Commissioner of Internal Revenue v. Citytrust Banking Corp.

[CA-G.R. SP No. 26839. July 31, 1992.] (C.T.A. Case No. 4099) COMMISSIONER OF INTERNAL REVENUE , petitioner , vs . CITYTRUST BANKING CORPORATION , respondent . D E C I S I O N HERRERA , J p : The principal question raised in this Petition is whether or not private respondent Citytrust Banking Corporation is entitled to the tax refund in the amount of P13,314,506.14 as alleged overpaid income taxes for the years 1984 and 1985. The factual backdrop of this petition, as narrated by the respondent Court of Tax Appeals, is as follows: "This case involves a claim for refund of overpaid income taxes for calendar years 1981, 1984 and 1986 amounting to P19971,745.00 this amount is the cumulative total of the income tax payments made by petitioner on its quarterly income tax returns, taxes withheld on proceeds from its investments in government securities and on its rental income hereunder is a summary of petitioner's final adjustment returns for the years involved: 1983 Net Income P21,859,364 Tax Due P7,640,778 Previous year's creditable amount P2,229,060 Quarterly payments 10,239,072 (12,448,032) Balance of Tax Due (4,817,354) Tax Credits (W/T) on Income from Govt.. Securities and rental Income) (61,763,869) Tax Refundable P(6,611,223) 1984 Net Income P13,501,522 Tax Due P4,715,533 Previous year's creditable amount P6,611.223 Quarterly payments 16,214,593 (22,825,822) Balance of Tax Due (18,110,289) Tax Credits (W/T) on Income from Govt.. Securities and rental Income) (1,987,752) (20,098,041) FCDU payable 150,252 Tax Refundable P(19,974.789) 1985 Net Income P(16,855,560) Tax Due P 0 Previous year's creditable amount P19,947,789 Quarterly payments 0 (19,947.789) Balance of Tax Due (19,947,789) Tax Credits (W/T) on Income from Govt.. Securities and rental Income) (42,830) (19,990,619) FCDU payable 18,874 Tax Refundable P(19,971,745) "Petitioner filed a claim for refund with the Commissioner of Internal Revenue on August 26, 1986 and instituted this petition for review on August 28, 1986 in order to prevent the tolling of the statute of limitations. "Respondent, in its answer, alleged that a mere averment that petitioner incurred a net loss for 1985 does not ipso facto merit a refund; that the amounts of P6,611,223 (overpaid income tax for 1983), P1,959,514 and P28,238 (withheld taxes in 1984) were not properly documented and, that the right to claim for a refund with respect to income payments prior to August 28, 1984 has prescribed pursuant to Sections 292 and 295 of the 1977 Tax Code as amended (now Sections 230 and 204). However, it did not present the BIR records or any other evidence and instead submitted this case based on the pleadings and petitioner's evidence. Both parties agreed to submit the case for decision without memoranda." (Decision, Rollo, pp. 53-55). On May 28, 1991, public respondent rendered a decision upholding private respondent's claim for a tax refund for overpaid taxes incurred in 1984 and 1985 only. Thus, the decretal portion of the decision reads as follows: "Wherefore, in view of the foregoing, petitioner is entitled to a refund but only for the overpaid taxes incurred in 1984 and 1985. The refundable amount as shown in its 1983 income tax return is hereby denied on the ground of prescription. Respondent is hereby ordered to grant a refund to petitioner Citytrust Banking Corp. in the amount of P13,314,506.14 representing the overpaid income taxes for 1984 and 1985, recomputed as follows: 1984 Income Tax Due P4,715,533.67 Less: 1984 Quarterly payments P16,214,599.00* 1984 Tax Credits W/T on int. on Govt.. sec. 1,921,245.37* W/T on rental inc. 26,604.30* 18,162,448.67 Tax Overpayment (13,146,915.62) Less: FCDU payable 150,252.00 amount refundable for 1984 (13,246,663.67) * Note : These credits are smaller than the claimed amount because only the above figures are well supported by the various exhibits presented during the hearing. No pronouncement as to costs. SO ORDERED." (Decision, Rollo, p. 68). From said decision herein petitioner filed a motion for reconsideration contending for the first time that the existence of the statements and certificates of withholding taxes accomplished by its withholding agents showing the amounts deducted or withheld, do not constitute conclusive evidence of payments and remittances to the Bureau of Internal Revenue of withholding taxes on herein private respondent's income payments, the same being a mere proof of withholding taxes and not payment of remittance thereof. Thereafter, petitioner also filed a supplemental motion for reconsideration professing that through an inter-office memorandum of the Tax Credit Refund Division Chief dated August 8, 1984, Tax Commissioner of Internal Revenue came to know and, lately that private respondent Citytrust has an outstanding tax liabilities for 1984 in the amount of P56,588,240.91, representing deficiency income and business taxes covered by the Demand/Assessment Notice No. FA8-1-84-88-003291-003296. In a resolution dated December 3, 1991, public respondent denied the motion for reconsideration stating as reason that Section 52 (b) of the Tax Code, as implemented by Revenue Regulation 6-85, requires only that the claim for tax credit or refund must show that the income received was declared as part of the gross income and the fact of withholding is established. Moreover, in regard to the argument raised in the supplemental motion for reconsideration of the petitioner, public respondent also ruled that since the matter was not raised in the pleading the same cannot be considered, citing the salutary purpose of the omnibus motion rule to obviate multiplicity of motion as well as to discourage dilatory pleadings (Rollo, p. 95). Aggrieved by the aforesaid resolution, petitioner instituted this instant petition seeking the reversal of public respondent's decision granting the tax refund in favor of private respondent Citytrust. The focal point of petitioner's argument is that the statements and certificate of tax withheld presented and offered by private respondent as proof of withholding are not conclusive evidence of payment and remittance to the Bureau of Internal Revenue. Furthermore, the findings of deficiency income and business tax liabilities against the private respondent for 1984 is a bar to an administrative granting of the amount sought to be refunded. We find the petition devoid of merit and must be dismissed. Contrary to the petitioner's pretence, the arguments now raised before Us are issues which was neither averred in the complaint nor raised during the trial in the court below which cannot be raised for the first time on appeal as it would be offensive to the basic rules of fair play, justice and due process (Ruiz vs. Caneba, 191 SCRA 865). It is now worthy to note that petitioner's main thrust in his objection for the tax refund of private respondent before the respondent Tax Court is simply that the latter was unable to substantiate its claim for refund. Nevertheless, despite the documentary evidence of the private respondent, still the petitioner miserably failed to rebut the same although he is in an advantageous position to determine the veracity of the documents presented. It would have been a lot easier on the part of the petitioner since he holds such relevant and pertinent documents concerning the implementation of laws and regulations on the payment of taxes. Verily, the respondent Tax Court is practically left without any solid piece of evidence upon which petitioner's objection may be be validly concluded. Thus, We cite with favor the asseveration of the respondent Tax Court and, We quote: Respondent (herein petitioner) alleges that the withholding taxes for the years claimed were not properly documented. On the contrary, petitioner presented statements and certificates of withholding taxes accomplished by its withholding agents. As held in Ateneo de Manila vs. Commissioner of Internal Revenue (CTA Case No. 3213, July 28 1989), "proof of withholding is established by copies of statements duly issued by the various payors to petitioner." And in Ateneo de Manila vs. Commissioner of Internal Revenue (CTA Case 3656, October 23, 1990), the withholding taxes claimed thereon were allowed because these were "covered by such requisite statements and certifications of taxes withheld at source consistent with the prescribed revenue regulations." Respondent did not object to the existence of statements and certificates which were offered by petitioner as proof of the withholding taxes but took exception to their contents and purpose. Despite said reservation, up until the submission of this case for decision, respondent was not heard to complain about the veracity of the contents of these documents or exhibits nor has it shown any irregularity in the same which will taint their reliability or sufficiency as proofs of the taxes withheld despite the fact it is well within their competence to do so. . . .". (Decision, Rollo, pp. 65-66). In addition, the respondent Tax Court likewise opined: "More importantly, one of the evidences presented by the petition is an audit report submitted by the BIR Assessment Branch and recommended by the Regional Director, Revenue Region 4-B-2, in connection with the investigation conducted by the BIR pursuant to petitioner's claim, recommending the refund of overpaid taxes for the years concerned (Exhibits Y to Y-3, Records, pp. 185-188). To this report applies the presumption of irregularity of performance of official duty (Rules of Court, Rule 131, Sec. 3) which has not been disputed by the respondent. . . ." (Decision, Rollo, p. 67). Of greater significance also is the respondent Tax Court's observation that the remittance of tax withheld made by the withholding agents could have been easily verified by petitioner, considering that it is within their competence to know, to check and verify the regularity of performance of his subordinates. It underscored the fact that the remittances of withholding taxes by producing the confirmation receipt is not required by law and regulations as the withholding agent is not within the control of the payee taxpayer but are the tax agent of the Commissioner of Internal Revenue. It is on this account that the taxes deducted and withheld are considered special fund in trust for the government until paid to the Bureau of Internal Revenue. The withholding agent merely holds the amount in trust for the government (Resolution of the Court of Tax Appeals, December 3, 1991, Rollo, p. 96). It is well-settled in this jurisdiction that findings of fact of the Court of Tax Appeals are entitled to the biggest respect and can only be disturbed on appeal if they are not supported by substantial evidence or if there is a showing of gross error or abuse on the part of the tax court (Commissioner of Internal Revenue vs. Court of Tax Appeals, 181 SCRA 211; Commissioner of Internal Revenue vs. Court of Tax Appeals, 183 SCRA 102). Anent the allegation of private respondent's income and business tax deficiencies, suffice it to state that the same was not ventilated before the respondent Tax Court since the issue was not within those presented in the principal pleading. It becomes inconceivable that petitioner could only come up with the deficiency assessments issue only after all the facts, issues and arguments in the pleadings were already determined by the respondent Tax Court. It must be noted that the tax liabilities of private respondent allegedly came to the knowledge of petitioner only through an inter-office memorandum. Never was it shown that petitioner, at the very first instance that private respondent claim, for a refund, immediately took time in verifying it with its Tax Credit/Refund Division. It took this case to be decided by the Court of Tax Appeals before the petitioner raised the issue of the tax deficiencies although it can be easily verified or inquired into with the Tax Credit Refund Division of the Bureau of Internal Revenue. At any rate, the alleged assessments as the deficiencies for 1984 of the private respondent appears to be inconsequential as it was not shown to have attain finality. Accordingly, it can neither be legally nor logically possible for private respondent thereafter to be considered a debtor of the government where the alleged assessments are still pending in the light of the various protests filed by private respondent. WHEREFORE, in view of the foregoing, the decision appealed from is hereby AFFIRMED. No pronouncement as to costs. SO ORDERED. Lapea and Austria, JJ ., concur.