Commissioner of Internal Revenue v. Ison

THIRD DIVISION [CA-G.R. SP No. 49225. June 30, 1999.] COMMISSIONER OF INTERNAL REVENUE , petitioner , vs . LUIS J. ISON , respondent . D E C I S I O N BELLO , E.R. , JR. , J p : The instant Petition for Review questions the Decision of the Court of Tax Appeals promulgated on August 6, 1998 in CTA Case No. 5343, entitled "Luis J. Ison vs. Commissioner of Internal Revenue" ordering herein petitioner to refund in favor of the respondent the sum of P347,534.00 representing overpaid income tax for 1993. The dispositive portion of the Decision reads: "WHEREFORE, finding the petition for review meritorious, the same is hereby GRANTED. Respondent is ORDERED to REFUND in favor of petitioner the sum of P347,534.00 representing overpaid income tax for 1993." (p . 18, rollo) The facts as found by the Court of Tax Appeals are as follows: "This case involves a claim for refund of overpaid income tax in the amount of P347,534.00 for the calendar year ending December 31, 1993. Petitioner is a Filipino citizen and an employee of Goodyear Philippines, Incorporated. During the period January 2, 1993 to May 14, 1993, he was detailed on official business to visit three countries where Goodyear has an office (Exh. H). He earned compensation income from domestic and foreign assignments detailed as follows: LLjur Countries Currencies Amount Exh. Philippines Peso P 804,311.64 A-1 & A-2 Indonesia Rupiah Rp.3,109,900.00 C, C-1 England Pound Sterling Ps 2,408.00 D Luxembourg Luxembourg Francs Luf 25,967.00 E On April 4, 1994, petitioner filed his 1994 income tax return reflecting a total compensation income in the amount of P1,951,726.00, representing income within and without the Philippines. He had a total tax due of P616,979.00 for the taxable year 1993. The amount of P153,841.00, representing tax withheld on compensation, was applied to the tax due of P616,979.00 resulting to a tax payable of P463,138.00 (Exhs. A and A-3). The tax due was paid in two installments. The first was paid on April 4, 1993 in the amount of 154,649.00 and the second installment was paid on July 12, 1994 in the amount of P308,489.00 (Exhs. A-1, B-3 and B-6). Petitioner alleges that upon review of his 1993 Individual Income Tax Return it was discovered that the per diem paid in Luxembourg francs had been considered as pound sterling resulting in the overstatement of petitioner's compensation income for taxable year 1993. The correct compensation income should be P958,771.12 instead of P1,951,726.00 reported in his income tax return, to wit: Income Conversion Reported Conversion Should Be P 804,311.64 1 P804,311.64 1 P804,311.74 Pp3,109,900.00 0.012499 38,870.64 0.012499 38,870.64 Ps 2,408.00 38.94 93,767.52 38.94 93,767.52 Luf 25,967.00 38.94 1,011,134.98 0.840348 21,821.32 Total P1,951,726.00 P958,771.12 =========== ========= On February 13, 1995, petitioner through his authorized agent, Ms. Josephine L. Adalem, filed his amended income tax return reflecting, among others, the refundable amount of P349,442.00 (Exhs. B and B-1) On March 6, 1995, petitioner through his tax counsel SGV & Co., filed with the Bureau of Internal revenue a letter-request for the refund of the aforementioned overpayment (Exhs. F, and F-1 to F-3). On September 12, 1995, a memorandum report was submitted by Revenue Officer, Mr. Gilquin B. Tolentino, recommending the total denial of the amount sought (Exhs. 1, 1-a and 1-b). On September 26, 1995, presumably still unaware of the result of P347,534.00 (Exhs. G and G-1). On April 3, 1996, petitioner lodged his appeal with this Court in order to toll the running of the two-year prescriptive period prescribed by Section 230 of the Tax Code. Herein Petitioner asserts that the decision rendered by the Court of Tax Appeals is contrary to law. He buttressed such assertion the following grounds, to wit: 1) The Court of Tax Appeals erred in not giving the Memorandum report of herein Petitioner's Witness, probative value. 2) The Court of Tax Appeals erred in considering the Petition for Review meritorious despite incredible evidence presented by the petitioner. As to the first assigned error, we believe that the Court of Tax Appeals did not err in not lending credence or probative value to the Memorandum Report of Petitioner's Witness, Revenue Examiner Gilquen B. Tolentino. The report of Mr. Tolentino is undisputably based on a single photocopied document, that is, the amended income tax return. petitioner said: cdt "With all due respects, we strongly believe that the lower court erred in concluding that the memorandum in question has no probative value. The findings of the witness, Mr. Tolentino, despite being based on a single photocopied document , deserves a second look and serious consideration. his findings is independent from any other documents even those belatedly submitted by the herein respondent to the BIR and can stand alone even without the need for verification with other documents . . . . (Emphasis supplied) Yet despite the acknowledgment that Mr. Tolentino's Report was based on a single document and that no verification with other documents was performed, the Report maintained that: "The gross compensation received by the subject was already included as part of the expenses claimed for the same year by his employer. It is thus precarious to allow the subject taxpayer to claim refund on the basis of an error to which the company has bluntly admitted." But what is the basis of the statement? How could Mr. Tolentino say that the gross compensation received by Mr. Ison was already included as part of the expenses claimed for the same year by his employer when he did not even make verification from other documents? How could he know that when all he has was the photocopied amended income tax report? It appears likewise that Mr. Tolentino's Report was hastily prepared and therefore creates doubt as to its correctness. It was prepared even before all the documents submitted by Mr. Ison were in. And as admitted by Mr. Tolentino himself: "A. Some papers were given to me after that. And on that basis I prepared a memorandum under pressure and soon afterwards my memorandum was dated September 12 the documents followed came only on October but the memorandum report was already prepared, your Honors. So, how can we give probative value to a Report which was prepared under pressure, and without any basis at all but a single, unreliable document? The observation by the Court of Tax Appeals is succinct: "If the revenue examiner was given an opportunity to review all the documents submitted by the petitioner, his findings would have been different. . . ." We are very much cognizant of the principle in Taxation that taxes are the lifeblood of the government and that any tax exemptions, as tax refunds or credit, are to be construed in strictissimi juris against the taxpayer. But the sense of justice and fair play, which are the basis of all laws, be it taxation, or otherwise, require that claim for refund of overpayment of taxes must be carefully studied and its denial must have sufficient basis. Taxpayers deserve no less. People are required by the government to share the burden of maintaining the society where they live, but it does not mean that the government must be confiscatory. Nobody is allowed to enrich himself at the expense of another, even the government. Had the revenue examiner had been more conscientious in his tasks, his recommendation could have been given more weight. As it is, he had been remiss in his duty. Noticeable also from the Report of Mr. Tolentino that his denial of the refund was anchored on the fact that the gross compensation of Mr. Ison has already been claimed as part of the expenses of Goodyear Philippines, Incorporated. And so according to him, if the same is to be refunded, this will be tantamount to utilizing the same amount twice, first, by the employer as a deduction, and then, second, by the employee as a refund. But what is lost on the revenue examiner is that Mr. Ison and Goodyear Philippines, Inc. are two and distinct taxpayers. The liability of one can not be collected from the other. The recommendation in the memorandum is what it was because of the revenue examiner's fear that the government will be shortchanged in the process. Not to our thinking. What the Bureau of Internal Revenue can do is to re-assess income tax of Goodyear for 1993, and claim whatever tax deficiency it incurred, but for the meantime give the refund to whom it is due. In this way, nobody is prejudiced. Re-assessment of internal revenue taxes is feasible and is in fact sanctioned under Sec. 222 of the New Tax Reform Act of 1997. Said provision provides: "SECTION 222. Exceptions as to period of Limitation of Assessment and Collection of Taxes . "(a) In the case of a false or fraudulent return with intent to evade tax or failure to file a return, the tax may be assessed, or a proceeding in court for the collection of such tax may be filed without assessment, at any time within ten (10) years after the discovery of the falsity , fraud or omission. . . ." (Emphasis supplied) With regard to the second assigned error, we are not convinced. We believe the Court of Tax Appeals when it ruled that the Petition for Review lodged by Mr. Ison before it is meritorious and that he was able to present convincing proofs to back his claim for tax refund. The fact is there were no changes in the amount claimed by the respondent to have been earned by him in his original and in his amended return. What he earned in different countries he visited, he rightfully reflected in both returns. His income were even certified by several officials of Goodyear. The discrepancies lie in the conversion of those earnings. There was a mistake in the conversion which mistake is not apparent upon casual glance in the return. That is probably the reason why the error was discovered only sometime in February 1995, or nearly a year after the filing of the original return in April 1994. Moreover, the fact that the respondent's employer, Goodyear Philippines, Inc. failed to amend its income tax return for the year 1993 so as to reflect the reduced salary of the respondent should not be taken as an evidence against him. As mentioned earlier, there are here involved two (2) taxable entities, and that the act of one should not be used to prejudice another. Finally, the factual findings of the Court of Tax Appeals should be accorded great weight considering that it was the one which received and assessed the evidence presented, unless of course such findings have no bases at all, which is not the case in the present controversy. We are also convinced, as the Court of Tax Appeals is, that an error was committed in computing the respondent's taxable income for the calendar year 1993, and that such error, is just but necessary to be rectified. WHEREFORE, the instant Petition for Review is hereby DISMISSED for lack of merit. SO ORDERED. Rasul and Reyes, JJ . , concur.