Saint Anthony Academy of Iriga, Inc. v. Court of Tax Appeals

[CA-G.R. SP No. 34310. August 18, 1994.] (C.T.A. Case No. 4569) SAINT ANTHONY ACADEMY OF IRIGA, INCORPORATED , petitioner , vs . COURT OF TAX APPEALS and COMMISSIONER OF INTERNAL REVENUE , respondents . D E C I S I O N YNARES-SANTIAGO , J p : This petition for review on certiorari seeks to annul and set aside the following resolutions of respondent. Court of Tax Appeals, In C.T.A. Case No. 4569, to wit: a) Resolution dated August 26, 1993, dismissing petitioner's Petition for review of respondent Commissioner of Internal Revenue's assessment; and b) Resolution dated December 8, 1993, denying petitioner's Motion for Reconsideration of the resolution dated August 26, 1993. The antecedent facts of the case are as follows: On February 5, 1987, Filomena Delos Reyes, Revenue District Officer of Naga City, sent petitioner Saint Anthony Academy of Iriga Inc., a letter containing a preliminary assessment of petitioner's 1985 deficiency income tax in the amount of P112,699.00, which allegedly arises from the disallowances of its claim for expansion of school facilities, due to non-compliance with the provision of BIR-MECS Regulation No. 6-84. On February 16, 1987, petitioner, through its President, Santiago D. Ortega, Jr., sent respondent Commissioner Bienvenido A. Tan, Jr., a letter stating that they are ignorant of the existence of BIR-MECS Regulation No. 6-84, hence, they failed to submit the Information Return required by Section 4 of said Regulation. However, it claims that the deductions for expenses incurred for expansion of facilities can easily be proven by an ocular inspection of the facilities constructed, thus, petitioner requested respondent Commissioner to allow petitioner to submit the said Information Return. On January 22, 1988, respondent Commissioner, through Asst. Commissioner for Collection Pedro C. Aguillon, formally issued to petitioner an assessment notice in the amount of P163,907.01. On January 25, 1988, petitioner, through its accountant, Federico M. Oquendo, sent a letter to Pedro C. Aguillon, requesting for a certified true copy of the BIR-MECS Regulation No. 6-84, before payment is effected. On July 29, 1988, petitioner wrote a letter to respondent Commissioner questioning the validity of BIR-MECS Regulation No. 6-84, considering that petitioner was informed by the Department of Education, Culture and Sports that it does not have in its possession a copy of said regulation, and upon verification from the BIR Central Office, petitioner was furnished a xerox copy of an unnumbered BIR-MECS Regulation which is not signed by DECS' officials. On May 16, 1989, Deputy Commissioner Eufracio Santos issued a final decision on the deficiency assessment of petitioner. On July 8, 1989, petitioner wrote a letter to Deputy Commissioner Eufracio D. Santos, claiming that what was furnished to them is mere photocopy of the questioned Regulation and not certified true copy as requested petitioner moved for the reconsideration of the decision. On December 18, 1990, respondent Commissioner Jose U. Ong, through Revenue Director II, Themistocles R. Montalban, served a warrant of Distraint and/or Levy against petitioner. Petitioner filed a petition for review before respondent Court of Tax Appeals against respondent Commissioner, docketed as C.T.A. Case No. 4569, alleging that respondent Commissioner's refusal to reconsider the BIR's disallowance of the deductions from petitioner's taxable income for 1985 of the expenses incurred by it in said year for the expansion of its school facilities, is contrary to law, considering that: a) said disallowance is predicted solely on BIR-MECS Regulation No. 6-84, which was not signed by the DECS' officials and does not even bear any number or date, hence, said regulation is for all legal purposes and intents, non-existent ; b) assuming arguendo that the said regulation was approved, still the same is legally inefficacious for the reason that the same was not published in the Official Gazette and hence, without any binding effect; c) the said regulation unduly expands Presidential Decree No. 305 by not merely providing the determination of the deductible expenses therein provided, but by imposing additional requirements and penalties which tend to negate or denigrate the enabling law's objective, hence, the said regulation is rendered invalid under the fundamental principle that administrative regulations "shall be valid only when they are not contrary to the laws of the Constitution; d) in sum, respondent Internal Revenue Commissioner's assessment against petitioner of an alleged income tax liability on the basis of an inexistent administrative fiat and the enforcement of said assessment by means of a warrant of distraint and levy is tantamount to deprivation of petitioner's property without due process of law. On July 29, 1991, respondent Commissioner filed his answer to the petition, partially denying and partially admitting the allegations of the petition, and alleged, by way of Special and Affirmative Defenses, the following, to wit: a) the tax assessment is presumed valid and correct; b) the tax assessment is final and unappealable for failure of the petitioner to lodge its protest within 30-day period from receipt thereof on January 22, 1988, as provided for under Section 229 of the Tax Code; c) the law granting the deductibility of expenses incurred for the expansion of school faculties and educational activities was then Section 30 (a)(3) of the Tax Code, as amended by P. D. No. 305, and not BIR-MECS Regulation No. 6-84, which merely amplified said Presidential Decree and merely sets the implementing rules to be followed by educational institutions in order that they can validly avail of such deductions, hence, the said regulation need not be published in the Official Gazette for it to be binding upon the petitioner; d) Deductions are privilege and must be strictly construed and will be allowed only when granted by clear and unequivocal language. The burden is upon the taxpayer to show that he comes within the terms of the provision granting the privilege; e) the imposition of the 20% annual interest on the deficiency tax assessment is proper and legal, the same being statutory and therefore mandatory. On may 5, 1993, respondent Commissioner filed a Motion to Dismiss the petition on the ground that the assessment is already final, executory and demandable for failure of petitioner to appeal to the Court of Tax Appeals within 30 days from June 30, 1989, the date petitioner received the respondent Commissioner's letter-decision, as provided for under Section 229 of the Tax Code, as amended by P. D. No. 1773. Petitioner filed its Opposition to the Motion to Dismiss, stating that respondent Commissioner did not act on its motion for reconsideration, but instead, issued a warrant of distraint and/or levy. Petitioner further contended that the Motion to Dismiss is fatally defective for containing no notice of hearing. On August 26, 1993, respondent court granted respondent Commissioner's Motion to Dismiss. On October 13, 1993, petitioner filed its Motion for Reconsideration, which was denied by respondent court on December 8, 1993. Hence, the instant petition for review, Petitioner submits the following issues, to wit: A. WHETHER OR NOT PETITIONER WAS BARRED BY PRESCRIPTION WHEN IT FILED THE PETITION FOR REVIEW BEFORE RESPONDENT CO U RT OF TAX APPEALS B. WHETHER OR NOT UNDER THE PECULIAR CIRCUMSTANCES OF THIS CASE, PRESCRIPTION CAN BE SAID TO HAVE SET IN WHERE THE ASSESSMENT MADE BY RESPONDENT COMMISSIONER HAD NEITHER FACTUAL NOR LEGAL BASIS, IT APPEARING THAT BIR-MECS REGULATION NO. 6-84 NEVER REALLY EXISTED. C. WHETHER OR NOT THE PETITIONER SHOULD PROTECTED AT THE VERY LEAST. ON EQUITABLE GROUNDS. D. WHETHER OR NOT THE FATALLY DEFECTIVE MOTION TO DISMISS COULD BE CURED BY THE RESPONDENT COURT OF TAX AP PEA LS BY ITSELF PROVIDING THE REQUIRED NOTICE OF HEARING WHICH THE MOVANT CLEARLY DID NOT COMPLY WITH." Petitioner, claims that within ten (10) days from receipt of the letter decision dated May 16, 1989 of respondent Commissioner, it filed a reconsideration thereof in its letter of July 8, 1989, alleging that the assessment sought to be enforced against petitioner was based on non-existent and spurious document. Hence, the filing of the said motion for reconsideration stayed the running of the period within which to file a petition for review with the respondent Court of Tax Appeals. Petitioner further claims that even assuming that respondent Commissioner's letter of May 16, 1991 is a final decision, the same cannot be enforced, considering that the said decision was based on BIR-MECS Regulations No. 6-84, which is a non-existent document, hence, everything that emanates from it must perforce fall. Petitioner further alleged that the respondent Commissioner's Motion to Dismiss was fatally defective, considering that it did not contain notice of hearing, hence, respondent Court should not have taken cognizance of the said motion, being a mere scrap of paper. The petition is devoid of merit. Section 229 of the National Internal Revenue Code reads: "SEC. 229. Protesting of assessment . When the Commissioner of Internal Revenue or his duly authorized representative finds that proper taxes should be assessed, he shall first notify the taxpayer of his findings, within a period to be prescribed by implementing regulations, the taxpayer shall be required to respond to said notice. If the taxpayer fails to respond, the Commissioner shall issue an assessment based on the findings. Such assessment may be protested administratively by filing a request for reconsideration or reinvestigation in such form and manner as may be prescribed by implementing regulations within (30) days from receipt of the assessment; otherwise, the assessment shall become final and unappealable. If the protest is denied in whole or in part, the individual, association or corporation adversely affected by the decision on the protest may appeal to the C our t of Tax Appeals within thirty (30) days from the receipt of the said decision; otherwise, the decision shall become final, and executory and demandable" It appears from the records that when respondent Commissioner, through Asst. Commissioner for collection, Pedro C. Aguillon, formally issued to petitioner an assessment notice on January 22, 1988. Instead of protesting against the tax assessment, petitioner merely requested the respondent that the school be furnished with a copy of BIR-MECS Regulation No. 6-84, for information and guidance, in a letter dated January 25, 1988. It was only on July 29, 1989, when petitioner wrote a letter to respondent Commissioner, questioning the validity of the BIR-MECS Regulation No. 6-84, which in effect was a protest on the assessment by the respondent Commissioner. However, the same was filed beyond the 30-day period from the date of the assessment. Even granting arguendo that petitioners' letter dated January 25, 1988 was in effect a protest against respondent Commissioner's assessment, the same was resolved by respondent Commissioner in his letter-decision dated May 16, 1989, where the respondent Commissioner categorically stated that the letter constitutes the final decision of his office on the matter of the disputed assessment. The tenor of the said letter-decision shows that it embodies the Commissioner's final decision within the meaning of Section 30 (a) (3) of the Tax Code, as amended by PD No. 305 and as amplified by the BIR-MECS Regulations No. 6-84. Although it appears that the petitioner has moved for a reconsideration of the respondent Commissioner's decision in its letter dated July 8, 1989, the same will not toll the running of the 30-day period within which to file a petition for review before the respondent Court of Tax Appeals, considering that the respondent Commissioner had signified in his letter decision dated May 16, 1989, that the same constituted the final decision of his office on said matter. Clearly, the period to appeal has commenced to run. It appearing that petitioner received a copy of the letter-decision on June 30, 1989, petitioner has only until July 30, 1989, within which to file for review. Thus, when petitioner filed its petition on January 16, 1991, the period to appeal has already prescribed. Given the above-stated facts, the respondent court of tax A ppe als correctly ruled that the 30-day reglementary period for filing a petition for review before the Court of Tax Appeals is jurisdictional in nature and is determinative of the power of respondent court to proceed and hear the case on the merits. In the case of Surigao Electric Co., Inc. vs. Court of Tax Appeals (57 SCRA 523), the Honorable Supreme Court, held: "The thirty-day prescribed by Section 11 of Republic Act 1125, as amended, within which a taxpayer adversely affected by a decision of the Commissioner of Internal Revenue should file his appeal the Tax Court, is a jurisdictional requirement, and the failure of a taxpayer to lodge his appeal within the prescribed period bars his appeal and renders the questioned decision final and executory." "Jurisdiction over the subject matter is fundamental for a court to act on a given controversy. It is conferred by law not by consent of the parties. It can be challenged at any stage of the proceedings and for lack of it a court can dismiss a case ex mero motu." (Commissioner of Internal Revenue vs. Villa, 22 SCRA 3) The perfection of an appeal within the statutory or reglementary period is mandatory and jurisdictional, and the failure thereof, renders final and executory the questioned decision, and deprives the appellate court of jurisdiction to entertain the appeal (Sembrano vs. Ramirez, 166 SCRA 30). WHEREFORE, the petition is hereby DISMISSED. SO ORDERED. Herrera and Vidallon-Magtolis, JJ ., concur.