BIR Ruling [DA-033-06]

February 8, 2006 BIR RULING [DA-033-06] SEC. 282 (A) The Honorable Secretary Department of Finance Manila S i r : This refers to a case where the informer has allegedly relatives within the sixth degree of consanguinity employed with the Bureau of Internal Revenue and the Bureau of Customs, which he did not divulge in his Affidavit of Confidential Information. It could be ascertained from records that Mr. FELICITO J. DOLAR JR. of #22 BLISS Project, La Paz, Iloilo City, is the informer of Confidential information No. 46-98 dated October 15, 1998, against the Estate of the late Aguedo del Rosario for alleged tax evasion. On the basis of this Confidential Information, the case was assigned originally to a group of examiners at the Tax Fraud Division, BIR National Office. However, due to the fact that the decedent had no properties within Metro Manila and nearby places and for the expediency of the investigation, the case was indorsed to BIR Revenue Region II (Iloilo), the BIR office having jurisdiction over the last residence of the decedent, on March 25, 1999. The case was re-assigned to Revenue Officer Crister Marie Vallejo of Revenue District Office No. 74 (Iloilo City) with the findings that the total estate tax due inclusive of interest and penalties amounted to P222,887.85 and the income tax liability of the decedent and surviving spouse for taxable years 1995, 1996 and 1997 amounted to P40,368.00 inclusive of penalties. Upon re-investigation conducted by the examiners of BIR Revenue Region 11, the amount of deficiency estate tax computed was increased to P9,490,210.69 inclusive of penalties. The deficiency tax was brought about by the wrong valuation of the property located at Brgy. Lalab, Batan, Aklan for P9,719,950.00 instead of P16,500,000.00 and the disallowance of the claims against the estate in the amount of P17,135,296.78 as it did not comply with the requirements of Section 79-C of the Tax Code. Besides, the Deed of Extrajudicial Partition succinctly disclosed that the deceased left no debts. On January 6, 2000, the taxpayer paid the amount of P3,422,152.26 for estate tax liability and subsequently on December 14, 2001, taxpayer again paid P4,724,112.41 at the Landbank of the Philippines, Plaza Libertad Branch, Iloilo City as per Certification issued by Revenue Region 11, Iloilo City dated May 21, 2003. aIHCSA The informer, FELICITO J. DOLAR JR. instituted his claim for informer's reward on June 26, 2001 pursuant to Section 282 (A) of the Tax Code of 1997. However, his claim for reward was refuted by the counsel of Encarnacion L. del Rosario, the surviving wife of the late Aguedo del Rosario. Atty. Luzel D. Demasu-ay, in her letter to the Commissioner of Internal Revenue, stated that Felicito J. Dolar, Jr., the herein informer, lied in his affidavit. He did not disclose that he has relatives employed with the Bureau of Customs (BOC) and the Bureau of Internal Revenue (BIR). His father's brother Glicerio R. Dolar, is employed at the BOC, while Edgar Allan D. del Rosario of the BIR is his father's cousin. Certifications to this effect were issued by BOC and BIR, respectively. On the basis of these certifications, this Office denied Mr. Felicito J. Dolar, Jr.'s claim for informer's reward in BIR Ruling DA 223-2001 dated October 25, 2001. (Copy attached for ready reference) However, the informer countered the allegation of the counsel of the taxpayer by stating that his relatives themselves were the authors of the fraud subject of the information and investigated by this Bureau. They made it appear in the Deed of Extrajudicial Settlement that the estate contracted multi-million debts by securing bank certifications to this effect from the different banking institutions in their locality and from personalities abroad and they, being among the several heirs, affixed their signatures knowing the fact that fraudulent schemes were introduced to arrive at a lower tax liability. Further, he asserted that if it were not for his information which led to, or was instrumental in, the discovery of the fraud being perpetrated by the heirs and their agents, millions of taxes would not have come into the coffers of the government. Although late admitted that those mentioned persons are indeed his relatives, he persisted on the fact that these two relatives were not the sources of the information he provided the Bureau, although they are employees of the BOC and BIR Instead, they themselves are among the culprits of the tax evasion committed by the estate of Aguedo del Rosario. With these allegations, Mr. Dolar is claiming 10% of P8,146,264.67, or the amount of P814,626.46, as informer's reward. Finance Regulation No. 1 of the Department of Finance approved on July 15, 1960 provides that in case the degree of relationship between the informer and the internal revenue or customs official or employee or other official is in issue, the matter shall be jointly resolved by the Commissioner of Internal Revenue or the Commissioner of Customs, as the case may be, and the Solicitor General (Section 1 [c]). DHSACT However, Revenue Memorandum Circular No. 10-2001 dated February 22, 2001, categorically provides that in case of denial of claim for Informer's Reward under Section 282 of the Tax Code of 1997, the Assistant Commissioner of the Legal Service is authorized to sign such, pursuant to Section 7 of the Tax Code of 1997, to expedite the action. In a recent development, the informer filed a criminal case against the responsible officers of this Bureau, namely Commissioner Jose Mario C. Buag, Asst. Commissioner James H. Roldan, retired Asst. Commissioner Milagros V. Regalado and Gelmo P. Sabayle for violation of RA 2338 in relation to Section 269 (c) of the NIRC, Section 3 (e) of RA 3019 and for Estafa docketed as IS No. 2005-1183 of the Department of Justice, Manila, alleging among other things that then Assistant Commissioner Atty. Milagros V. Regalado has no authority to act on the issue of relationship of the informer to a BIR/BOC employees as this is within the competence of the Commissioner and the Solicitor General to jointly resolve the issue, allegedly pursuant to Finance Regulation No. 1 viz-a-viz the provisions of Revenue Memorandum Circular No. 10-2001. Despite the two denials issued by this Office, the informer is insistent on his claim for informer's reward claiming that the Assistant Commissioner for Legal Service has no authority to sign denials of claims for informer's reward as he believed that the power to resolve the issue regarding degree of relationship is vested jointly on the Commissioner of Internal Revenue and the Solicitor General pursuant to Finance Regulations No. 1 viz-a-viz the provision of Revenue Memorandum Circular No. 10-2001 which stated that the Assistant Commissioner for Legal Service has the power to sign denial of claims for Informer's Reward. cda1uptax06 In view of the foregoing, this Office is submitting the matter for the review and resolution of the Honorable Secretary. SCEDAI Very truly yours, (SGD.) JOSE MARIO C. BUAG Commissioner of Internal Revenue