BIR Ruling [DA-051-98]

February 10, 1998 BIR RULING [DA-051-98] Hon. Roberto F. de Ocampo Secretary of Finance Manila S i r : We are forwarding herewith for your approval the herein claim for informer's reward of Messrs . Petronilo C . Mira and Reynaldo R . Villaluz , with their respective residence at No. 48 De Guzman Street and Caridad Alonzo Streets, Dalahican, both in Cavite City, including the entire docket bearing on the internal revenue tax case of Saulog Transit, Inc. (STI) for the year 1992. LLjur The records show that on April 26, 1993, the above-named persons who were former employees of STI, sent a letter (in Tagalog) informing this Office that STI withheld from their backwages the respective amounts of P25,817.09 and P11,188.76 but which they found out were not remitted to the Bureau of Internal Revenue. On the basis of said denunciation, an investigation was immediately conducted by a Revenue Officer of then Withholding Tax Audit Division who confirmed the non-remittance by STI of the taxes withheld from the backwages of the informers. Thereafter, the case was devolved to Revenue District Office No. 52, Paraaque and on the basis of the recommendation of the investigating examiner who also confirmed the non-remittance by STI of the taxes withheld from the backwages of its former employees, Assessment Notice No. 92-7341 was issued on August 23, 1994 demanding from STI payment of the amount of P2,955,048.18 as deficiency withholding tax on compensation for the year 1992. Such assessment also resulted in the seizure of three (3) air-conditioned buses owned by STI. Upon request for reconsideration filed by the taxpayer's counsel, a reinvestigation was conducted by the Legal Division of Revenue Region No. 8, Makati City wherein it was established that the total amount of taxes withheld by STI was P1,022,045.52 but what was remitted was only P524,531.58. It was, however, found out that the taxes withheld were not immediately remitted to the BIR because the concerned employees did not report for work nor submit their Employees Withholding Exemption Certificates (W-4's) and it was only in March 1993 when they submitted their bio-data that STI was able to compute the taxes to be remitted. In the conference-hearing conducted by our Appellate Division, it was ascertained that the failure of STI to completely remit the taxes withheld is not tempered with willful or fraudulent intent, hence, we decided to abate the 50% fraud penalty and the additional penalty imposed under section 251 of the Tax Code. Accordingly, the 1992 deficiency withholding tax assessment against STI in the amount of P2,995,048.18 was reduced to P1,120,216.36 which amount was paid by the taxpayer under BCS No. 90137 dated March 13, 1997, as verified by our Revenue Accounting Division. It will be noted, however, that the denunciation made by the informers, although in writing, was not in the form of a sworn statement and neither was it recorded in the official Entry Book of our Records Division showing the confidential entry number and the date and time of its receipt. When informed, the informers explained in their subsequent affidavit that they were not aware of the procedures in the filing of confidential information as required under Revenue Memorandum Order No. 12-93. Considering that herein informers appear to be uneducated, this Office believes that their non-compliance with the rules implementing the informer's reward law may be dispensed with. To paraphrase the Supreme Court in the case of Penid, et. al. vs. Hon. Cesar Virata, et al., G.R. No. L-44004, statutes offering rewards must be liberally construed in favor of informers and with mere technicality yielding to the substantive purpose of the law. The records further show that Messrs. Petronilo C. Mira and Reynaldo R. Villaluz are, as represented, neither internal revenue officers/employees nor public officers or that their relatives within the sixth degree of consanguinity are such; and that the information furnished by them was not yet in the possession of the Bureau of Internal Revenue or the Department of Finance nor is the aforesaid tax liability pending or have previously been the subject of an investigation by an official or employee of this Bureau or by the Department of Finance. LLpr In view thereof, and it appearing that the information by Messrs. Petronilo C. Mira and Reynaldo R. Villaluz was instrumental in the discovery of a violation of the internal revenue laws in the recovery of taxes, it is respectfully recommended that they be paid the amount of P168,032.45 which is equivalent to 15% of P1,120,216.36, as informer's reward to Section 281(1) of the Tax Code, as amended, to be divided by them share and share alike. Very truly yours, (SGD.) LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue