St. Luke's Medical Center, Inc. v. Commissioner of Internal Revenue

SPECIAL SECOND DIVISION [C.T.A. CASE NOS. 7823 & 7832. May 29, 2014.] ST. LUKE'S MEDICAL CENTER, INC. , petitioner , vs . COMMISSIONER OF INTERNAL REVENUE , respondent . RESOLUTION MINDARO-GRULLA , J p : Before this Court is respondent's "MOTION FOR PARTIAL RECONSIDERATION" filed on March 6, 2014, with petitioner's "COMMENT/OPPOSITION (To the Motion for Partial Reconsideration of the CIR)" filed on April 4, 2014. Respondent prays that this Court partially reconsider and set aside the Decision promulgated on February 18, 2014 and render a new one ordering petitioner to pay its deficiency tax assessments. The dispositive portion of the assailed Decision reads: " WHEREFORE , premises considered, the instant consolidated Petitions for Review are hereby PARTIALLY GRANTED . The assessment issued by respondent against petitioner for taxable year 2003 covering alleged deficiency income tax for the taxable year 2003 is hereby CANCELLED due to prescription. However, the assessments issued by respondent against petitioner for taxable year 2004 covering deficiency income tax, deficiency value-added tax, deficiency withholding tax on compensation, deficiency expanded withholding tax and deficiency documentary stamp tax are UPHELD but with some modifications. Accordingly, petitioner is hereby ORDERED TO PAY the amount of P151,850,822.97 for the following deficiency taxes, inclusive of the 25% surcharge imposed under Section 248(A)(3) of the NIRC of 1997, as amended: Type of Tax Basic Tax 25% Surcharge Total Income Tax P132,011,615.87 P132,011,615.87 Value-added Tax 193,921.57 P48,480.39 242,401.96 Withholding Tax on 2,317,996.65 579,499.16 2,897,495.81 Compensation Expanded Withholding Tax 13,357,824.46 3,339,456.12 16,697,280.58 Documentary Stamp Tax 1,623.00 405.75 2,028.75 P147,882,981.55 P3,967,841.42 P151,850,822.97 ============== ============ ============== In addition, petitioner is hereby ORDERED TO PAY 20% deficiency interest per annum on the following basic deficiency taxes computed from the dates indicated herein after full payment thereof pursuant to Section 249(B) of the NIRC of 1997, as amended: EcATDH Basic Deficiency Tax Computed from: Value-added Tax P193,921.57 January 25, 2005 Withholding Tax on Compensation 2,317,996.65 January 15, 2005 Expanded Withholding Tax 13,357,824.46 January 15, 2005 Documentary Stamp Tax 1,623.00 January 10, 2005 P15,871,365.68 ============ Further, petitioner is hereby ORDERED TO PAY 20% delinquency interest per annum on the deficiency taxes of P15,871,365.68, on the 25% surcharge of P3,967,841.42 and on the 20% deficiency interest which have accrued as stated above from December 31, 2007 until full payment thereof pursuant to Section 249(C) of the NIRC of 1997, as amended. SO ORDERED ." Respondent claims that her right to assess petitioner has not yet prescribed since it was made under the exception provided in Sec. 222 (a) 1 of the National Internal Revenue Code (NIRC) of 1997. She argues that petitioner's 2003 Income Tax Return is deficient and likewise false as it did not contain the income tax due, citing the case of Jose B. Aznar, et al. vs. Court of Tax Appeals, et al. 2 as her basis thereof. Lastly, respondent claims that based on the audit/investigation conducted, petitioner's expanded withholding tax, withholding tax on compensation, and documentary stamp tax were erroneously arrived at. On the other hand, in its Comment, petitioner mainly asserts that respondent's motion does not raise any new or substantial ground to justify the reconsideration sought. Petitioner claims that respondent failed to support her allegations with any factual basis. After cautiously weighing the arguments raised by respondent, this Court finds no merit in the instant motion. A false return has been defined as one "which contains wrong information due to mistake, carelessness or ignorance." 3 However, a sweeping application thereof should be avoided. Otherwise, any return which contains wrong information of whatever nature, regardless of their intention, may be argued as being a "false return" thereby subjecting taxpayers to harassment and extortion from unscrupulous tax agents who invoke the slightest inaccuracy in a return. It is noteworthy that the Supreme Court in the case of Bank of Philippine Islands vs. Commissioner of Internal Revenue , 4 explained that "the statute of limitations on assessment and collection of national internal revenue taxes benefits both the Government and the taxpayer, it principally intends to afford protection to the taxpayer against unreasonable investigation. The indefinite extension of the period for assessment is unreasonable because it deprives the said taxpayer of the assurance that he will no longer be subjected to further investigation for taxes after the expiration of a reasonable period of time." Thus, it must be stressed that for a return to qualify as a "false return" within the import of Section 222 of the NIRC of 1997, there must appear intent to mislead or deceive on the part of the taxpayer, or at least culpable negligence and none of these are found in this case. Accordingly, the three-year prescriptive period applies. As to the other grounds raised by respondent in her motion, the same are mere rehash of the same facts and issues which have already been analyzed and passed upon extensively in the assailed Decision, and neither raises anything new to merit reconsideration. ACaTIc WHEREFORE , premises considered, respondent's Motion for Partial Reconsideration is DENIED for lack of merit. SO ORDERED . (SGD.) CIELITO N. MINDARO-GRULLA Associate Justice Juanito C. Castaeda, Jr. and Caesar A. Casanova, JJ., concur. Footnotes 1. " SEC. 222. Exceptions as to Period of Limitation of Assessment and Collection of Taxes . (a) In the case of a false or fraudulent return with intent to evade tax or of failure to file a return, the tax may be assessed, or a proceeding in court for the collection of such tax may be filed without assessment, at any time within ten (10) years after the discovery of the falsity, fraud or omission: Provided, That in a fraud assessment which has become final and executory, the fact of fraud shall be judicially taken cognizance of in the civil or criminal action for the collection thereof." 2. G.R. No. L-20569, August 23, 1974. 3. CIR vs. B.F. Goodrich Phils., Inc. ; G.R. No. 104171, February 24, 1999. 4. G.R. No. 139736, October 17, 2005.