BIR Ruling [DA-376-00]

October 30, 2000 BIR RULING [DA-376-00] Hon. Jose T. Pardo Secretary of Finance Manila S i r : We are forwarding herewith for your approval the herein claim for informer's reward of Mr. Justino B. Ligos , c/o Suite 315 YMCA, 350 A. Villegas Street, Ermita, Manila, under then Section 281(1) of the Tax Code, as amended (now Section 282(A) of the Tax Code of 1997) including the entire records consisting of three (3) folders, bearing on the internal revenue tax case of Mr. Gerardo L. Contreras for the years 1975, 1976, 1977, 1978, 1979, 1980 and 1981. ISEHTa The records show that on December 29, 1981, an affidavit which was recorded as Confidential information No. 1580 was filed by the abovenamed informer denouncing Mr. Contreras for not filing his true and correct taxes and assets since 1975 up to 1981 (p. 18); that a preliminary investigation was conducted thereon by examiners of the Tax Fraud Division and it was ascertained that Mr. Contreras operates as a contractor-architect and builds houses but his income as declared in his income tax returns were very minimal and uniform in amount and that he had several construction projects which he wilfully did not declare therein; that on the basis of their recommendation (pp. 220-222), this office assessed Mr. Contreras in the aggregate amount of P8,210,391.18 as deficiency income tax, including increments, for the years 1975 to 1981 (pp. 246-261); that the taxpayer protested the assessment and requested for a reinvestigation of his case which was granted by this office; that after reinvestigation, the previous assessment of P8,210,391.18 was withdrawn and cancelled and a new assessment was issued requiring Mr. Contreras to pay the total amount of P6,879,834.79 as deficiency income, fixed and percentage taxes for the years 1975 to 1981 (pp. 478-493; that Mr. Contreras protested the assessment and again requested for a reinvestigation which was also granted by this office; that after reinvestigation, Letter of Demand and Assessment Notices dates October 31, 1989 were issued by this Office reiterating the deficiency income tax assessment for the years 1975, 1976, 1977 and 1981 and the fixed and percentage taxes for the years 1975 to 1981 but revising the deficiency income tax assessment for the years 1978, 1979 and 1980 amounting to P4,196,927.71, (pp. 616-644) broken down as follows: Deficiency income taxes: 1975 P558,130.56 1976 48,890.88 1977 155,863.84 1981 35,767.20 Total P798,652.48 1978 P564,693.30 1979 1,961,421.73 1980 806,916.60 Total 3,333,031.63 Deficiency fixed taxes: (1975 to 1981) 26,504.97 Deficiency fixed taxes: (1975 to 1981) 38,738.63 Grand Total P4,196,927.71 that on June 8, 1990, taxpayer's counsel offered to pay 30% of the basic tax assessed (pp. 711-712) which was reiterated in another letter dated October 29, 1990 (pp. 716-821) this time offering to compromise the case by paying the amounts of P184,950.83 as deficiency income taxes for 1975 to 1981 and P30,960.00 as PTR and percentage taxes for the same years as full and complete settlement of Mr. Contreras' liabilities; that in a Memorandum dated February 26, 1992 prepared by the Chief of the now defunct Accounts Receivable Billing Division which was approved by then Commissioner Jose U. Ong, Mr. Contreras was allowed to settle his case by paying 20% of the basic tax assessed or the amount of P406,330.00; and that the said amount of P406,330.00 was paid by Mr. Contreras on April 8, 1992 as evidenced by the Authority to Accept Payment No. 103-71 hereto attached. The records further show that the information furnished by the informer was in writing and under oath; that it was not yet in the possession of the Bureau of Internal Revenue nor is the aforesaid tax liability pending or previously investigated by any official or employee of this Bureau or by the Department of Finance; and that the informer is, as represented, not related to any internal revenue official or employee or to any public officer within the sixth degree of consanguinity. It appearing that the information furnished by Mr. Justino B. Ligos was instrumental in the discovery of a violation of the internal revenue laws and in the recovery of taxes which otherwise would not have been effected, it is respectfully recommended that he be paid the amount equivalent to 15% of P406,330.00 or the amount of P60,949.50 as informer's reward pursuant to Section 281(1) of the Tax Code, as amended, the law applicable herein. The said reward shall not be subject to the 10% final tax imposed under Section 282(A) of the Tax Code of 1997 for the reason that R.A. No. 8424 does not contain provision providing for its retroactive application. (Opinion No. 67, S. 1998 of the Secretary of Justice) HIAEaC Very truly yours, (SGD.) DAKILA B. FONACIER Commissioner of Internal Revenue