Commissioner of Internal Revenue v. Citytrust Banking Corp.

SECOND DIVISION [CA-G.R. SP No. 46793. May 21, 2001.] COMMISSIONER OF INTERNAL REVENUE , petitioner , vs . CITYTRUST BANKING CORPORATION , respondent . D E C I S I O N ALIO-HORMACHUELOS , J p : Petition for Review under Rule 43 of the 1997 Rules of Civil Procedure of the Order dated 16 October 1997 rendered by the Court of Tax Appeals in CTA Case No. 4099, the dispositive portion of which reads: "WHEREFORE, in view of all the foregoing, this Court grants the refund sought by petitioner. Respondent is hereby ORDERED to REFUND to petitioner the amount of P13,314,506.14 as its overpaid income tax for the years 1984 and 1985." (p. 34 Rollo) The antecedent facts: On 28 May 1991, the Court of Tax Appeals (CTA) in the herein CTA Case No. 4099 ordered the Commissioner of Internal Revenue to grant a refund to herein private respondent Citytrust Banking Corporation (Citytrust) in the amount of P13,314,506.14, representing its overpaid income taxes for 1984 and 1985. On 12 August 1991, the Commissioner sought reconsideration of the Order on the ground that the Certificate of Tax Withheld is inconclusive as evidence of payment and remittance to the Bureau of Internal Revenue. (pp. 37-41, Rollo ) The Commissioner also filed a Supplemental Motion for Reconsideration alleging additional/new ground to show that respondent Citytrust has outstanding deficiency income and business tax liabilities for 1984 thus the claim of refund is not in order. Both motions were denied by the tax court in its Resolution dated 3 December 1991. It declared that the production of confirmation receipts is not a requirement in law to prove the fact of remittance of withholding taxes; that it is sufficient to present a copy of the statement showing the amount paid and the amount of tax withheld to establish the fact of withholding; that since the deficiency tax assessment against herein petitioner, was not raised in the pleadings, the same cannot be considered by the tax court. The case was elevated to the Court of Appeals in CA-G.R. SP No. 26839 which affirmed the judgment of the tax court. Upon further elevation by way of petition for review on certiorari, the Supreme Court ruled that there was an apparent contradiction between the claim of refund and the assessment of deficiency against respondent Citytrust, and that government cannot and must not be estopped due to the negligence of its officials or employees particularly in matters involving taxes. Accordingly, the Supreme Court remanded the case to the tax court for further reception of evidence. (pp. 18-19 and 38-39 Rollo) The tax court conducted hearings therefor. One such evidence presented was a letter dated 28 February 1995 (Exh. "Z") signed by the Commissioner of Internal Revenue stating the withdrawal and cancellation of the following assessments, to wit: Kinds of Tax Year Involved Amount 1. Deficiency Fixed Tax 1984 P 44,132.88 2. Deficiency Withholding Tax 1984 22,363,791.31 on Deposit Substitutes (1-1-84 to 10-14-84) 3. Deficiency withholding Tax 1984 11,292,140.50 on Deposit Substitutes (10-15-84 to 112-31-84) 4. Deficiency Documentary 1984 17,825,342.30 Tax on Deposit Substitutes (Decision, p. 29 Rollo ) and demanded payment of the following amounts to wit: Kinds of Tax Year Involved Amount a) Deficiency Income Tax 1984 P 3,301,578.19 b) Deficiency Gross Receipts Tax 1984 1,193,092.52 c) Fixed tax for real estate 1984 14,625.00 (p. 29 Rollo ) Respondent Citytrust decide not to contest the foregoing assessment and paid the assessed deficiencies to remove all administrative impediments to its claim for refund. The deficiency fixed tax and gross receipts tax were paid in full while the deficiency income tax was only partially paid in the amount of P2,405,940.90, since the company excluded the expenses allocable to non-taxable income. (p. 31 Rollo) This issue was raised in a separate proceeding docketed as CTA Case No. 5261 which is pending in the tax court. Citytrust offered the following exhibits as evidence of payment of the alleged deficiency: Exhibits Description Purpose "AA" Photocopy of Authority To prove full payment to Accept Payment No. of deficiency fixed tax 2233270, dated July 11, 1995 "AA-1" Machine Validation found To prove that the at the lower right portion of payment for deficiency "AA" fixed tax has been received by the United Coconut Planters Bank (UCPB), Makati Ave. Branch "BB" Photocopy of Authority to To prove full payment Accept Payment No. 2232274, of deficiency gross Dated July 11, 1995 receipts Tax "BB-1" Machine Validation found at the To prove that the lower right portion of "BB" partial payment for deficiency gross receipts tax has been received (by) CPB, Makati "CC" Photocopy of Authority to To prove that there Accept Payment No. 2232271, has been partial Dated July 11, 1995 payment of Income Tax "CC-1" Machine Validation found at the To prove that the lower right portion of "CC" partial payment for deficiency gross receipts tax has been received (by) UCPB, Makati (p. 30, Rollo ) and prayed that it be refunded the amount of P13,314,506.14 as its allegedly overpaid income taxes for 1984 and 1985. On 16 October 1997, the tax court rendered the assailed Decision supra in favor of Citytrust ratiocinating that when the Supreme Court directed the tax court to receive further evidence on the case, such evidence was confined to the 1984 assessment which was the only issue raised on appeal to both the Court of Appeals and the Supreme Court; and that to admit evidence related to other assessments would lead to endless litigation; that it has no jurisdiction to try an assessment which was never appealed to it; and that in the hearing of refund claims, it cannot hear an assessment dispute. Petitioner's Motion for Reconsideration was denied by the tax court in its Resolution dated 5 January 1998. (p. 43, Rollo) Thus this petition for review which framed the issue in this manner: "Thusly, in ordering the refund to herein respondent of the total amount of P13,314,506.14 as alleged overpaid income tax for 1984 and 1985 in spite of the foregoing, the CTA was again in error as it dispose of the case inconsistent with the adjudgment of the Supreme Court in G.R. No. 106611 to the effect that respondent cannot be entitled to refund and at the same time be liable for a tax deficiency assessment for the same year." (p. 19, Rollo ) The petition must fail. Respondent Citytrust has adequately proven that it is entitled to its claim of refund. It satisfied the three conditions for the grant of tax refund, namely: (1) that the claim is filed with the Commissioner of Internal Revenue within two years from the date of payment of the tax; (2) it must be shown in the return of the recipient that the income payment received was declared as part of the gross income; and (3) the fact of withholding is established by a copy of a statement duly issued by the payor to the payee showing the amount paid and the amount of the tax withheld therefrom. (Citytrust Finance Corp. vs. CTA and CIR, C.A.-GR SP No. 28239, March 1994) CDAHIT This Court agrees that there is an apparent contradiction between the claim of refund and the assessment of deficiency tax as observed by the Supreme Court in its Decision dated 21 July 1994. However, the taxes claimed as subject to refund pertains to overpayment of taxes on income and withholding taxes for 1984 which is different from the income tax, business tax and withholding tax for the year 1985 subject of the deficiency assessment questioned by the petitioner. Besides, precisely pursuant to the order of the High Court, a new evidence was presented to clear the apparent contradiction. Finally, it is a well-settled principle that the findings of facts by the Court of Tax Appeals, when supported by evidence, is binding upon this Court and is entitled to the highest respect. (Bonifacia Sy Po vs. Honorable Court of Tax Appeals and Honorable Commissioner of Internal Revenue [G.R. No. L-81446. August 18, 1988]) In the absence of a showing of gross error or abuse on the part of the Tax Court, the findings of facts of the Court of Tax Appeals may not be reviewed. (Coca-Cola Export vs. Commissioner of Internal Revenue, 55 SCRA 5; Nasiad vs. Court of Tax Appeals, 61 SCRA 238; Nasiad, et al. vs. Court of Tax Appeals, 61 SCRA 238 (1974); Raymundo vs. de Joya, et al., 101 SCRA 495 (1980); Commissioner of Internal Revenue vs. Arnoldus Carpentry Shop, Inc., et al., 159 SCRA 199 (1988)). WHEREFORE, for lack of merit, the instant Petition is DENIED and the assailed Decision dated 16 October 1997 is AFFIRMED. SO ORDERED. Martin, Jr . and Gozo-Dadole, JJ . , concur.