Commissioner of Internal Revenue v. First Balfour, Inc.

EN BANC [C.T.A. EB CASE NO. 1597. June 19, 2018.] (C.T.A. Case No. 9020) COMMISSIONER OF INTERNAL REVENUE , petitioner , vs. FIRST BALFOUR, INC. , respondent . [C.T.A. EB CASE NO. 1600. June 19, 2018.] (C.T.A. Case No. 9020) FIRST BALFOUR, INC. , petitioner , vs. COMMISSIONER OF INTERNAL REVENUE , respondent . DECISION MINDARO-GRULLA , J p : Submitted for decision are the Petitions for Review for the Court En Banc under Rule 4, Section 2 (a) (1), in relation to Rule 8, Section 4 (b) of the 2005 Revised Rules of the Court of Tax Appeals (RRCTA), 1 as amended, of the Resolution 2 dated November 17, 2016, rendered by the Second Division of this Court in CTA Case No. 9020, and its Resolution 3 dated January 31, 2017. HTcADC The Second Division of this Court ruled that petitioner Commissioner of Internal Revenue's (CIR) right to assess petitioner First Balfour, Inc.'s (herein referred as "corporation") for (1) deficiency Value Added Tax (VAT) for the first quarter of 2009; (2) deficiency Expanded Withholding Tax (EWT) for the months of January to March 2009; and (3) deficiency Fringe Benefit Tax (FBT) for the first quarter of 2009 had prescribed and thereafter set the case for hearing for the remaining tax deficiency assessments for taxable year 2009. Petitioner CIR and petitioner corporation assail both the aforesaid Resolutions, the dispositive portions of which, respectively, read as follows: Resolution dated November 17, 2016: " WHEREFORE ,in view of the foregoing, petitioner's Omnibus Motion is PARTIALLY GRANTED .Accordingly, respondent's right to assess the following: (1) deficiency VAT for the first quarter of 2009; (2) deficiency EWT for the months of January to March 2009; and (3) deficiency FBT for the first quarter of 2009 had prescribed. Set this case for hearing on December 12, 2016 at 9:00 a.m. for the presentation of evidence for the petitioner to determine its liability for the remaining tax deficiency assessments for the taxable year 2009 . SO ORDERED ." Resolution dated January 31, 2017: CAIHTE " WHEREFORE ,petitioner's Motion for Reconsideration filed on November 29, 2016, and respondent's Omnibus Motion, with respect to its prayer for partial reconsideration, filed on November 25, 2016, are DENIED for lack of merit. Set this case for hearing on March 1, 2017 at 9:00 a.m. for the presentation of evidence for the petitioner to determine its liability for the remaining tax deficiency assessments for the taxable year 2009 . SO ORDERED ." The following facts are undisputed: On May 18, 2010, the corporation received a copy of a Letter of Authority No. LOA-116-2010-00000031 dated May 14, 2010 issued by the then CIR Joel L. Tan-Torres, authorizing the conduct of an audit of its taxable records for taxable year 2009. 4 On June 27, 2014, the corporation received a copy of the Preliminary Assessment Notice (PAN) of even date issued by the BIR, which stated that after investigation, taxpayer has been found liable for deficiency income tax, VAT, FBT, EWT and DST for the taxable year 2009 in the total amount of Five Hundred Ninety-Four Million Eight Hundred Ninety-Six Thousand Ninety Pesos and Twenty-One Centavos (Php594,896,090.21). 5 On July 11, 2014, the corporation filed a Reply to the PAN with corresponding supporting documents which opposed the assessments contained in the PAN. Thereafter, on July 31, 2014, the corporation received a copy of the Formal Letter of Demand with Final Assessment Notice. On May 11, 2015, after filing a petition before the Court (docketed as CTA Case No. 9020 before the Court's Second Division),the corporation received a copy of the Final Decision on Disputed Assessment (FDDA) denying the protest. 6 On June 4, 2015, the corporation filed a Supplementary Petition for Review before the Court's Division. The existence of the Waivers of the Defense of Prescription under the Statute of Limitations of the National Internal Revenue Code (NIRC) has been agreed upon with the following details: 7 a) Waiver dated May 14, 2012, executed by Mr. Eladio S. Feraer (Mr. Feraer) extending CIR's period of assessment until December 31, 2012, which was accepted by then Officer-in-Charge Assistant Commissioner for large taxpayers Service Alfredo V. Misajon (OIC-ACIR Misajon) on June 11, 2012. aScITE b) Waiver dated November 29, 2012, executed by Mr. Feraer, extending CIR's period of assessment until June 30, 2013, which was accepted by OIC-ACIR Misajon on December 5, 2012. c) Waiver dated February 7, 2013, executed by Mr. Feraer, extending CIR's period of assessment until December 31, 2013, which was accepted by OIC-ACIR Misajon on February 7, 2013. d) Waiver dated September 6, 2013, executed by Mr. Feraer, extending CIR's period of assessment until June 30, 2014, which was accepted by OIC-ACIR Misajon on September 9, 2013. e) Waiver dated February 14, 2014, executed by Mr. Feraer, extending CIR's period of assessment until December 31, 2014, which was accepted by OIC-ACIR Misajon on February 14, 2014. During the course of the hearing, on November 17, 2016, the Court in Division issued a Resolution which ruled that CIR's right to assess some 8 of the deficiency tax assessment had prescribed and thereafter set the presentation of evidence on December 12, 2016 at 9:00 a.m. to determine the taxpayer's liability for the remaining tax deficiency assessments for the taxable year 2009. The parties' motion for reconsideration thereon was denied. Hence, both parties filed their respective petitions. Petitioner CIR filed the Petition for Review on March 3, 2017 while petitioner corporation filed its Petition for Review on March 16, 2017. Thus, on March 22, 2017, both petitions were consolidated. 9 Both parties assailed the Court in Division's resolution and argued on the issue of prescription which is just a portion of the issues in the CIR's deficiency tax assessment. We resolve. We find no merit in the petitions. A careful and closer look at the arguments set forth by petitioners in their respective Petitions for Review readily reveals that their Petitions for Review were prematurely filed before the Court En Banc. The assailed resolutions of the Court in Division do not finally dispose the case, as it is an interlocutory order and it still leaves something to be done. The assailed resolutions dated November 17, 2016 and January 31, 2017 read as follows: Resolution dated November 17, 2016: " WHEREFORE ,in view of the foregoing, petitioner's Omnibus Motion is PARTIALLY GRANTED .Accordingly, respondent's right to assess the following: (1) deficiency VAT for the first quarter of 2009; (2) deficiency EWT for the months of January to March 2009; and (3) deficiency FBT for the first quarter of 2009 had prescribed. Set this case for hearing on December 12, 2016 at 9:00 a.m. for the presentation of evidence for the petitioner to determine its liability for the remaining tax deficiency assessments for the taxable year 2009 . DETACa SO ORDERED ." Resolution dated January 31, 2017: " WHEREFORE ,petitioner's Motion for Reconsideration filed on November 29, 2016, and respondent's Omnibus Motion, with respect to its prayer for partial reconsideration, filed on November 25, 2016, are DENIED for lack of merit. Set this case for hearing on March 1, 2017 at 9:00 a.m. for the presentation of evidence for the petitioner to determine its liability for the remaining tax deficiency assessments for the taxable year 2009 . SO ORDERED ." Clearly, the above resolutions neither fully and finally terminate nor dispose of the case. In fact, the Court in Division in the assailed resolutions still set the case for hearing for the presentation of evidence on the other remaining deficiency tax assessments. Evidently, there was no final judgment rendered in the case that could be elevated on appeal to the Court En Banc. Trial is still necessary for the Court to rule on the entire case. Petitioner CIR anchored the petition for review pursuant to Rule 8 Section 3 (b) 10 while petitioner corporation on Rule 8 Section 4 (b) 11 of the Revised Rules of Court of Tax Appeals (RRCTA). However, the said provisions must be read in relation to Section 1, Rule 41 of the Revised Rules of Court which applies suppletorily to proceedings before the Court of Tax Appeals, and expressly provides that no appeal may be taken from an interlocutory order, to wit: "Section 1. Subject of appeal. An appeal may be taken from a judgment or final order that completely disposes of the case, or of a particular matter therein when declared by these Rules to be appealable . No appeal may be taken from: xxx xxx xxx. (c) An interlocutory order (Emphasis supplied.)" Interlocutory is defined as: provisional; interim; temporary; not final. Something intervening between the commencement and the end of a suit which decides some point or matter but is not a final decision of the whole controversy. 12 Only decision or order which is appealable to the Court En Banc is that which has resolved the case with finality, and in effect terminates or finally disposes of a case, as it leaves nothing to be done by the court as the case has finally been decided on the merits. In the consolidated petitions, the Court takes judicial notice that the docket in CTA Case No. 9020 is still with the Court's Second Division and still at the trial stage for petitioner's presentation of evidence on the remaining tax deficiency assessment. Clearly, the case is still pending and has neither been terminated nor disposed. In the case of Santos vs. People of the Philippines and BIR , 13 the Supreme Court distinguished final judgments and orders from interlocutory orders, to wit: HEITAD "According to Section 1, Rule 41 of the Revised Rules of Court, governing appeals from the Regional Trial Courts (RTCs) to the Court of Appeals, an appeal may be taken only from a judgment or final order that completely disposes of the case or of a matter therein when declared by the Rules to be appealable. Said provision, thus, explicitly states that no appeal may be taken from an interlocutory order . The Court distinguishes final judgments and orders from interlocutory orders in this wise : Section 2, Rule 41 of the Revised Rules of Court provides that "(o)nly final judgments or orders shall be subject to appeal." Interlocutory or incidental judgments or orders do not stay the progress of an action nor are they subject of appeal "until final judgment or order is rendered for one party or the other." The test to determine whether an order or judgment is interlocutory or final is this: "Does it leave something to be done in the trial court with respect to the merits of the case? If it does, it is interlocutory; if it does not, it is final." A court order is final in character if it puts an end to the particular matter resolved or settles definitely the matter therein disposed of, such that no further questions can come before the court except the execution of the order. The term "final" judgment or order signifies a judgment or an order which disposes of the cause as to all the parties, reserving no further questions or directions for future determination. The order or judgment may validly refer to the entire controversy or to some definite and separate branch thereof. "In the absence of a statutory definition, a final judgment, order or decree has been held to be x x x one that finally disposes of, adjudicates, or determines the rights, or some right or rights of the parties, either on the entire controversy or on some definite and separate branch thereof, and which concludes them until it is reversed or set aside." The central point to consider is, therefore, the effects of the order on the rights of the parties. A court order, on the other hand, is merely interlocutory in character if it is provisional and leaves substantial proceeding to be had in connection with its subject. The word "interlocutory" refers to "something intervening between the commencement and the end of a suit which decides some point or matter but is not a final decision of the whole controversy." In other words, after a final order or judgment, the court should have nothing more to do in respect of the relative rights of the parties to the case. Conversely, "an order that does not finally dispose of the case and does not end the Court's task of adjudicating the parties' contentions in determining their rights and liabilities as regards each other, but obviously indicates that other things remain to be done by the Court, is interlocutory." Furthermore, it should be noted that tax assessment by the CIR may at sometimes involve several years, various kinds of deficiency tax assessment with different issues. To chop a single assessment and allow an appeal on a piecemeal basis and not on the entirety of the assessment would be counterproductive, encourages multiplicity of appeals and unnecessary expenses. aDSIHc The Supreme Court in the case of Angelina Pahila-Garrido vs. Eliza M. Tortogo, et al. 14 ruled that the reason for disallowing an appeal from an interlocutory order is to avoid multiplicity of appeals in a single action and avoid unnecessary expenses, for one of the parties may interpose as many appeals as there are incidental questions raised by him and as there are interlocutory orders rendered or issued by the lower court, to wit: "The distinction between a final order and an interlocutory order is well known. The first disposes of the subject matter in its entirety or terminates a particular proceeding or action, leaving nothing more to be done except to enforce by execution what the court has determined, but the latter does not completely dispose of the case but leaves something else to be decided upon. An interlocutory order deals with preliminary matters and the trial on the merits is yet to be held and the judgment rendered. The test to ascertain whether or not an order or a judgment is interlocutory or final is: does the order or judgment leave something to be done in the trial court with respect to the merits of the case? If it does, the order or judgment is interlocutory; otherwise, it is final. x x x. The reason for disallowing an appeal from an interlocutory order is to avoid multiplicity of appeals in a single action, which necessarily suspends the hearing and decision on the merits of the action during the pendency of the appeals. Permitting multiple appeals will necessarily delay the trial on the merits of the case for a considerable length of time, and will compel the adverse party to incur unnecessary expenses, for one of the parties may interpose as many appeals as there are incidental questions raised by him and as there are interlocutory orders rendered or issued by the lower court .An interlocutory order may be the subject of an appeal, but only after a judgment has been rendered, with the ground for appealing the order being included in the appeal of the judgment itself." (Emphasis supplied) Evidently, the proper procedure that petitioners should have taken in this case was to await the final termination of the proceedings before the Court in Division, prior to the filing of the instant petition for review, because it is a well settled rule that only final orders or judgments on the merits may be the subject of appeal. This rule is founded on considerations of orderly procedure, to forestall useless appeals and avoid undue inconvenience to the appealing party by having to assail orders as they are promulgated by the court, when all such orders may be contested in a single appeal. The right to appeal is not a natural right nor a part of due process. It is merely a statutory privilege and may be exercised only in the manner and in accordance with the provisions of the law. 15 ATICcS Under the obtaining circumstances, petitioners cannot elevate the assailed resolutions dated November 17, 2016 and January 31, 2017 to the Court En Banc by way of appeal. WHEREFORE ,in view of the foregoing considerations, the consolidated Petitions for Review are hereby DISMISSED for being premature. SO ORDERED. (SGD.) CIELITO N. MINDARO-GRULLA Associate Justice Juanito C. Castaeda, Jr.,Lovell R. Bautista, Erlinda P. Uy, Caesar A. Casanova, Esperanza R. Fabon-Victorino, Ma. Belen M. Ringpis-Liban and Catherine T. Manahan, JJ. ,concur. Roman G. del Rosario, P.J. ,with Concurring Opinion. Separate Opinions DEL ROSARIO , P.J.,concurring opinion : I concur with the ponencia of my esteemed colleague, the Honorable Associate Justice Cielito N. Mindaro-Grulla, in dismissing the consolidated Petitions for Review for being premature. The assailed Resolutions of the Court in Division disposed of the case with respect to the deficiency VAT for the first quarter of 2009, deficiency EWT for the months of January to March 2009, and deficiency FBT for the first quarter of 2009, sans final disposition of the other reliefs pleaded in petitioner's Petition for Review. Truth to tell, no appeal may be taken from the assailed Resolutions at this stage as, in legal sense, they are in the nature of "interlocutory orders." Section 1, Rule 41 of the Rules of Court states: "Section 1. Subject of appeal. An appeal may be taken from a judgment or final order that completely disposes of the case, or of a particular matter therein when declared by these Rules to be appealable. No appeal may be taken from : ETHIDa (a) An order denying a motion for new trial or reconsideration; (b) An order denying a petition for relief or any similar motion seeking relief from judgment; (c) An interlocutory order; (d) An order disallowing or dismissing an appeal; (e) An order denying a motion to set aside a judgment by consent, confession or compromise on the ground of fraud, mistake or duress, or any other ground vitiating consent; (f) An order of execution; (g) A judgment or final order for or against one or more of several parties or in separate claims, counterclaims, cross-claims and third-party complaints, while the main case is pending, unless the court allows an appeal therefrom ;and (h) An order dismissing an action without prejudice. In all the above instances where the judgment or final order is not appealable, the aggrieved party may file an appropriate special civil action under Rule." 65 (Boldfacing supplied) To allow the parties' appeal of the aforementioned Resolutions would unnecessarily result in the suspension of proceedings pertaining to the remaining deficiency tax assessments for calendar year 2009 considering that elevation of the dockets and records of the case to the Court En Banc is a necessary consequence of appeal .Certainly, such consequence is anathema to the orderly and speedy disposition of cases. All told, I VOTE to DENY the respective Petitions for Review of the Commissioner of Internal Revenue and First Balfour, Inc., without prejudice to their right to appeal the Court in Division's Resolutions dated November 7, 2016 and January 31, 2017 upon disposition of the entire case on the merits . Footnotes 1. Sec. 2. Cases within the jurisdiction of the Court en banc . The Court en banc shall exercise exclusive appellate jurisdiction to review by appeal the following: (a) Decisions or resolutions on motions for reconsideration or new trial of the Court in Division in the exercise of its exclusive appellate jurisdiction over: (1) Cases arising from administrative agencies Bureau of Internal Revenue, Bureau of Customs, Department of Finance, Department of Trade and Industry, Department of Agriculture; xxx xxx xxx Sec. 4. Where to appeal; mode of appeal . (a) x x x. (b) An appeal from a decision or resolution of the Court in Division on a motion for reconsideration or new trial shall be taken to the Court by petition for review as provided in Rule 43 of the Rules of Court. The Court en banc shall act on the appeal. (c) x x x. 2. En Banc Docket, pp. 27-45. 3. En Banc Docket, pp. 46-50. 4. En Banc Docket (CTA EB No. 1597),pp. 10-11. Citing the Joint Stipulation of Fact by the parties. 5. Ibid. 6. Ibid. 7. Ibid. 8. (1) deficiency VAT for the first quarter of 2009; (2) deficiency EWT for the months of January to March 2009; and (3) deficiency FBT for the first quarter of 2009 . 9. En Banc Docket (CTA EB No. 1597),p. 53. 10. SEC. 3. Who may appeal; period to petition. a) x x x. b) A party adversely affected by a decision or resolution of a Division of the Court on a motion for reconsideration or new trial may appeal to the Court by filing before it a petition for review within fifteen days from receipt of a copy of the questioned decision or resolution. Upon proper motion and the payment of the full amount of the docket and other lawful fees and deposit for costs before the expiration of the reglementary period herein fixed, the Court may grant an additional period not exceeding fifteen days from the expiration of the original period within which to file the petition for review. (Rules of Court, Rule 42, Sec. 1 a) c) x x x. 11. Sec. 4. Where to appeal; mode of appeal. a) x x x. b) An appeal from a decision or resolution of the Court in Division on a motion for reconsideration or new trial shall be taken to the Court by petition for review as provided in Rule 43 of the Rules of Court. The Court en banc shall act on the appeal. c) x x x. 12. H. Black, BLACK'S LAW DICTIONARY (5th ed.,1979). 13. Santos vs. People of the Philippines and BIR ,G.R. No. 173176, August 26, 2008. 14. G.R. No. 156358, August 17, 2011. 15. CIR vs. Fort Bonifacio Development Corporation ,G.R. No. 167606, August 11, 2010.