Production of the Late Lao Chay Hing's Books of Accounts

April 21, 1960 BIR RULING NO. 172-60 The Provincial Revenue Officer Kalibo Aklan S i r : With reference to your letter dated April 11, 1960, relative to the Order dated March 14, 1960 in Special Proceedings No. K-978 (C.F.I., Aklan), requiring the production of the late Lao Chay Hing's books of accounts, following are the reasons in support of the stand that said order cannot be complied with, without violating section 347 of the Tax Code: aisadc In Opinion No. 34, s. 1941, of the Secretary of Justice it was held: ". . .. The Internal Revenue Law compels taxpayers to disclose to internal revenue officers certain data regarding their business for the sole purpose of enabling said officers to assess the amount of tax that said taxpayers should pay. It would greatly discourage or handicap taxpayers in giving to the internal revenue officers information about their business which generally they are unwilling to furnish to private persons or to the public in general, if such information could be used against them not only in the assessment of the taxes due from them but also in other matters which have nothing to do with the payment of taxes . "All records in the offices of collectors of internal revenue or any of their deputies are in their custody and control for purposes relating to the collection of the revenues of the government only. They have no control and no discretion with regard to permitting the use of them for any other purpose (U.S. Int. Rev. Reg. cited in Araneta's Adm. Code.) "I believe the Auditor General will understand the position of the Collector of Internal Revenue in refusing, pursuant to section 347 and 349 abovementioned, to give out the information desired. The request is simple enough, but the principle involved is quite fundamental in the full and proper enforcement of tax law." (Emphasis supplied) Still in a subsequent opinion (No. 366, s. 1956), the Secretary of Justice held that, by reason of section 347 of the Tax Code, agents of the National Bureau of Investigation (NBI) may not be given access to the records of a cigarette factory submitted to and under the custody of the Collector (now Commissioner) of Internal Revenue, said the Secretary of Justice: "The NBI Director submits the view that the quoted section (section 347) should yield to Section 5(f) of Republic Act No. 157 which empowers the members of the investigation staff of his Office 'to have access to all public records'. "This view proceeds from a misconstruction of the term 'public records'. Section 38 of the Rules of Court provides that only the following records shall be considered public: 'xxx xxx xxx.' And with reference as to who makes it and why, a public record is one prepared by a public officer in pursuance of a duty, the immediate purpose of which is to disseminate information to the public, or to serve as a memorial of official transactions for public reference. Also, a record is not public unless it can be inspected by any person interested. 'Public records and documents are such as placed on the public files for the use and information of the public, to which the public has access, and of which the public has the right, usually upon payment of certain fees, to demand copies'. . . In line with these principles, the Supreme Court of the United States has held that reports made by a taxpayer to the Collector of Internal Revenue are in no sense public records . . ' In Opinion No. 86, s. 1957, however, the Secretary of Justice opined that: "It is true that in the leading case of Boske v. Comingere . . ., cited in a recent opinion of this Office (Op. No. 366, s. of 1956), it was held that a federal revenue collector put in jail for contempt in refusing to produce in a state court copies of reports made to him by distillers was entitled to a writ of habeas corpus, and that the attempt of the state court to punish the collector for obeying regulations of U.S. Treasury Department prohibiting him (the collector) from producing records in his office or copies thereof, in a state court, would be a violation of his rights under the Constitution and laws of the United States. Stogell v. Thurman (175 F 813) and Ex Parto Sackett (74 F 2d 922)are to same effect. It ought to be emphasized, however, that in all those proceedings the U . S . government itself was not a party . . . . And also, as pointed out by Mr. Justice Learned Hand in the case of U.S. vs. Andolschek (142 F 2d 503, 506), none of those case involved ' the prosecution of a crime consisting of the very matters recorded in the suppressed document, or of matters nearly enough akin to make relevant the matter recorded . . . . While we must accept it as lawful for a department of the government to suppress documents, even when they will help to determine controversies between third persons, we cannot agree that this should include their suppression in a criminal prosecution, founded upon those very dealings to which the documents relate, and whose criminality they will, or may, tend to exculpate. So far as they directly touch the criminal dealings, the prosecution necessarily ends any confidential character the documents may possess; it must be conducted in the open, and will lay bare their subject matter. The Government must choose; either it may leave the transactions in the obscurity from which a trial will draw them, or it must expose them fully. Nor does it seem to us possible to draw any line between documents whose contents bear directly upon the criminal transactions and those which may be only indirectly relevant' (Emphasis supplied). "In the light of all the foregoing, I believe that when the government institutes criminal proceedings in which evidence, otherwise privileged under a statute or regulations, becomes relevant, it abandons the privilege (see 95 L. ed. 446). . . ." From the aforecited opinions, it seems quite clear that information or records pertaining to the business of a taxpayer may not be divulged or show without violating the provisions of Section 347 of the Tax Code, unless such information or records are relevant evidence in a criminal case instituted by the Government. And while the exception in the case of criminal proceedings instituted by the Government also applies in proceedings of a civil nature instituted; by the Government, or to which it is a party defendant (see 95 L. ed. 447), and in cases to which the Commissioner of Internal Revenue or any of his deputies is a party (see 95 L. ed. 450), Special Proceedings No. K-978, however, is neither a criminal or civil proceedings to which the Government is a party nor a case to which the Commissioner of Internal Revenue or any of his deputies is a party. lexlib Please be guided accordingly. Very truly yours, MELECIO R. DOMINGO Commissioner of Internal Revenue