COA Regional Director's Request to Audit the Capital Gains Tax Returns Filed with the Revenue District #59 Office in Mandaue City

March 19, 1992 BIR RULING NO. 090-92 269; 277 000-00 090-92 Atty. Sol E. Hubahib Regional Director Revenue Region No. 7 Central Visayas Cebu City M a d a m : This refers to your 1st indorsement letter dated December 26, 1991 referring to this Office the request of the Region VII Director of the Commission on Audit to conduct, on the basis of Section 28 of PD 1445, a revenue audit on the capital gains tax returns filed in the Revenue District #59 Office in Mandaue City. In reply, please be informed that the Administrative Code of 1987 (E.O. 292), in Section 13 of Book V, Title I, Subtitle B, Chapter 1 thereof, provides the following: " Examining Authority . The Commission [on Audit] shall have authority to examine books, papers, documents filed by individuals and corporations with, and which are in the custody of, government offices in connection with government revenue collection operations, for the sole purpose of ascertaining that all funds determined by the appropriate agencies and collectible and due the Government have actually been collected, except as otherwise provided in the Internal Revenue Code of 1977 ." (Emphasis supplied) In connection with the above, Section 269 of the Tax Code, as amended, makes it unlawful for any officer or employee of the Bureau of Internal Revenue, except as provided in Section 74 (now 64) of the Tax Code and Section 26 of R.A. 6388, to divulge to any person or make 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. Conversely, any person who causes or procures an officer or employee of the Bureau of Internal Revenue to divulge any confidential information regarding the business, income, or inheritance of any taxpayer, knowledge of which was acquired by him in the discharge of his official duties, and which it is unlawful for him to reveal, and any person who publishes or prints in any manner whatever, not provided by law, any income, profits, losses, or expenditures appearing in any income tax return shall be fined in a sum of not more than two thousand pesos or imprisoned for a term of not less than six months nor more than five years, or both. (Section 277, Tax Code, as amended). At this point, your attention is herein called to the letter request of the COA Director dated December 19, 1991 whereby the admission was made by the said Director that "the exceptions being referred thereto [Section 28, PD 1445] pertains only to the examination of income tax returns on file in the Office of the Commissioner of Internal Revenue which may be opened only upon order of the President of the Philippines." By such admission, the COA Director in effect admitted that he cannot examine the capital gains tax returns filed with the Revenue District #59 Office. For after all, the capital gains tax is also an income tax. Therefore, it is the opinion of this Office as it hereby holds that the COA Regional Director's request to audit the capital gains tax returns filed with the Revenue District #59 Office in Mandaue City cannot be granted for lack of legal basis. atdc Very truly yours, JOSE U. ONG Commissioner of Internal Revenue