Cargo Lane Realty Development Corp. v. Vinzons-Chato

TWELFTH DIVISION [CA-G.R. SP No. 47950. March 19, 1999.] CARGO LANE REALTY DEVELOPMENT CORP. and THE SPOUSES ROGELIO A. AND VIRGINIA S. DIO , petitioners , vs . THE HONORABLE LIWAYWAY VINZONS-CHATO IN HER CAPACITY AS THE COMMISSIONER OF INTERNAL REVENUE , respondent . D E C I S I O N ALIO-HORMACHUELOS , P. , J p : This Petition for Review under Rule 43 of the 1997 Rules of Civil Procedure seeks relief from the Resolution (Rollo, pp. 17-23) dated February 23, 1998 of the Court of Tax Appeals in CTA Case No. 5287, the decretal portion of which reads as follows: "WHEREFORE, in view of the foregoing, respondent's Motion to Dismiss is hereby GRANTED. Accordingly, the petition for review filed on September 9, 1995 is DISMISSED on the ground of lack of jurisdiction. dctai "SO ORDERED." (Rollo, p. 22). The undisputed facts are summarized by the respondent Commissioner of Internal Revenue as follows: "On May 2, 1990, Revenue Officers Fortunato Lagmay, Jesus Emmanuel Savellano, Sonia T. Estorco and Tomas T. Que of the Tax Fraud Division, BIR National Office, served upon Cargo Lane Realty Development Corporation (CLRDC for brevity) a Letter of Authority and by virtue of which, an examination of petitioner's books of accounts and other accounting records was conducted. After the termination of said examination, a deficiency income tax liability amount of P9,703,693.90 was found and established against CLRDC. "A Memorandum-Report and, a Supplemental Report, dated May 13, 1992 and April 29, 1994, respectively, containing details of CLRDC's 1987 deficiency income tax liability were submitted to the Commissioner of Internal Revenue. "Meanwhile, a Notice, dated October 3, 1990, was sent to CLRDC granting the latter opportunity to present evidence and to dispute the findings of the Revenue Officers of the Bureau of Internal Revenue. "Through various letters, petitioner disputed the proposed assessment, requested reinvestigation of the deficiency findings of the Bureau of Internal Revenue and to view the records of the case. "In a letter dated May 17, 1995, then Commissioner Liwayway Vinzons-Chato denied petitioner's request for reinvestigation stating that petitioner's request cannot be given favorable action considering that no formal assessment has as yet been issued by the Bureau of Internal Revenue (Petition, p. 5). LLcd "Thereafter, in a letter-complaint to the Department of Justice, dated June 29, 1995, the then Commissioner of Internal Revenue recommended the criminal prosecution of Rogelio A. Dio and Virginia S. Dio, President and Treasurer respectively, of CLRDC, for attempting to defeat or evade payment of income tax for 1987, 1988 and 1993. Attached to the Commissioner's recommendation for criminal prosecution was the Joint-Affidavit of the Revenue Officers who conducted an investigation of petitioner's deficiency income tax liability. "On August 11, 1995, petitioners received a Subpoena from the Department of Justice in connection with the criminal complaint involving its deficiency income tax in the amount of 9,703,693.90 for 1987 (p. 9, Petition). "On September 9, 1995, petitioners filed a petition for review before the Supreme Court of Tax Appeals in order that said Court would review an alleged decision of the Commissioner of Internal Revenue regarding the income tax liability of petitioners in the amount of P9,703,693.90 (p. 6, Petition). "The Commissioner filed a Motion to Dismiss (Annex "H" [petition]) alleging that the Court of Tax Appeals did not have jurisdiction over the petition because there was no formal assessment and no decision was made by her on said assessment if one was made (Ibid). "On February 23, 1998, the Court of Tax Appeals dismissed the petition for lack of jurisdiction stating that there was no assessment, and that even if there was one, there was no decision made by the Commissioner on a disputed assessment." LibLex (Rollo, pp. 190-192). Hence, this petition raising the following as issues: "I. WHETHER OR NOT AN ASSESSMENT WAS MADE AGAINST THE PETITIONERS. "II. WHETHER OR NOT THE COMMISSIONER RENDERED A DECISION ON A DISPUTED ASSESSMENT." (Rollo, p. 8). Petitioners contend that the requisites of assessment, protest on the assessment, and decision by the Commissioner of Internal Revenue (CIR) on the disputed assessment, essential for the assumption of jurisdiction by the Court of Tax Appeals were already extant when their petition was filed with the CTA. The petition lacks merit. The law in point is Section 229 of the National Internal Revenue Code (NIRC) as amended which provides: "SECTION 229. Protesting of Assessment . When the Commissioner or his duly authorized representative finds that proper taxes should be assessed, he shall first notify the taxpayer of his findings: Provided, however, That a pre-assessment notice shall not be required in the following cases: "xxx xxx xxx "Within a period to be prescribed by implementing rules and regulations, the taxpayer shall be required to respond to said notice. If the taxpayer fails to respond, the Commissioner of his duly authorized representative shall issue an assessment based on his findings. "Such assessment may be protested administratively by filing a request for reconsideration or reinvestigation within thirty (30) days from receipt of the assessment in such form and manner as may be prescribed by implementing rules and regulations. Within sixty (60) days from filing of the protest, all relevant supporting documents shall have been submitted; otherwise, the assessment shall become final. LLpr "If the protest is denied in whole or in part, or is not acted upon within the one hundred eighty (180) days from submission of documents, the taxpayer adversely affected by the decision or inaction may appeal to the Court of Tax Appeals within thirty (30) days from receipt of the said decision, or from the lapse of the One Hundred Eighty (180)-day period: otherwise, the decision shall become final, executory and demandable." Revenue Regulations No. 12-85 likewise provides for the procedural steps governing administrative protests as follows: "1. Sending by the BIR to the taxpayer of a notice for an informal conference or post-reporting notice. This notice is issued after an investigation has been conducted with the corresponding report of the investigative findings. "2. Notice prior to an assessment or pre-assessment notice is issued after the informal conference in cases where it is believed that taxes should be assessed against the taxpayer. The taxpayer is given fifteen days (extendible for not more than ten days) within which to reply to the pre-assessment notice. "3. In case the taxpayer fails to respond to the pre-assessment notice within the reglementary period or in the event of a response the BIR still believes that taxed should be assessed, the BIR then issues the necessary assessment notice. "4. The taxpayer may then file an administrative protest against the assessment which must be filed within thirty days from receipt of the assessment; otherwise, the assessment shall become final and unappealable and the taxpayer is thereby precluded from disputing the assessment. "5. Decisions rendered by the Commissioner which are adverse to the taxpayer may be appealed by the taxpayer to the Court of Tax Appeals within thirty days from receipt thereof; otherwise, the same becomes final and executory." cdll (Aban, Law of Basic Taxation in the Philippines, 1994 ed., pp. 202-203). Thus, it is clear the BIR should first issue the necessary formal or official assessment before the taxpayer may file an administrative protest. It is only after the Commissioner renders an adverse decision over the disputed assessment that the case may be appealed to the Court of Tax Appeals, for the jurisdiction of the Tax Court is to review by appeal decisions of the Commissioner of Internal Revenue on disputed assessments, that is, decisions of the Commissioner on the protests of the taxpayers against the assessment (Commissioner of Internal Revenue vs. Villa, 22 SCRA 3). A perusal of the record shows that the respondent Commissioner of the CIR never issued any formal assessment. The filing of the joint affidavit (Rollo, pp. 84-85) of the officers of the Tax Fraud Division cannot be taken as an implied assessment since an assessment is a written notice and demand made by the Bureau on the taxpayer for the settlement of a due tax liability that is there definitely set and fixed (Vitug, Compendium of Tax Law and Jurisprudence, 1992 ed., p. 243). The petitioners' contention that the act of the respondent in recommending criminal prosecution by the Department of Justice is an unequivocal and preemptory determination of petitioners' tax liability deserves scant consideration. To repeat, there was no assessment which the petitioners could dispute hence there can be no disputed assessment upon which the petitioner could act with finality. To sustain petitioners' contention would render nugatory the requirement set by the Supreme Court regarding final decisions of the Commissioner, viz: ". . . [W]e deem it appropriate to state that the Commissioner of Internal Revenue should always indicate to the taxpayer in clear and unequivocal language whenever his action on as assessment questioned by a taxpayer constitutes his final determination on the disputed assessment, as contemplated by sections 7 and 11 of Republic Act 1125, as amended. On the Basis of this indicium indubitably showing that the Commissioner's communicated action is his final decision on the contested assessment, the aggrieved taxpayer would then be able to take recourse to the tax court at the opportune time. Without needless difficulty, the taxpayer would be able to determine when his right to appeal to the tax court accrues. This rule of conduct would also obviate all desire and opportunity on the part of the taxpayer to continually delay the finality of the assessment and, consequently, the collection of the amount demanded as taxes by repeated requests for recomputation and reconsideration. On the part of the Commissioner, this would encourage his office to conduct a careful and thorough study of every questioned assessment and render a correct and definite decision thereon in the first instance. This would also deter the Commissioner from unfairly making the taxpayer grope in the dark and speculate as to which action constitutes the decision appealable to the tax court. Of greater import, this rule of conduct would meet a pressing need for fair play, regularity, and orderliness in administrative." (Surigao Electric Co., Inc. vs. Court of Appeals, 57 SCRA 523). Therefore the petition for review filed by the petitioners with the Court of Tax Appeals was premature, and the Court of Tax Appeals has no jurisdiction to entertain the same. LLjur WHEREFORE, the instant petition is DISMISSED. SO ORDERED. Guerrero and Regino, JJ . , concur.