Commissioner of Internal Revenue v. Marcelo

[CA-G.R. SP No. 32254. May 13, 1994.] (C.T.A. Case No. 4340) COMMISSIONER OF INTERNAL REVENUE , petitioner , vs . EDWARD T. MARCELO and THE COURT OF TAX APPEALS , respondents . D E C I S I O N DE PANO , JR ., J p : This treats of the petition for review of the decision rendered September 21, 1993 in C.T.A Case No. 4340, "Edward T. Marcelo v. Commissioner of Internal Revenue" of the Court of Tax Appeals whose closing paragraphs read: "It is not disputed that when petitioner filed his Tax Amnesty Return under E.O No. 41 and paid his amnesty tax thereon. On October 29 and 30, 1986, respectively, he had no disqualification inasmuch as his alleged disqualification accrued seven months later when his name was among those listed in the PCGG's freeze order dated May 31, 1987. Petitioner has thus validly availed of the E. O. No 41 amnesty and the same could no longer be adversely affected by his subsequent disqualification. "Having found that petitioner validly availed of tax amnesty under B. O. no. 41. We find no need to discuss the issue regarding the correctness of the amount of tax deficiency assessed against petitioner. "Accordingly, the instant petition is GRANTED. Respondent Commissioner is hereby ordered to withdraw the deficiency income tax assessments, dated March 16, 1987, filed against petitioner covering the years 1982 to 1985, inclusive. "SO ORDERED." (Annex A. Petition: pp. 34-35., rec.) A fifteen-day non-extendible extension to file this petition for review was, upon the petitioner's motion, granted from October 7, 1993, the petition was filed on October 22, 1993, within the extended period granted by the resolution of October 8, 1993. The petitioner, Edward T. Marcelo, had filed with the Court of Tax Appeals (CTA, as a more convenient reference) a petition for review dated February 23, 1989 asking the latter to declare the petitioner (or Marcelo), after hearing, as "not liable for any deficiency income taxes for the years 1982 to 1985 and ordering the respondent to withdraw his assessments against the petitioner." (Annex C, Petition: pp. 50-51, rec.) Marcelo had filed the petition because the present petitioner (or Commissioner) had sent the former five (5) tax assessment notices, "assessing his deficiency income taxes for the years 1982 to 1985." Marcelo says this was based on the fact that he was a director of Philippine Amusement and Gaming Corporation (PAGCOR), also president and director of the Philippine Casino Operators Corporation (PCDC) and president and director as well of the Provident International Resources Corporation (PIRC). He had received income from the above entities as director and/or president, he continues, saying that the Bureau of Internal Revenue had assessed him for non-declared income for the years 1982 to 1985. The deficient amounts of income tax alleged not to have been paid by the respondent Marcelo were summarized by the BIR as follows: 1982 P2,751,449.40 1983 44,304,260.00 1984 60,839.869.00 1985 212,688.27 Total P108,109,267.37 Marcelo protested the above assessments by letter dated May 8, 1989. In response, the assessments were modified by the Commissioner in a letter dated January 3, 1989, the Commissioner reducing the amount of deficiency income taxes due. From P108,109,267.70: the letter's stating as well that was the final say on the matter. Marcelo then filed his petition with the CTA submitting the following amounts to support his view that the Commissioner's posture "is not supported by the pertinent facts and the applicable laws and regulations, because: "3.1 PETITIONER HAS AVAILED OF THE AMNESTY UNDER EXECUTIVE ORDER NO. 41 "3.2 THE PROCEDURE UTILIZED BY RESPONDENT IN ARRIVING AT PETITIONER'S NET WORTH DOES NOT COMPLY WITH APPLICABLE REGULATIONS "3.3 RESPONDENT ERRED IN INCLUDING THE COOLIDGE ST. HOUSE AND NOT IN DETERMINING PETITIONER'S NET WORTH "3.4 RESPONDENT ERRED IN VALUING PETITIONER'S RESIDENCE AT CORINTHIAN GARDENS AT P10 MILLION "3.5 RESPONDENT ERRED IN NOT CONSIDERING A LOAN OF P3 MILLIONS FROM PCIB UTILIZED BY PETITIONER TO ACQUIRE CORINTHIAN GARDENS PROPERTY" (Annex C, Petition: p. 43, rec.). The petitioner Commissioner opposed the petition in an answer dated September 7, 1989, through counsel, the then Solicitor General, Francisco T. Chavez assisted by Assistant Solicitor General, Pio C. Guerrero, Associate Solicitor, Cesar Manuel Chavez and Special Attorney Severino De Leon, Jr. The answer denies that Marcelo's income from PAGCOR, PCDC and PIRC were exempt from taxation, denies also that Marcelo had validly availed of the tax amnesty offered in Executive Order No. 41, and denies also the charge that the BIR had erred in arriving at Marcelo's net worth. In the answer's special and affirmative defenses, the BIR claims that respondent Marcelo's availment of the tax amnesty under EO No. 41 is not valid because as early as August 5, 1986, before Marcelo availed of the tax Amnesty, the BIR was already investigating the deficiency income taxes Marcelo had not paid. The availment was not valid too because Marcelo's name was among those appearing in PCGG's list as of May 31, 1987 placing him under Section 4(a) of EO 41 which disqualifies him from availment. Marcelo, further, BIR complained, had not furnished its investigator "with necessary information . . . to the items claimed by him in his income tax returns filed with respondent bureau . . ." driving BIR to rely on "the best evidence obtainable." The answer contended, in addition, that BIR's assessments are prima facie correct. The inclusion of the property in No. 22 Cambridge St., Greenhills in Marcelo's net worth is proper because the Assessor's Office in San Juan, Metro Manila lists the property in his name. Its P10,000,000.00 valuation is further, compatible with the prices prevailing in the years 1978 to 1982. The claim by Marcelo of tax exemption under PD 1399 and PD 1869 is misplaced, and Marcelo must show that these enactments intended to include him, the Commissioner contends. The CTA heard the case, and the minutes of June 15, 1992 as follows: "Respondent submitted this case based on the pleadings and the BIR records for the reason that the examiner who conducted the examination of this case can no longer be located. The parties are given a period of 30 day from today to submit their respective memoranda, after which this case shall be considered submitted for decision." (Annex A Comment: p. 91, rec.) In deciding the case before it, the CTA in part, stated: "On October 29, 1986, petitioner filed his Tax Amnesty Return on his 'accumulated increase in net worth from 1981 to 1985, inclusive, under the provisions of Executive Order No. 41 dated August 22, 1986 and its implementing regulations.' On October 30, 1986, petitioner paid the amount of P308,536.00 to the BIR as amnesty tax under the return, as evidenced by Confirmation Receipt No. R-10126835 and BIR Payment Order No. R-865057. Petitioner was not included in the Presidential Commission on Good Government's (PCGG's) 'Freeze Order Compiled Lists As of August 18, 1986', which was the list in effect in October, 1986 when petitioner filed his amnesty Tax Return. "Tax assessment notices were issued by the BIR against petitioner on March 15, 1987, demanding payment of deficiency income taxes for the years 1982 to 1985, inclusive, in the following amounts: 1982 P2,751.449.40 1983 44,304,260.00 1984 60,839,869.00 1985 212,688.27 TOTAL P108,107,267.37 "Petitioner, through his counsel, filed on May 8, 1987 a formal protest from the March 15, 1987 assessment contending that: (1) he had already availed of tax amnesty for the period 1981 to 1985 under the provisions of Executive Order No. 41; (2) under Presidential Decree No. 1399, the Compensation and/or other renumeration ( sic ) he received as Director of PAGCOR, PCDC and PIRC were tax-exempt; and (3) the assessment had no legal and/or factual basis. "On March 2, 1988, Warrants of Distraint and Levy were issued against petitioner. Simultaneously, tax liens issued against petitioner's properties were also sent by the BIR to the Register of Deeds of Caloocan City and Malabon. "On January 3, 1989, respondent Commissioner of Internal Revenue rendered a decision modifying the questioned assessments by reducing the assessed amount from P108,109,267.37, to P9,320,383.70. "On September 1, 1989, a Warrant of Garnishment was issued against petitioner, followed by notices of tax lien sent to the Register of Deeds of San Juan, Metro ,Manila and Quezon City, and Cebu City, and Warrants of Distraint and Levy, dated September 18, 1989. "On February 7, 1989, petitioner requested reconsideration of the decision of respondent Commissioner, dated January 3, 1989. He reiterated his contention that he was absolved of any liability for deficiency income taxes by virtue of his availment of tax amnesty under the provisions of E.O. 41 and further claimed that respondent Commissioner had used the wrong method in computing his income tax liability. "The instant petition was filed on February 25, 1989. Two issues are raised by petitioner for us to resolve: whether his availment of tax amnesty under E.O. 41 was valid and absolved him from liability for any income tax deficiencies for 1981 to 1985; and, in case of a negative resolution on the first issue, whether respondent Commissioner erred in computing petitioner's net worth used as basis for determining the questioned deficiency income tax assessments against him. "We shall first discuss the first issue. "Petitioner contends that his availment of amnesty under E.O. 41 was valid for two reasons, namely, that : he complied with all the conditions of amnesty under said law, and paid the corresponding tax; and he was not ineligible for amnesty. Further to the second reason, petitioner claims that: ". . . (a) he was covered by disqualification provision of Section 4(a) of E.O. 41, as amended, in relation to Executive Order nos. 1, 2 and 14; (b) he was not among the supposedly tainted persons listed by the Presidential Commission on Good Government ('PCGG') in its Freeze Order list dated 18 August 1986 and which was the current list at the time the petitioner filed his tax amnesty ; and (c) when the petitioner filed his tax return and paid the amnesty tax on 30 October 1986, the BIR readily accepted his application without any question about his eligibility. In fact, the Commissioner of Internal Revenue, issued a Certification of Availment of the tax amnesty dated January 20, 1987 . . ." (Memorandum For The Petitioner, p. 5; Rollo , p. 214) (Emphasis supplied). "On the Other hand, respondent Commissioner contends that: "'As previously explained in respondent's letter-decision cited earlier, petitioner's name appears those in the updated PCGG Freeze Order list as of May 31, 1987 . It is of no moment that at the time petitioner availed of the tax amnesty under E.O. #41 on October 14, 1986 his name was not in the PCGG Freeze Order list. Neither can it be considered error on the part of the implementors of E.O. #41 in respondent's Bureau that petitioner's eligibility to avail of the benefits thereof was not first verified by them considering the urgency to raise well as the need for more revenues of the government at that time whose coffers the previous administration virtually depleted and enormity of its foreign debts which it had to address and settle.'" "We find for petitioner. "It is not disputed that when petitioner filed his Tax Amnesty Return under E.O. No. 41 and paid his amnesty tax thereon, on October 29 and 30, 1986, respectively, he had no disqualification inasmuch as his alleged disqualification occurred seven months later when his name was among those listed in the PCGG's freeze order dated May 31, 1987. Petitioner has thus validly availed of the E.O. No. 41 amnesty and the same could no longer be adversely affected by his subsequent disqualification. "Having found that petitioner validly availed of tax amnesty under E.O. No. 41, we find no need to discuss the issue regarding the correctness of the amount of tax deficiency assessed against petitioner. "Accordingly, the instant petition is GRANTED. Respondent Commissioner is hereby ordered to withdraw the deficiency income tax assessments, dated March 16, 1987, filed against petitioner covering the years 1982 to 1985, inclusive. "SO ORDERED." (Annex A, Petition; pp. 30-35, rec.) Here, the petitioner presents the following as error committed by the CTA: "RESPONDENT TAX COURT ERRED IN FINDING THAT PRIVATE RESPONDENT VALIDLY AVAILED OF THE BENEFITS OF TAX AMNESTY UNDER EXECUTIVE ORDER NO. 41 AND IN ORDERING THE WITHDRAWAL OF PETITIONER'S DEFICIENCY INCOME TAX ASSESSMENTS AGAINST PRIVATE RESPONDENT BY REASON THEREOF." (p. 14, rec.) The petitioner claims that respondent Marcelo had not validly availed of the tax amnesty under EO No. 41 because: (1) valid availment is conditioned on voluntary declaration/disclosure of untaxed income (2) Marcelo's availment of the amnesty is "not a voluntary disclosure of untaxed income" (3) Marcelo is not qualified "to avail amnesty under E.O No. 41" and (4) "Presumption in favor of the legality of assessment". Supporting the petition are the following: (a) certified true copy of the CTA decision (b) true copy of this Court's resolution of October 14, 1993 allowing the petitioner a 15-day extension from October 7, 1993 to file the petition (c) true copy of the petition for review filed with the CTA, and (d) true copy of respondent Marcelo's answer before the CTA On November 26, 1993, the respondent Marcelo filed his comment on the petition for review. The comment starts with the statement that the petitioner had made no offer of evidence before the CTA; so it is, and the minutes before the CTA of June 15, 1992 (Annex A, Comment; p. 91, rec.) says, that the petitioner Commissioner submitted his case "on the pleadings and the BIR records." Respondent Marcelo counters the petitioner's assignment of error stating: "I. THE PETITIONER RAISES ISSUES IN HER PETITION FOR REVIEW THAT WERE NOT RAISED OR RESOLVED IN HER FINAL DECISIONS AT THE ADMINISTRATIVE LEVEL OR IN THE HONORABLE COURT OF TAX APPEALS AND SHOULD THEREFORE NOT BE CONSIDERED BY THIS HONORABLE COURT "II. THE VALIDITY OF AVAILMENT OF TAX AMNESTY UNDER EXECUTIVE ORDER NO. 41 IS NOT CONDITIONED UPON VOLUNTARY DISCLOSURE OF UNTAXED INCOME "III. EVEN ASSUMING THAT TAX AMNESTY UNDER EO NO. 41 IS CONDITIONED ON VOLUNTARY DISCLOSURE, PRIVATE RESPONDENT FILED HIS TAX AMNESTY VOLUNTARILY "IV. PRIVATE RESPONDENT IS NOT DISQUALIFIED FOR TAX AMNESTY ON ACCOUNT OF ANY ALLEGED LETTER OF A SO-CALLED TAX INFORMER "V. EVEN ASSUMING PRIVATE RESPONDENT WAS DISQUALIFIED TO AVAIL TAX AMNESTY, THE PROCEDURE UTILIZED BY PETITIONER IN COMPUTING NET-WORTH DID NOT COMPLY WITH REVENUE MEMORANDUM CIRCULAR NO. 43-74 "A. The use of a Starting Net Worth of Zero in Erroneous "B. Petitioner Erred in Disallowing Deductions That Private Respondent Never Claimed During Years Private Respondent Filed Gross Income Tax Returns "C. Petitioner Erred in Including Coolidge Street Property in Calculating Private Respondent's Net Worth "D. Petitioner Erred in Valuing Private Respondent's Corinthian Gardens Residence at Ten Million Pesos "E. Petitioner Erred in Not Considering Loan of Three Million Pesos from PCIB in Acquiring Corinthian Gardens Property "F. Method Utilized by Petitioner Did Not Reflect Private Respondent's Net Worth with Any Degree of Reasonable Certainty "G. BIR Personnel Who Computed Private Respondent's Net Worth Did Not Possess The Necessary Competence to Do So. (pp. 66-67, rec.) The Court agrees with respondent Marcelo's claim that the issue of his having availed of amnesty under E.O. 41 being conditioned upon his voluntary declaration/disclosure, is being raised for the first time in this, what actually is, a second appeal. The Authorities abound in support of this proposition, that issues cannot be raised for the first time on appeal. Moreover, the petitioner's claim that voluntary declaration/disclosure of income is a sine gua non for availment is not supported by the text of E.O. No. 41. The amnesty offered by E.O. No. 41 covered the years 1981 to 1985 (Section 1) and Section 2 of the Executive Order states the conditions for its availment, to wit: "SECTION 2. Conditions of the Amnesty . A taxpayer who wishes to avail himself of the tax amnesty shall on or before September 30, 1986: a) file a sworn statement declaring his net worth as of December 31, 1985; b) file a certificate true copy of his statement declaring his net worth as of December 31, 1980 on record with the Bureau of Internal Revenue, or if no such record exists, file a statement of said net worth therewith subject to verification by the Bureau of Internal Revenue; c) file a return and pay a tax equivalent to ten percent (10%) of the increase of net worth from December 31, 1980 to December 31, 1985; Provided , That in no case shall the (sic) be less than P5,000.00 for individuals and P10,000.00 for juridical persons." (p. 15, rec.) A valuation of income prior to availment is not listed as a condition. Expresio unius est exclusio alterius . The CTA had found with E.O. 41. The Court is not persuaded to disagree, especially in the light of the fact that the petitioner has not shown otherwise by competent evidence formally presented to the CTA. The petitioner states also that Marcelo was disqualified from availing of the amnesty offered by E.O. No. 41. allegedly because Marcelo was already under investigation by BIR when he availed of the amnesty. There is, however, no evidence the petitioner can point to that would suffice to overturn the CTA's findings that a valid availment had been made by Marcelo. The petitioner finally refers to the presumption of legality in favor of assessment issued by the BIR, that particularly, respondent Marcelo is, in law bound to prove that he is not liable for deficiency tax for 1981. However, the presumption would not apply if only because the BIR issued tax assessment notices only for 1982, to 1985, and that is what all this litigation is all about. The BIR did not, for this case, involve the year 1981, and consequently, even its tax assessment notices were only for 1982 to 1985. The Certification of Availment dated January 20, 1987 issued by Assistant Eufracio V. Santos for the then Commissioner, Bienvenido A. Tan Jr. (Annex F, Comment) should, at the very least, bind the petitioner that, indeed, respondent Marcelo had availed of the amnesty under E.O. No. 41 for the years covered. This means that the BIR was fully satisfied that the respondent Marcelo has complied with E.O. No. 41, that he filed a sworn statement declaring his net worth as of December 31, 1985, that Marcelo had filed a certified true copy of his net worth as of December 31, 1980, on record with the BIR (or if no such record exists a statement of such net worth subject to verification by BIR), that he had filed a return and paid a tax equivalent to ten (10%) percent of the increase of net worth from December 31, 1980 to December 31, 1985. Incidentally, that covers the year 1981. All this show lack of merit in the petition for review. WHEREOF, the petition for review is DENIED for lack of merit. SO ORDERED. Francisco and Guerrero, JJ ., concur.