Republic of
the
Supreme
Court
SECOND DIVISION
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ALLIED BANKING |
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G.R. No. 175097 |
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CORPORATION, |
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Petitioner, |
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Present: |
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CARPIO, J., Chairperson, |
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- versus - |
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BRION, |
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ABAD, and |
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PEREZ, JJ. |
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COMMISSIONER OF |
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INTERNAL REVENUE, |
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Promulgated: |
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Respondent. |
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February 5, 2010 |
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D E C I S I O N
The key to effective communication is clarity.
The Commissioner
of Internal Revenue (CIR) as well as his duly authorized representative must indicate
clearly and unequivocally to the taxpayer whether an action constitutes a final
determination on a disputed assessment.[1]
Words must be carefully chosen in order
to avoid any confusion that could adversely affect the rights and interest of
the taxpayer.
Assailed in this
Petition for Review on Certiorari[2]
under Section 12 of Republic Act (RA) No. 9282,[3]
in relation to Rule 45 of the Rules of Court, are the August 23, 2006 Decision[4]
of the Court of Tax Appeals (CTA) and its October 17, 2006 Resolution[5]
denying petitioner’s Motion for Reconsideration.
Factual
Antecedents
On April 30,
2004, the Bureau of Internal Revenue (BIR) issued a Preliminary Assessment
Notice (PAN) to petitioner Allied Banking Corporation for deficiency Documentary
Stamp Tax (DST) in the amount of P12,050,595.60 and Gross Receipts Tax (GRT)
in the amount of P38,995,296.76 on industry issue for the taxable year
2001.[6]
Petitioner received the PAN on
On
It is requested that the above deficiency tax be
paid immediately upon receipt hereof, inclusive of penalties incident to
delinquency. This is our final decision
based on investigation. If you disagree,
you may appeal the final decision within thirty (30) days from receipt hereof,
otherwise said deficiency tax assessment shall become final, executory and
demandable.
Petitioner
received the Formal Letter of Demand with Assessment Notices on
Proceedings
before the CTA First Division
On
On
On
Clearly, it is neither the assessment nor the
formal demand letter itself that is appealable to this Court. It is the
decision of the Commissioner of Internal Revenue on the disputed assessment that
can be appealed to this Court (Commissioner of Internal Revenue vs. Villa, 22
SCRA 3). As correctly pointed out by
respondent, a disputed assessment is one wherein the taxpayer or his duly
authorized representative filed an administrative protest against the formal
letter of demand and assessment notice within thirty (30) days from date [of]
receipt thereof. In this case,
petitioner failed to file an administrative protest on the formal letter of
demand with the corresponding assessment notices. Hence, the assessments did
not become disputed assessments as subject to the Court’s review under Republic
Act No. 9282. (See also Republic v. Liam Tian Teng Sons & Co., Inc.,
16 SCRA 584.)
WHEREFORE, the Motion to Dismiss is GRANTED. The Petition for
Review is hereby DISMISSED for lack
of jurisdiction.
SO
ORDERED.[16]
Aggrieved, petitioner
moved for reconsideration but the motion was denied by the First Division in its
Resolution dated
Proceedings
before the CTA En Banc
On
Finding no reversible error in the Resolutions dated
The CTA En
Banc declared that it is absolutely necessary for the taxpayer to file an
administrative protest in order for the CTA to acquire jurisdiction. It emphasized that an administrative protest
is an integral part of the remedies given to a taxpayer in challenging the
legality or validity of an assessment. According
to the CTA En Banc, although there are exceptions to the doctrine of
exhaustion of administrative remedies, the instant case does not fall in any of
the exceptions.
Issue
Hence, the
present recourse, where petitioner raises the lone issue of whether the Formal
Letter of Demand dated
Our Ruling
The petition is meritorious.
Section 7 of RA 9282 expressly
provides that the CTA exercises exclusive appellate jurisdiction to review by
appeal decisions of the CIR in cases involving disputed assessments
The CTA, being a
court of special jurisdiction, can take cognizance only of
matters that are
clearly within its jurisdiction.[21] Section 7 of RA 9282 provides:
Sec. 7. Jurisdiction.
— The CTA shall exercise:
(a) Exclusive
appellate jurisdiction to review by appeal, as herein provided:
(1) Decisions of the Commissioner of Internal
Revenue in cases involving disputed assessments, refunds of internal
revenue taxes, fees or other charges, penalties in relation thereto, or other
matters arising under the National Internal Revenue Code or other laws
administered by the Bureau of Internal Revenue;
(2) Inaction
by the Commissioner of Internal Revenue in cases involving disputed
assessments, refunds of internal revenue taxes, fees or other charges,
penalties in relation thereto, or other matters arising under the National
Internal Revenue Code or other laws administered by the Bureau of Internal
Revenue, where the National Internal Revenue Code provides a specific period of
action, in which case the inaction shall be deemed a denial; (Emphasis supplied)
x x x x
The word “decisions”
in the above quoted provision of RA 9282 has been interpreted to mean the
decisions of the CIR on the protest of the taxpayer against the assessments.[22] Corollary thereto, Section 228 of the
National Internal Revenue Code (NIRC) provides for the procedure for protesting
an assessment. It states:
SECTION 228. Protesting of Assessment. – When
the Commissioner 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:
(a) When the finding for any deficiency tax is the result of
mathematical error in the computation of the tax as appearing on the face of
the return; or
(b) When a discrepancy has been determined between the tax withheld
and the amount actually remitted by the withholding agent; or
(c) When a taxpayer who opted to claim a refund or tax credit of
excess creditable withholding tax for a taxable period was determined to have
carried over and automatically applied the same amount claimed against the
estimated tax liabilities for the taxable quarter or quarters of the succeeding
taxable year; or
(d) When the excise tax due on excisable articles has not been paid;
or
(e) When an article locally purchased or imported by an exempt person,
such as, but not limited to, vehicles, capital equipment, machineries and spare
parts, has been sold, traded or transferred to non-exempt persons.
The taxpayers shall be informed in writing of the
law and the facts on which the assessment is made; otherwise, the assessment
shall be void.
Within a period to be prescribed by implementing
rules and regulations, the taxpayer shall be required to respond to said
notice. If the taxpayer fails to respond, the Commissioner or his duly
authorized representative shall issue an assessment based on his findings.
Such assessment may be protested administratively
by filing a request for reconsideration or reinvestigation within thirty (30)
days from receipt of the assessment in such form and manner as may be
prescribed by implementing rules and 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 the instant
case, petitioner timely filed a protest after receiving the PAN. In response thereto, the BIR issued a Formal
Letter of Demand with Assessment Notices.
Pursuant to Section 228 of the NIRC, the proper recourse of petitioner
was to dispute the assessments by filing an administrative protest within 30
days from receipt thereof. Petitioner,
however, did not protest the final assessment notices. Instead, it filed a Petition for Review with
the CTA. Thus, if we strictly apply the
rules, the dismissal of the Petition for Review by the CTA was proper.
The case is
an exception to the
rule on exhaustion of
administrative remedies
However, a
careful reading of the Formal Letter of Demand with Assessment Notices leads us
to agree with petitioner that the instant case is an exception to the rule on
exhaustion of administrative remedies, i.e., estoppel on the part of the
administrative agency concerned.
In the case of Vda. De Tan v. Veterans Backpay Commission,[23] the respondent
contended that before filing a petition with the court, petitioner should have
first exhausted all administrative remedies by appealing to the Office of the President.
However, we ruled that respondent was
estopped from invoking the rule on exhaustion of administrative remedies considering
that in its Resolution, it said, “The opinions promulgated by the Secretary of
Justice are advisory in nature, which may either be accepted or ignored by the
office seeking the opinion, and any aggrieved party has the court for recourse”.
The statement of the respondent in said
case led the petitioner to conclude that only a final judicial ruling in her
favor would be accepted by the Commission.
Similarly, in
this case, we find the CIR estopped from claiming that the filing of the
Petition for Review was premature because petitioner failed to exhaust all
administrative remedies.
The Formal
Letter of Demand with Assessment Notices reads:
Based on your letter-protest dated
1.
That the said
assessment has already prescribed in accordance with the provisions of Section
203 of the Tax Code.
2.
That since
the exemption of FCDUs from all taxes found in the Old Tax Code has been
deleted, the wording of Section 28(A)(7)(b) discloses that there are no other
taxes imposable upon FCDUs aside from the 10% Final Income Tax.
Contrary to your allegation, the assessments covering GRT and DST for
taxable year 2001 has not prescribed for [sic] simply because no returns were
filed, thus, the three year prescriptive period has not
lapsed.
With the implementation of the CTRP, the phrase
“exempt from all taxes” was deleted.
Please refer to Section 27(D)(3) and 28(A)(7) of the new Tax Code. Accordingly, you were assessed for deficiency
gross receipts tax on onshore income from foreign currency transactions in
accordance with the rates provided under Section 121 of the said Tax Code.
Likewise, deficiency documentary stamp taxes was [sic] also assessed on Loan
Agreements, Bills Purchased, Certificate of Deposits and related transactions
pursuant to Sections 180 and 181 of NIRC, as amended.
The 25% surcharge and 20% interest have been
imposed pursuant to the provision of Section 248(A) and 249(b), respectively,
of the National Internal Revenue Code, as amended.
It is requested that the above deficiency tax be
paid immediately upon receipt hereof, inclusive of penalties incident to
delinquency. This is our final decision based on investigation. If you disagree, you may appeal this final
decision within thirty (30) days from receipt hereof, otherwise said deficiency
tax assessment shall become final, executory and demandable.[24] (Emphasis supplied)
It appears from
the foregoing demand letter that the CIR has already made a final decision on
the matter and that the remedy of petitioner is to appeal the final decision
within 30 days.
In Oceanic Wireless Network, Inc. v.
Commissioner of Internal Revenue,[25] we considered the
language used and the tenor of the letter sent to the taxpayer as the final
decision of the CIR.
In this case, records
show that petitioner disputed the PAN but not the Formal Letter of Demand with
Assessment Notices. Nevertheless, we
cannot blame petitioner for not filing a protest against the Formal Letter of
Demand with Assessment Notices since the language used and the tenor of the demand
letter indicate that it is the final decision of the respondent on the matter. We have time and again reminded the CIR to
indicate, in a clear and unequivocal language, whether his action on a disputed
assessment constitutes his final determination thereon in order for the
taxpayer concerned to determine when his or her right to appeal to the tax
court accrues.[26] Viewed in the light of the foregoing,
respondent is now estopped from claiming that he did not intend the Formal
Letter of Demand with Assessment Notices to be a final decision.
Moreover, we
cannot ignore the fact that in the Formal Letter of Demand with Assessment
Notices, respondent used the word “appeal” instead of “protest”,
“reinvestigation”, or “reconsideration”. Although there was no direct reference
for petitioner to bring the matter directly to the CTA, it cannot be denied
that the word “appeal” under prevailing tax laws refers to the filing of a
Petition for Review with the CTA. As
aptly pointed out by petitioner, under Section 228 of the NIRC, the terms
“protest”, “reinvestigation” and “reconsideration” refer to the administrative
remedies a taxpayer may take before the CIR, while the term “appeal” refers to
the remedy available to the taxpayer before the CTA. Section 9 of RA 9282,
amending Section 11 of RA 1125,[27]
likewise uses the term “appeal” when referring to the action a taxpayer must
take when adversely affected by a decision, ruling, or inaction of the CIR. As
we see it then, petitioner in appealing the Formal Letter of Demand with
Assessment Notices to the CTA merely took the cue from respondent. Besides, any
doubt in the interpretation or use of the word “appeal” in the Formal Letter of
Demand with Assessment Notices should be resolved in favor of petitioner, and
not the respondent who caused the confusion.
To be clear, we
are not disregarding the rules of procedure under Section 228 of the NIRC, as
implemented by Section 3 of BIR Revenue Regulations No. 12-99.[28]
It is the Formal Letter of Demand and
Assessment Notice that must be administratively protested or disputed within 30
days, and not the PAN. Neither are we
deviating from our pronouncement in St.
Stephen’s Chinese Girl’s School v. Collector of Internal Revenue,[29]
that the counting of the 30 days within which to institute an appeal in the CTA
commences from the date of receipt of the decision of the CIR on the disputed
assessment, not from the date the assessment was issued.
What we are
saying in this particular case is that, the Formal Letter of Demand with Assessment
Notices which was not administratively protested by the petitioner can be
considered a final decision of the CIR appealable to the CTA because the words
used, specifically the words “final decision” and “appeal”, taken together led
petitioner to believe that the Formal Letter of Demand with Assessment Notices was
in fact the final decision of the CIR on the letter-protest it filed and that
the available remedy was to appeal the same to the CTA.
We note,
however, that during the pendency of the instant case, petitioner availed of
the provisions of Revenue Regulations No. 30-2002 and its implementing Revenue
Memorandum Order by submitting an offer of compromise for the settlement of the
GRT, DST and VAT for the period 1998-2003, as evidenced by a Certificate of
Availment dated
WHEREFORE, the petition is hereby GRANTED. The assailed
SO
ORDERED.
MARIANO
C.
Associate
Justice
WE
CONCUR:
ANTONIO T. CARPIO
Associate Justice
Chairperson
|
ARTURO D. BRION Associate
Justice |
ROBERTO A. ABAD Associate
Justice |
JOSE P. PEREZ
Associate Justice
ATTESTATION
I
attest 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.
ANTONIO T. CARPIO
Associate Justice
Chairperson, Second Division
C E R T I F I C A T I O N
Pursuant
to Section 13, Article VIII of the Constitution, and the Division Chairperson’s
attestation, it is hereby certified 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
Chief
Justice
[1] Surigao Electric Co., Inc. v. Court of Tax
Appeals, 156 Phil. 517, 522-523 (1974).
[2] Rollo,
pp. 7-21.
[3] An
Act Expanding the Jurisdiction of the Court of Tax Appeals (CTA), Elevating its
Rank to the Level of a Collegiate Court with Special Jurisdiction and Enlarging
its Membership, Amending for the Purpose Certain Sections of Republic Act No.
1125, As Amended, otherwise known as the Law Creating the Court of Tax Appeals,
and for Other Purposes.
[4] Rollo, pp. 23-30; penned by Associate
Justice Erlinda P. Uy and concurred in by Presiding Justice Ernesto D. Acosta,
and Associate Justices Juanito C. Castañeda, Jr., Lovell R. Bautista, and
Caesar A. Casanova. Associate Justice
Olga Palanca-Enriquez inhibited herself and did not take part.
[5]
[6]
[7]
[8]
[9]
[10]
[11]
[12]
[13]
[14]
[15]
[16]
[17]
[18]
[19]
[20]
[21] Rizal Commercial Banking Corporation v.
Commissioner of Internal Revenue,
G.R. No. 168498,
[22] Commissioner of Internal Revenue v. Villa, 130
Phil. 3, 6 (1968).
[23] 105
Phil. 377, 383 (1959).
[24] Rollo, p. 36.
[25] G.R.
No. 148380,
[26] Surigao Electric Co., Inc. v. Court of Tax
Appeals, supra note 1.
[27] Section
11. Who may Appeal; Mode of
Appeal; Effect of Appeal; – Any party adversely affected by a decision,
ruling or inaction of the Commissioner of Internal Revenue, the Commissioner of
Customs, the Secretary of Finance, the
Secretary of Trade and Industry or the Secretary of Agriculture or the Central
Board of Assessment Appeals or the Regional Trial Courts may file an appeal
with the CTA within thirty (30) days after the receipt of such decision or
ruling or after the expiration of the period fixed by law for action as
referred to in Section 7(a) (2) herein.
x x x x
[28] Section
3. Due Process Requirement in the Issuance of a Deficiency Tax Assessment.
–
x
x x x
3.1.2 Preliminary Assessment
Notice (PAN). – If after review and evaluation by the Assessment Division or by
the Commissioner or his duly authorized representative, as the case may be, it
is determined that there exists sufficient basis to assess the taxpayer for any
deficiency tax or taxes, the said Office shall issue to the taxpayer, at least
by registered mail, a Preliminary Assessment Notice (PAN) for the proposed
assessment, showing in detail, the facts and the law, rules and regulations, or
jurisprudence on which the proposed assessment is based. If the taxpayer fails
to respond within fifteen (15) days from date of receipt of the PAN, he shall
be considered in default, in which case, a formal letter of demand and
assessment notice shall be caused to be issued by the said Office, calling for
payment of the taxpayer's deficiency tax liability, inclusive of the applicable
penalties.
x x x x
3.1.4 Formal Letter of Demand and
Assessment Notice. – The formal letter of demand and assessment notice shall be
issued by the Commissioner or his duly authorized representative. The letter of
demand calling for payment of the taxpayer's deficiency tax or taxes shall
state the facts, the law, rules and regulations, or jurisprudence on which the
assessment is based, otherwise, the formal letter of demand and assessment
notice shall be void. The same shall be sent to the taxpayer only by registered
mail or by personal delivery. x x x
3.1.5 Disputed Assessment – The
taxpayer or his duly authorized representative may protest administratively
against the aforesaid formal letter of demand and assessment notice within thirty
(30) days from date of receipt thereof x x x.
The taxpayer shall state the
facts, the applicable law, rules and regulations, or jurisprudence on which his
protest is based, otherwise, his protest shall be considered void and without
force and effect x x x.
The taxpayer shall submit the
required documents in support of his protest within sixty (60) days from the
date of filing of his letter of protest, otherwise, the assessment shall become
final and executory and demandable x x x
If the taxpayer fails to file a
valid protest against the formal letter of demand and assessment notice within
thirty (30) days from date of receipt thereof, the assessment shall become
final, executory and demandable.
If the protest is denied, in
whole or in part, by the Commissioner, the taxpayer may appeal to the Court of
Tax Appeals within thirty (30) days from date of receipt of the said decision,
otherwise, the assessment shall become final, executory and demandable.
In general, if the protest is denied, in whole or in
part, by the Commissioner or his duly authorized representative, the taxpayer
may appeal to the Court of Tax Appeals, within thirty (30) days from date of
receipt of the said decision, otherwise, the assessment shall become final, executory
and demandable: Provided, however, that if the taxpayer elevates his protest to
the Commissioner within thirty (30) days from date of receipt of the final
decision of the Commissioner’s duly authorized representative, the latter’s
decision shall not be considered final, executory and demandable, in which
case, the protest shall be decided by the Commissioner.
If the Commissioner or his duly
authorized representative fails to act on the taxpayer’s protest within one
hundred eighty (180) days from date of submission, by the taxpayer, of the
required documents in support of his protest, the taxpayer may appeal to the
Court of Tax Appeals within thirty (30) days from the lapse of said 180-day
period, otherwise, the assessment shall become final, executory and demandable.
x x x x
[29] 104
Phil. 314, 317 (1958).
[30] Annex
“A” of petitioner’s Memorandum.