Commissioner of Internal Revenue v. Atlas Consolidated Mining and Development Corp.

FIFTH DIVISION [CA-G.R. SP No. 41979. September 30, 1999.] COMMISSIONER OF INTERNAL REVENUE , petitioner , vs . ATLAS CONSOLIDATED MINING AND DEVELOPMENT CORPORATION , respondent . D E C I S I O N GARCIA , J p : Thru this petition for review, the Commissioner of Internal Revenue seeks the annulment and setting aside of the decision, dated May 3, 1996, and the affirmatory resolution, dated September 2, 1996, of the Court of Tax Appeals in CTA Case No. 4498, a proceeding thereat instituted by Atlas Consolidated Mining & Development Corporation against the Commissioner of Internal Revenue questioning the latter's assessment against Atlas of a deficiency tax liability amounting to P40,691.335.85 for the year 1979. LibLex As found in the decision under review, which finding is no less adopted by the Commissioner, CTA Case No. 4498 is casts against the following factual backdrop: "Petitioner (Atlas, for short) is a domestic corporation duly organized and existing under the laws of the Philippines. It is engaged in the business of mining gold, copper ores and concentrates. An investigation was conducted by the Bureau of Internal Revenue on Atlas' income and business tax liabilities for the year 1979. As a result thereof the Revenue Examiners who have conducted the examination prepared a Memorandum Report (Exhs. 1, 2, 3 and 4, pp. 5-20, BIR records), dated March 25, 1985, addressed to the respondent Commissioner of Internal Revenue. Thereafter, respondent issued an assessment letter (Exh. A), dated April 12, 1985, against the petitioner demanding for the payment of the sum of P40,691,335.85, representing alleged deficiency income and expanded withholding taxes, inclusive of increments thereon, and penalties for late payment of the quarterly income tax, computed as follows: xxx xxx xxx On May 16, 1985 , a letter-protest (Exh. C), dated May 13, 1985, was filed by Atlas through the Gadioma Law Offices contesting the assessments as null and void. Pertinent portion of the protest reads: 'On behalf of our client called ACMDC for short, we file this protest under the provisions of law requiring taxpayers to protest deficiency assessments within 30 days from receipts else they become final and executory. This is not a request for reconsideration or reinvestigation or a plea for accommodation in any sense . It should not therefore be interpreted to estop our client from invoking the defense of prescription whenever this becomes available'. Atla's representative, Mr. Zoilo Y. Castrillo, Jr., Senior Vice President and Assistant Treasurer, signed a Waiver of the Statute of Limitations (undated) valid up to December 31, 1989, (p. 76, BIR record). On December 29, 1989, another waiver was signed by the same representative valid up to March 31, 1990 (p. 79, BIR record). The last waiver signed (also undated) was valid up to June 30, 1990 (p. 140, BIR record). But in all instances, the three (3) waivers were not signed by the Commissioner of Internal Revenue. On August 29, 1990 , Atlas received the Decision of Victor A. Deoferio, Jr., then Deputy Commissioner, dated May 23, 1990, denying the request for cancellation of the assessments and reiterated the collection of the sum of P40,691,335.85 (Exh. D), portion thereof is quoted hereunder, to wit: 'Please be informed that as per report of reinvestigation conducted by Revenue Officer Rolando M. Dionisio, relative to your deficiency income and business tax liabilities for the year 1979, there was still found due and collectible from you the total amount of P40,691,335.85, inclusive of increments. In this connection, please be informed that our decision on the matter is to reiterate the collection of the aforesaid amount as originally assessed for the reason that you failed to substantiate the allegations contained in your letter-protest during the re-investigation . . .' (Emphasis Ours). Hence, petitioner filed an appeal with this Court on September 28, 1990. Petitioner questioned the disallowance made by respondent, namely; (1) the exchange earned of P2,004,000.00; (2) General overhead of P360,894.89; (3) Adjustment of Accrual of Tax Differential on Net Taxable Income (1968) of P1,602,183.00; (4) Management Fee of P52,289,911.92, as well as the penalties for late payment of the Quarterly Income Tax Return ending March 31, 1979 and the collection of expanded withholding tax on the Management Fees paid to ANSCOR amounting to P52,289.911.92. Respondent filed an answer contending that the abovementioned disallowed deductions, totalling P56,256,989.81, are valid and legal for the reasons indicated in the Memorandum Report of the Revenue Examiners, dated March 25, 1985 (Exhs. 1-4, pp. 5-20, BIR Records). The issue raised is whether or not the deficiency tax liabilities in the total amount of P40,691,335.85 assessed by respondent against petitioner was proper". Instead, however, of addressing the very issue formulated by it, the tax courts, in its assailed decision of May 3 1996, dwelt on the question of prescription, explaining that " a discussion of each of the arguments raised by both parties would be inutile until the question of prescription is first settled ". Hence, and consistent with its view that " [T]he primordial issue presented . . . is whether or not the period to collect on the part of respondent has prescribed ", the said court disposed of CTA Case No. 4498 on the sole issue of prescriptions, which it ultimately resolved against the Commissioner of Internal Revenue, saying "While it may be true that respondent has issued an assessment within the five (5) year period to assess under Section 318 (now 203) of the Tax Code, still it cannot be denied that respondent's Decision, dated May 23, 1990, was rendered beyond the five-year period to collect counted from the date of the assessment. More than five years have elapsed when the Decision was rendered by the respondent counted from the date of the assessment (for calendar year 1979) on April 12, 1985. LLphil Although the Waivers of the Statute of Limitations were signed by Atlas' representative, the same has no force and effect considering that the Commissioner of Internal Revenue did not sign it. The only logical conclusion that can be reached is that there were no valid waiver executed there being no agreement that will toll the running of the statute of limitations on the part of respondent. The waiver is vital for the suspension of the running of the period to collect the assessments issued by the respondent. Of sad note, the Court cannot comprehend why a simple waiver cannot be signed by the respondent Commissioner knowing fully well that it is to his advantage if the same have been property signed and accepted", and accordingly concluded its challenged decision of may 3, 1996 with the following dispositive portion: "WHEREFORE, in view of the foregoing, the petition for review is hereby GRANTED on the ground of prescription pursuant to the provisions of Section 319 (c) [now 223] of the Tax Code. Respondent's Decision, dated May 23, 1990, cannot be enforced by law having been issued beyond the five (5) year period to collect, therefore, the same is hereby set aside. Accordingly, the assessment letter, dated April 12, 1985, issued by the respondent against petitioner amounting to P40,691,335.85 is hereby cancelled and withdrawn. No pronouncement as to costs of suits". In time, the Commissioner of Internal Revenue moved for a reconsideration, contending, in the main, that the tax court is without jurisdiction to decide the issue of prescription because the question of whether or not the right to collect the subject deficiency taxes has already prescribed, was never raised or pleaded by the parties. In its resolution of September 2, 1996, the tax court denied the motion even as it upheld its authority to resolve the question of prescription. In this recourse, petitioner Commissioner of Internal Revenue insists, as it did in its motion for reconsideration below, that the Court of Tax Appeals is without jurisdiction to resolve CTA Case No. 4498 on the issue of prescription since the matter of whether or not the petitioner's right to collect the deficiency taxes involved in the suit has already lapsed, was never raised by the parties therein. We AFFIRM. It may be so, as the petitioner alleged, that private respondent Atlas Consolidated Mining & Development Corporation did not plead prescription in the petition it filed with the Court of Tax Appeals, nor was such an issue ever raised by the parties during the proceedings thereat. To Our mind, however, this procedural inadequacy could not have thereby barred the tax court from knocking down the May 23, 1990 decision of the petitioner's deputy denying Atlas' request for the cancellation of the BIR's letter-assessment dated April 12, 1985, whereunder Atlas is being assessed a tax deficiency of P40,691,335.85, and reiterating the collection thereof. In Philippine National Bank vs . Devaras , 183 SCRA 121, 125 [1990], the Supreme Court has made clear the rule that "The issue or defense of prescription under the circumstances of the case, particularly with reference to Article 173 of the Civil Code, may still be invoked and considered, despite its not having been pleaded in petitioner's answer to the complaint, because the factual basis of prescription can be ascertained nevertheless from the pleadings or the evidence on record themselves". Stated differently, for as long as the factual bases of prescription can be ascertained or determined from the pleadings and evidence already on record, a court or any quasi-judicial agency like the Court of Tax Appeals, may resolve a case before it on the basis of the quieting effect of prescriptions regardless of whether or not the same was pleaded or raised by either of the parties. Such is the situation obtaining herein. For, and as explained by the tax court in its resolution of September 2, 1996: "In declaring respondent's right to collect as already prescribed, We made use of respondent's assessment letter, dated April 12, 1985 (Exh. 'A', Pet., p. 6, CTA rec.; Exh. '5' Resp., p. 46, BIR rec.), and the letter, dated May 23, 1990 (Exh. 'D', Pet., p. 15, CTA rec.; Exh. '7', Resp. p. 146, BIR rec.), denying petitioners' protest and reiterating payment of the subject deficiency taxes. Under Section 318 (now Sec. 203) of the Tax Code, the five-year period to collect should be counted from the date of assessment. May 23, 1985 is obviously beyond five (5) years from April 12, 1985. Therefore, having determined the dates vital to the computation of the five (5) year period to collect from the assessment letter and letter of denial, both of respondent, which were part of the evidence by both parties, and applying the ruling in the aforequoted PNB vs. Deveras case, the issue of prescription may still be considered even if not expressly pleaded, so long as its factual bases can be ascertained from the evidence themselves". Petitioner argues, however, that the documentary evidence relied upon by the tax court were presented for no other purpose but " to show primarily the Jurisdiction of the Court of Tax Appeals over the case pursuant to the provision of Section 7 of Republic Act No. 1125 providing for the exclusive jurisdiction of the Tax Court to review by appeal decisions of the Commissioner of Internal Revenue in cases involving disputed assessment " (Petition, p. 12). In short, it is petitioner's posture that it was error on the part of the tax court to have used its documentary evidence as basis in determining whether prescription has already set in since those evidence were offered solely for the purpose of establishing the court's jurisdiction over the case before it. We are not persuaded. cdll In the first place, there is nothing before Us to back up the allegation that the documentary evidence adduced by the petitioner in the proceedings a quo were merely offered for the purpose of establishing the jurisdiction of the tax court on the appeal thereto taken by the private respondent. In the second place, there is simply neither rhyme nor reason for the petitioner to take upon itself the burden of showing that the tax court has jurisdiction over the recourse brought before it by the private respondent. Given the circumstance that it was Atlas itself which invoked such jurisdiction, the task, if at all, must be for Atlas to discharge. In any event, the matter of the tax court's exclusive jurisdiction over the case is a non-issue between the parties, and, therefore, there was no need for either of them, much more for the herein petitioner, to adduce documentary evidence to establish the same. Lastly, and more importantly, the rule is and has always been that quasi-judicial agencies such as the Court of Tax Appeals are not bound by the technical rules of evidence, including the rule which restricts their use to the purpose of the offer ( Rizal Workers' Union vs . Ferrer-Calleja, 186 SCRA 431; Pizon-Arceo Agricultural and Development Corp . vs . NLRC, 279 SCRA 470; NPC vs . NLRC , 272 SCRA 704). This brings Us to petitioner's head-on challenge to the decision under review, to wit: that contrary to the conclusion reached by the Court of Tax Appeals, the petitioner's right to collect the subject tax liability had not yet prescribed as of May 23, 1990 when collection thereof was sought to be enforced against Atlas. There is here no questioned that petitioner made the assessment against the private respondent within the 5-year period fixed under Section 318 (now Section 203), of the Tax Code, as amended. In fact, the tax court itself so concedes. What is disputed, however, is, whether the collection thereof, either by distraint or levy or by a proceeding in court, was made within five (5) years after the assessment, as mandated under subparagraph (c), Section 319 (now Section 223), of the same Code, which reads: "(c) Where the assessment of any internal revenue taxes has been made within the period of limitation above prescribed, such tax may be collected by distraint or levy or by a proceeding in court but only if begun (1) within five years after the assessment of the tax or (2) prior to the expiration of any period for collection agreed upon in writing by the Commissioner of Internal Revenue and the tax payer before the expiration of such five-year period. The period so agreed upon may be extended by subsequent agreements in writing made before the expiration of the period previously agreed upon" (Emphasis supplied). In this connection, it bears repeating herein what the Court of Tax Appeals has said in its assailed decision: "While it may be true that respondent (now petitioner) has issued an assessment within the five (5) year period under Section 318 (now 203) of the Tax Code, still it cannot be denied that respondent's Decision, dated May 23, 1990, was rendered beyond the five-year period to collect counted from the date of assessment. More than five years have elapsed when the Decision was rendered by the respondent counted from the date of the assessment (for calendar year 1979) on April 12, 1985" (Emphasis supplied). To the above, petitioner disagrees, making much of the fact that on May 16, 1985, Atlas addressed a letter-protest to the petitioner, which letter-protest, so petitioner contends, thereby tolled the running of the 5-year prescriptive period under Section 319 (c), supra , of the Tax Code. In support thereof, petitioner cites and invokes Section 224 of the same Code, which, insofar as pertinent, reads: "Sec. 224. Suspension of running of statute . The running of the statute of limitations provided in Section 203 and 233 on the making of assessment and the beginning of distraint or levy or a proceeding in court for collection, in respect of any deficiency, shall be suspended for the period during which the Commissioner is prohibited from making the assessment or beginning distraint or levy or a proceeding in court and for sixty days thereafter; when the taxpayer requests for a re-investigation which is granted by the Commissioner; or when the taxpayer cannot be located in the address given by him in the return filed upon which a tax is being assessed or collected" (Emphasis supplied). Evidently, petitioner takes Atlas' letter-protest of May 16, 1985 as a " request for re-investigation " and, therefore, pursuant to the underscored portion of the aforequoted provision, the prescriptive period for collection was thereby suspended. We disagree. As reproduced in the decision subject hereof, the very letter reads: "On behalf of our Client ACMDC for short, we file this protest under the provisions of law requiring tax payers to protest deficiency assessments within 30 days from receipt else they become final and executory. This is not a request for reconsideration or reinvestigation or a plea for accommodation in any sense. It should not therefore be interpreted to estop our client from invoking the defense of prescription whenever this becomes available" (Emphasis supplied). We are simply at a loss to understand how petitioner could have interpreted the letter in question as a " request for re-investigation " when the very letter itself says that it is not. In fact, the manner by which the same letter was worded should have warned petitioner that Atlas had not the least intention of waiving the defense of prescription. Quite the contrary, it was so made plain therein that the letter should not be construed as estopping Atlas from raising the defense of prescription if and when it becomes available. Besides, and as pointed out by the tax court, to which We fully agree: " . . . Nothing in the records of the case would show that by the acts of petitioner, respondent was made to believe and was persuaded for good reasons to postpone the collection of the tax. Neither was a request for reinvestigation sufficient to toll the running of the prescriptive period to collect. Otherwise there would be no need for the legal requirement that an extension of the original period can be agreed upon by the parties in writing. With more reason, like in the case at bar, if the petitioner did not even request for a reinvestigation or a reconsideration in its protest". If ever, what should have tolled the running of the 5-year prescriptive period to collect were the three (3) waivers of the statute of limitations signed by Atlas' Senior Vice President, Zoilo Castrillo, Jr. Unfortunately, however, none of those waivers was ever signed by the petitioner or by any of his authorized representative. Again, in the words of the tax court to which We also agree: "Although the Waivers of the Statute of Limitations were signed by Atlas' representative, the same has no force and effect considering that the Commissioner of Internal Revenue did not sign it. The only logical conclusion that can be reached is that there were no valid waivers executed there being no agreement that will toll the running of the statute of limitations on the part of respondent (now petitioner). The waiver is vital for the suspension of the running of the period to collect the assessments issued by the respondent. Of sad note, the Court cannot comprehend why a simple waiver cannot be signed by the respondent Commissioner knowing fully well that it is to his advantage if the same have been properly signed and accepted". As early as 1958, in the unreported case of Collector vs . Solano, L-11475, July 23, 1958, the Supreme Court has laid down the rule that " . . . the only agreement that could have suspended the running of the prescriptive period for the collection of the tax in question is, as correctly pointed out by the Court of Tax Appeals, a written agreement between Solano and the Collector, entered into before the expiration of the five-year prescriptive period, extending the period of limitation prescribed by law (Sec. 332 [c], N.I.R.C.). The rule is in accord with the general law on prescription that requires a written agreement of the debtor to renew the cause of action or interrupt the running of the limitation period (Act 190, sec. 50; New Civil Code, Art. 1155). The Court of Tax Appeals found, and the record shows, that no such written agreement was ever entered into between respondent Solano and the petitioner Collector", which ruling was reiterated by the same Court in the subsequent cases of Collector vs . Pineda, 2 SCRA 401 [1961], and Cordero vs . Gonda, 18 SCRA 331 [1966]. In fact, in the comparatively recent case of Republic vs . Acebedo, 22 SCRA 1356 [1968], We find the following pronouncement: "The plaintiff contends that the period of prescription was suspended by defendant's various requests for reinvestigation of reconsideration of the tax assessment. The trial court rejected the contention, saying that a mere request for reinvestigation or reconsideration of an assessment does not have the effect of suspension. The ruling is logical, otherwise there would be no point to the legal requirement that the extension of the original period be agreed upon in writing" (Emphasis supplied). The "legal requirement" above adverted to obviously refers to Section 319 (c), supra , of the Tax Code, whereunder the 5-year period therein fixed to enforce collection of a tax, either by distraint or levy or by a proceeding in court, may be extended if, prior to the expiration thereof, another period is " agreed upon in writing by the Commissioner of Internal Revenue and the taxpayer ". To stress, however, no such agreement exists in this case because petitioner, for reasons not disclosed in the records, never signed any of the three (3) waivers submitted by Atlas. Much reliance is placed by the petitioner in Commissioner vs . Wyeth Suaco Laboratories, Inc ., vs. 202 SCRA 125 [191] even saying that the case " is in all fours with the case at bar " (Petition, p. 17). We have gone at length in reviewing the facts of Wyeth and found that the faith given it is unwarranted. For there, unlike here, there was an exchange of communications between the Commissioner of Internal Revenue and Wyeth Suaco Laboratories, which communications belie Wyeth's claim that "it did not seek reinvestigation or reconsideration of the assessments". In the very words of the High Court itself: "After carefully examining the records of the case, we find that Wyeth Suaco admitted that it was seeking reconsideration of the tax assessments as shown in a letter of James A. Gump, its President and General Manager, dated April 28, 1975, the relevant portion of which is quoted hereunder, to wit: 'We submit this letter as a follow-up to our protest filed with your office, through our tax advisers, Sycip, Gorres, Velayo & Co., on January 20 and February 10, 1975 regarding alleged deficiency on withholding tax at source of P3,178,994.15 and on percentage tax of P60,855.21 including interest and surcharges, on which we are seeking reconsideration.' Furthermore, when Wyeth Suaco thru its tax consultant SGV & Co. sent the letters protesting the assessments, the Bureau of Internal Revenue, Manufacturing Audit Division, conducted a review and reinvestigation of the assessments. This fact was admitted by Wyeth Suaco thru its Finance Manager in a letter dated July 1, 1975 addressed to the Chief, Tax Accounts Division. The pertinent portion of said letter reads as follows: 'This will acknowledge receipt of your letter dated May 22, 1975 regarding our alleged income and business tax deficiencies on fiscal year 1972/73. xxx xxx xxx Nevertheless, please be advised that the deficiency tax stated in your letter is what we are protesting on pursuant to the letters we filed with the Bureau of Internal Revenue on January 20, 1975 and on February 10, 1975. xxx xxx xxx As we understand, the matter is now undergoing review and consideration by your Manufacturing Audit Division. Pending the outcome of their decision, we regret our inability to make settlement. . . .'" (Emphasis supplied). As could be seen in the case relied upon, let alone Wyeth Suaco's very admission in its letter of April 28, 1975 that "we are seeking reconsideration" , the subsequent letters addressed by it to the Commissioner even confirms its earlier request for reconsideration, thus prompting the High Court to conclude, thus: "Although the protest letters prepared by SGV & Co. in behalf of private respondent did not categorically state or use the words 'reinvestigation' and 'reconsideration', the same are to be treated as letters of reinvestigation and reconsideration. By virtue of these letters, the Bureau of Internal Revenue ordered its Manufacturing Audit Division to review the assessments made. Furthermore, private respondent's claim that it did not seek reinvestigation or reconsideration of the assessments is belied by the subsequent correspondence or letters written by its officers, as shown above". LibLex In the case at bench, other than Atlas' protest letter of March 16, 1985, about which We have already pointed out why it could not serve as basis for suspending the 5-year prescriptive period, none has been adduced by the petitioner to negate what the letter is truly about, nor evidence presented inconsistent with Atlas' posture therein. True, the letter was followed by Atlas' several waivers of the statute of limitations. As earlier stressed, however, those waivers were ineffective for having been unsigned by the petitioner or by any of his representative even as the latter is forewarned that Atlas is not thereby waiving the defense of prescription if and when it becomes available. In short, Wyeth cannot save the day for the petitioner. WHEREFORE, the instant petition is hereby DISMISSED. No costs. SO ORDERED. Salas and Rivera, JJ ., concur.