Compromise Penalty on Violations of the Provisions of the Tax Code and Bookkeeping Regulations

April 28, 1959 BIR RULING NO. 236-59 Returned to the Regional Director, BIR Regional District No. 6, Naga City, the herein papers bearing on the query contained in the letter of the Deputy Provincial Treasurer of Ragay, Camarines Sur, dated March 4, 1959. The question presented is whether or not deputy provincial or city treasurers can impose the compromise penalty on violations of the provisions of section 204 of the Tax Code and section 19 of the Bookkeeping Regulations. A compromise is an agreement entered into by and between the parties to a case about or already instituted for the purpose of settling their claims amicably and of avoiding court litigations or of putting an end to one already begun. It is not an act of apprehending violations nor is it recommendatory in character. It settles or terminates contemplated or actual court litigations. The power to compromise cases arising under the provisions of the National Internal Revenue Code or other law or part of law administered by the Bureau of Internal Revenue is exclusively vested in the Commissioner of Internal Revenue (Section 309, Tax Code). The aforecited section mentions no other internal revenue officer, except the Commissioner, who can exercise this power to compromise in contrast to sections 6, 9, 10, 13 and 14 of the same Code. The exercise of this power is discretionary on the part of the Commissioner and as such it may be exercised only by him or by his subordinates who are authorized by him or by the law to do so. Hence, unless authorized by law or the Commissioner of Internal Revenue, no internal revenue officer can compromise internal revenue cases. There is no law or regulation authorizing deputy provincial treasurers to enter into compromise on violations of section 204 of the Tax Code and section 19 of the Bookkeeping Regulations nor of any internal revenue law or regulation for that matter. While it is true that deputy provincial treasurers are constituted agents of the Commissioner of Internal Revenue for the collection of the national internal revenue and the enforcement of all laws falling within the jurisdiction of the Bureau (section 6, Tax Code), their power to enforce the said laws is limited by section 309 of the same Code. With respect to the power to enforce revenue laws and regulations, section 6 of the said Code is a general provision. Section 309 of the same Code specifically treats of, among others, the enforcement of revenue laws and regulations through compromises. The latter section limits the scope of the former. It is a well settled rule of statutory construction that, where two provisions of law, one a general provision and the other specific, may be applicable to a given set of facts the specific provision shall govern. In case any internal revenue officer (including deputy provincial treasurers) discovers any violation of the Tax Code or any law or regulation administered by this Bureau of such character as to warrant the institution of criminal proceedings, his duty is to report the facts to the Commissioner of Internal Revenue or, in urgent cases, he may send his report direct to the prosecuting officer but a copy of said report shall also be sent to the Commissioner of Internal Revenue. (Sections 13 and 308, Tax Code). From the aforecited provisions of law, it will be readily noted that in cases of violations of internal revenue laws or regulations, internal revenue officers are authorized to report or recommend the prosecution of the violators but not to take steps to settle or terminate cases arising from said violations. As stated earlier, compromises are made to avoid court litigations or to terminate one that was already begun but is still undecided. In view of the foregoing considerations, this Office believes and so holds that while under existing laws and regulations deputy provincial treasurers are authorized to report violations of internal revenue laws and regulations or to recommend prosecution for said violations, they are not, however, empowered to compromise internal revenue cases. Accordingly, they cannot impose the compromise penalties on violations of section 204 of the Tax Code and section 19 of the Bookkeeping Regulations. cdtech (SGD.) JOSE ARAAS Commissioner of Internal Revenue