BIR Ruling [DA-067-97]

February 14, 1997 BIR RULING [DA-067-97] Hon. Roberto F. de Ocampo Secretary of Finance Manila S i r : Respectfully forwarded to that Office for approval is the claim for informer's reward of Mr. Danilo A. Lihaylihay under Section 281(1) of the Tax Code, as amended, including the entire docket bearing on the internal revenue tax case of ST. BERNARD SERVICES CORPORATION (SBSC for Brevity) for the year 1990. The records show that on October 23, 1991, an affidavit which is denominated as Confidential Information No. 2605 was filed by the abovenamed informer denouncing SBSC for alleged tax evasion "by way of understatement of its income in 1990 and/or preparing two (2) sets of financial statements with discrepancies". Acting on said confidential information, a group of revenue enforcement officers of the Tax Fraud Division conducted preliminary investigation and upon a finding that a prima facie case of fraud existed, Letter of Authority No. 002569 dated February 11, 1993 was issued authorizing the investigation of the books of accounts and other accounting records of SBSC for income and business taxes for the year 1990. It may be stated herein that prior to the issuance of said Letter of Authority No. 002569, "an investigation of SBSC's income and percentage taxes also for the year 1990 was already undertaken by revenue enforcement officers of Revenue District Office No. 25, South Manila, pursuant to Letter of Authority No. 0504449 dated February 14, 1992. Based on the report of investigation submitted by revenue enforcement officers of South Manila which was duly approved by the defunct National Audit Review Division, SBSC paid under various Authority to Accept Payment (ATAP) the total amount of P69,814.60 as deficiency income, lending investor, EWT and percentage taxes, inclusive of penalties, for the year 1990. It is to be emphasized herein that the revenue enforcement officers who conducted the original investigation of the case where obviously not aware that a confidential information was filed against subject-taxpayer. In fact, the entire docket of the case had to be retrieved by the revenue enforcement officers of the Tax Fraud Division from our Records Division as the same was already sent thereat for file. In the reinvestigation conducted by the Tax Fraud Division, it was ascertained that there was still due from SBSC the respective amounts of P1,431,906.27 and P100,345.01 as deficiency income and expanded withholding taxes inclusive of surcharge and interest for 1990. However, prior to the issuance of the corresponding assessment notices, SBSC filed Applications for Compromise Settlement/Abatement under Revenue Memorandum Order No. 45-93 as amended by RMO No. 54-93. Considering that the said applications were filed prior to the issuance of any formal assessment against SBSC and the fact that the alleged fraud was definitely established, the said applications were approved by this Office. The aggregate payments, therefore, amounted to P681,259.01 broken down as follows: Abatement of income tax P567,879.00 Abatement of common carrier's tax 13,035.00 Deficiency expanded withholding tax 100,345.01 Total P681,259.01 ========== With the availment by SBSC of the privileges under RMO No. 45-93, as amended, our Assessment Notice Nos. C.I.-90-IT-079-95 and C.I.-90-EWT-080-95 both dated November 9, 1995 for payment of the amounts of P1,431,906.27 and P100,345.01 as deficiency income and expanded withholding taxes for 1990 became unenforceable and should therefore be cancelled. The records further show that the information furnished by the informer was in writing and under oath; that the same was not yet in the possession of the Bureau of Internal Revenue nor are the aforesaid tax liabilities pending or previously investigated by any official or employee of this Office or by the Department of Finance; and that the informer is not related to any internal revenue officers within the sixth degree of consanguinity. However, the informer is not entitled to a reward with respect to the amount of P69,814.60 paid by SBSC since he was not instrumental in the collection of the said amount. In view of the foregoing, it is respectfully recommended that Mr. Danilo A. Lihaylihay be paid the amount equivalent to 15% of P681,259.01 or P102,198.85 as informer's reward pursuant to Section 281(1) of the Tax Code, as amended. cdll Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue