BIR Ruling No. 134-10

December 1, 2010 BIR RULING NO. 134-10 000-00 Mr. Danilo A. Lihaylihay 25 Kaunlaran Street, Batasan Hills Quezon City Sir : This refers to your letter dated September 16, 2010 requesting for reconsideration of BIR Ruling No. 055-2010 dated September 15, 2010 denying your claim for reward, alleging that "the narrated facts to Your Honor by the Legal Service and Law Division are all twisted." In reply, we reiterate our position that your request for informer's reward relative to the payment made by the heirs of Benigno P. Toda, Jr. as full settlement of the liability of the Estate under the abatement program of the BIR under Revenue Regulations No. 15-2006 in relation to Revenue Regulations No. 23-2006, is denied for lack of factual and legal basis. We sustain our earlier view in BIR Ruling No. DA-546-07 dated October 18, 2007 that the late NICOLAS Y. CERVANTES, alias RICK HERNANDEZ was the confidential informant in the internal revenue tax case of the Estate of Benigno P. Toda, Jr., as covered by Confidential Informations (CI) No. 2458 dated September 15, 1990 and CI No. 113-92 dated December 29, 1992, quoted again as follows: EADSIa "In view of the foregoing, only the CI's filed by the late NICOLAS Y. CERVANTES alias RICK HERNANDEZ, are considered as the true and official confidential information filed with this Bureau, as the same were in the form of statements sworn before the Law Division and recorded in the Confidential Entry Book of this Bureau. Thus the position of Mr. Danilo A. Lihaylihay that he is a co-informer of the late Nicolas Y. Cervantes, and therefore entitled to receive informer's reward on the strength of the denunciation letter he filed with the defunct Tax Fraud Division cannot be sustained. The letter did not show any CI number nor was it recorded in the Confidential Entry Book. Moreover, the letter was submitted after the date of the CI filed by the late informer. Section 3 of Finance Regulations No. 1, categorically states that in order to be entitled to a reward, the information must not yet be in the possession of the BIR, nor shall it refer to a case of fraud or violation already pending or previously investigated or examined by the BIR and must lead to or be instrumental in the discovery of the fraud upon or violation of any of the provisions of the Internal Revenue Code. Furthermore, Mr. Lihaylihay cannot claim to be a co-informer with the late NICK CERVANTES, as he failed to register his papers before CI #2458 and CI #113-92 were filed and registered with the Confidential Entry Book. Besides, the Confidential Information must be of personal knowledge of the informer. The late NICK CERVANTES was the Vice-President of the Cibeles Insurance Company. He, of no doubt, knew well the facts of the case. Mr. Lihaylihay, on the other hand, is not connected in any manner to CIC." Furthermore, the mere filing of an affidavit denouncing a certain taxpayer does not automatically entitle the informer to the corresponding reward. Established guidelines, rules and procedures must be followed in order to ascertain the validity of an informer's claim for reward. Parts II and III of RMO No. 12-93 provide for the proper filing of duly sworn confidential information with the Law Division (then the Legislative, Ruling and Research Divisions), which provide: "II. Filing of Information: Pursuant to Section 5 of Finance Regulations No. 1, in relation to Section 281 of the NIRC, duly sworn confidential information on frauds upon or violations of any of the provisions of the NIRC, shall be filed with the Legislative, Ruling and Research Division (LRRD) for scrutiny and verification to determine if the information given is in accordance with the Regulations. The information must be accompanied with a sworn statement and the informer shall appear in person and execute under oath the statement, specifying the particular violation by the denounced person and the kind of tax or taxes allegedly not paid." "III. Transmittal of the Information and Documents: Having taken cognizance of the Confidential Information, the same shall be transmitted by the LRRD to the Records Division, BIR, National Office, for numbering and recording in the Confidential Entry Book provided for the purpose. The individual entries to be made by the Records Division shall indicate the day and time the information is received, the name and address of the informer, name and address of the person denounced, names and addresses of the witnesses, if any, the subject matter of the information and the list of records, documents and books submitted, if any. HcTIDC The informer shall retain a duly stamped received and initialed copy of his sworn information which shall serve as his identification or evidence that he is the true informer. The Original Copy of the information/sworn statement, together with the documents submitted, if any, shall be returned to the LRRD where it shall be filed and kept strictly confidential. Only the copies thereof shall be referred to the Intelligence and Investigation Office (IIO) or the Special Investigation Branch (SIB) of the Regional Office for investigation and assessment of the tax/taxes. In no case shall an information filed with other units of the Bureau be the subject of an action or investigation without the same having been verified in accordance with Rule II of this Order." Furthermore, Affidavit dated April 16, 1997 fell short in conforming to the requirements set forth under Sections 2 and 6 of Finance Regulations No. 1, which provide the manner by which a confidential information is made and rendered as previously resolved in BIR Ruling No. DA-546-07 dated October 18, 2007. Sections 2 and 6 provide: SEC. 2. Form and Contents of the information. The information shall be in the form of a sworn statement given voluntarily and shall state definitely the facts or acts consisting the fraud upon or violation of the Internal Revenue or the Tariff and Customs Laws (as defined in Section 1, Republic Act No. 2338) . . . SEC. 6. Information to be recorded in an entry book. Any information received must be entered immediately in a confidential entry book provided for the purpose by the Official to whom the information is given directly, and the entire entries shall be consecutively numbered in order of time the information is received. The individual entries must indicate the day and time the information is received . . . Likewise, your contentions that liberal interpretation should be applied in the payment of your informer's reward relying in the case of Penid, et al. vs. Hon. Cesar Virata, et al., G.R. No. L-44004 wherein it was held therein that statutes offering rewards must be liberally construed in favor of informers, is inapplicable since your case has different factual circumstances. In BIR Ruling No. DA-051-98 dated February 10, 1998, the BIR considered the educational attainment of the informers "who appeared to be uneducated", thus recommending the payment of informer's reward. This Office ruled therein: "It will be noted, however, that the denunciation made by the informers, although in writing, was not in the form of a sworn statement and neither was it recorded in the official Entry Book of our Records Division showing the confidential entry number and the date and time of its receipt. When informed, the informers explained in their subsequent affidavit that they were not aware of the procedures in the filing of confidential information as required under Revenue Memorandum Order No. 12-93. Considering that herein informers appear to be uneducated, this Office believes that their non-compliance with the rules implementing the informer's reward law may be dispensed with. To paraphrase the Supreme Court in the case of Penid, et al. vs. Hon. Cesar Virata, et al., G.R. No. L-44004, statutes offering rewards must be liberally construed in favor of informers and with mere technicality yielding to the substantive purpose of the law." (emphasis and underscoring supplied) In your case, being the supposed president of Philippine Association of Revenue Informers, Inc. (PARI), it is presumed that you are educated and knowledgeable in the process of filing information, denunciations and claiming for rewards thereafter, and that you are fully aware of the requirements under Section 282 of the Tax Code of 1997, Finance Regulations No. 1 and RMO 12-93. Therefore, the prescribed filing of sworn and definite information with then Legislative, Ruling and Research Division so as to make the information contained in your Affidavit valid and be qualified for a reward, should have been sufficiently followed. EADCHS Hence, your Affidavit dated April 16, 1997 failed to comply with the essential requirements under established rules and procedures, rendering you disqualified to be the confidential informer in the payment made by the heirs of Benigno P. Toda, Jr. to the government. In view of the foregoing, we deny your request for reconsideration of BIR Ruling No. 055-2010 which denied the grant of your request for informer's reward. This denial is final. This Office will no longer entertain any further motion/request for reconsideration or other pleadings of similar import. Please be guided accordingly. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue