Asiatrust Development Bank, Inc. vs. Commissioner of Internal Revenue

An application for a tax abatement is considered approved only upon the issuance of a termination letter by the Bureau of Internal Revenue (BIR); without such a letter, a tax assessment is not considered closed and terminated. Furthermore, an appeal of a CTA Division's decision (including an amended decision) to the CTA En Banc requires a prior and timely-filed motion for reconsideration, the absence of which is a fatal procedural defect that warrants dismissal of the appeal.

The Commissioner of Internal Revenue assessed Asiatrust for deficiency internal revenue taxes for the fiscal years 1996, 1997, and 1998. Asiatrust protested the assessments, and upon the CIR's inaction, elevated the matter to the Court of Tax Appeals. During the proceedings, Asiatrust claimed it had settled its liabilities by availing of various government tax relief programs, including a compromise on certain taxes, a tax abatement program for its deficiency final withholding tax, and the 2007 Tax Amnesty Law for its deficiency documentary stamp tax. The core dispute centered on whether Asiatrust had sufficiently proven its availment of these programs to extinguish the assessed tax liabilities.

• In February 2000, Asiatrust received Formal Letters of Demand with Assessment Notices from the CIR for deficiency taxes for fiscal years 1996, 1997, and 1998.
• Asiatrust protested the assessments, and due to the CIR's inaction, it filed a Petition for Review with the CTA.
• During the proceedings, Asiatrust claimed it availed of the Tax Abatement Program for its deficiency final withholding tax for fiscal year 1998 by paying the basic tax amount of P6,097,825.03 on June 29, 2007.
• To prove its availment of the abatement program, Asiatrust presented a BIR Certification, BIR Tax Payment Deposit Slips, and a letter from a Revenue District Officer (RDO), but it failed to present a termination letter from the BIR.
• The CTA Division and subsequently the CTA En Banc ruled that without a termination letter, Asiatrust's availment of the tax abatement program was not proven, and thus its liability for the deficiency final withholding tax for 1998 remained.
• The CTA Division issued an Amended Decision which found Asiatrust entitled to the immunities of the Tax Amnesty Law for other assessments, which the CIR sought to appeal directly to the CTA En Banc without first filing a motion for reconsideration.
• The CTA En Banc dismissed the CIR's appeal for being procedurally infirm due to the lack of a prior motion for reconsideration.

• Asiatrust argued that the CTA En Banc erred in affirming its deficiency final withholding tax assessment for 1998, contending that the BIR Certification and payment slips were sufficient proof of its availment of the Tax Abatement Program, especially given the CIR's unjustifiable refusal to issue a termination letter.
• Asiatrust claimed that affirming the assessment would amount to double taxation, as it had already paid the basic tax.
• Asiatrust also argued that the CTA should have relaxed procedural rules regarding the formal offer of evidence.
• The CIR argued that the CTA En Banc erred in dismissing its appeal on procedural grounds, claiming that the Amended Decision was a mere resolution that did not require a motion for reconsideration.
• The CIR also contended that Asiatrust was not entitled to tax amnesty because it failed to submit its Income Tax Returns (ITRs).

• The CIR, as respondent, argued that the BIR Certification did not cover the fiscal year 1998 and that the other documents presented by Asiatrust were insufficient to prove a valid availment of the Tax Abatement Program.
• Asiatrust, as respondent, countered that the CTA En Banc correctly dismissed the CIR's appeal because an Amended Decision is a new decision that requires a prior motion for reconsideration for an appeal to prosper.
• Asiatrust insisted that the Tax Amnesty Law only requires the submission of a Statement of Assets, Liabilities and Networth (SALN), not ITRs.

• Procedural Issues:
  • Whether the CTA En Banc erred in dismissing the CIR's petition for review on the ground that the CIR failed to file a motion for reconsideration of the CTA Division's Amended Decision.
• Substantive Issues:
  • Whether Asiatrust is liable for deficiency final withholding tax for the fiscal year ending June 30, 1998.
  • Whether Asiatrust's presentation of a BIR Certification and proof of payment, in the absence of a BIR-issued termination letter, is sufficient to prove its valid availment of the Tax Abatement Program.
  • Whether the affirmance of the deficiency tax assessment constitutes double taxation.

• Procedural:
  • The petition of the CIR was denied. The Supreme Court affirmed the CTA En Banc's dismissal of the CIR's appeal. The filing of a motion for reconsideration of a decision or resolution of the CTA Division is a mandatory prerequisite for an appeal to the CTA En Banc. An amended decision is considered a new decision, not a mere resolution, and is therefore a proper subject of a motion for reconsideration. The CIR's failure to file the required motion was a fatal procedural lapse that rendered the Amended Decision final and executory as to the CIR.
• Substantive:
  • The petition of Asiatrust was denied. The Court affirmed the CTA En Banc's ruling that Asiatrust is liable for the deficiency final withholding tax for 1998. The governing revenue regulation on tax abatement explicitly requires the issuance of a termination letter as the final step to consider an assessment closed and terminated. Asiatrust's failure to present this letter was fatal to its claim. The documents it submitted only proved payment, which, without an approved abatement, would simply be applied to its outstanding liability. The argument of double taxation was dismissed because the payment of the basic tax is merely credited against the still-valid assessment, not a second payment of a settled obligation.

• Primacy of the Termination Letter in Tax Abatement — Based on Revenue Regulations No. 15-06, the final and essential proof that a taxpayer's application for tax abatement has been approved is the issuance of a Termination Letter by the BIR. Without this document, a tax assessment cannot be considered closed and terminated, even if the taxpayer has already paid the basic tax due.
• Mandatory Nature of Motion for Reconsideration in Tax Appeals — Under Section 1, Rule 8 of the Revised Rules of the CTA, an appeal to the CTA En Banc from a decision of a CTA Division must be preceded by a timely motion for reconsideration or new trial. The word "must" indicates that this requirement is mandatory, and failure to comply is a valid ground for the dismissal of the appeal. This rule applies equally to an amended decision, which is treated as a new decision.

• "An application for tax abatement is deemed approved only upon the issuance of a termination letter by the Bureau of Internal Revenue (BIR)."
• "Based on the guidelines, the last step in the tax abatement process is the issuance of the termination letter. The presentation of the termination letter is essential as it proves that the taxpayer's application for tax abatement has been approved. Thus, without a termination letter, a tax assessment cannot be considered closed and terminated."
• "Failure to do so is a ground for the dismissal of the appeal as the word 'must' indicates that the filing of a prior motion is mandatory, and not merely directory."

• CE Luzon Geothermal Power Company, Inc. v. Commissioner of Internal Revenue — Cited to establish the principle that an amended decision is a distinct decision, not a mere resolution, and is therefore a proper subject of a motion for reconsideration before an appeal can be taken to the CTA En Banc.
• Commissioner of Customs v. Marina Sales, Inc. — Referenced to support the legal principle that procedural rules are not to be trifled with and must be followed, and may only be relaxed for the most persuasive and compelling reasons.

• Section 204(B) of the 1997 National Internal Revenue Code (NIRC) — This provision grants the CIR the authority to abate or cancel a tax liability, which serves as the legal basis for the tax abatement program availed of by the taxpayer.
• Revenue Regulations (RR) No. 15-06, Section 4 — This regulation outlines the procedure for the one-time administrative abatement program and was cited by the Court to establish that the issuance of a Termination Letter is the final step that concludes the process.
• Revised Rules of the Court of Tax Appeals, Rule 8, Section 1 — This procedural rule was the basis for dismissing the CIR's appeal, as it mandatorily requires the filing of a motion for reconsideration before the CTA Division prior to elevating a case to the CTA En Banc.
• Revised Rules of the Court of Tax Appeals, Rule 14, Section 3 — This rule, which defines an "amended decision," was used to defeat the CIR's argument that its appeal did not require a prior motion for reconsideration.