Commissioner of Internal Revenue v. R.O.H. Auto Products Phils., Inc.

SEVENTH DIVISION [CA-G.R. SP No. 22923. December 11, 1992.] (C.T.A. Case No. 4318) COMMISSIONER OF INTERNAL REVENUE , petitioner-appellant , vs . R.O.H. AUTO PRODUCTS PHILIPPINES, INC. and THE COURT OF TAX APPEALS , respondents-appellees . D E C I S I O N BENIPAYO , J p : This is an appeal from the decision of the Court of Tax Appeals in C.T.A. Case No. 4318 ordering petitioner Commissioner of Internal Revenue "to desist from collecting the deficiency taxes it had assessed against petitioner (herein respondent) for the same are considered cancelled and withdrawn with the proper availment of petitioner of the amnesty under Executive Order No. 41, as amended". (Records, p. 94) The record discloses that in a letter dated 13 August 1986, private respondent taxpayer R.O.H. Auto Products Phils., Inc. received notice from petitioner Commissioner of Internal Revenue ("Commissioner") for the payment of deficiency income and business taxes for the fiscal years ended 30 September 1981 and 1982, in the aggregate amount of P1,410,157.71. Reacting, private respondent through its accountants wrote the Receivable Accounts Division of the Bureau of Internal Revenue requesting that the deficiency taxes due be cancelled and withdrawn in view of Executive Order No. 41 issued on 22 August 1986, as amended, declaring a one-time tax amnesty covering unpaid income taxes, estate and donor's taxes and taxes on business for the years 1981 to 1985. Availing itself of the amnesty grant, respondent taxpayer on 28 October 1986 and 24 November 1986, filed its Tax Amnesty Return No. 34-F-00146-41 and Supplemental Tax Amnesty Return No. 34-F-00146-64-B, respectively, and paid the corresponding amnesty taxes. In his letter dated 22 November 1988, petitioner Commissioner denied respondent taxpayers request for cancellation and withdrawal of the assessed deficiency taxes, citing Revenue Memorandum Order No. 4-87 dated 09 February 1987, which allegedly restricts the application of the amnesty to assessments made after the promulgation of the amnesty law. Since, respondent taxpayer was assessed on 13 August 1988, petitioner Commissioner of Internal Revenue insisted that respondent taxpayer could not avail itself of the amnesty grant. From this denial, respondent taxpayer filed a petition for review with the Court of Tax Appeals. The latter upheld that taxpayer's claim, and reversed the findings of petitioner Commissioner of Internal Revenue. Interpreting the provisions of Executive Order No. 41, as amended, the court a quo made the following observations: "Respondent (herein petitioner Commissioner) failed to present any case or law which proves that an assessment can withstand or negate the force and effects of a tax amnesty. This burden of proof on the petitioner (herein respondent taxpayer) was created by the clear and express terms of the executive order's intention qualified availers of the amnesty may pay an amnesty tax in lieu of said unpaid taxes which are forgiven (Section 2, Section 5, Executive Order No. 41, as amended). More specifically, the plain provisions in the statute granting tax amnesty for unpaid taxes for the period January 1, 1981 to December 31, 1985 shifted the burden of proof on respondent to shown how the issuance of an assessment before the date of the promulgation of the executive order could have a reasonable relations with the objective periods of the amnesty, so as to make petitioner still answerable for a tax liability which, through the statute, should have been erased with the proper availment of the amnesty . "Additionally, the exceptions enumerated in Section 4 of Executive Order No. 41, as amended, do not indicate any reference to an assessment or pending investigation aside from one arising from information furnished by an informer. . . . Thus, we deem that the rule in Revenue Memorandum Order No. 4-87 promulgating that only assessments issued after August 21, 1986 shall be abated by the amnesty is beyond the contemplation of Executive Order No. 41, as amended." (Records, pp. 91-92, 93) Hence, this petition which hinges principally on the issue whether or not private respondent taxpayer may validly take advantage of the tax amnesty granted under Executive Order No. 41, as amended. We rule in the affirmative and sustain the tax court's disposition of the case. Petitioner Commissioner of Internal Revenue urges us to deny respondent taxpayer the benefits afforded by the subject amnesty law on the ground that under Revenue Memorandum Order No. 4-87 ("Observance of the Immunities and Privileges accorded to taxpayers who have availed of the tax amnesty under Executive Order No. 41, as expanded by Executive Order No. 64"), only those with assessment notices and letters of demand issued after 21 August 1986 may take advantage of the amnesty grant. In particular, petitioner Commissioner cites the following provisions of the memorandum, to wit: "TO: All Internal Revenue Officers and Others Concerned. 1.0 To give effect and substance to the immunity provisions of the tax amnesty under Executive Order No. 41, as expanded by Executive Order No. 64, the following instructions are hereby issued: xxx xxx xxx 1.02. A certification by the Tax Amnesty Implementation Officer of the fact of availment of the said tax amnesty shall be sufficient basis for: xxx xxx xxx 1.02.3. In appropriate cases, the cancellation/withdrawal of assessment notices and letters of demand issued after August 21, 1986 for the collection of income, business, estate or donor's taxes due during the same taxable years." Petitioner Commissioner likewise relies heavily on Section 326 (now Sec. 245) of the National Internal Revenue Code which expressly grants him the authority "to make rulings or opinions in connection with the implementation of the provisions of internal revenue laws". We are not persuaded. One cannot question the authority of petitioner Commissioner to promulgate rules and regulations to effectuate the clear intent of our internal revenue laws. It is also well settled that the construction given to a statute by an administrative agency charged with the interpretation and application of that statute is entitled to great respect and should be accorded great weight by the courts. And the rationale for this rule relates not only to the emergence of the multifarious needs of a modern or modernizing society and the establishment of diverse administrative agencies for addressing and satisfying those needs; it also relates to the accumulation of experience and growth of specialized capabilities by the administrative agency with implementing a particular statute. (Nestle Philippines, Inc. vs. Court of Appeals, 203 SCRA 504 [1991]) This rule however is not without some exception. Equally settled is the rule that administrative regulations promulgated by these administrative agencies must be in harmony with the provisions of the law, and in case of discrepancy between the basic law and an implementing rule or regulation, the former prevails. (Philippine Petroleum Corp. vs. Municipality of Pililla, Rizal, 198 SCRA 82 [1991]) In the instant case, examining carefully the words used in Executive Order No. 41, as amended, we find nothing which justifies petitioner Commissioner's ground for denying respondent taxpayer's claim to the benefits of the amnesty law. Section 4 of the subject law enumerates, in no uncertain terms, taxpayers who may not avail of the amnesty granted, namely: "a) Those falling under the provisions of Executive order Nos. 1, 2 and 14; b) Those with income tax cases already filed in Court as of the effectivity hereof; c) Those with criminal cases involving violations of the income tax law already filed in court as of the effectivity hereof; d) Those that have withholding tax liabilities under the National Internal Revenue Code, as amended, insofar as the said liabilities are concerned; e) Those with tax cases pending investigation by the Bureau of Internal Revenue as of the effectivity hereof as a result of information furnished under Section 316 of the National Internal Revenue Code, as amended; f) Those with pending cases involving unexplained or unlawfully acquired wealth before the Sandiganbayan; and, g) Those liable under Title Seven Chapter Three (Frauds, Illegal Exactions and Transactions) and Chapter Four (Malversation of Public Funds and Property) of the Revised Penal Code, as amended." Admittedly, respondent taxpayer does not fall under any of the above exceptions. The added exception urged by petitioner Commissioner based on Revenue Memorandum Order No. 4-87, further restricting the scope of the amnesty clearly amounts to an act of administrative legislation quite contrary to the mandate of the law which the regulation ought to implement. In Commissioner of Internal Revenue vs. Tikicraft Industries, Inc. and Court of Tax Appeals, CA-G.R. SP NO. 24488, 26 August 1991, this Court had the occasion to rule on the nullity of the questioned administrative directive in this wise: "In fine, the power of the Secretary of Finance to promulgate rules and regulations, upon the recommendation of the Commissioner of Internal Revenue, for the effective enforcement of internal revenue laws, is subject to the limitation that said rules and regulations should not be in conflict with the terms and provisions of a pre-existing law. "The interpretation forced upon us by the petitioner with respect to the coverage of those who can avail of the tax amnesty under the provisions of E.O. 41 as amended is erroneous. Petitioner also insists that E.O. 41 as amended must be given only prospective application. "Obviously the title of E.O. 41 itself as amended by E. O. 64 'Declaring a One-Time Tax Amnesty covering Income Taxes, . . . and the Tax on Business under Chapter II, Title V of the National Internal Revenue Code, as amended, for the years 1981-1986' suggests that the tax amnesty has to be given retroactive effect so (as) to include in its coverage unpaid income and business taxes for the past years specifically mentioned, namely, 1981 to 1985. ". . . as held by the Supreme Court in ABS-CBN vs. Court of Tax Appeals 108 SCRA 142, 'A ruling or circular issued by the Commissioner of Internal Revenue has no retroactive effect if to so apply them would adversely affect the taxpayer.' "By analogy, the aforecited rule may be applied to rules and regulations promulgated by the Secretary of Finance. Conversely, a rule or regulation, may be given retroactive application if the same would be beneficial to the taxpayer, as in the case at bar". xxx xxx xxx "It is well to stress that taxpayers whose tax assessments were issued prior to August 22, 1986 are not among the exceptions. Under the rule of ' expressio unius est esclusio alterius ,' 'where a statute enumerates the subjects or things on which it is to operate, it is to be construed as excluding from its effects all those not expressly mentioned.' . . . Hence, since Section 4 of E.O. 41 specifically mentions the exceptions from the coverage of the tax amnesty, it necessarily follows that others not mentioned, such as taxpayers who were issued assessments prior to August 21, 1986, are not included in the exceptions. xxx xxx xxx "For the reasons aforecited, We find that the questioned Revenue memorandum Orders, promulgated by the Secretary of Finance have the effect of expanding the provisions of Sec. 4 of E.O. 41 by including therein exceptions not contemplated by said law, hence, the same are held to be null and void." We sense no cogent reason to depart from the above pronouncements. Lastly, by its very nature, "a tax amnesty, being a general pardon or intentional overlooking by the State of its authority to impose penalties on persons otherwise guilty of evasion or violation of a revenue or tax, partakes of an absolute forgiveness or waiver by the Government of its right to collect what otherwise would be due it, and in this sense, prejudicial thereto, particularly to give tax evaders, who wish to relent and are willing to reform a chance to do so and thereby become a part of the new society with a clean slate." (Republic vs. Intermediate Appellate Court, 196 SCRA 335, 340 [1991] citing Commissioner of Internal Revenue vs. Botelho Shipping Corp., 20 SCRA 487) To follow the restrictive application of Revenue Memorandum Order No. 4-87 pressed by petitioner Commissioner would be due to work against raison d'etre of E.O. 41, as amended, i.e., to raise government revenues encouraging taxpayers to declare their untaxed income and pay the tax due thereon. (E.O. 41, First paragraph) WHEREFORE, judgment is hereby rendered affirming the appealed decision. No pronouncement as to costs. SO ORDERED. Javellana and Gutierrez , * JJ ., concur. Footnotes * In lieu of Justice Martin, Jr. who is on leave.