BIR Ruling

January 7, 1974 MEMORANDUM FOR: The Chief, Special Investigation Division Returned to you herewith are the papers relative to the 1967 income tax case of Bishop Macario V. Ca, Independent Church of the Philippines, Manila, involving the amount of P300 as compromise penalty for subject taxpayer's alleged "failure to present books of accounts and other records upon demand", with the following information: Pertinent portion of Section 337 of the Tax Code as amended by Presidential Decree No. 69 reads thus: aisa dc "SEC. 337. Preservation of books of accounts, and other accounting records . All the books of accounts, including the subsidiary books, and other accounting records, of corporations, partnerships, or persons shall be preserved by them for a period of at least five years from the last entry in each book and shall be subject to examination and inspection only once in a taxable year during that five-year period by internal revenue officers . . . ." (Emphasis supplied) The provision of Section 21 of the Bookkeeping Regulations, requiring that all books of accounts and other records of a taxpayer be kept at all times in his place of business, is mandatory. (B.I.R. Ruling dated Jan. 3, 1956) Section 337 of the Tax Code, however, provides that said records and books of accounts should be preserved by taxpayers for a period of at least five (5) years from the date of last entry made therein. Since this case involves taxpayer's 1967 income, the requirement on September 25, 1972 by the Regional Director, Revenue Region No. 14, Bacolod City, for the taxpayer to produce and/or present his books of accounts and other pertinent records was made well within the said five-year period reckoned from the date of last entry which is presumably sometimes in December, 1967. Because of the taxpayer's failure to comply with the aforestated requirement, the compromise penalty of P300 suggested by this Office has legal and factual bases. Be that as it may, without his consent, Bishop Ga cannot be compelled to pay the suggested compromise penalty of P300. A compromise is defined as "a contract whereby the parties, by making reciprocal concessions, avoid a litigation or put an end to one already commenced." (Art. 2028, Civil Code). "A compromise by its very nature implies mutual agreement by the parties in regard to the thing or subject matter which is to be compromised. An offer of compromise does not, therefore, assume the category of a compromise until it is voluntarily accepted by the other party, and no obligation arises or is created by a simple offer or suggestion coming from one of the parties without acceptance by the other." (Soledad R. Brias v. Collector of Internal Revenue, C.T.A. No. 16, September 14, 1955, cited in UST vs. Collector of Internal Revenue, CTA case No. 10, Sept. 10, 1956). Be guided accordingly. (SGD.) MISAEL P. VERA Commissioner of Internal Revenue TAN-1601-593-5 "TAXPAYERS SHOULD INDICATE THEIR TAN IN ALL COMMUNICATIONS TO THE BIR."