BIR Ruling [UN-196-94]

July 5, 1994 BIR RULING [UN-196-94] The Honorable The Secretary of Finance Manila S i r : There is forwarded to that Office for approval the claim of Mr. Hadi Esmaelzadeh for informer's reward pursuant to the provisions of Section 281(1) of the Tax Code, as amended, including the entire docket bearing on the 1990 internal revenue tax case of The Severino H. Gonzales, Jr. Construction Co., Inc. (SHGJCCI, for brevity) of 57 Scout Delgado Street, Quezon City. casia The records show that on February 20, 1990, the abovenamed informer, using the pseudonym Jonathan David, executed an Affidavit which was recorded as Confidential Information No. 2403 denouncing SHGJCCI for tax evasion. The informer alleged in his letter attached to his Affidavit that on April 25, 1988, SHGJCCI purchased two (2) parcels of land from RFG Realty & Development Corporation for a consideration of P1,000,000.00 which it later sold to the Alyansa ng mga Maka-Maralitang Asosasyon at Kapatirang Organisasyon, Inc. (AMAKO) for P36,786,711.55. On the basis of said confidential information, Letter of Authority No. 001242 was issued by this Office to a group of revenue enforcement officers of the Intelligence & Investigation Office (now Tax Fraud Division) to examine the books of accounts and other accounting records of SHGJCCI for the years 1989 and 1990. Two months after service of said Letter of Authority or on September 17, 1990, SHGJCCI filed its annual corporate income tax return for the Fiscal Year ending May 30, 1990 declaring therein only the proceeds derived from the sale of the two parcels of land in the aforesaid amount of P36,786,711.55. SHGJCCI however, claimed as deductions the total amount of P35,654,676.32 thereby reducing its taxable income to only P1,142,035.23 and accordingly paid the amount of P399,712.00 as its corporate income tax. However, the revenue enforcement officers who conducted the investigation of the case disallowed all but three of the items which SHGJCCI claimed as deductions and on the basis of their recommendation, the taxpayer was assessed in the amount of P25,280,207.70 as deficiency income tax which included surcharges of 25% and 50%, plus interest and compromise penalty. Moreover, a criminal case was filed against Mrs. Ceres G. Pajaron, the corporate president, who was found guilty of violating the internal revenue laws and ordered to pay the BIR the said amount of P25,280,207.70. Several Warrants of Distraint, Levy and Garnishment were simultaneously issued by this Office to enforce collection of the deficiency tax but to no avail. It turned out that Mrs. Pajaron had left only one parcel of land registered in her name containing an area of 202.50 square meters, which was levied upon by this Office and eventually sold for P1,800,000.00 in a public auction sale held on February 21, 1994 to partially satisfy the tax liability of Mrs. Pajaron. The records further show that the information furnished by the informer was in writing and under oath; that the same was not yet in the possession of the Bureau of Internal Revenue nor is the aforesaid tax liability pending or previously investigated or examined by any of its official or employee or by the Department of Finance; and that the informer is not related to any internal revenue official or employee within the sixth degree of consanguinity. It appearing that the information furnished by Mr. Hadi Esmaelzadeh was instrumental in the discovery of a violation of the internal revenue laws and in the recovery of taxes, albeit partially, it is respectfully recommended that he be paid the amount equivalent to 15% of P1,800,000.00 or P270,000.00 as informer's reward, pursuant to Section 281(1) of the Tax Code, as amended. cdtech Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue