Request for Condonation of Penalties, Interests and Surcharges for Late Remittance of Withholding Tax Payments Allegedly Caused by a Tax Fraud Syndicate

August 22, 1995 BIR RULING NO. 125-95 204 (2) (a) 000-00 125-95 Miriam College Quezon City Attention: Ms . Loreta N . Castro President Gentlemen : This refers to you letter dated June 8, 1995 requesting for condonation of penalties, interests and surcharges for late remittance of withholding tax payments allegedly caused by a tax fraud syndicate. LexLib You have requested that MIRIAM COLLEGE was one of several taxpayers whose checks for withholding tax payments were intercepted and subsequently encashed by a tax fraud syndicate; that the checks stolen represented your withholding tax payments for the months of May, June and July of the taxable year 1993 in the amount of P410,436.71, P631,335.34 and P711,494.10, respectively; that sometime during the third week of April, 1994, you received a demand letter asking the College for the remittance of the aforestated withholding tax payments; that your legal counsel, ATTYS. MANUEL ANTONIO & ASSOCIATES, responded that "your records show that the College's obligation to remit those taxes were extinguished by the Bureau's receipt, through the agent bank, the ASIA TRUST BANK at Quezon Ave., Quezon City, of the subject payments. Your said position, however, was contested by Regional Director Antonio I. Ortega of Revenue Region No. 7, Quezon City stating that when you filed your Monthly Remittance Returns of Income Taxes Withheld for the months of May, June and July, 1993 on different dates, its Collection Division has reported that the alleged check payments for the above-mentioned returns were not credited to the account of the Bureau of Internal Revenue, and the payee bank, Asia Trust Bank, denied having received the said checks allegedly covering the said payments. It was further noted that the markings in the stamp and validation codes as reflected in the copy of the said Monthly Remittance Returns appeared to be spurious as attested to in a sworn statement executed by Mr. Oswald Medina, the Assistant Manager of Asia Trust Bank, Quezon Avenue Branch. Hence, you were required to pay the Bureau the basic withholding tax in the total amount of P1,253,176.15, and the corresponding interest, surcharge and penalties for late payment. The Special Investigation Division of the said Revenue Region had the some findings; hence, it reiterated that you have to pay the same amount as mentioned above plus all the legal increments attendant thereto. In the meantime, the further represented that the College sought to recover from the drawee banks the amount lost to the syndicate without waiving other courses of action available to it, the soon after it recovered the said losses from the drawee banks, the College remitted to the Bureau the said withholding tax payments as evidenced by the Debit Memos of Far East Bank dated March 10, 1995 in the amounts of P410,436.71 P631,335.86 and P711,494.10, covering withholding tax remittance for the months of May, June and July, 1993, respectively, but further reiterating its request to condone the penalties, interests and surcharges as may be assessed against the College, which request was forwarded to this Office for resolution. In reply thereto, it should first be emphasized that when you were required to present any evidence that would prove that you really had been a victim of a tax fraud syndicate, you presented to this Office a newspaper clipping entitled "NBI Tags Husband of CB Official as Brains of Tax Fraud Syndicate" published in "The Philippine Star" on October 20, 1993 stating among others, that " the group (i.e., the tax fraud syndicate) was even able to victimize the Quezon City-based Miriam College Foundation ." Considering therefore that you have convincingly proven your said allegation that you have been a victim of a tax fraud syndicate, you seemed "failure" to remit the subject withholding tax liabilities or time is indeed not your fault and clearly beyond your control. It is therefore the opinion of this Office that the first payment that you made produced the effect of "remittance"; hence, no interest nor surcharge nor any other penalties can be imposed to MIRIAM College on its seemed "failure" to remit the withholding taxes on time. Besides, the subject checks were honored when presented for payment, thus, tantamount to producing the effect of payment. The fault therefore lies not in MIRIAM COLLEGE but to the drawee banks who encashed the checks without meticulously checking the personality of the payee, who happened to be a member of tax fraud syndicate. In view thereof, and considering that you have paid for the second time the basic withholding tax payments on March 10, 1995 in the total amount of ONE MILLION SEVEN HUNDRED FIFTY-THREE THOUSAND ONE HUNDRED SEVENTY-SIX AND SIXTY-SEVEN CENTAVOS (P1,753,176.67) when you were able to recover from the drawee banks the amount lost to the syndicate, this Office is hereby granting your request for condonation of penalties, interests and surcharges in accordance with Section 204(2)(a) of the Tax Code, as amended. cdt Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue