Protectors Services, Inc. v. Commissioner of Internal Revenue

FIRST DIVISION [CA-G.R. SP No. 31825. November 28, 1994.] (C.T.A. Case No. 4514) PROTECTORS SERVICES, INC. , petitioner , vs . COMMISSIONER OF INTERNAL REVENUE and the COURT OF TAX APPEALS , respondent . D E C I S I O N MABUTAS , JR ., J p : Before Us is a petition seeking to review the decision of respondent Court of Tax Appeals in C.T.A. Case No. 4514 dismissing petitioner's move to annul the assessments made by respondent Commissioner of Internal Revenue for deficiency percentage taxes. The dispositive portion of the assailed decision is worded as follows: "WHEREFORE, in all the foregoing, this case is hereby DISMISSED for lack of jurisdiction the subject assessments having become final and unappeasable." (page 62 of the Rollo) Stripped of verbose trappings, the antecedent facts, as gleaned from the petition and the comment thereon, follow: The petitioner, a corporation engaged, among other things in recruiting security guards for its customers was investigated by the Bureau of Internal Revenue for income and business taxes for the years 1983, 1984 and 1985. On the basis of such investigation, the petitioner was assessed for deficiency percentage tax including surcharge, penalties and interests as follows: Amount Demand No. 1983 P503,564.59 18-452-83B-87-B2 1984 831,464.30 18-451-84B-87-B2 1985 1,514,047.86 18-450-85B-87-B2 Assessment letters. all dated December 2, 1987, were simultaneously sent on December 7, 1987 by registered mail to the petitioner. Petitioner admits to have received on December 10, 1987 the demand letters for taxable years 1983 and 1984 only. In a letter dated January 2, 1988, the petitioner protested against the 1983 and 1984 assessments, which letter was received by respondent Commissioner of Internal Revenue on January 12, 1988. Without acting formally on the petitioner's protest of the 1983 and 1984 assessments, respondent Commissioner of Internal Revenue sent a tracer letter dated July 12, 1988, which demanded payment for the total amount of P2,851,805.16 for deficiency business taxes including P2,025.00 for the documentary stamp tax on capitalization for the years 1983 and 1984 and P703.41 for the deficiency expanded withholding tax. On July 21, 1988, the petitioner paid the documentary stamp tax and the deficiency expended withholding tax demanded by respondent Commissioner of Internal Revenue in his tracer letter. In a letter, dated July 22, 1988, the petitioner requested for a reconsideration of the demand and, at the same time, protested the assessment of its deficiency taxes for 1983, 1984 and, for the first time, 1985. On November 9, 1990, the petitioner received a letter from Deputy Commissioner Eufracio Santos denying with finally petitioner's protests against the subject assessments. On December 5, 1990, the petitioner filed with respondent Court of Tax Appeals a petition for review contesting the subject deficiency percentage tax assessments. On July 21, 1993, respondent Court of Tax Appeals rendered a decision dismissing the petition, the dispositive portion of which was earlier quoted. From said decision, the petitioner came to this Court alleging that: "I. RESPONDENT COURT OF TAX APPEALS HAS JURISDICTION TO ACT ON THE PETITION FOR REVIEW FILED BEFORE IT. "II. THE ASSESSMENTS AGAINST THE PETITIONER FOR THE ALLEGED DEFICIENCY PERCENTAGE TAX (3% OR 4% CONTRACTOR'S TAX) FOR THE TAXABLE YEARS 1983, 1984 WERE MADE AFTER THE PRESCRIPTIVE PERIOD. "III. THE TERM 'GROSS RECEIPTS' DOES NOT INCLUDE ANY MONEY WHICH HAS BEEN ESPECIALLY EARMARKED BY LAW OR REGULATIONS FOR SOME PERSON OTHER THAN THE PROPRIETOR." (page 8 of the Petition). Relative to the first ground of its petition, the petitioner declared: "Considering that the BIR sent the tracer letter, dated 12 July 1988, and responded to petitioner's second letter, dated 22 July 1988 and jointly considering the subsequent formal conference between the BIR and the petitioner taxpayer and the re-examination of the records, through its communication dated 05 June, 1989, it is inescapably clear that the controverted assessments have not yet attained finality even until 1990 inasmuch as the BIR continued to further review or study the subject assessment. Moreover, it may be read from the action of the BIR of calling a conference for a re-examination of the records and subsequent issuance by the BIR of the letter, dated 30 October 1993, denying the protest and request for reconsideration of petitioner, referring to petitioner's first letter, dated 02 January 1988, that the BIR did not consider the letter, dated 02 January 1988, filed out of time. The subsequent actions taken by the BIR, coupled with the final letter-advice dated 05 November 1990, indubitably show that the conclusion of respondent Court of Tax Appeals is erroneous and contrary to the law and evidence presented. Said subsequent actions and final letter-advice dated 05 November 1990 patently belie the premise of the respondent Court of Tax Appeals that said assessments became final and unappealable when petitioner questioned the alleged 1983, 1984 and 1985 deficiencies on 12 January 1988 through the letter dated 02 January 1988. "Thus, at the time the petitioner files its Petition for Review or appeal from the final decision of the respondent Commissioner with the respondent Court on 05 December 1990, or twenty-six (26) days from receipt of the decision of the respondent Commissioner appealed from, said decision had not attained final and unappealable character. Consequently, under the law, the respondent Court still has complete jurisdiction over the petition for review or appeal filed by the petitioner." (pages 11-12 of the Petition). The respondents disputed the foregoing contention of the petitioner as it cited Section 270 of the 1986 tax code, saying said provision specifies two instances when an assessment becomes final, to wit: 1) "When it is not protested within thirty (30) days from receipt thereof from the Commissioner; and 2) "When the adverse decision on the protest is not appealed to the Court of Tax Appeals within thirty (30) days from receipt of the said decision." They (respondent) thereby junked petitioner's disquisition thus: "In this case, petitioner protested the assessment for the taxable years 1983 and 1984 only on January 12, 1988 through a letter dated January 2, 1988 or after thirty-three days had already lapsed from the time it admittedly received the assessments for the taxable years 1983 and 1984 on December 10, 1987. With respect to the assessment for the taxable year 1985, petitioner is presumed to have received it in the regular course of mail on December 10, 1987 also since the 1983, 1984 and 1985 assessments were placed in one envelope and sent by registered mail on December 7, 1987. Clearly, the disputed assessments had already become final and unappealable when it filed before respondent Court of Tax Appeals the petition for review disputing the BIR's deficiency percentage tax assessments for taxable years 1983 , 1984 and 1985. "It is well settled that when an assessment has become final and executory for failure of the taxpayer to appeal to the Court of Tax Appeals in due time, he is barred from disputing the correctness of the assessment or invoking any defense that would reopen the question of his tax liability on the merits (Republic vs. Lopez, 7 SCRA 566; Republic vs. Albert, 3 SCRA 717; Republic vs. Manila Port Service, 12 SCRA 384; Republic vs. Lim Tian Teng Sons & Co., 1 SCRA 584)." (pages 7-8 of the Comment). They further pointed out that the cited cases of St. Stephen's Association and Filipinas Investment and Finance Corp . "are note applicable to the case at bar", since said cases involve the application of the 30-day prescriptive period to appeal the decision of the Commissioner of Internal Revenue to the Tax Court. They said that at the time of the promulgation of said cited cases, there was no existing provision of law which prescribed that an assessment should be protested within thirty (30) days from receipt thereof. On the other hand, the case at bench involves the applications of the 30-day prescriptive period of protest an assessment under Section 270 of the 1986 Tax Code. We agree with the foregoing posture of the Solicitor General for the respondents: Respondent Court of Tax Appeals no longer had jurisdiction to act on petition for review since the disputed assessment had already become final. With respect to petitioner's second ground, the same was considered "without merit" by the Solicitor General as he cited the following explanation of respondent Court of Tax Appeals: ". . . under taxable year 1983 the period of limitation for assessment of taxes was five (5) years after the date of the return was due or was filed whichever is later (see Section 318 of the 1983 Tax Code). Thus, the prescriptive period for assessment will be up to 1988. Accordingly, the assessment received by the petitioner on December 10, 1987 was well within the prescriptive period. "This is also true in so far as taxable year 1984 is concerned although, the period of limitation for assessment or collection has been reduced by Batas Pambansa Blg. 700 from five (5) years to three (3) years, yet the assessments made on or before April 5, 1984 (date of approval) covering taxable years beginning January 1, 1984 was well within the new three-year period. Accordingly, the assessment received by the petitioner on December 10, 1987 for taxable year 1984 has not yet prescribed since presumably it was filed on January 20, 1985. Hence, it was well within the prescriptive period. It is a settled rule the counting of the prescriptive period of assessment commences from the day of the filing of the final return (Section 318, 1984 Tax Code, Central Azucarera de Tarlac v. Collector of Internal Revenue v. Ayala Securities Corporation and the Court of Tax Appeals, L-229485, March 31, 1976)." It was pointed out that contrary to petitioner's contention, Section 3 of Batas Pambansa Blg. 700 (effective April 15, 1984) "clearly means that taxable 1984 is the cut-off for the non-application of the 5 year period. Stated differently, it means that the three (3) year period of limitation prescribed under B. P. 700 applies prospectively or beginning taxable year 1984 when said law took effect. Thus, the 5-year prescription period still applied with respect to petitioner's deficiency percentage tax assessment for taxable year 1983", the Solicitor General argued. We also agree with such conclusion. Relative to petitioner's third ground the respondents claimed that, it (petitioner) is subject to contractor's tax on gross receipt thus: "It will suffice to state that the BIR assessment for the deficiency percentage taxes for 1983, 1984 and 1985 were correctly based on petitioner's gross receipts or the total contract price received by petitioner from its clients under the contract to provide them with security guards, including that portion of the contract price which corresponds to the salaries of the security guards and other amounts earmarked by law, rules or regulations for persons other than the petitioner, in accordance with the provision of the Tax Code . . ." (page 11 of the Comment). Maintaining that the petitioner falls under the category of "watchman agencies", the respondents declared: "Under the aforequoted provision of the Tax Code, it is thus subject to contractor's tax on its gross receipts. Said tax imposed on petitioner is a tax on its business and privilege of selling the service and labor of its security guards and not on the professional service of the security guards themselves (Commissioner of Internal Revenue vs. Court of Tax Appeals and Avecilla Building Corp., No. L-42394, January 17, 1985, 134 SCRA 49)." After filtering the disputants' (petitioner and respondents) argument taking not also of existing jurisprudence on the matter We are inclined to share in the views of the latter (respondents). Also respondent Court of Tax Appeals committed no error in not passing upon the issue of the correctness of the assessments for deficiency percentage taxes, "since the issue of prescription against petitioner and all the assessments have already become final and unappealable, the discussion on the third issue will just be purely academic." Above all, as We affirm the questioned decision of the Court of Tax Appeals, We are reminded of the well-settled rule that findings of administrative-judicial agencies, which have acquired expertise/special knowledge because their jurisdiction is confined to specific matters, are accorded not only respect but also finality (Motoomul vs. De La Paz, 187 SCRA 743; Villanueva vs. Court of Appeals, 205 SCRA 537; Sesbreno vs. Ala, 208 SCRA 359; Villanueva, Sr. vs. Leogardo 215 SCRA 835). WHEREFORE, premises considered, the questioned decision of the Court of Tax Appeals in C.T.A. No. 4514 is hereby AFFIRMED. No pronouncement as to costs. SO ORDERED. De Pano, Jr . and Luna JJ., concur.