Tektite Insurance Brokers, Inc. v. Commissioner of Internal Revenue

[C.T.A. CASE NO. 5554. August 8, 2000.] TEKTITE INSURANCE BROKERS, INC. , petitioner , vs . COMMISSIONER OF INTERNAL REVENUE , respondent . D E C I S I O N Appealed before Us is the letter decision of the Acting Chief of the Assessment Division of Revenue Region No. 7, Bureau of Internal Revenue ("BIR" for brevity), Quezon City, Metro Manila, for and in behalf of the Respondent, dated August 4, 1997, which Petitioner deemed as a denial of its protest on the assessment issue against it for deficiency value added tax and income tax, under Assessment Notice No. 000422, dated August 30, 1996, in the amounts of P2,027.96 and P144,573.04, inclusive of surcharge, interest and compromise penalty, respectively, covering the year 1993. Petitioner is a corporation duly organized under and by virtue of the laws of the Republic of the Philippines, with principal office located at the 5th Floor, Philippine Stock Exchange Centre, Ortigas, Pasig City, Metro Manila. The bone of contention in the present controversy is the propriety of the deductible expense on salaries and wages amounting to P519,933.35 which Petitioner stated in its income tax return for the year 1993 (Exhibit "B-2"). Respondent disallowed the amount of P71,938.16 on such expense account on the simple ground that they were not duly supported. Petitioner filed a protest dated October 29, 1996, where it asserted that the deductions were completely and adequately supported (Exhibit "D"). In the Petition for Review, Petitioner claims that the disallowed amount represent bonuses paid to its employees for the year covered, despite the fact that they were given to employees only sometime in 1994. It reasons that said bonuses were already treated as accrued expenses for year 1993, as shown by entries recorded in its General Ledger Book (Exhibits "H" and "H-1") and other documents proving due receipt and withholding of taxes on the bonuses (Exhibits "J", "K" and "M", inclusive). As regards the assessment for value added tax in the amount of P2,027.96, Petitioner asserts that the same had already been paid and should no longer be collected. To prove the point, it offered as evidence the Authority To Accept Payment dated November 4, 1996 of Respondent's Bureau showing the machine validation of such amount, as proof of payment (Exhibit "N"). Prescinding from the above, it is worthy to note that in his Answer, Respondent has alleged that the instant case is premature on account of the fact that the assailed decision on the protest was merely issued by the Chief of the Assessment Division and not by Respondent as required under Section 7 in relation to Section 11 of Republic Act No. 1125. Based on the foregoing facts, disquisition of the parties and the law in point, the following are the issues confronting Us, to wit: 1. Whether or not the filing of the instant petition is premature; and if in the negative, 2. Whether or not the disallowance made by the Respondent on the salaries and wages is proper; and, 3. Whether or not Petitioner has fully paid its value added tax liability for the year 1993. We rule peremptorily in favor of the Respondent . This is not a case of first impression. On all fours with the first issue of herein case is the Resolution of this Court in the Case of Anscor Land Management and Development Corporation vs. Commissioner of Internal Revenue , CTA Case No. 5463 , July 30, 1997 ( With Entry of Judgment dated August 21, 1997 ), to wit: Pertinent to the issue at bar is Section 7 of Republic Act No. 1125 and Section 10 of Revenue Regulations No. 12-85, which states: "SEC. 7. Jurisdiction . The Court of Tax Appeals shall exercise exclusive appellate jurisdiction to review by appeal, as herein provided (1) Decisions of the Commissioner of Internal Revenue in cases involving disputed assessment, refunds of internal revenue taxes, fees or other charges, penalties imposed in relation thereto, or other matters arising under the National Internal Revenue Code or other law or part of law administered by the Bureau of Internal Revenue; (emphasis supplied) (R.A. No. 1125 xxx xxx xxx Section 10. Appeals of Decisions of Commissioner or Regional Director to the Court of Tax Appeals . Final decision issued by the Commissioner or Regional Director may be appealed to the Court of Tax Appeals within thirty (30) days from receipt thereof, otherwise the same shall become final and executory. (Revenue Regulations No. 12-85) TSEAaD It is unmistakably clear and explicit from the aforementioned provisions of law and regulations that what is reviewable by this Court on appeal, among others, are the decisions of the Commissioner of Internal Revenue and Regional Directors . It is the intention of the law to give the taxpayer an opportunity to exhaust all administrative remedies before coming to this Court and on the other hand, give the Commissioner or the Regional Director, as the case may be, an opportunity to correct the mistakes committed, if any, by his subordinates. Thus, a party dissatisfied with the decision of the Chief of Assessment Division may appeal to the Commissioner or Regional Director, whose decisions are appealable to this Court in the manner and within the period prescribed by law and regulations. Since petitioner did not exhaust his administrative remedies, his recourse to this Court is premature. In fine, the law and regulations are crystal clear that only the decisions of the Respondent himself or his Regional Directors over protested assessments are what are appealable to this Court. The decision of the Acting Chief of Assessment Division of Revenue Region No. 7 simply does not meet the requirement provided by law. It is important to point out that the foregoing decision has for its legal basis the 1996 Tax Code because this was the Law prevailing at the time the assessment was issued and the protest was filed. Under the present law as embodied in the Tax Reform Act of 1997, taxpayers which were issued assessments by the Bureau of Internal Revenue need not wait for the decision of the Commissioner of Internal Revenue or the Regional Directors on their protests before coming to this Court. Under Section 228 of the Tax Reform Act of 1997, taxpayers aggrieved by the issuance of an assessment may seek recourse to this Court even without a decision being rendered by the aforementioned officials on their protests provided that the taxpayers do so within the period prescribed and conditions specified therein. However, since the factual milieu of this case dictates the application of the 1996 Tax Code, We find that said case has been filed prematurely, there being no proper decision yet appealable to this Court. With this conclusion, this Court finds it unnecessary to delve into the other issues involved in this case. WHEREFORE, in view of the foregoing, the instant Petition for Review is hereby DISMISSED, without prejudice, for LACK OF JURISDICTION. SO ORDERED. (SGD.) RAMON O. DE VEYRA Associate Judge I CONCUR: (SGD.) AMANCIO Q. SAGA Associate Judge Separate Opinions The majority opinion dismissed the instant petition due to lack of jurisdiction agreeing with the Respondent that the decision of the Chief of the Assessment Division on the protest filed by Petitioner is not the one appealable to this Court. My esteemed colleagues reiterated the view that only decisions of the Commissioner of Internal Revenue and the Regional Director fall within this Court's jurisdiction. I humbly believe otherwise. SIcEHC It is well established and recognized in a number of cases that lower ranking officials of the BIR, acting for and in behalf of the Commissioner, have the delegated authority to act with finality on matters involving request for reinvestigation or reconsideration of protested assessments. In the case of Commissioner of Internal Revenue vs. Ayala Securities Corporation and the Honorable Court of Tax Appeals, 70 SCRA 209, the High Court considered a plain letter of the Chief of Manila Examiners of the Office of the Commissioner of Internal Revenue, wholly reiterating the demand by the BIR for the settlement of the assessment already made, as a clear indication of the final decision of the Commissioner against the reconsideration of the disputed assessment. In addition, this Court has had the opportunity to declare as respondent's final decision the acts and signatures of the Acting Regional Director, Chief of the Assessment Department, and Chief of Accounts Receivable/Billing Division, all of the BIR. ( Thomas B . Villamin vs . The Collector of Internal Revenue, CTA Case No . 258, Resolution, promulgated on July 31, 1956, pp . 6-7 ; Philippine Rock Products, Inc . vs . The Collector of Internal Revenue, CTA Case No . 546, Resolution, promulgated on December 22, 1958, p . 4; Cleomenes Fortaleza, Jr . vs . Collector, CTA Case No . 1527, Resolution, promulgated on December 22, 1964; Oceanic Wireless Network, Inc . vs . Commissioner of Internal Revenue, CTA Case No . 4668, promulgated on September 16, 1994 ). The aforecited cases prove the point that not only the decisions of the Commissioner or the Regional Director of the BIR are appealable to this Court. Although Revenue Regulations No. 12-85 has specified that the final decisions of the latter two persons are the ones appealable, it doesn't mean, however, that the same is exclusive especially considering that in the particular case the incumbent Commissioner herself has delegated further said authority to even lower officials of the BIR. I always adhere to the pronouncement enunciated by the Supreme Court in Advertising Associates vs . Commissioner of Internal Revenue, 133 SCRA 765 which provides that: "The decision is in accordance with this Court's dictum that the Commissioner should always indicate to the taxpayer in clear and unequivocal language what constitutes his final determination of disputed assessment . That procedure demanded by the pressing need for fair play, regularity and orderliness in administrative action . (Surigao Electric Co., Inc. vs. Court of Tax Appeals, L-25289, June 28, 1972, 57 SCRA 523).' (Emphasis provided)" This means that regardless of the literal and exclusive mention of the Commissioner or the Regional Director in Revenue Regulations No. 12-85, the controlling factor in the determination of a final decision on a disputed assessment is founded on the Commissioner's clear and unequivocal language on what constitutes final decision on the same. A review of paragraph II.D of Revenue Memorandum Order (RMO) No. 37-94 duly issued by herein respondent Commissioner herself clearly states: "II.D The Assistant Division Chief/Division Chief of Assessment Divisions in the Regional Offices for regional cases or the Assistant Commissioner, Intelligence and Investigation Service for Tax Fraud Division cases shall decide whether or not the protest to an assessment notice in accordance with the provisions of Section 229 and its implementing regulations, should be given due course and whether the protest involves a question of fact or of law or both:" (Emphasis supplied) In fact, the Court of Appeals in the case entitled Commissioner of Internal Revenue vs . Cyanamid Philippines, Inc ., CA G . R . SP No . 39933 promulgated February 4, 1999 , considered the demand letter of the Assistant Chief, Accounts Receivable/Billing Division as a final denial of the protest filed by taxpayer which is appealable to the Court of Tax Appeals. This aforecited case fully agreed with the Court of Tax Appeals' findings and quoted the appealed decision in this wise: "In a later case, very much akin to the surrounding circumstances the High Court even considered a plain letter of the Chief of Manila Examiners of the Office of the Commissioner of Internal Revenue, wholly reiterating the demand by the Bureau of Internal Revenue for the settlement of the assessment already made and sans any form of warning to enforce collection in case of failure to pay as a clear indication of the final decision of the Commissioner against the reconsideration of the disputed assessment. (Commissioner of Internal Revenue vs. Ayala Securities Corporation and the Honorable Court of Tax Appeals, 70 SCRA 209). In like manner, this Court had the occasion to pass upon as respondent's final decision a letter coming from the Chief of Accounts Receivable/Billing Division, acting for respondent Commissioner of Internal Revenue, which reiterated the assessments made with a note thereunder on the denial of petitioner's request for reinvestigation. Afterwards, respondent therein served warrants of distraint and/or levy to enforce collection of deficiency taxes. (Oceanic Wireless Network, Inc. vs. CIR, CTA Case No. 4668, September 16, 1994). HcTIDC Of great concern is the fact that herein respondent never questioned the authority of the Chief of the Accounts Receivable/Billing Division to act "FOR THE COMMISSIONER OF INTERNAL REVENUE" in said CTA case. Inexplicably, respondent is now singing a different tune. Under the doctrine of estoppel in pais, the respondent has by her own act intentionally and deliberately led this Court to believe that the Chief of the Accounts Receivable/Billing Division can act for the Commissioner of Internal Revenue, she cannot now be permitted to repudiate or change such representation to satisfy her interests. (Section 2(a), Rule 131, Revised Rules of Court). In fine, the allegations of the respondent cater only to befuddle and prolong the resolution of the merits of the case of the petitioner which in effect may deprive of vital content the import of the High Court's entreaty for the Commissioner of Internal Revenue to always indicate to the taxpayer in clear and unequivocal language her final action on the matter. There is the pressing need for fair play, regularity and orderliness of administrative action so as not to leave the taxpayer groping in the dark. (Surigao case, supra .) We fully concur with the CTA. It is a time-tested tax jurisprudence that a mere letter of the Office of the Commissioner of Internal Revenue reiterating demand for the settlement of an assessment already made constitutes the decision appealable to the CTA (Commissioner vs. Ayala Securities Corporation, 70 SCRA 204)." WHEREFORE, in view of the foregoing, I register my dissent to the majority opinion and vote to decide the case on the merits instead of dismissing the same for lack of jurisdiction. (SGD.) ERNESTO D. ACOSTA Associate Judge