days from receipt of the said decision, or from the lapse of the one hundred eighty (180)- day period; otherwise, the decision shall become final, executory and demandable.
In this case, respondent received the tax
assessment on 3 January 2002 and timely submitted its protest and attached the GIS and Balance Sheet as of 31 December 1998. Within 60 days from the filing of protest or until 2 April 2002, respondent should submit relevant supporting documents. Respondent, having submitted the supporting documents together with its protest, did not present additional documents anymore.
Petitioner subsequently requested respondent to
present proof of payment of DST on subscription. Respondent replied that it could not produce any proof of DST payment because it was not required to pay DST under the law considering that the deposit on subscription was an advance made by its stockholders for future subscription, and no stock certificates were issued.
Above-considered, the Court ruled that it cannot
be said that respondent failed to submit relevant supporting documents and has complied with the requisites in disputing an assessment pursuant to Section 228 of the Tax Code. Hence, the tax assessment cannot be considered as final, executory and demandable. Further, respondent’s deposit on subscription is not subject to the payment of DST. Consequently, respondent is not liable to pay the deficiency DST of ₱12,328.45.