Bureau of Local Government Finance Opinion

February 15, 2005 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION 1st Indorsement Respectfully referred, thru the Regional Director for Local Government Finance, Department of Finance, Region III, Benigno Aquino Memorial Hall, Provincial Capitol Compound, San Fernando City, Pampanga, to the Provincial Assessor of Bulacan, Malolos City. This has reference to the within letter dated May 25, 2004 of Mr. Eliodoro M. Ponio, 22 Garnet Street, Severina Diamond Subdivision, Km. 18, SSHW, Paraaque City, requesting reclassification and reassessment of his land previously declared as Agricultural/Residential, covered by TCT No. 6853 and declared under Tax Declaration No. 26865-A, with an area of 33,280.5 sq.m. situated in Tibagan, San Miguel, that province. It appears from the attached letter dated September 5, 2001, that Mr. Ponio requested the reclassification of his subject property from "Industrial/Residential" back to "Riceland/un-irrigated and Residential land". In his Affidavit of Non-Operation of Marble Plant, Mr. Ponio alleged that the operation of the plant supposedly in CY 1999 did not materialize. Under his attached letter dated September 9, 2003 to that Regional Office, Mr. Ponio alleged that in 1994 , the Provincial Assessor's Office of Bulacan reclassified the subject property under Tax Declaration No. 26865-A from agricultural to industrial under ARP No. 94-047-0099. aTEHIC In his letter of September 9, 2003, Mr. Ponio claims that the said reclassification made on his property under ARP No. 94-047-0099 was erroneous for the following reasons: 1) the land was not actually used for industrial purposes in violation of Sec. 217 of the Local Government Code; and 2) he did not receive any Notice of Assessment that the land had been reclassified from Agricultural/Residential to purely Industrial. It was, allegedly in 2004 that he came to know of the reclassification made by the Assessor. The Municipal Assessor of San Miguel in his letter of November 18, 2003, submitted the following findings in the ocular inspection conducted by his Office: "1. The land is declared under ARP # 2003-000000161 in the name of Eliodoro Ponio m/to Abremilla B. Ponio as 33,280.5 sq.m. industrial site; "2. Under T.D. # 26865 (1985 Gen. Rev.) the land was classified as 31,000 sq.m. Riceland and 2,280.5 residential lot; "3. During the tax mapping of San Miguel in 1993 it was wholly classified as Marble Crushing Site (industrial) and said classification was carried over up to the present revision; "4. As per ocular inspection we conducted, we found out that the place was wildly grown with grass and cogon except to the area where buildings were erected; "5. A portion of 5,000 sq.m. was planted with palay by its caretaker, Mr. Maximo Maniquiz; "6. The building (warehouse and house) were partially demolished; no roofs and only the CHB walls and concrete flooring could be seen in the area; DcHaET "7. A concrete fence is still erected on its three (3) sides, at the front and its sides with a length of less than 100 meters each; "8. The cleared area is closed to the former classification of 2,280.5 sq.m. residential lot; and "9. As per interview conducted, the operation of the plant did not materialize, the rear portion (Riceland) was never planted with palay. It was again planted (5,000 sq.m.) only this year 2003. The building were partially demolished in 2001." The Provincial Assessor in her letter dated January 5, 2004 informed Mr. Ponio that the ocular inspection conducted by the Municipal Assessor of San Miguel, Bulacan "revealed the truth and actual use of the property." Indeed, the lot in question was "grown with grass and cogon." However, the Provincial Assessor explained that the requested reclassification shall only be made upon payment of his real property tax delinquency since 1994 invoking Section 252 of the Local Government Code which according to the Provincial Assessor was a pre-requisite to the reclassification. We believe that the main issue herein is on the liability of Mr. Ponio to pay the real property tax deficiency since 1994 in spite of the admission by the Provincial Assessor that the assessment is erroneous. The sub-issue is whether payment of the real property tax is a condition precedent before a reassessment can be made. In this regard, please be informed about the provision under Section 223 of the Local Government Code of 1991 (R.A. No. 7160) quoted hereunder: "SEC. 223. Notification of New or Revised Assessment . When real property is assessed for the first time or when an existing assessment is increased or decreased, the provincial, city or municipal assessor shall within thirty (30) days give written notice of such new or revised assessment to the person in whose name the property is declared . The notice may be delivered personally or by registered mail or through the assistance of the punong barangay to the last known address of the person to be served." (Emphasis ours) TIAEac In the implementation of the foregoing provision of law, the Department of Finance issued Local Assessment Regulations No. 1-92 which, among others, made the following clarification: "a. Purpose of Service of Notice of Assessment. "Although the real property tax is levied against the real property, it is the owner who pays the tax. After that tax is fixed, he is entitled to a hearing on the assessment of his property; notice and hearing constitute part of due process (not strictly judicial) in taxation. If he is not satisfied with the action of the assessor in the assessment of his property, he may, within sixty (60) days from the date of receipt by him of the written notice of the assessment of his property, appeal to the Board of Assessment Appeals of the province or city where the property is located. If he does not appeal within the said period, he will be deprived of his right to be heard in the Board. "b. To whom and where the notice shall be delivered. "The written notice together with the owner's copy of the tax declaration shall be addressed to the person in whose name the property is declared. It may be delivered to him personally or to the occupant in possession of the property, or by mail to the last known address of the owner thru the assistance of the punong barangay." We took note of the claim of Mr. Ponio that no notice of assessment was issued to him by the Assessor. It was only in 2004 when he learned of the assessment. We believe that Mr. Ponio should not be faulted for being delinquent because he was not given an opportunity to examine and question the assessments made on his property. Sending of Notice of Assessment together with a copy of Tax Declaration by the Assessor is of paramount importance for the purpose of giving effect to the assessment made by the assessor, without which the taxpayer concerned cannot resort to applicable remedies under the law. TcSICH The subject area (33,280.5 sq.m.) which was entirely classified as Industrial since 1993, and intended to be a Marble plant did not materialize because the government decided to stop quarrying operations in the municipalities of San Miguel and San Ildefonso, Bulacan. This Bureau has consistently ruled that real property shall always be classified, valued and assessed based on its actual use. Clearly, the industrial activity contemplated was not accomplished because of the closure of the plant. Also, the required approval of the Department of Agrarian Reform for the conversion of the property's classification from Agricultural to Industrial was not secured. Coming now to the main issue, we hereby declare that Mr. Ponio is not liable to pay the real property tax deficiency since 1994. The Provincial Assessor in her letter of January 5, 2004, clearly admitted that the assessment is erroneous. However, the Provincial Assessor required the payment of the real property tax deficiency invoking Section 252 of the Code and submitted that the said payment is a pre-requisite for the reassessment. We hereby rule that Section 252 is not applicable. Section 252 is applicable only in case there is a pending protest. In the herein case, there is no such protest since the Provincial Assessor admitted that "the inspection made (by the Municipal Assessor) revealed the truth and actual use of the property." Therefore, the applicable provision is Section 221 of the LGC, which provides as follows: "SEC. 221. Date of Effectivity of Assessment or Reassessment . All assessments or re-assessments made after the first (1st) day of January of any year shall take effect on the first (1st) day of January of the succeeding year: Provided, however, That the reassessment of real property due to its partial or total destruction, or to a major change in its actual use, or to any great sudden inflation or deflation of real property values, or to the gross illegality of the assessment when made or any other abnormal cause, shall be made within ninety (90) days from the date any such cause or causes occurred, and shall take effect at the beginning of the quarter next following the reassessment." (Emphasis supplied) TaISDA The abovequoted provision of Section 221 does not require payment before reassessment can be effected. Therefore, there is no legal basis to require Mr. Ponio to pay the real property tax deficiency before his request for reassessment could be acted upon. Relatedly, attached is a copy of our 1st Indorsement dated October 12, 2000, treating on a similar subject matter, the pertinent portion of which reads as follows: ". . ., this Bureau has consistently ruled that collection of real property taxes shall be based solely on correct assessments. Erroneous assessments resulting from improper or non application of existing laws, rules or regulations should be corrected, the effectivity of which shall be the same as the effectivity of the erroneous assessments being rectified ." (Emphasis supplied) Taxpayers owe honesty to the government just as the government owes fairness to taxpayers ( Commissioner of Internal Revenue vs. Tokyo Shipping Co., Ltd., etc, et al ., G.R. No. 68252, May 26, 1995) The power of taxation is sometimes called also the power to destroy. Therefore, it should be exercised with caution to minimize injury to the proprietary rights of a taxpayer. It must be exercised fairly, equally and uniformly, lest the tax collector kill the 'hen that lays the golden egg.' And in order to maintain the general public's trust and confidence in the government, this power must be used justly and not treacherously." ( Roxas, et al. vs. CTA, et al ., L-25043, April 26, 1968) In view of all the foregoing, that Office is hereby instructed to restore the previous classification of the herein subject property of Mr. Eliodoro M. Ponio, that is, as agricultural/residential effective 1994 the time when the said error was made. Likewise, the Provincial Treasurer thereat, for her part should be advised of the said corrections for her immediate appropriate action. Be guided accordingly. cEaCAH (SGD.) MA. PRESENTACION R. MONTESA Executive Director