Isabela Cultural Corp. v. Court of Tax Appeals

SECOND DIVISION [CA-G.R. SP No. 46383. August 19, 1998.] ISABELA CULTURAL CORPORATION , petitioner , vs . COURT OF TAX APPEALS and COMMISSIONER OF INTERNAL REVENUE , respondents . D E C I S I O N TUQUERO , J p : Is the final notice before seizure issued by the Commissioner of Internal Revenue considered a decision which is appealable to the Court of Tax Appeals under RA 1125? LLphil This is the crux of this petition for review filed by Isabela Cultural Corporation which seeks to reverse the decision dated December 15, 1997 of the Court of Tax Appeals in C.T.A. Case No. 5211, dismissing its petition for review of said final notice before seizure. As succinctly summarized by the Court of Tax Appeals (CTA for brevity), the antecedent facts are as follows: In an investigation conducted on the 1986 books of account of petitioner, respondent had the preliminary findings that petitioner incurred a total income tax deficiency of P9,985,392.15, inclusive of increments. Upon protest by petitioner's counsel, the said preliminary assessment was reduced to the amount of P325,869.44, a breakdown of which follows: Deficiency Income Tax P321,022.68 Deficiency Expanded Withholding Tax 4,846.76 Total P325,869.44 ========= On February 23, 1990, petitioner received from respondent an assessment letter, dated February 9, 1990, demanding payment of the amounts of P333,196.86 and P4,897.79 as deficiency income tax and expanded withholding tax inclusive of surcharge and interest, respectively, for the taxable period from January 1, 1986 to December 31, 1986. (pp. 204 and 205, BIR rec.) In a letter dated March 22, 1990, filed with the respondent's office on March 23, 1990 (pp. 296-311, BIR rec.), petitioner requested for a petitioner requested for a consideration of the subject assessment. Supplemental to its protest was a letter, dated April 2, 1990, filed with the respondent's office on April 18, 1990 (pp. 224 & 225, BIR rec.), to which letter were attached certain documents supportive of its protest as well as a waiver of Statute of Limitations, dated April 17, 1990, where it was indicated that respondent would only have until April 5, 1991 within which to assess and collect the taxes that may be found due from petitioner after the reinvestigation. On February 9, 1995, petitioner received from respondent a Final Notice Before Seizure, dated December 22, 1994 (p. 340, BIR rec.). In said letter respondent demanded payment of the subject assessment within ten (10) days from receipt thereof. Otherwise failure on its part would constrain respondent to collect the subject assessment through summary remedies. Petitioner considered said final notice of seizure as respondent's final decision. Hence the instant petition for review filed with this Court on March 9, 1995. The CTA having rendered judgment dismissing the petition, petitioner filed the instant petition anchored on the argument that respondent CIR's issuance of the Final Notice Before Seizure constitutes his decision on petitioner's as request for reinvestigation, which the petitioner may appeal to the CTA. In arriving at its assailed decision, the CTA reasoned out as follows: Petitioner holds the view that the "final notice before seizure" is the final decision of respondent relative to its request for reconsideration and/or reinvestigation. To support its view, petitioner cited the Supreme Court decision in the case of Commissioner of Internal Revenue v. Ayala Securities Corporation (31 March 1976, 70 SCRA 204), which held that: "The letter of February 18, 1963 is tantamount to a denial of the reconsideration or protest of the respondent corporation on the assessment made by the petitioner, considering that the said letter is in itself a reiteration of the demand by the Bureau of Internal Revenue for the settlement of the assessment already made, and for the immediate payment of the sum of P758,687.04 inspite (sic) 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." The court cannot uphold petitioner's view. The facts of the above-quoted case are not in all fours with the facts of the instant case. The taxpayer in the aforequoted case did not execute in a waiver of the period of limitation as it believed that the assessment in question had already prescribed. In the instant case, petitioner/taxpayer executed a waiver of the statute of limitations where it was provided that respondent Commissioner of Internal Revenue would have until April 15, 1991 within which to collect the disputed assessment. This Court understands the logic why taxpayer in the above-cited case continuously refused to execute a waiver of the statute of limitations Obviously and true enough as the decision stated the right to collect of the Commissioner of Internal Revenue had already of said decisions is quoted thereunder, to wit: "Under Section 46(d) of the National Internal Revenue Code, the Ayala Securities Corporation designated September 30, 1955, as the last day of the closing of its fiscal year, and under Section 46(b) the income tax returns for the said corporation shall be filed on or before the fifteenth (15th) day of the fourth (4th) month following the close of its fiscal year. The Ayala Securities Corporation could, therefore, file its income tax returns on or before January 15, 1956 . The assessment by the Commissioner of Internal Revenue shall be made within five (5} years from January 15, 1956 , or not later than January 15, 1961 , in accordance with Section 331 of the National Internal Revenue Code herein above-quoted. As the assessment issued on February 21, 1961, which was received by the Ayala Securities Corporation on March 22, 1961, was made beyond the five-year period prescribed under Section 331 of said Code, the same was made after the prescriptive period had expired and therefore, was no longer binding on the Ayala Securities Corporation." (Emphasis supplied: Commissioner of Internal Revenue v. Ayala Securities Corp., 70 SCRA 204. p. 210). Thus, in another portion of same decision, it was narrated that: "On May 30, 1961, petitioner wrote respondent corporation's auditing and accounting firm with the "advise that your request for reconsideration will be the subject matter of further reinvestigation and a thorough analysis of the issued involved conditioned, however upon the execution of your client of the enclosed form for waiver of the defense of prescription. (Exh. F) However, respondent corporation did not execute the requested waiver of the statute of limitations considering its claim that the assessment in question had already prescribed." ( Ibid . p. 206) Evidently, from all the foregoing, it has been shown that the facts of the aforequoted case are not identical to the instant case. Therefore it is highly improper for petitioner to apply to the case at bar the ruling laid down in the cited case. The Court believes that what should properly apply to the instant case is the decision of the Supreme Court in the case of "Commissioner of Internal Revenue v. Union Shipping Corporation and the Court of Tax Appeals." G.R. No. 66160, May 21, 1990 which held that: " . . . the reviewable decision of the Bureau of Internal Revenue is that contained in the letter of its Commissioner that such constitutes the final decision on the matter which may be appealed to the Court of Tax Appeals. . ." (Emphasis supplied) From the above quotation in the Union Shipping Corp. case, it can be gleaned that the final decision appealable to this Court is a letter of the Commissioner of Internal Revenue clearly stating that it is her final decision. Therefore, as the "final notice before seizure" was merely signed by the Assistant Chief of the Accounts Receivable Division of the Bureau of Internal Revenue, and the same did not state that it is the final decision appealable to Us, this Court decision with the respondent's stance that the instant case was prematurely filed. It would have been different however, if respondent upon issuance of said final notice, subsequently issued that warrant of seizure which pursuant to the Supreme Court decision entitled CIR vs. Algue. Inc., L-28896, February 17, 1988, was considered as final decision appealable to this Court. As it is, no final decision has yet been rendered by the Commissioner of Internal Revenue. And there being no final question this Court has no jurisdiction to tackle or resolve the other issue on the merits. We do not agree. First . The subject final notice before seizure renders hopeless petitioner's request for reconsideration of respondent CIR's assessment. Such being the case, the issuance thereof is tantamount to denial of the petitioner's request for reconsideration of said assessment. It peremptoriness may be gleaned from the following decisive tenor thereof: xxx xxx xxx In this connection, we are giving you this LAST OPPORTUNITY to settle the adverted assessment within ten (10) days after receipt hereof. Should you again fail and refuse to pay, this Office will be constrained to enforce its collection by summary remedies of warrant of Levy on Real Property, Distraint of Personal Property or Warrant of Garnishment, and/or simultaneously court action. xxx xxx xxx Second . It is a long-settled tax jurisprudence that a demand letter reiterating the payment of tax deficiency amounts to a decision on a disputed or protested assessment. In the cases of CIR vs. Algue, 158 SCRA 11, and CIR vs. Union Shipping Corporation and the Court of Tax Appeals, G.R. No. 66160, May 21, 1990, the Supreme Court did not categorically abrogate its ruling in the case of CIR vs. Ayala Securities Corporation, 70 SCRA 204. A cursory comparison of the demand letter reiterating payment of the assessed tax in Ayala Securities Corporation case and the questioned final notice before seizure reveals that the latter encapsulates the finality of assessment and stamps a definite resolve on the protest. Third . In the recent case of Cynamid Philippines, Inc. vs. CIR, C.T.A. Case No. 4724, August 28, 1995, the CTA, bolstering the Ayala doctrine, considered the following CIR's demand letter as final decision, to wit: To avoid the accumulation of interest and surcharges, it is requested that you pay within ten (10) days from receipt hereof the aforesaid tax liability/ies at the Accounts Receivable/Billing Division, Room 203, BIR National Office Bldg. . . . failing in that, we shall be constrained to refer your case to the Collection Enforcement Division for the issuance of warrants of distraint and levy to enforce its collection, as provided by law, without further notice . We will appreciate your preferential attention hereon. Fourth . We find respondent CIR's contention that the ruling in Ayala Case is not applicable to the instant case in view of the absence of waiver of statute of limitations in the former to be incongruous with the following allegation in its answer: xxx xxx xxx 10. The Waiver of the Statute of Limitations presented and signed by petitioner was not accepted by respondent, hence, of not legal force and effect whatsoever and will not, in any effect whatsoever and will not in any way bind the respondent (Section 223(b), Tax Code; Bolse Cascade Phils., Inc. v. CIR, Case No. 1858 [1987]): In any case, petitioner's waiver of the statute of limitations has no bearing on the determination of what constitutes CIR's appealable decisions to the CTA. In sum, We hold that respondent CIR's Final Notice before Seizure dated December 23, 1994 constitute a decision appealable to the CTA. WHEREFORE, the assailed decision is REVERSED AND SET ASIDE. Accordingly, judgment is hereby rendered REMANDING the case to the CTA for proper disposition. SO ORDERED. Cui and Versola, JJ . , concur.