Citytrust Realty Corp. v. Commissioner of Internal Revenue

SPECIAL SECOND DIVISION [CA-G.R. SP No. 36487. May 31, 2000.] CITYTRUST REALTY CORPORATION , petitioner , vs . COMMISSIONER OF INTERNAL REVENUE , respondent . D E C I S I O N GARCIA , J p : Thru this appeal by way of petition for review under Rule 43 of the Rules of Court, petitioner Citytrust Realty Corporation seeks the setting aside of the decision dated September 4, 1994 and resolution dated February 8, 1995 of the Court of Tax Appeals (CTA), which respectively denied petitioner's claim for tax refund and motion for reconsideration of CTA Case No. 4727, entitled " Citytrust Realty Corporation vs . Commissioner of Internal Revenue ". ISDCaT Briefly, the facts may be stated, as follows: Petitioner is a registered domestic corporation engaged in real estate business and in the leasing of buildings and other pieces of real estate. For the calendar year ending December 31, 1989, one of the petitioner's lessees, Citytrust Banking Corporation, paid rentals to the petitioner amounting to P8,200,520.58, withholding five (5%) per cent thereof in the amount of P410,026.02, pursuant to Revenue Regulations No. 6-85, as amended, otherwise known as the Expanded Withholding Tax Regulations. In the same year, petitioner filed with the Bureau of Internal Revenue its Annual Income Tax Return (ITR), therein reporting a net loss of P44,346.00, thereby resulting in a refundable amount of P410,026.02, representing the unutilized/unapplied 5% creditable withholding tax on the rental fees paid to it by Citytrust Banking Corporation. Petitioner initially opted to apply the aforesaid 5% withholding tax credit to the succeeding taxable year of 1990, but since it also allegedly sustained losses for that year, it simply abandoned its option. Instead, on December 6, 1991, petitioner filed with the respondent Commissioner of Internal Revenue a claim for tax refund of the same unutilized/unapplied withholding tax of P410,026.02 as of December 31, 1989. Unfortunately, the respondent Commissioner merely slept on the claim. Hence, on March 19, 1992, petitioner filed with the Court of Tax Appeals the necessary recourse to pursue its claim. In the ensuing proceedings, the respondent Commissioner, for reasons not disclosed in the records, did not take any part at all, much less oppose the claim. In its decision of September 4, 1994, the Court of Tax Appeals denied petitioner's claim on the main ground that petitioner failed to offer in evidence its Annual Income Tax Return for 1990 to prove its allegation that it likewise suffered losses for that same year. Says the tax court in its decision: "In this case, herein petitioner seeks the refund of the refundable income tax as of December 31, 1989 of P410,026.02 which it already declared in its ITR to be applied as tax credit to taxable year 1990. There is allegedly no internal revenue tax liability on which the 1989 tax credit can be credited against by petitioner in 1990 since it allegedly again suffered a loss. However, petitioner failed to include in its written offer of evidence its 1990 Income Tax Return as proof of said loss and to show that the 1989 refundable income tax was not applied as tax credit in 1990. The verbal offer of evidence were best confusing since the exhibit referred to do not correspond to the evidence on file (T.S.N., January 4, 1993, pp. 7-9). There is likewise no file of petitioner's 1990 ITR in the records of this case on which the foregoing can be verified". In time, petitioner filed a MOTION FOR RECONSIDERATION AND NEW TRIAL. In its resolution of February 8, 1995, the tax court denied the motion. Hence, the instant petition for review, it being petitioner's contention that the Court of Tax Appeals erred "1) . . . in finding that Petitioner failed to sufficiently prove that it is entitled to a refund, or in the alternative, to the issuance of a tax credit certificate in the amount of P410,026.02, representing unutilized/unapplied creditable withholding tax payments for the taxable year ending December 31, 1989; 2) . . . in denying Petitioner's motion for new trial and erred in failing to appreciate the documentary evidence as well as the testimonial evidence submitted in the case". The appeal must be denied. While admitting that its 1990 corporate income tax return was never included in its formal offer of exhibits, petitioner argues that its failure in this respect is not fatal to claim considering that said document " was in fact marked, properly identified, testified to, and subsequently presented to the Respondent Court and to Respondent on the hearing dated January 3, 1993 " (Petition, p. 10). Petitioner's argument cannot be sustained. In the law of procedure, there is a whale of a difference between the identification and marking of a document and its formal offer as an evidence. As held in Interpacific Transit, Inc. vs. Aviles, 186 SCRA 385 [1990], the first is done in the course of the trial while the second takes place when a party rests its case and not before. A document may be identified and even marked in the course of trial, but unless formally offered, the same is without any evidentiary value and is deemed excluded or rejected ( Alonte vs. Savellano, Jr ., 287 SCRA 245 [1998]; Candido vs. Court of Appeals , 253 SCRA 78 [1996]; Republic vs. Sandigan, 255 SCRA 438 [1996]. For sure, without the formal offer, such a document ought not be considered at all by a court. This is the plain and emphatic command of Section 34, Rule 132 of the Rules of Court, to wit: "Sec. 34. Offer of evidence . The court shall consider no evidence which has not been formally offered. The purpose for which the evidence is offered must be specified". So it is that in Libudan vs. Gil , 45 SCRA 17, 30, the High Court made clear the following: " One cannot, of course, quarrel over the need for a formal offer of evidence, the purpose of which is to inform the court about what is expected to be proved and 'to preserve exceptions to the conclusion of the offered evidence' . Moreover, the judge has to build his factual findings and his judgment only and strictly upon the evidence offered by the parties at the trial. Hence, documents that form no part of the proofs before the court will not be considered in disposing of issues before it " (Emphasis supplied). Petitioner appeals for a liberal interpretation of the Rules, arguing that albeit not formally offered, its 1990 corporate income tax return was nonetheless testified to and identified by its witness in the proceedings below. We are not persuaded. Given the clear and explicit language of Section 34, Rule 132, supra , of the Rules of Court, the occasion hardly calls for leniency. Besides, the unoffered 1990 income tax return stands, as it were, as the very foundation of petitioner's claim for refund to establish its basic factual allegation that it incurred losses for that year. The non-offer of that document, therefore, cannot be taken lightly, more so because a claim for refund partakes of the nature of a claim for tax exemption that must be construed in strictissimi juris against a taxpayer (Commissioner of Internal Revenue vs. Tokyo Shipping Co., Ltd . , 244 SCRA 332 ; Magsaysay Lines, Inc. vs. Court of Appeals, 260 SCRA 513) . Petitioner made much of the fact that the respondent Commissioner of Internal Revenue never adduced contra evidence below, much less objected to the identification of its 1990 Income Tax Return by one of its witnesses. The reliance on the inaction of the respondent Commissioner cannot improve petitioner's cause. For, let alone the fact that the burden is on the petitioner to prove its claim for refund, the testimony of the witness alluded to relative to the income tax return in question is, at best, self-serving. In any event, with the reality that the same income tax return was never formally offered in evidence, the respondent Commissioner of Internal Revenue could not have possibly objected thereto even if present during the proceedings a quo . Finally, petitioner faults the tax court for denying its motion for new trial, contending that the failure of its former counsel to include its 1990 Income Tax Return in the offer of evidence constitutes excusable negligence as said counsel merely took over from yet another former counsel. Petitioner thus invoke Section 1[a], Rule 37 of the Rules of Court, allowing new trial on grounds, among others, of " excusable negligence which ordinary prudence could not have guarded against and by reason of which aggrieved party has probably been impaired in his right " (Petition, p. 18). We are not convinced. For, and as correctly pointed out by the tax court in its resolution of February 8, 1995: ". . . Atty. Medel Belen entered his appearance as new counsel as early as October 12, 1992 and he attended no less than three (3) hearings after that date. The formal offer of evidence was made on January 8, 1993. He had therefore all the time to sift through documents that he intended to formally offer as evidence. He had a longer time to review his documents before the rendition of this Court's decision on September 14, 1994." Apropos hereto, the Supreme Court has time and again stressed that there will be no end to a suit so long as a new counsel could be employed who could allege negligence or incompetence of a former lawyer ( Aguila vs. CFI of Batangas , 160 SCRA 352; Tupas vs. Court of Appeals , 193 SCRA 597). With the ample time with which petitioner's new counsel could have prepared and arranged the documents for his client, and his presumed awareness of the materiality of petitioner's 1990 Income Tax Return to the latter's cause, it taxes the mind to think that counsel's failure to include said return in his offer of evidence, which is even written is a mere matter of excusable negligence. It may be negligence alright, but certainly not excusable, and to allow a new trial on such a ground is to reward plain and simple negligence with undeserved tolerance. WHEREFORE, the instant petition is hereby DISMISSED for lack of merit. SO ORDERED. Dacudao and * Salazar-Fernando, JJ., concur. Footnotes * In lieu of J. Adefuin-De la Cruz who is on leave.