COMMISSIONER OF INTERNAL G.R. No. 134062
REVENUE,
Petitioner, Present:
PUNO, C.J.,
Chairperson,
SANDOVAL-GUTIERREZ,
- v e r s u s -
AZCUNA
and
GARCIA, JJ.
BANK OF THE PHILIPPINE
ISLANDS,
Respondent. Promulgated:
x- - - - - - - - - - - - - - - - - -
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This is a petition for review on
certiorari[1]
of a decision[2]
of the Court of Appeals (CA) dated
In
two notices dated P129,488,656.63:
1986 – Deficiency Percentage Tax
Deficiency percentage tax P 7, 270,892.88
Add: 25% surcharge 1,817,723.22
20%
interest from
Compromise penalty 15,000.00
TOTAL AMOUNT DUE AND COLLECTIBLE P12,319,441.13
1986 – Deficiency Documentary Stamp Tax
Deficiency percentage tax P93,723,372.40
Add: 25% surcharge 23,430,843.10
Compromise penalty 15,000.00
TOTAL AMOUNT DUE AND COLLECTIBLE P117,169,215.50.[5]
Both
notices of assessment contained the following note:
Please be informed that your [percentage and
documentary stamp taxes have] been assessed as shown above. Said assessment has been based on return –
(filed by you) – (as verified) – (made by this Office) – (pending
investigation) – (after investigation).
You are requested to pay the above amount to this Office or to our
Collection Agent in the Office of the City or Deputy Provincial Treasurer of
xxx[6]
In
a letter dated
1. Your “deficiency assessments” are no
assessments at all. The taxpayer is not
informed, even in the vaguest terms, why it is being assessed a deficiency. The very purpose of a deficiency assessment
is to inform taxpayer why he has incurred a deficiency so that he can make an
intelligent decision on whether to pay or to protest the assessment. This is
all the more so when the assessment involves astronomical amounts, as in this
case.
We
therefore request that the examiner concerned be required to state, even in the
briefest form, why he believes the taxpayer has a deficiency documentary and
percentage taxes, and as to the percentage tax, it is important that the
taxpayer be informed also as to what particular percentage tax the assessment
refers to.
2. As to the alleged deficiency documentary
stamp tax, you are aware of the compromise forged between your office and the
Bankers Association of the
3. As to the alleged deficiency percentage tax,
we are completely at a loss on how such assessment may be protested since your
letter does not even tell the taxpayer what particular percentage tax is
involved and how your examiner arrived at the deficiency. As soon as this is explained and clarified in
a proper letter of assessment, we shall inform you of the taxpayer’s decision
on whether to pay or protest the assessment.[7]
On
… although in all respects, your letter failed to
qualify as a protest under Revenue Regulations No. 12-85 and therefore not
deserving of any rejoinder by this office as no valid issue was raised against
the validity of our assessment… still we obliged to explain the basis of the
assessments.
xxx xxx xxx
… this constitutes the final decision of this office
on the matter.[8]
On
On
On appeal, the CA reversed the tax court’s decision
and resolution and remanded the case to the CTA[14] for a
decision on the merits.[15] It ruled that the
This petition raises the following issues:
1)
whether or not the assessments issued to BPI for
deficiency percentage and documentary stamp taxes for 1986 had already become
final and unappealable and
2)
whether or not BPI was liable for the said
taxes.
The former Section 270[18] (now
renumbered as Section 228) of the NIRC stated:
Sec. 270. Protesting of assessment. — When the [CIR]
or his duly authorized representative finds that proper taxes should be
assessed, he shall first notify the taxpayer of his findings. Within a
period to be prescribed by implementing regulations, the taxpayer shall be
required to respond to said notice. If the taxpayer fails to respond, the [CIR]
shall issue an assessment based on his findings.
xxx xxx xxx (emphasis supplied)
Were the
Notices Valid Assessments?
The first issue for our resolution is whether or
not the
The CIR argues that the CA erred in holding that
the
BPI counters that due process demanded that the facts, data and law upon which the assessments were based be provided to the taxpayer. It insists that the NIRC, as worded now (referring to Section 228), specifically provides that:
“[t]he taxpayer shall be informed in writing of the law and the facts on
which the assessment is made; otherwise, the assessment shall be void.”
According
to BPI, this is declaratory of what sound tax procedure is and a confirmation
of what due process requires even under the former Section 270.
BPI’s contention has no merit. The present Section 228 of the NIRC provides:
Sec. 228. Protesting of Assessment. — When the [CIR]
or his duly authorized representative finds that proper taxes should be
assessed, he shall first notify the taxpayer of his findings: Provided,
however, That a preassessment notice shall not be
required in the following cases:
xxx xxx xxx
The taxpayer shall be
informed in writing of the law and the facts on which the assessment is made;
otherwise, the assessment shall be void.
xxx xxx xxx (emphasis
supplied)
Admittedly, the CIR did not inform
BPI in writing of the law and facts on which the assessments of the deficiency
taxes were made. He merely notified BPI of his findings, consisting only of the
computation of the tax liabilities and a demand for payment thereof within 30
days after receipt.
In merely notifying BPI of his findings,
the CIR relied on the provisions of the former Section 270 prior to its
amendment by RA 8424 (also known as the Tax Reform Act of 1997).[23] In CIR v. Reyes,[24]
we held that:
In the present case, Reyes was not informed in writing of
the law and the facts on which the assessment of estate taxes had been made.
She was merely notified of the findings by the CIR, who had simply relied upon
the provisions of former Section 229 prior
to its amendment by [RA] 8424, otherwise known as the Tax Reform Act of 1997.
First, RA 8424 has already
amended the provision of Section 229 on protesting an assessment. The old
requirement of merely notifying the taxpayer of the CIR's
findings was changed in 1998 to informing the taxpayer of not only
the law, but also of the facts on which an assessment would be made; otherwise,
the assessment itself would be invalid.
It was on
Accordingly, when the assessments were
made pursuant to the former Section 270, the only requirement was for the CIR to
“notify” or inform the taxpayer of his “findings.” Nothing in the old law required a written
statement to the taxpayer of the law and facts on which the assessments were
based. The Court cannot read into the law what obviously was not intended by
Congress. That would be judicial
legislation, nothing less.
Jurisprudence,
on the other hand, simply required that the assessments contain a computation
of tax liabilities, the amount the taxpayer was to pay and a demand for payment
within a prescribed period.[26] Everything considered, there was no doubt the
The
sentence
[t]he taxpayers shall be informed in writing of the
law and the facts on which the assessment is made; otherwise, the assessment
shall be void
was not in the
old Section 270 but was only later on inserted in the renumbered Section 228 in
1997. Evidently, the legislature saw the need to modify the former Section 270
by inserting the aforequoted sentence.[27]
The fact that the amendment was necessary showed that, prior to the
introduction of the amendment, the statute had an entirely different meaning.[28]
Contrary
to the submission of BPI, the inserted sentence in the renumbered Section 228
was not an affirmation of what the law required under the former Section
270. The amendment introduced by RA 8424
was an innovation and could not be reasonably inferred from the old law.[29] Clearly, the legislature intended to
insert a new provision regarding the form and substance of assessments issued
by the CIR.[30]
In ruling that the
xxx. Elementary concerns of due
process of law should have prompted the [CIR] to inform [BPI] of the legal and
factual basis of the former’s decision to charge the
latter for deficiency documentary stamp and gross receipts taxes.[31]
In other words, the CA’s theory was that BPI was
deprived of due process when the CIR failed to inform it in writing of the
factual and legal bases of the assessments —even if these were not called for
under the old law.
We disagree.
Indeed, the underlying reason for the law was the basic constitutional requirement that “no person shall be deprived of his property without due process of law.”[32] We note, however, what the CTA had to say:
xxx xxx xxx
From the foregoing testimony, it can be safely adduced that not only was [BPI] given the opportunity to discuss with the [CIR] when the latter issued the former a Pre-Assessment Notice (which [BPI] ignored) but that the examiners themselves went to [BPI] and "we talk to them and we try to [thresh] out the issues, present evidences as to what they need." Now, how can [BPI] and/or its counsel honestly tell this Court that they did not know anything about the assessments?
Not only that. To further
buttress the fact that [BPI] indeed knew beforehand the assessments[,] contrary
to the allegations of its counsel[,] was the testimony of Mr. Jerry Lazaro, Assistant Manager of the Accounting Department of
[BPI]. He testified to the fact that he prepared worksheets which contain his
analysis regarding the findings of the [CIR’s]
examiner, Mr. San Pedro and that the same worksheets were presented to Mr.
Carlos Tan, Comptroller of [BPI].
xxx xxx xxx
From all the foregoing discussions, We can now conclude
that [BPI] was indeed aware of the nature and basis of the assessments, and was
given all the opportunity to contest the same but ignored it despite the notice
conspicuously written on the assessments which states that "this
ASSESSMENT becomes final and unappealable if not
protested within 30 days after receipt." Counsel resorted to dilatory
tactics and dangerously played with time. Unfortunately, such strategy proved
fatal to the cause of his client.[33]
The CA never disputed these findings of fact by the CTA:
[T]his Court recognizes that the
[CTA], which by the very nature of its function is dedicated exclusively to the
consideration of tax problems, has necessarily developed an expertise on the
subject, and its conclusions will not be overturned unless there has been an
abuse or improvident exercise of authority. Such findings can only be disturbed
on appeal if they are not supported by substantial evidence or there is a
showing of gross error or abuse on the part of the [CTA].[34]
Under the former Section 270, there were two
instances when an assessment became final and unappealable:
(1) when it was not protested within 30 days from receipt and (2) when the adverse
decision on the protest was not appealed to the CTA within 30 days from receipt
of the final decision:[35]
Sec. 270. Protesting of assessment.
xxx xxx xxx
Such assessment may be
protested administratively by filing a request for reconsideration or
reinvestigation in such form and manner as may be prescribed by the
implementing regulations within thirty (30) days from receipt of the
assessment; otherwise, the assessment shall become final and unappealable.
If the protest is denied in whole or in part, the individual, association or corporation adversely affected by the decision on the protest may appeal to the [CTA] within thirty (30) days from receipt of the said decision; otherwise, the decision shall become final, executory and demandable.
Implications Of A
Valid Assessment
Considering that the
The inevitable conclusion is that BPI’s failure to protest the assessments within the 30-day
period provided in the former Section 270 meant that they became final and unappealable. Thus, the
CTA correctly dismissed BPI’s appeal for lack of
jurisdiction. BPI was, from then on, barred from disputing the correctness of
the assessments or invoking any defense that would reopen the question of its
liability on the merits.[37] Not
only that. There arose a presumption of correctness when BPI failed to protest
the assessments:
Tax assessments by tax
examiners are presumed correct and made in good faith. The taxpayer has the
duty to prove otherwise. In the absence
of proof of any irregularities in the performance of duties, an assessment duly
made by a Bureau of Internal Revenue examiner and approved by his superior
officers will not be disturbed. All
presumptions are in favor of the correctness of tax assessments.[38]
Even if we considered the
… the [CIR] should always indicate to the taxpayer in
clear and unequivocal language whenever his action on an assessment questioned
by a taxpayer constitutes his final determination on the disputed assessment,
as contemplated by Sections 7 and 11 of [RA 1125], as amended. On the basis
of his statement indubitably showing that the Commissioner's communicated
action is his final decision on the contested assessment, the aggrieved
taxpayer would then be able to take recourse to the tax court at the opportune
time. Without needless difficulty, the taxpayer would be able to determine when
his right to appeal to the tax court accrues.
The rule of conduct would also
obviate all desire and opportunity on the part of the taxpayer to continually
delay the finality of the assessment — and, consequently, the collection of the
amount demanded as taxes — by repeated requests for recomputation
and reconsideration.
On the part of the [CIR], this would encourage his office to conduct a careful
and thorough study of every questioned assessment and render a correct and
definite decision thereon in the first instance. This would also deter the
[CIR] from unfairly making the taxpayer grope in the dark and speculate as to
which action constitutes the decision appealable to
the tax court. Of greater import, this rule of conduct would meet a pressing
need for fair play, regularity, and orderliness in administrative action.[39] (emphasis supplied)
Either way (whether or not a protest was made), we cannot absolve BPI of its liability under the subject tax assessments.
We realize that these assessments (which have been pending for almost 20 years) involve a considerable amount of money. Be that as it may, we cannot legally presume the existence of something which was never there. The state will be deprived of the taxes validly due it and the public will suffer if taxpayers will not be held liable for the proper taxes assessed against them:
Taxes are the lifeblood of the
government, for without taxes, the government can neither exist nor endure. A
principal attribute of sovereignty, the exercise of taxing power derives its
source from the very existence of the state whose social contract with its
citizens obliges it to promote public interest and common good. The theory
behind the exercise of the power to tax emanates from necessity; without taxes,
government cannot fulfill its mandate of promoting the general welfare and
well-being of the people.[40]
WHEREFORE, the petition is hereby GRANTED.
The
SO
ORDERED.
Associate Justice
WE CONCUR:
Chief Justice
Chairperson
ANGELINA SANDOVAL-GUTIERREZ
Associate Justice
|
ADOLFO S. AZCUNA
Associate Justice
|
CANCIO C. GARCIA
Pursuant to
Section 13, Article VIII of the Constitution, I certify that the conclusions in
the above decision had been reached in consultation before the case was
assigned to the writer of the opinion of the Court’s Division.
REYNATO S. PUNO
[1] Under Rule 45 of the Rules of Court.
[2] Penned by Associate Justice Emeterio C. Cui (retired) and concurred in by Associate
Justices Ramon U. Mabutas, Jr. (retired) and Hilarion L. Aquino (retired) of
the Second Division of the Court of Appeals; rollo,
pp. 40-46. Under RA 9282, effective
[3] Penned by Associate Judge Ramon O. De Veyra (retired) and concurred in by Presiding Judge Ernesto D. Acosta and Associate Judge Manuel K. Gruba (deceased) of the old CTA; id., pp. 47-69.
[4]
[5]
[6]
[7]
[8]
[9]
[10]
[11]
[12]
Sec. 7. Jurisdiction
— The [CTA] shall exercise exclusive appellate jurisdiction to review by appeal
as herein provided —
(1) Decisions of the Collector (now Commissioner) of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties imposed in relation thereto, or other matters arising under the [NIRC] or other law or part of law administered by the Bureau of Internal Revenue; xxx
Sec. 11. Who may appeal; effect of appeal. — Any person, association or corporation adversely affected by a decision or ruling of the Collector (now Commissioner) of Internal Revenue, the Collector of Customs or any provincial or city Board of Assessment Appeals may file an appeal in the [CTA] within thirty days after the receipt of such decision or ruling.
[13]
[14]
[15]
[16]
[17]
[18] People v. Sandiganbayan
(G.R. No. 152532,
“Sec. 229 was originally
found in the [National Internal Revenue Code (NIRC)] of 1977, which was
codified by and made an integral part of Presidential Decree (PD) No. 1158,
otherwise known as ‘A Decree to Consolidate and Codify all the Internal Revenue
Laws of the
When the NIRC of 1977 was amended by PD 1705 on
At present, Sec. 229 has been amended as Sec. 228 by RA 8424, otherwise known as the ‘Tax Reform Act of 1997.’”
[19] FAS-4-86-88-003209 and FAS-5-86-88-003210; id., p. 72.
[20]
[21]
[22]
[23] Sec. 270 was renumbered Sec. 229 before it was amended and became Sec. 228; supra note 18.
[24]
G.R. No. 159694,
[25]
[26]
Tupaz
v. Ulep, G.R. No. 127777,
[27] See Commissioner v. Court
of Tax Appeals, G.R. Nos. L-48886-88,
[28] Palanca
v. City of
[29] See Pioneer Texturizing Corp. v. NLRC, 345 Phil. 1057, 1072 (1997).
[30]
[31] Rollo, p. 43.
[32] Constitution, Art. III, Sec. 1.
[33] Rollo, pp. 62-65, citations omitted.
[34] Barcelon,
Roxas Securities, Inc. (now known as UBP Securities,
Inc.) v. Commissioner of Internal Revenue, G.R. No. 157064,
[35] Rollo, pp. 51-52.
[36] Supra note 7.
[37] Republic v. Court of Appeals,
G.R. No. L-38540,
[38] Sy
Po v. Court of Appeals, G.R. No. L-81446,
[39] Oceanic Wireless Network, Inc. v.
Commission of Internal Revenue, G.R. No. 148380, 9 December 2005, 477 SCRA
205, 211-212, citing Surigao Electric Co.,
Inc. v. Court of Tax Appeals, G.R. No. L-25289,
[40] National Power Corporation v.
City of Cabanatuan, G.R. No. 149110,