Antam Consolidated, Inc. v. Court of Tax Appeals

FIFTH DIVISION [CA-G.R. SP No. 33588. March 31, 2004.] ANTAM CONSOLIDATED, INC. , petitioner , vs . COURT OF TAX APPEALS AND THE GOZO-DADOLE and COMMISSIONER OF INTERNAL REVENUE , respondents . D E C I S I O N CARANDANG , J p : This is a petition to review and set aside (1) the Resolution of the Court of Tax Appeals dated 24 August 1993 dismissing the Petition for Review filed by the petitioner dated 14 February 1991, and (2) the Resolution of the Court of Tax Appeals dated 8 March 1994 denying petitioner's motion for reconsideration of the previous resolution. The facts of the case are as follows: On 18 April 1986, petitioner received a letter dated 15 April 1985 from the Commissioner of Internal Revenue (Bureau) alleging that petitioner was liable in the aggregate amount of PhP4,292,246.88 for deficiency income tax, fixed and documentary stamp taxes for the year ending 1981. On 15 May 1986, petitioner filed a protest with the Bureau contesting its alleged tax liabilities, which was duly received by the Bureau on 16 May 1986. Petitioner availed of the tax amnesty offered under Executive Order No. 41, as amended, on 27 October 1986. On 15 January 1991, a Warrant of Distraint and/or Levy was served upon petitioner by the Bureau in the total amount of PhP4,298,954.88. Petitioner then considered the issuance and service of the Warrant of Distraint and/or Levy as a denial of its protest. Hence, on 14 February 1991, petitioner filed a Petition for Review with the Court of Tax Appeals (CTA). In a Resolution dated 24 August 1993, the CTA dismissed the Petition for Review for lack of jurisdiction. The dismissal was without prejudice to the filing of another petition upon receipt of the Bureau's "final decision" on petitioner's protest. On 16 September 1993, petitioner filed a Motion for Reconsideration of the above Resolution, which was however denied in a Resolution dated 8 March 1994. Hence, this petition. Petitioner submits the following issues for consideration of this Court: I. WHETHER OR NOT THE ISSUANCE OF A WARRANT OF DISTRAINT AND/OR LEVY BY THE COMMISSIONER OF INTERNAL REVENUE IS TANTAMOUNT TO A DENIAL OF A TAXPAYER'S PROTEST, AND THEREFORE, WOULD CONSTITUTE A FINAL DECISION WHICH IS APPEALABLE TO THE COURT OF TAX APPEALS; II. WHETHER OR NOT PURSUANT TO THE EVIDENCE PRESENTED BY THE PETITIONER, THE DISPUTED ASSESSMENTS ISSUED BY RESPONDENT COMMISSIONER OF INTERNAL REVENUE HAVE NO VALID AND SOUND FACTUAL AND LEGAL BASIS, AND HENCE SHOULD BE ACCORDINGLY CANCELLED AND WITHDRAWN. We find the petition impressed with merit. The law conferring jurisdiction to the Court of Tax Appeals on the matter of disputed assessments is found in Section 7 of Republic Act 1125, which provides: "Sec. 7. Jurisdiction. The Court of Tax Appeals shall exercise exclusive appellate jurisdiction to review by appeal as herein provided (1) Decisions of the Collector of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties imposed in relation thereto, or other matters arising under the National Internal Revenue Code or other law or part of law administered by the Bureau of Internal Revenue;" The word "decisions" in paragraph 1, Section 7 of Republic Act 1125, quoted above, has been interpreted to mean the decisions of the Commissioner of Internal Revenue on the protest of the taxpayer against the assessments. 1 The Supreme Court, in the case of Surigao Electric Co., Inc. vs. Court of Appeals , 2 laid down the standard for such decisions of the Commissioner, to wit: "Prescinding from the foregoing, we deem it appropriate to state that the Commissioner of Internal Revenue should always indicate to the taxpayer in clear and unequivocal language whenever his action on an assessment questioned by a taxpayer constitutes his final determination on the disputed assessment , as contemplated by sections 7 and 11 of Republic Act 1125, as amended. On the basis of this indicium indubitably showing that the Commissioner's communicated action is his final decision on the contested assessment, the aggrieved taxpayer would then be able to take recourse to the tax court at the opportune time. Without needless difficulty, the taxpayer would be able to determine when his right to appeal to the tax court accrues. This rule of conduct would also obviate all desire and opportunity on the part of the taxpayer to continually delay the finality of the assessment and, consequently, the collection of the amount demanded as taxes by repeated requests for recomputation and reconsideration. On the part of the Commissioner, this would encourage his office to conduct a careful and thorough study of every questioned assessment and render a correct and definite decision thereon in the first instance. This would also deter the Commissioner from unfairly making the taxpayer grope in the dark and speculate as to which actions constitutes the decision appealable to the tax court. Of greater import, this rule of conduct would meet a pressing need for fair play, regularity, and orderliness in administrative action." (emphasis supplied) 3 The appealable decision of the Commissioner may be embodied in a letter to the taxpayer, signifying the denial of any protest on the assessment filed by the taxpayer. In the case of St. Stephen's Association and St. Stephen's Chinese Girl's School vs. Collector of Internal Revenue, 4 the Court held: "From the above-quoted statement appearing in his letter . . . it is evident that the respondent Collector himself considered said letter as his final decision in the case, hence his warning that the same would become final in thirty days unless petitioners appealed to the Court of Tax Appeals within the same period." Similarly, in the case of Surigao Electric Co., Inc. vs. Court of Appeals, 5 it was held: "Moreover, the letter of demand dated April 29, 1963 unquestionably constitutes the final action taken by the Commissioner on the petitioner's several requests for reconsideration and recomputation. In this letter, the Commissioner not only in effect demanded that the petitioner pay the amount . . . but also gave warning that in the event it failed to pay, the said Commissioner would be constrained to enforce the collection thereof by means of the remedies provided by law. The tenor of the letter, specifically the statement regarding the resort to legal remedies, unmistakably indicates the final nature of the determination made by the Commissioner of the petitioner's deficiency' franchise tax liability." 6 Also, in Commissioner of Internal Revenue vs. Ayala Securities Corporation, 7 the Court said: "The letter of February 18, 1963 (Exh. G), in the view of the Court, is tantamount to a denial of the reconsideration or protest of the respondent corporation on the assessment made by the petitioner, considering that the letter is in itself a reiteration of the demand made by the Bureau of Internal Revenue for the settlement of the assessment already made, and for the immediate payment of the sum. . . in spite of the vehement protest of the respondent corporation on April 21, 1961. This certainly is a clear indication of the firm stand of petitioner against the reconsideration of the disputed assessment , in view of the continued refusal of the respondent corporation to execute the waiver of the period of limitation upon the assessment in question. This being so, the said letter amounts to a decision on a disputed or protested assessment and, therefore, the court a quo did not err in taking cognizance of this case." 8 In Advertising Associates, Inc. vs. Court of Appeals, 9 it was likewise held: "We hold that the petition for .review was filed on time. The reviewable decision is that contained in Commissioner Plana's letter of May 23, 1979 and not the warrants of distraint. No amount of quibbling or sophistry can blink the fact that said letter, as its tenor shows, embodies the Commissioners final decision within the meaning of section 7 of Republic Act No. 1125. The Commissioner said so. He even directed the taxpayer to appeal it to the Tax Court." 10 Finally, in the case of Commissioner of Internal Revenue vs. Isabela Cultural Corporation , 11 the Court said: "In the light of the above facts, the Final Notice Before Seizure cannot but be considered as the commissioner's decision disposing of the request for reconsideration filed by respondent, who received no other response to its request. Not only was the Notice the only response received; its content and tenor supported the theory that it was the CIR's final act regarding the request for reconsideration. The very title expressly indicated that it was a final notice prior to seizure of property. The letter itself clearly stated that respondent was being given "this LAST OPPORTUNITY to pay otherwise, its properties would be subjected to distraint and levy. How then could it have been made to believe that its request for reconsideration was still pending determination, despite the actual threat of seizure of its properties?" 12 While the decision of the Commissioner is usually expressed in the form of a letter to the taxpayer, a, civil suit for collection can also be considered as a denial of the protest of the assessment, as held in the cases of Yabes vs. Flojo 13 and Commissioner of Internal Revenue vs. Union Shipping Corp. 14 The decision may yet come in another form, that is, the issuance by the Commissioner of a warrant of distraint and levy. In the case of Commissioner of Internal Revenue vs. Algue, Inc., 15 the Supreme Court held that as a rule, a warrant of distraint and levy is "proof of the finality of the assessment" ( Phil. Planters Investment Co. Inc. v. Acting Comm. of Internal Revenue , CTA Case No. 1266, Nov. 11, 1962) and "renders hopeless a request for reconsideration, ( Vicente Hilado v. Comm. of Internal Revenue , CTA Case No. 1256, Oct. 22, 1962) being "tantamount to an outright denial thereof and makes the said request deemed rejected" ( Vicente Hilado v. Comm. of Internal Revenue , CTA Case No. 1256, Oct. 22, 1962). We therefore sustain petitioner's contention that the issuance of a warrant of distraint and levy by the Commissioner is considered as the "disputed assessment" for purposes of filing an appeal to the CTA. In tax assessment and collection, there is nothing more compelling than the issuance by the Commissioner of a warrant of distraint and levy which is preparatory to actual auction sale of the taxpayer's property to satisfy the tax liability. The cases cited by the respondent, although relevant, are not applicable. In the case of Advertising Associates, Inc. vs. Court of Appeals 16 therein petitioner contested the assessments of the Commissioner and it was only after four (4) years that the Commissioner resorted to the summary remedy of issuing two warrants of distraint. However, more than a year later, the Commissioner wrote a letter in answer to the requests of the taxpayer for the cancellation of the assessments and the withdrawal of the warrants of distraint, in the following tenor: "This constitutes our final decision on the matter. If you are not agreeable, you may appeal to the Court of Tax Appeals within 30 days from receipt of this letter." The Supreme Court held that the reviewable decision is that contained in the Commissioner's letter, and not the warrants of distraint , reasoning thus: "No amount of quibbling or sophistry can blink the fact that said letter, as its tenor shows, embodies the Commissioner's final decision within' the meaning of section 7 of Republic Act No. 1125. The Commissioner said so. He even directed the taxpayer to appeal it to the Tax Court. The directive is in consonance with this Court's dictum that the Commissioner should always indicate to the taxpayer in clear and unequivocal language what constitutes his final determination of the disputed assessment. That procedure is demanded by the pressing need for fair play, regularity and orderliness in administrative action." In Commissioner of Internal Revenue vs. Union Shipping Corp. , 17 the taxpayer's protest was likewise not ruled upon by the Commissioner. Instead, more than a year, after the protest on the assessment, the Commissioner issued a Warrant of Distraint and Levy. In a letter to the Commissioner, the taxpayer reiterated its request for reinvestigation of the assessment and for the reconsideration of the summary collection through the Warrant of Distraint and Levy. The Commissioner, without acting on the request for reinvestigation and reconsideration, filed a collection suit before the Court of First Instance of Manila. Thereafter, the taxpayer filed a petition for review to the tax court, which reversed the decision of the Commissioner with respect to the assessment issued to the taxpayer. The Supreme Court held that under the circumstances, the Commissioner, not having clearly signified his final action on the disputed assessment, legally the period to appeal has not commenced to run and that it was only when the taxpayer received the summons on the civil suit for collection of deficiency income that the period to appeal commenced to run. In other words, the aforementioned cases held that it was not the warrants of distraint but the letter of the Commissioner or the filing of the civil collection suit that should be considered the appealable decision of the Commissioner, which signifies the start of the period for appeal. There was no categorical ruling that the warrant of distraint cannot be considered as the reviewable decision of the tax court. On the other hand, the case of Algue 18 definitively ruled that the issuance of a warrant of distraint and levy is tantamount to an outright denial of the protest and makes said request deemed rejected. In the present case, there was no action on the part of the Commissioner with regard to the protest filed by the petitioner before or after the issuance of a warrant of distraint and levy. In the cases cited, after the warrants of distraint and levy were issued, the Commissioner sent a letter to the taxpayer (as in the case of Advertising Associates, supra ), or filed a civil suit for collection (as in the case of Union Shipping, supra ). After five (5) years of inaction, it would certainly appear to the petitioner that the issuance of a warrant of distraint and levy signified a denial of its protest on the assessment. Hence, the petition for review filed before the tax court. It is but fair to uphold petitioner on this point considering that the protest on the assessment has been pending with the office of the Commissioner for almost five (5) years, until the warrant of distraint and levy was issued, and up to the present, in view of the Manifestations 19 filed by both petitioner and respondent Commissioner that there have been no new developments or supervening events that would render the issues of this case moot and academic. If We were to rule that the dismissal by the tax court was proper, such would be contrary to the express dictum of the courts that the taxpayer, should not be left groping in the dark and speculating as to which action constitutes the decision appealable to the tax court, in keeping with the precepts of fair play, regularity and orderliness in administrative action. WHEREFORE, premises considered, the Resolution of the Court of Tax Appeals dated 24 August 1993 dismissing the Petition for Review filed by the petitioner, as well as its Resolution dated 8 March 1994, denying the Motion for Reconsideration filed thereto, are hereby REVERSED and SET ASIDE. The case is hereby REMANDED to the respondent Court of Tax Appeals for the proper resolution of the Petition for Review filed by the petitioner. SO ORDERED. Labitoria and Gozo-Dadole, JJ., concur. Footnotes 1. Commissioner of Internal Revenue vs. Villa , 22 SCRA 3 (1968). 2. Surigao Electric Co., Inc. vs. Court of Tax Appeals , 57 SCRA 523, 528 (1974). 3. Ibid. 4. 104 Phil., 314 (1958). 5. 57 SCRA 523 (1974). 6. Ibid. 7. 70 SCRA 204 (1976). 8. Ibid. 9. 133 SCRA 765 (1984). 10. Ibid. 11. 361 SCRA 71 (2001). 12. Ibid. 13. 115 SCRA 278 (1982). 14. 185 SCRA 547 (1990). 15. 158 SCRA 9 (1988). 16. 133 SCRA 765 (1984). 17. 185 SCRA 547 (1990). 18. Supra at note 15. 19. Rollo , pp. 161, 164.