Commissioner of Internal Revenue v. Court of Tax Appeals

FOURTH DIVISION [CA-G.R. SP No. 35520. March 29, 1996.] (C.T.A. Case No. 3075) COMMISSIONER OF INTERNAL REVENUE , petitioner , vs . COURT OF TAX APPEALS, ADAMSON MANAGEMENT CORP., LUCAS G. ADAMSON, THERESA JUNE D. ADAMSON and SARA DELOS REYES , respondents . D E C I S I O N PARAS , J p : Before this Court is a "PETITION FOR CERTIORARI AND PROHIBITION WITH APPLICATION FOR TEMPORARY RESTRAINING ORDER/PRELIMINARY INJUNCTION" questioning the Resolution dated September 19, 1994 of the respondent Court of Tax Appeals denying the petitioner's Motion to Dismiss C.T.A. Case No. 3075, entitled "ADAMSON MANAGEMENT CORP., LUCAS G. ADAMSON, THERESA ADAMSON AND SARA DELOS REYES VS. COMMISSIONER OF INTERNAL REVENUE". As setforth in the Resolution dated September 19, 1994 of the respondent court in the aforementioned case, the undisputed facts are as follows: "On October 15, 1993, BIR sent notice to petitioners captioned 'Notice to Taxpayer' informing them of their tax deficiencies based on the investigation conducted by its Revenue Enforcement Officers. This letter contained a schedule for a preliminary conference to give the petitioners the opportunity to present their side, however, this meeting did not materialize because at that time the respondent had already filed a criminal complaint against them with the Department of Justice for tax evasion as evidenced by the subpoena which they received on November 4, 1993 from the Department of Justice. In an effort to defend themselves from all possible angles, petitioners filed with the BIR, a letter request for reinvestigation on December 1, 1993 apparently as a response to the 'Examiner's Findings' earlier issued by the respondent and subsequently filed a Motion for Reconsideration when the Resolution of the Department of Justice recommending the filing of criminal information against them was issued. The letter request for reinvestigation was not acted upon by the respondent and the motion for reconsideration was denied by the Department of Justice in a Resolution dated February 17, 1994 and received by the petitioners on February 22, 1994. As a last recourse, petitioners came to this Court by filing a petition for review on March 15, 1994." (Rollo, pp. 18-19) Instead of filing an answer to the private respondents' petition in the respondent court, the herein petitioner filed a motion to dismiss, which was opposed by the private respondents. The respondent court in its resolution of September 19, 1994 denied the motion to dismiss as it considered the deficiency tax liability mentioned in the criminal complaint with the Department of Justice as "an implied formal assessment" and the subsequent filing of the criminal information with the Regional Trial Court as a denial of the private respondents' protest, which denial amounted to a decision appealable to the respondent court. Thus, the Internal Revenue Commissioner pursued the instant petition before this Court alleging that the respondent court acted with grave abuse of discretion in denying her motion to dismiss. She contends that the amounts of the proposed tax assessments were mentioned in the criminal complaint only to show the discrepancy between the amounts indicated in value added tax and the capital gains tax returns and, the findings shown in the investigation audit report submitted by the herein petitioner's revenue examiner, and that for purposes of the protest contemplated under said Section 229 of the tax Code, there must first be formal assessment issued by the petitioner and said protest must be in accordance with Section 6 of the Revenue Regulation No. 12-85 implementing said provision of Section 229 of the Tax Code. Section 229 of the Tax Code, to wit: "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 the period prescribed by implementing regulations, the taxpayer shall be required to respond to the said notice. If the taxpayer failed to respond, the Commissioner shall issue assessment based on his 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 thirty (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 Court of Tax Appeals within thirty (30) days from receipt of the decision otherwise, the decision shall become final, executory and demandable." readily shows that the issuance of the assessment based on the findings of the Internal Revenue Commissioner is mandatory if the taxpayer fails to respond. In the instant case, there was observance of aforesaid Section 229 because when the said commissioner found that proper taxes should be assessed, she notified the private respondents thereof scheduling on October 25, 1993 an informal conference. The pre-assessment conference was not held as the private respondents were advised to wait for a notice coming from the Department of Justice. On November 4, 1993, the private respondents received a subpoena from the Department of Justice requiring them to file their counter-affidavits to a criminal complaint for tax fraud by the said Commissioner. On December 1, 1993, after the private respondent filed a request for extension of time to file counter-affidavits and for suspension of proceeding, they filed a motion for reinvestigation. The motion to suspend proceedings was denied by the DOJ. After the private respondents had filed their counter affidavits, the DOJ issued a resolution dated January 25, 1994 for filing a criminal information for tax fraud against the private respondents. Private respondents' motion for reconsideration of the January 25, 1994 resolution was denied by the resolution. This Court agrees with the ruling of the respondent court that it has jurisdiction over the case a quo for the reason that there was deemed a formal assessment of the private respondents' deficiency of tax liability. Said court correctly considered the tax liability indicated in the criminal complaint of the petitioner with the Department of Justice as an implied formal assessment and the subsequent filing of the criminal the subsequent filing of the criminal information with the Regional trial Court as a denial of the protest. Be it stressed that the petitioner will not file a complaint before the Department of Justice if she was not sure of the correctness of the said findings. Where the private respondents asked for a reinvestigation and submitted their counter affidavits, these are in the nature of protest against the tax liability mentioned in the complaint. And the filing of the criminal case for tax fraud in the Regional Trial Court constitutes a final decision by the Internal Revenue Commission on the private respondents protest, which is appealable to the respondent court. The decision brought up on appeal to the respondent court is not the resolution of the Department of Justice but that of the Commissioner of Internal Revenue for Sections 221 and 222 of the Tax Code require the prior approval of the said commissioner before any court of criminal action may be instituted. As very well stated by the respondent request in the decision in Sanchez, et al., vs. Commissioner of Internal Revenue, CTA case No. 5044, May 24, 1994): "To avoid taking cognizance of this case would pave the way of allowing respondent to sit on protests of any taxpayer, then merely file a criminal action in the Regional trial Court against the same, thereby depriving the Court of Tax Appeals of jurisdiction over certain cases. This court will not allow the stripping of its jurisdiction to rule on assessment cases. It is not far fetched that there will come a time that this Court will contend itself on deciding cases which are for refund only. This is so since instead of issuing formal assessments, the BIR will directly file a criminal case against the taxpayer for the deficiency tax liability allegedly to have been assessed which is being disputed, or the payment of the taxes alleged to have been evaded, hence, there would be collection already of the alleged tax liability without even giving the taxpayer the opportunity to dispute the assessment." Concluding, the respondent court does not act with grave abuse of discretion in the issuance of its questioned decision. WHEREFORE THE PRESENT PETITION IS DISMISSED FOR LACK OF MERIT. SO ORDERED. Sandoval-Gutierrez and Vasquez, Jr., JJ . , concur.