Far East Bank and Trust Co. v. Commissioner of Internal Revenue

SIXTEENTH DIVISION [CA-G.R. SP No. 49597. January 31, 2001.] FAR EAST BANK AND TRUST COMPANY , petitioner , vs . COMMISSIONER OF INTERNAL REVENUE , respondent . D E C I S I O N ADEFUIN-DE LA CRUZ , J p : Before this Court is a petition for review seeking: (1) to set aside the decision dated July 30, 1998 rendered by the Court of tax Appeals ("CTA" for brevity) in CTA Case No. 5439, entitled: "Far East Bank & Trust Company, petitioner versus Commissioner of Internal Revenue, respondent," denying the claim of the petitioner for a refund on its alleged excess payments of gross receipts tax for the 3rd and 4th quarters of 1994 and the four (4) quarters in 1995 in the total amount of P14,816,373.00 and (2) the Resolution dated October 29, 1998 of the CTA denying the petitioner's motion for reconsideration of the said CTA decision dated July 30, 1998, and to remand the present case to the CTA for the reception of petitioner's documentary and testimonial evidence and for the rendition of CTA's decision as well as based on the merits of the case. The dispositive portion of the assailed decision reads as follows: "WHEREFORE, in view of the foregoing, herein Petition for Review is hereby DENIED due to lack of evidence. No pronouncement as to costs. "SO ORDERED." (Decision, p. 5; Rollo , p. 54) The facts of the case, as summarized by the CTA in its decision, are hereby reproduced, to wit: "For the abovesaid quarters of years 1994 and 1995, petitioner allegedly paid the total amount of P244,016,142.01 representing gross receipts tax which was arrived at by including from the tax base the twenty percent (20%) final taxes on passive income. "On October 16, 1996, petitioner filed with the respondent a written claim for tax credit/tax refund of its alleged overpaid gross receipts tax pursuant to this Court's decision in CTA Case No. 4720 entitled, "Asian Bank Corporation vs. Commissioner of Internal Revenue" dated January 30, 1996 wherein it was ruled that the basis for determining the gross receipts tax on banks and non-bank financial intermediaries should be the gross receipts of said institutions minus the twenty percent (20%) final taxes already withheld by various withholding agents on interest and other passive income of said institutions. EDIHSC "Two days later, on October 18, 1996, petitioner filed the instant petition for review. "At bar, petitioner reasserts its stance a quo . On the other hand, respondent contends, inter alia , the following special and affirmative defenses, to wit: xxx xxx xxx "7. Interest from deposits and yield on any other monetary benefit from deposit substitutes and from trust fund and similar arrangement earned by a domestic corporation is subject to a 20% tax in accordance with Section 24(e)(1) of the National Internal Revenue Code, which is the law applicable on this matter; xxx xxx xxx "9. In claiming for refunds, it is incumbent upon petitioner to prove that it is indeed entitled thereto. It must be able to point positively a provision of law granting such right, otherwise, it would be fatal to the claim for refund; HaIATC "Records show that petitioner made several non-appearances and failed to file its formal offer of evidence while respondent submitted her case for decision without presenting evidence and without submitting memorandum. In the same manner petitioner failed to submit its memorandum despite notice." (Decision, pp. 1-3; Rollo , pp. 50-52) On July 30, 1998, the CTA issued the assailed decision in the manner herein-above mentioned. ( Rollo , p. 50) On August 27, 1998, the petitioner filed a motion for reconsideration of the decision dated July 30, 1998. ( Ibid, p. 65) On October 29, 1998, the CTA issued the assailed Resolution denying the motion for reconsideration filed by the petitioner. ( Rollo, p. 67). Aggrieved by the said rulings of the CTA, the petitioner filed the instant petition for review before this Court interposing the following: "ISSUES "1. The Honorable Court of Tax Appeals failed to consider that petitioner has presented documentary and testimonial evidences tending to prove the validity of its claim for refund; DaScAI "2. The Honorable Court of Tax Appeals erred in not considering the exception provided in the Vda. De Onate vs. Court of Appeals decision despite the fact that petitioner's documentary exhibits were duly identified and incorporated in the records of the case. "3. Petitioner's counsel is grossly negligent in handling the case before the CTA, and in the interest of justice, the dismissal of the case based on procedural technicality should not deprive the petitioner in vindicating its legislative grievance." (Petition, p. 4; Rollo , p. 37) The petition is devoid of merit. Since the first and the second issues are intertwined, both of which shall be discussed jointly. On these issues, the petitioner avers that the CTA failed to consider that the former has presented both testimonial and documentary evidence to support the validity of its claim for tax refund, as the records show that the petitioner relied on the testimonies of its two (2) witnesses who were able to identify the documents necessary to prove its claim; that the documentary exhibits presented by the petitioner were identified, compared with the original copies, and were duly marked as petitioner's exhibits in a hearing before the Commissioner on April 8, 1997 and, thereafter, said exhibits were incorporated in the records of this case; that the presentation of these testimonial and documentary evidence during the trial proved that the 20% final taxes withheld by the Bangko Sentral ng Pilipinas were included in the "gross receipts" reported in the quarterly percentage tax returns wherein the petitioner paid the corresponding 5% GRT which resulted in the overpayment of GRT; that in the case of Vda. De Onate vs. Court of Appeals, the Supreme Court relaxed the rules on Offer of Evidence and instead it provided two conditions for allowing an evidence not formally offered to be admitted and considered in the determination of the case; that the finding of the CTA that the petitioner failed to submit its formal offer of evidence on time does not deprive the latter to rely on these documentary exhibits in order to secure a favorable decision on its claim for tax credit in that said exhibits, as a matter of fact, were duly identified during the hearing by the petitioner's witnesses and were all incorporated in the records of this case. We are not persuaded. The CTA made the following observations in its Resolution dated October 29, 1998, which this Court considers the same to have resolved already such issue, thus: "In the second place and on the substantive aspect, the document presented by petitioner as evidence which is the "Certification" of a post office employee at Ayala, Makati City (Exh. "DD"), only attests that Atty. Salvador, counsel for petitioner, mailed a 'letter' under Registry Receipt No. 679 but does not positively identify that the paper mailed on that day, January 9, 1998, is petitioner's formal offer of evidence in this case. "Neither could the bare allegations of Atty. Salvador in his manifestation filed on September 29, 1998 and affidavit of merit supporting his motion for reconsideration, be taken as proof that a formal offer of evidence was filed by postal registry mail. For, as respondent stressed in his opposition, they are self-serving. Further, on the basis of court records, they are unbelievable. The minutes of the proceeding on February 3, 1998 show that Atty. Salvador, after orally acknowledging that petitioner had been considered by the Court to have waived its right to present further evidence, moved that petitioner be given a period of time to file its formal offer of evidence, and the Court instructed him to file the proper motion within five (5) days, copy furnished respondent' (See p. 78, CTA rec.) How then can this Court believe that said counsel had sent by registered mail petitioner's formal offer of evidence on January 9, 1998 or twenty five (25) days ahead of February 3, 1998, the date he was authorized by the Court to file his motion to admit formal offer of evidence? Obviously, the picture which petitioner's counsel would wish to project is contested by the records and runs counter to the ordinary course of events. And Atty. Salvador did not even appear at the hearings to explain or confirm before the Court his allegations on this matter on September 4, 1998 and October 2, 1998. Instead, his collaborating counsel filed an entry of appearance and appeared for petitioner, but apparently filed an erroneous post office certification (Exh. 'CC')." (Resolution, pp. 2-4; Rollo , pp. 24-26) Consequently, the CTA in its decision of July 30, 1998 explicitly ruled on such issues in this wise, to wit: "We bewail the lack of interest of the petitioner to prosecute its case with vigor and candor, its repeated non-appearance and failure to comply with court procedures such as the filing of a formal offer of evidence and memorandum only to serve to weaken, if not put a death knell, to its claim for refund. "The Rules of Court is strict in considering no evidence which has not been formally offered. (Section 34, Rule 132) Without any formal offer of evidence, thus, we could only blame the petitioner for its lost cause. Simply put, it has not proven anything. " Even the case of Onate vs. the Court of Appeals and Taguba, G . R . No . 116149, promulgated on November 23, 1995, which relaxed the foregoing rule and allowed evidence not formally offered to be admitted and considered by the court provided that such evidence must have been duly identified by testimony duly recorded and that it must have been incorporated in the records of the case, fails to save petitioner's case . This is due to fact that its duly marked and identified exhibits have not been incorporated in the records of the instant case . They are nowhere to be found . "As it stands, petitioner has only its petition for review and the documents annexed to it to prove its case. Respondent has properly denied all of petitioner's material allegations except as regards the parties and the existence of the laws and jurisprudence cited therein as well as the existence, likewise, of its written claim for refund. No admission was made as to the alleged facts contained in the petition. In effect, thus, the veracity of the alleged facts surrounding the claim for refund has been squarely put into issue by the respondent and in the absence of petitioner's duly offered evidence, this court is constrained not to grant herein claim for refund on the ground of lack of evidence to support the same. " In the same vein, the annexes to the petition cannot be considered by this Court because they have not been duly marked and identified by testimony duly recorded following the rule enunciated in the Onate case, supra ." (Emphasis supplied) DSAacC (Decision, pp. 3-4; Rollo , pp. 52-53) Thence, it finally ruled that: "It must be stressed at this point that a refund of taxes partakes the nature of a tax exemption and are construed in strictissimi juris against the taxpayer and in favor of the taxing authority. (Insular Lumber Co., vs. CTA, 104 SCRA 710; CIR vs. Rio Tuba Nickel Mining Corp., 207 SCRA 549)" ( Ibid. , p. 54) On the last issue raised by the petitioner, it contends that the instant petition falls squarely within the ambit of the case of Asian Bank vs. Commissioner of Internal Revenue, CTA Case No. 4720, January 30, 1996 and that the petitioner has no expectation that its application for refund may be denied for lack of evidence; that the witnesses presented by the petitioner were enthusiastic in their efforts to present their case before the CTA, however, petitioner's counsel failed to present his case thoroughly and likewise failed to attend the scheduled hearings and to submit the required formal offer of evidence, neither did he file a motion for reconsideration on time; that due to the failure of the counsel for the petitioner to take note of the hearings scheduled by the CTA and to file the required formal offer and memorandum, the petitioner should not be deprived of its right to be heard; and that in interest of justice and equity, the petitioner claims that it should not be penalized for the costly importunings of its previous counsel. We disagree. In the present case, no acceptable reason has been advanced by the petitioner to excuse the repeated absences and blatant failure of petitioner's counsel to submit the required pleadings before the CTA. The legal consequences arising out of the failure of petitioner's counsel to submit the required pleadings and repeated absences are binding upon his client. "A client is generally bound by the action of his counsel in the management of a litigation, as by the attorney's mistake or negligence in procedural technique." Absent a clear showing of fraud or excusable negligence on the part of the petitioner's counsel, this Court finds no cogent reason to depart from the foregoing rule. (Paramount Vinyl Products Corp. vs. NLRC, 190 SCRA 525, 534) "True enough, the party-litigant should not rely totally on his counsel to litigate his case even if the latter expressly assures that the former's presence in court will no longer be needed. No prudent party will leave the fate of his case entirely to his lawyer . Absence in one or two hearings may be negligible but want of inquiry or update on the status of his case for several months (as in the case at bar, the failure to submit the required formal offer of evidence and memorandum), is inexcusable. It is the duty of a part-litigant to be in contact with his counsel from time to time in order to be informed of the progress of his case. " (Bernardo vs. Court of Appeals (Special Sixth Division), 275 SCRA 413, 430) (Emphasis ours) In the case of People vs. Hernandez, 260 SCRA 25, 38, the High Tribunal had the occasion to rule that: "The foregoing find basis in the general rule that a client is bound by the acts of his counsel who represents him. For all intents and purposes, the acts of lawyer in defense of a case are acts of his client. The rule extends even to the mistakes and negligence committed by the lawyer except only when such mistakes would result in serious injustice to the client." "Before procedural rules can be relaxed to give way to substantive justice, it is implicit that such liberality be applied in a proper case." (Ilasco, Jr. vs. Court of Appeals, 228 SCRA 413, 419) All told, "it is a principle of public policy that at the risk of occasional errors, judgments of courts should become final at some definite time fixed by law. The very object of which the courts were constituted was to put an end to controversies." ( Ibid , p. 419) WHEREFORE, foregoing considered, the petition for review is hereby DENIED DUE COURSE and accordingly DISMISSED for lack of merit. The assailed Decision date July 30, 1998 and the Resolution dated October 29, 1998 as well of the Court of Appeals in CTA Case No. 5439 are hereby affirmed in toto . SO ORDERED. Reyes, Jr .and De Guia-Salvador, JJ . , concur.