BIR Ruling [UN-271-95]

July 24, 1995 BIR RULING [UN-271-95] The Honorable The Secretary of Finance Manila S i r : I have the honor to forward to that Office for approval the claim for informer's reward of Mr. Bal Nava under Section 281(1) of the Tax Code, as amended, including the entire docket bearing on the 1985 capital gains tax case of Mr. & Mrs. Jose Z. Leoncio of 95 Rizal Avenue corner Maria Clara Street, Taytay, Rizal. cd The records show that on May 14, 1986, in a sworn statement recorded as Confidential Information No. 1843, the abovenamed informer denounced therein Mr. Jose Z. Leoncio & wife for alleged tax evasion thru non-payment of capital gains tax. Acting on said confidential information, a group of revenue examiners of the Tax Fraud Division conducted preliminary investigation and thereafter submitted their report and recommendation on May 30 and June 30, 1986. Forthwith, Letter of Authority No. 0005192 was issued to investigate taxpayer's books of accounts for internal revenue tax purposes for 1985 and unverified prior years. It was ascertained in the investigation that on May 28, 1985, the spouses sold a parcel of land in favor of the Church of Jesus Christ of Latter Day Saints (Mormons) for a consideration of P3,900,000.00. The report further stated that during the process of registration, the spouses allegedly modified the contract of sale by changing the contract price from P3,900,000.00 to P300,000.00 only and the date of the deed of sale was also changed from May 28, 1985 to April 4, 1978 to evade payment of the capital gains tax. The examiners then recommended that the amount of P1,246,609.57 and P39,000.00 be assessed against the taxpayers as deficiency capital gains tax and documentary stamp tax for 1985, respectively. In his letter dated March 24, 1987, Mr. Leoncio narrated the circumstances which attended his case. It appears that he (Mr. Leoncio) commissioned the services of ER Marfil Realty & Construction to pay the capital gains tax and to obtain the BIR Clearance in connection with the said sale of real property. However, the broker submitted a forged deed of sale which was antedated to April 4, 1978 whose consideration was P300,000.00 only and paid the amount of P3,005.00 as documentary stamp tax. This fact was corroborated by then Chief Eliseo Pitargue of the Intelligence & Investigation Office (now Tax Fraud Division) in his report dated September 13, 1989 to the effect that the spouses were indeed victimized by a syndicate and had no part in the attempt to defraud the government of the lawful taxes. For their part, the spouses filed a case of estafa against their broker. The spouses then offered for a compromise settlement of their case pursuant to E.O. No. 44 by paying 10% of the basic taxes proposed to be assessed but the Chief of the Intelligence & Investigation Office suggested that the offer be increased to 30%. Upon the failure of the taxpayers to pay the suggested compromise, Assessment Notice Nos. FAS-4-85-89-002265 and FAS-4-85-89-002266 were issued on November 10, 1989 requiring the former to pay the aforesaid amounts of P1,459,626.00 and P39,000.00 aside from threats of criminal prosecution. On July 1, 1991, taxpayers' counsel expressed the willingness of his clients to pay 30% of the basic taxes assessed or the amount of P220,218.00. In accepting the taxpayer's compromise offer, this Office took into account the fact that the former had no participation in the attempt to evade the correct taxes due from them; that they were victimized by some unscrupulous persons of no less than P800,000.00 intended to settle their capital gains tax liabilities; and that the taxpayers appear to be financially incapable of paying in full the assessed taxes. On July 1, 1992, the spouses paid the compromise amount of P220,218.00 per Authority To Accept Payment (ATAP) SN No. 67783. The records further show that the information furnished by the informer was in writing and under oath; that it was not yet in the possession of the Bureau nor is the aforesaid tax liability pending or previously investigated by any official or employee of the Bureau or by the Department of Finance; and that the informer is not related to any internal revenue official or employee or any public officer within the sixth degree of consanguinity. It appearing that the information furnished by Mr. Bal Nava was instrumental in the discovery of a violation of the internal revenue law and in the recovery of taxes which otherwise would not have been effected, it is respectfully recommended that he be paid the amount equivalent to 15% of P220,218.00 or the amount of P33,032.70 as informer's reward pursuant to Section 281 (1) of the Tax Code, as amended. Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue