Commissioner of Internal Revenue v. Jardine Davies, Inc.

FIFTH DIVISION [CA-G.R. SP No. 30826. November 22, 1993.] (C.T.A. Case No. 4032) COMMISSIONER OF INTERNAL REVENUE , petitioner , vs . JARDINE DAVIES, INC., ET AL. , respondent . D E C I S I O N FRANCISCO , J p : Petition for review of the Decision dated August 6, 1992 issued by the Court of Tax Appeals in C.T.A. Case No. 4032, entitled "Jardine Davies, Inc., petitioner, vs. Commissioner of Internal Revenue, respondent," the dispositive portion of which reads: "WHEREFORE, judgment is hereby rendered in favor of petitioner Jardine Davies, Inc. and against respondent, and the latter is directed to refund to the former the amount of P63,723.05, representing erroneously paid capital gains tax for the taxable year ended December 31, 1984." (Records, p. 104) On April 10, 1984, private respondent Jardine Davies, Inc. (Jardine Davies), a domestic corporation engaged in the sale of stocks, sold 29,000 Gang-Nail Philippines, Inc. shares of stock to Gang-Nail Systems, Inc. and Vitaliano T. Sabalo, Jr. for a consideration of P632,780.00 (Exh. C; Records, pp. 58-59). Two days later, or on April 12, 1984, Jardine Davies filed with the Bureau of Internal Revenue (BIR) the stock transaction capital gains tax return covering the said sale and reflecting a net capital gain of P342,417.50 (Exhs. D and G, id ., pp. 60-61 and 63, respectively), and on April 18, 1984, it paid the corresponding capital gains tax therefor in the amount of P58,483.50 (Exhs. E and F; id ., p. 62). On May 28, 1984, Jardine Davies sold 785,000 Jardine Davies, Inc. treasury shares of stock to Jardine Matheson & Co., Ltd. for a consideration of P1,570,000.00 (Exh. H; id ., pp. 65-66). The next day, or on May 29, 1984, Jardine Davies filed with the BIR the stock transaction capital gains tax return covering the same sale reflecting a net capital gain of P52,395.50 (Exhs. I and L; id ., pp. 67 and 69, respectively) and paid the corresponding capital gains tax in the sum of P5,239.55 (Exhs. J and K; id ., p. 68). On April 15, 1985, Jardine Davies filed with the BIR its final stock transaction capital gains tax return covering all its stock transactions, including the above-mentioned two transactions, for the taxable year ending December 31, 1984 (Exh. A; id ., pp. 49-51.) This return reflected a net capital loss of P3,802,722.30 and, therefore, there appeared a total refundable amount of P63,723.05, representing the aforementioned two capital gains tax payments of P58,483.50 and P5,239.55. On May 3, 1985, Jardine Davies formally requested the BIR to refund the aforesaid overpayment (Record, pp. 5-6). Pending action by the public respondent Commissioner of Internal Revenue (Commissioner) on its request for a refund, and in order to judicially claim the refund within the two-year prescriptive period mandated by law, on February 19, 1986, Jardine Davies filed with the court a quo a petition for review docketed as C.T.A. Case No. 4032 naming the BIR Commissioner as respondent. The respondent Commissioner in his answer ( id ., pp. 18-20) admitted 1) that the petitioner indeed filed its final adjustment stock transaction capital gains tax return but denied the veracity thereof, and 2) that the petitioner filed a claim for refund on May 3, 1985. He further alleged that the petitioner's claim for refund was under investigation; the tax in question was collected in accordance with law; in an action for refund, the burden of proof was upon the taxpayer to establish its right thereto; that the petitioner must show that it had complied with the provisions of Section 292 and 295 of the Internal Revenue Code of 1977; and that claims for refund of taxes being in the nature of an exemption from taxation are construed strictly against the claimant. The hearing of the petition was repeatedly deferred to give the parties an opportunity to have the claim settled on the administrative level. When the hearing was eventually conducted, only the petitioner adduced its evidence, while the respondent did not, apparently content with just manifesting that he was submitting the case for decision on the basis of the records and the pleadings ( id ., p. 98). On August 6, 1992, the court a quo handed down its decision ( id ., pp. 101-105) the dispositive portion of which is above quoted. The respondent filed a motion for reconsideration which the petitioner opposed and the court a quo denied said motion by its Resolution of April 14, 1993 ( id ., pp. 118-119). Hence, this petition. There is no merit in the petition. The issue is whether or not the findings and conclusions of the court a quo are supported by substantial evidence. Per Section 5, Rule 133, Revised Rules of Court, "in cases filed before administrative or quasi-judicial bodies, a fact may be deemed established if supported by substantial evidence" meaning "that amount of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion". The petitioner claims that the documents presented in evidence by the private respondent were self-serving in the absence of an audit of respondent's records by the petitioner's enforcement officers. Although essentially self-serving, but it should be considered that the returns were prepared and filed by the private respondent under the penalties of perjury. The mandate that a statement to that effect, in lieu of an oath, be made on every declaration, return or other statements required under the National Internal Revenue Code (Section 266, NIRC) gives rise to the assumption that those contained in such declaration, return or other statements are prima facie and correct. Furthermore, the admitted failure of BIR law enforcement officers or revenue examiners to conduct "a routine audit and investigation" of the subject returns, despite all the opportunity afforded them so to do, may be considered as an 'implied admission that the contents of such returns are true and correct. The petitioner had several opportunities to ascertain the veracity of the entries on the returns when filed. The petitioner could not have simply accepted the returns without asking any question or without making even a cursory audit over it specifically concerning the final stock transaction capital gains tax return, Exh. A, which reflected the filer's substantial capital loss. Also when the petitioner filed a formal claim for tax refund on May 3, 1985, he had another opportunity to investigate and act on the claim. Another opportunity for the petitioner to undertake an investigation of respondent's claim was when the private respondent's petition was pending consideration by the court a quo . A earlier alluded to, the hearing of the petition was deferred (from August 11, 1986, id ., p. 22) to July 22, 1988 ( id ., p. 34), which was to give the parties a chance to settle the claim on the administrative level. The records disclose that the claim was in fact pursued administratively. Under such circumstances, We cannot lend credence to petitioner's contention that the bureau examiners audited or investigated the private respondent's claim at all. The petitioner in the trial did not adduce evidence of its own nor did he file a memorandum in support of his side of the case but chose to submit the case for decision simply on the basis of the records and the pleadings. The court a quo said in this regard: "1. The respondent never seriously controverted petitioner's evidence entitling it to the refund. As a matter of fact, respondent merely submitted this case for decision on the basis of the evidence adduced by petitioner, as well as the records of the case, without presenting counter evidence or filing a memorandum." (Decision, pp. 3-4; Record, pp. 103-104). ". . . It is sufficient to state in this connection that in arriving at the decision this Court has carefully considered the evidences presented by the petitioner and it is incumbent upon respondent to dispute the evidences of the petitioner with counter evidences which might guide this Court in its final decision. Remiss in this duty, respondent is even passing to the petitioner the burden to show that the various capital gains tax returns were verified, audited and investigated by respondent's revenue examiner's, a function which under the national Internal Revenue Code primarily and properly pertains to the respondent. The code gives respondent three-years to do this, otherwise his right to assess the same save in case of fraud shall prescribed (sic). Since 1984 when the subject returns were filed up to the date this Court decides this case, no such audit or investigation was conducted by the respondent." (Resolution on motion for reconsideration, pp. 1-2; ibid , pp. 118-119). We candidly are not prepared to allow the petitioner so much time in performing the bounden duty of his office while the private respondent waits for a period of time which to it may already seem an eternity in order to get back what it believes rightfully belongs to it. We are not unaware of the BIR's desire to generate more revenues for the Government. But We are not unmindful, either, of the fact that any such desire should be tempered with fairness to the taxpayers. There is no reason for Us to disturb the findings and conclusions of the court a quo , supported as they are by substantial evidence. As the Supreme Court has held: ". . . [I]t has been the long standing policy and practice of this Court to respect the conclusions of quasi-judicial agencies, such as the Court of Tax Appeals which, by the nature of its functions, is dedicated to the study and consideration of tax problems and has necessarily developed an expertise on the subject, unless there has been an abuse or improvident exercise of its authority (Reyes, et al., vs. Commissioner of Internal Revenue, et al., 24 SCRA 198 [1969]; Ker & Co., Ltd. vs. Lingad, etc., 38 SCRA 524 [1971]; Coca-Cola Export Corporation vs. Commissioner of Internal Revenue, et al., 56 SCRA 6 [1974]; Nasaid, et al., vs. Court of Tax Appeals, 61 SCRA 238 [1974])." ( Commissioner of Internal Revenue vs. Court of Appeals ., G.R. No. 86785, 204 SCRA 182, 189-190 [1991].) WHEREFORE, and upon all the foregoing consideration, the Decision appealed from its hereby AFFIRMED in toto . No pronouncement as to costs. SO ORDERED. Herrera and Guerrero, JJ., concur.