BIR Ruling [DA-211-97]

May 20, 1997 BIR RULING [DA-211-97] The Honorable Secretary of Finance Manila S i r : Respectfully forwarded to that Office for approval is the herein claim for informer's reward under Section 281(1) of the tax Code, as amended, of Mr. Jose Arturo M. Malvar, including the entire docket bearing on the internal revenue tax case of International Corporate Bank (Union Bank). cdt The records show that on December 18, 1991, the abovenamed informer filed an Affidavit which was denominated as Confidential Information No. 2636, denouncing Interbank for "non-withholding of taxes on certain deposits contained in a position paper dated 25 November 1991"; that immediately thereafter, said confidential information together with Confidential Information No. 26367 filed by the same informer were referred to the then Special Operations Service for proper evaluation and recommendation; that on January 231, 1992, Letter of Authority No. 009794 NA was issued to Examiner Jose Suga by the Chief of the now defunct Banks, Financing and Insurance Division (DFID) to examine the books of accounts and other records of Interbank for income tax purposes for the taxable year 1989; that on July 23, 1993, Examiner Suga submitted his report of investigation and on the basis of which Interbank was assessed on July 30, 1993 for deficiency income tax, documentary stamp tax and final withholding tax (FWT) in the amounts of P250,749,242.17, P51,716,902.00 and P15,383,665.75 under FAS Nos. 002938, 002939 and 002940, respectively; that on the basis of the protest filed by taxpayer's counsel, a reinvestigation was conducted by revenue officers of the Tax Fraud Division and thereafter submitted a report reiterating the original deficiency income and documentary stamp tax assessments but recommended the cancellation of the deficiency final withholding tax (FWT) assessment in the aforesaid amount of P15,385,665.73; that on the basis of another request for reconsideration filed by Joaquin Cunanan & Co., an evaluation report dated December 13, 1995 was again submitted by revenue officer Benedicto Silag which was concurred in by the Chief of the Tax Fraud Division and finally approved by this Office canceling the deficiency income tax of P252,749,242.17 and deficiency withholding tax of P15,385,665.73 "inasmuch as Interbank was able to exonerate itself therefrom" but retaining the deficiency documentary stamp tax assessment in the aforesaid amount of P51,736,902.00; and that the said amount was paid by Interbank on January 29, 1996 under Authority to Accept payment (ATAP) No. 603293. It is interesting to note that in their memorandum-report dated July 18, 1993, revenue officers Silag and Villaluz made this remark concerning the informer: "Sometime thereafter, a certain Jose Arturo Malvar, who does not appear to be a tax informant either registered or not based upon all documents included in the docket of this case, filed with the Bureau of Internal Revenue a letter dated October 23, 1993. Stated therein are allegations or circumstances to warrant the letter to either exercise its power of constructive distraint, or to require a written assurance of guarantee that any tax liabilities that will be finally collectible will be honored and paid by the prospective buyer of Interbank's head office building in Makati, Metro Manila, which is the Union Bank . . . ." cdta We beg to disagree. The information furnished by the informer was duly recorded in the Entry Book of our Records Division as Confidential Information No. 2636 and was officially transmitted by Chief, Tax Fraud Division to the Assistant Commissioner, Special Operations Service, under 1st Indorsement dated December 16, 1991 (see attached folded xerox copy). Obviously, the said confidential information with attachments consisting of two (2) folders was the reason why the investigation of Interbank's 1989 internal revenue tax liabilities was conducted by revenue officer Jose Suga which resulted in the assessment and eventual collection of the deficiency documentary stamp tax in the amount of P51,736,902.00. It is informed herein that the said tax case of Interbank was not pending or previously investigated or examined by any official or employee of the Bureau of Internal Revenue or the Department of Finance; and that the informer is not related to any internal revenue officer or employee of the Bureau of Internal Revenue within the sixth degree of consanguinity. It appearing that the information furnished by Mr. Jose Arturo M. Malvar was instrumental in the discovery of a violation of the internal revenue law and in the recovery of the amount of P51,736,902, it is respectfully recommended that he be paid the amount equivalent to 15% thereof or P7,760,535.30 as informer's reward, pursuant to Section 281(1) of the Tax Code, as amended. cdi Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue