BIR Ruling [DA-374-05]

July 15, 2005 BIR RULING [DA-374-05] Mr. Danilo A. Lihaylihay 25 Kaunlaran St. Batasan Hills, Quezon City S i r : This refers to your letter in reply to a letter denying your request for the photocopies of the documents relative to the official acts or records of your CI #71-2002 against HONDA CARS PHILS on the ground of prohibition under Section 270 of the Tax Code of 1997. HTSaEC It is your belief that the tax dockets are public records and as such, they are open for inspection by the public and the reproduction and/or photocopying of such documents/records do not contravene Section 270 of the same Code nor violate trade secrets; that as an informer, you have a substantial interest in this case (HONDA CARS PHILS), thus, you are reiterating your request that you be furnished with documents/records related to the case of HONDA CARS. In reply, please be informed that Section 7 of Act 2338, otherwise known as "An Act to Provide for Reward to Informers of the Violation of Internal Revenue and Customs Laws" provides that the complete report of the action taken shall be submitted to the Secretary of Finance or to the Commissioner of Internal Revenue or the Commissioner of Customs, as the case may be, upon termination and final settlement of the case. There is nothing in the law that requires this Office to furnish the informer a copy of the investigation reports/documents aside from the fact that said report is an internal document for the use only of the Bureau of Internal Revenue (BIR). Moreover, the law provides that after the filing of the information, the informer will only be sent notice to collect his reward if collection had been made out of his information. Finally, contrary to your understanding, not all public records automatically become open to inspection. We, therefore, wish to reiterate the provision of Section 270 of the Tax Code of 1997, to wit: "SEC. 270. Unlawful Divulgence of Trade Secrets . Except as provided in Section 71 of this Code and Section 26 of Republic Act No. 6388, any officer or employee of the Bureau of Internal Revenue who divulges to any person or makes known in any other manner than may be provided by law information regarding the business, income, or estate of any taxpayer, the secrets, operation, style or work, or apparatus of any manufacturer or producer, or confidential information regarding the business of any taxpayer, knowledge of which was acquired by him in the discharge of his official duties, shall, upon conviction for each act or omission, be punished by a fine of not less than Fifty thousand pesos (P50,000) but not more than One hundred thousand pesos (P100,000), or suffer imprisonment of not less than two (2) years but not more than five (5) years, or both." The foregoing provision imposes penal sanctions upon any BIR official or employee who discloses "information regarding the business, income, or estate of any taxpayer", "knowledge of which was obtained by him in the discharge of his official duties", unless such disclosure comes within the purview of Section 71 of the Tax Code of 1997, which reads: "SEC. 71. Disposition of Income Tax Returns, Publication of Lists of Taxpayers and Filers . After the assessment shall have been made, as provided, in this Title, the returns, together with any corrections thereof which may have been made by the Commissioner, shall be filed in the Office of the Commissioner and shall constitute public records and be open to inspection as such upon the order of the President of the Philippines, under rules and regulations to be prescribed by the Secretary of Finance, upon recommendation of the Commissioner. "The Commissioner may, in each year, cause to be prepared and published in any newspaper the lists containing the names and addresses of persons who have filed income tax returns." Accordingly, the only exception to the rule that BIR officials shall be held criminally liable for divulging information in the income tax return of a taxpayer, which necessarily includes furnishing copies thereof, is if the divulgence or furnishing of copies of the return is made upon the order of the President of the Philippines in accordance with the rules and regulations issued by the Secretary of Finance. Section 71 speaks of returns, however, and is therefore not applicable to your request. The documents you are procuring from the BIR are internal management documents that contain information regarding the business, income, secrets, operation, style or work, or apparatus of the subject taxpayer, knowledge of which was acquired by the revenue officer in the discharge of his official duties . As such, they do not come within the exception to Section 270 quoted above. In relation to the information acquired by the BIR in accordance with Sec. 282 of the Tax Code, the same shall, together with all material evidence, e.g., returns of information filed with the BIR and appended to the docket of the case in the course of investigation, fall under classified public records which tend to disclose matter/information mentioned in Sec. 270, the divulgence of which to any person is unlawful. Conversely, Sec. 270 excludes any person access to such records available only to the concerned officer or employee of the BIR whose knowledge of matters/information regarding the business, income, secrets, operations of the taxpayer was acquired by him in the discharge of his official duties. Thus, reference to any person will include even the tax informer himself. Being an informer does not qualify him to gain access to the aforementioned documents/information, the same being available only to BIR officers/employees whose functions involve processing, monitoring and custodianship of the BIR records/files. HDAaIS In view thereof, your request for the copies of the investigation reports/documents, Assessment Notices or Formal Demands served by the BIR and received by Honda Cars on July 19, 2004 and Administrative Protest or letter of protest duly filed by HONDA in the BIR is hereby denied for lack of legal basis. Very truly yours, (SGD.) JOSE MARIO C. BUAG OIC-Commissioner of Internal Revenue