People v. Rodriguez

FIRST DIVISION [C.T.A. CRIM. CASE NO. O-028. September 7, 2011.] For: Violation of Section 255 in relation to Section 253 (d) and 256, TAX CODE OF 1997, as amended by RA 8424 PEOPLE OF THE PHILIPPINES , plaintiff, vs . RUPERTO P. RODRIGUEZ , accused. RESOLUTION UY , J p : For resolution is the "Motion for Partial Reconsideration (Of the Civil Aspect of the Case)" posted by the prosecution on July 27, 2011 and duly received by this Court on August 8, 2011, seeking the reconsideration of this Court's Decision in the above-captioned case promulgated on July 12, 2011, with the accused's Comment/Opposition thereto posted on August 15, 2011 and duly received by this Court on August 23, 2011. HIDCTA The dispositive portion of the assailed Decision states: " WHEREFORE , premises considered, accused RUPERTO P. RODRIGUEZ is hereby ACQUITTED on reasonable doubt. The cash bond posted by accused is hereby CANCELLED and ordered RELEASED to its lawful owner upon presentation of proper documents, in accordance with usual accounting rules and regulations. Moreover, the subject assessment against Luzon for taxable year 2000 is hereby CANCELLED and SET ASIDE , on procedural grounds. No Costs. SO ORDERED ." 1 In support of its Motion , the prosecution raises the following grounds, that: (a) "it is of no moment whether or not the PAN was validly served upon the taxpayer. It is well established doctrine in taxation that an assessment, whether valid or void, shall become final and executory when no administrative protest is filed within thirty (30) days from receipt of the assessments"; 2 and (b) "even an assessment which is contrary to law can attain finality if the same is not protested". 3 The prosecution maintains that the deficiency assessments with aggregate amount of P6,925,442.48 were based on factual findings of revenue officers of BIR-Manila which was never disputed/protested by the corporate taxpayer Luzon Insurance and Surety Co., Inc. (Luzon), hence, they become final, demandable, and executory. Allegedly, the presumption of the correctness of the assessment made by the Commissioner of Internal Revenue must be observed, and the taxpayer has the burden to prove the contrary. Thus, the prosecution prays that a new judgment, pertaining only as to the civil aspect of this case, be rendered declaring the subject assessment valid and ordering Luzon to pay the Bureau of Internal Revenue (BIR) the total amount of P6,925,442.48 as its corporate tax liabilities for taxable year 2000 due to the government. On the other hand, accused, in his Comment/Opposition seeking the denial of the instant motion, counters that Section 228 of the National Internal Revenue Code (NIRC) of 1997, as amended, is categorical on the matter that "the taxpayer shall be informed in writing of the law and the facts on which the assessment is made; otherwise the assessment shall be void". Clearly, as the evidence on record is clear that the PAN and FAN were not received by accused and/or by Luzon, or any other authorized representative of Luzon, BIR failed to comply with the aforesaid tax provision. As a result thereof, the assessment was allegedly void, and therefore, could not have attained finality. DCAEcS Accused further submits that, as correctly found by this Court, the right of the BIR to make an assessment and collect the corresponding tax had already prescribed for its failure to establish that the PAN and FAN were received by accused and/or Luzon. Lastly, it is the position of accused that the provision stating that the "institution of the criminal action carries with it the civil action for the collection of tax", is inapplicable in the present case since it allegedly applies only where the accused is the taxpayer himself, and not to cases where the taxpayer is a corporation which has a distinct and separate personality. We find the prosecution's arguments untenable. Indeed, the grounds raised by the prosecution in the subject motion had already been addressed by the Court in the assailed Decision dated July 12, 2011. By way of reiteration, Section 228 of the NIRC of 1997, as amended, provides: "SEC. 228. Protesting of Assessment . When the Commissioner or his duly authorized representative finds that proper taxes should be assessed, he shall first notify the taxpayer of his findings: provided, however, that a preassessment notice shall not be required in the following cases: (a) When the finding for any deficiency tax is the result of mathematical error in the computation of the tax as appearing on the face of the return; or (b) When a discrepancy has been determined between the tax withheld and the amount actually remitted by the withholding agent; or (c) When a taxpayer who opted to claim a refund or tax credit of excess creditable withholding tax for a taxable period was determined to have carried over and automatically applied the same amount claimed against the estimated tax liabilities for the taxable quarter or quarters of the succeeding taxable year; or (d) When the excise tax due on exciseable articles has not been paid; or (e) When the article locally purchased or imported by an exempt person, such as, but not limited to, vehicles, capital equipment, machineries and spare parts, has been sold, traded or transferred to non-exempt persons. The taxpayers shall be informed in writing of the law and the facts on which the assessment is made; otherwise, the assessment shall be void. Within a period to be prescribed by implementing rules and regulations, the taxpayer shall be required to respond to said notice. If the taxpayer fails to respond, the Commissioner or his duly authorized representative shall issue an assessment based on his findings. CAacTH Such assessment may be protested administratively by filing a request for reconsideration or reinvestigation within thirty (30) days from receipt of the assessment in such form and manner as may be prescribed by implementing rules and regulations. Within sixty (60) days from filing of the protest, all relevant supporting documents shall have been submitted; otherwise, the assessment shall become final. If the protest is denied in whole or in part, or is not acted upon within one hundred eighty (180) days from submission of documents, the taxpayer adversely affected by the decision or inaction may appeal to the Court of Tax Appeals within thirty (30) days from receipt of the said decision, or from the lapse of one hundred eighty (180)-day period; otherwise, the decision shall become final, executory and demandable." (Emphasis Ours) Applying the foregoing provision in the case at bench, it is clear that not any of the above-enumerated exceptions applies herein. Worthy of emphasis is the legal requirement that the taxpayer (Luzon Insurance and Surety Co., Inc.) must first be informed that it is liable for deficiency taxes through the sending of a Preliminary Assessment Notice (PAN). In so doing, the taxpayer must be informed of the facts and the law upon which the assessment is made. Undoubtedly, the law imposes a substantive, not merely a formal, requirement which is consistent with the right to due process. 4 Sending of a PAN to taxpayers for the purpose of informing them of the assessments made is but part of the due process requirement in the issuance of any deficiency tax assessment, the absence of which renders nugatory any assessment made by the tax authorities. Consequently, to proceed heedlessly with tax collection without first establishing a valid assessment is evidently violative of the cardinal principle in administrative investigations that taxpayers should be able to present their case and adduce supporting evidence. 5 As We have found in the assailed Decision, the prosecution miserably failed to establish that it was able to serve the required PAN in order to give Luzon Insurance and Surety Co., Inc. fifteen (15) days to respond thereto. This is a clear violation of the due process requirement under the law. Quoted hereunder are the relevant portions of Our finding are for easy reference: "Although it is apparent from the records that Luzon was informed about the examination conducted and the initial findings of the BIR as regards the subject deficiency taxes, however, there appears to be a gap in the series of the required due notice to the taxpayer. The prosecution failed to prove that the accused, or any of the representatives of Luzon, was duly notified of the Preliminary Assessment Notice (PAN) dated January 7, 2004. There is no evidence adduced by the prosecution to prove that the PAN was duly served to the accused, or to any of the authorized representatives of Luzon. The prosecution tried to show service of the Final Assessment Notice (FAN) and the corresponding demand letters when it presented the BIR's Document Locator, with Registry Receipt Number 803582 (Exhibit "QQ") which was mailed on January 23, 2004 and a Registry Return Card (Exhibit "PP"). However, both documents failed to clearly establish that one of the documents served under said registered mail is the PAN . Furthermore, even if this Court considers the BIR's Document Locator and Registry Return Card as proof of due notice of the aforesaid documents to Luzon, the same falls short of the due notice requirement provided under Section 228 of the NIRC of 1997, as amended." 6 (Emphasis Ours) "The Court notes that the Registry Return Card presented by the prosecution and marked as Exhibit "QQ" failed to establish the person who actually signed and received the mail matters attached thereto, and to show that the same refers to Registry Receipt No. 803582. The transmittal list or the BIR Document Locator likewise failed to state the nature of the mail matter or document supposedly mailed to Luzon. EaDATc While it is true that when an assessment notice is released and mailed by the BIR to the taxpayer and the original is not returned to the BIR, the presumption is that the taxpayer received it, such presumption however, is merely a disputable one. The same is subject to controversion and a direct denial by the taxpayer of the receipt of the assessment notice shifts the burden upon the party favored by the presumption (the BIR) to prove that the mailed letter was actually received by the taxpayer. In this regard, the records of this case negate compliance with the rudiments on procedural due process. The mere presentation of transmittal records by the prosecution is insufficient to establish that indeed, the preliminary assessment notice (PAN) and assessment notice, and letter of demand were sent to, and were duly received by Luzon's authorized representative, because transmittal records, by its very nature, do not clearly indicate or specify the nature of the document being mailed or sent out. Uncorroborated by other evidence to definitely identify, not only the nature of the mail matter sought to be proven as having been delivered, but also, the authority of the person who supposedly received said mail matter, have little probative value to establish notice to Luzon to pay its subject corporate tax liabilities. It must be remembered that in case of a civil action to collect unpaid taxes, the law requires a convincing proof to show that indeed preliminary assessment notice (PAN), assessment notice, and letter of demand were actually sent to and received by the taxpayer. Such requirement goes up to the level of proof beyond reasonable doubt on notice and demand in case of a criminal action such as the instant case. xxx xxx xxx This Court cannot turn a blind eye on the importance of such notices. For in the absence of due notice of PAN, the FAN and demand letters are consequently void. And, without proper notice, accused cannot be held criminally and civilly liable for the failure of the corporation to pay its subject unpaid corporate taxes. The presumption of regularity in the performance of official functions cannot preponderate over the presumption of innocence that prevails, if not overthrown by proof beyond reasonable doubt." 7 (Emphasis Ours) For purposes of resolving this Motion for Partial Reconsideration (of the Civil Aspect of the Case), We reiterate our findings that the prosecution failed to present sufficient evidence to hold accused, in his official capacity as the Vice President for Finance and Corporate Secretary of Luzon Insurance and Surety Co., Inc., criminally liable for the offense charged. We likewise reaffirm our findings that the prosecution also failed to present sufficient evidence to hold Luzon Insurance and Surety Co., Inc., the corporate taxpayer in this case, civilly liable to pay deficiency and unpaid corporate taxes, for non-compliance with the "due notice requirement" set forth under Section 228 of the NIRC of 1997, as amended. cHCIEA Accordingly, We find no legal basis to reconsider Our assailed Decision which acquitted accused Ruperto P. Rodriguez for the offense being charged; and cancelled and set aside the subject assessment against Luzon Insurance and Surety Co., Inc. for taxable year 2000. WHEREFORE , premises considered, plaintiff's Motion for Partial Reconsideration is hereby DENIED for lack of merit. SO ORDERED. (SGD.) ERLINDA P. UY Associate Justice Ernesto D. Acosta, P.J. and Esperanza R. Fabon-Victorino, J., concur. Footnotes 1. Decision dated July 12, 2011, pp. 31-32. 2. Citing Allied Bank Corporation vs. Commissioner of Internal Revenue , CTA EB No. 167, August 23, 2006. 3. Citing Singer Finance Corporation vs. Commissioner of Internal Revenue, CTA Case No. 6743 citing Republic vs. Manila Port Service , G.R. No. 18208, November 27, 1964. 4. As confirmed in Revenue Regulations No. 12-99. 5. Commissioner of Internal Revenue vs. Metro Star Superama, Inc. , G.R. No. 185371, December 8, 2010. 6. Decision dated July 12, 2011, pp. 23-24. 7. Ibid. , pp. 28-30.