Equitable Banking Corp. v. Court of Tax Appeals

FIRST DIVISION [CA-G.R. SP No. 53435. July 29, 2002.] EQUITABLE BANKING CORPORATION , petitioner , vs . THE HONORABLE COURT OF TAX APPEALS and COMMISSIONER OF INTERNAL REVENUE , respondents . D E C I S I O N GARCIA , J p : Via this special civil action of certiorari under Rule 65 of the 1997 Rules of Civil Procedure, petitioner Equitable Banking Corporation seeks the annulment and setting aside of the following issuances of the respondent Court of Tax Appeals , to wit: 1. Resolution dated January 5, 1999, denying its motion to reopen and present additional evidence in CTA Case No. 5547 ; and 2. Resolution dated April 30, 1999, denying its motion for reconsideration. From the petition, the comment thereto of the respondent Commissioner of Internal Revenue and the annexes respectively appended therewith, the Court gathers the following antecedents: On July 30, 1995, petitioner Equitable Banking Corporation (EBC , for short), filed with the Bureau of Internal Revenue various quarterly percentage tax returns for the period ending June 30, 1995. The returns cover those of petitioner's head office and those of its branches in Aranque, Magdalena, Ongpin, Reina Regente and Soler, all in Manila. On the basis of those returns, EBC paid BIR the corresponding Gross Receipt Tax (GRT) in the amount of P35,191,939.32 (Annex "A" of Annex "D", Petition; Rollo , pp. 60-62). On January 30, 1996, in CTA Case No. 4720 , entitled "Asian Development Bank vs. Commissioner of Internal Revenue" , the Court of Tax Appeals came out with a ruling that the twenty (20%) percent final withholding tax on a bank's income should not form part of a bank's taxable gross receipts for purposes of computing a bank's GRT. On the strength of said ruling, and invoking the beneficial effect thereof, EBC addressed a letter-request to the Commissioner of Internal Revenue, asking the latter for a refund or the issuance of a tax credit certificate in the amount of P1,445,561.50, stating that We are making the refund on the basis of the decision of CTA Case No. 4720 . . . wherein the Tax Court held that the 20% final withholding tax on the passive income of the bank is excluded from the gross receipts for purposes of computing the gross receipts tax, because gross receipts shall be based on all items of income actually received". Attached to the same letter-request are documents purportedly supportive of EBC 's claim for refund. Evidently dissatisfied with the slow pace by which the Commissioner of Internal Revenue acts on its claim, EBC filed with the respondent tax court a Petition for Review against the BIR Commissioner. In its petition, docketed as CTA Case No. 5547 , EBC alleged, inter alia, as follows: "4. On September 26, 1996, on the strength of said decision, EBC thru a letter of even date requested the respondent through the Revenue District Office of Binondo (the Office having area jurisdiction over the petitioner), the refund or issuance of a tax credit certificate for, among other sums, the amount of PHILIPPINE PESOS: ONE MILLION FOUR HUNDRED FORTY FIVE THOUSAND FIVE HUNDRED SIXTY ONE PESOS and 50/100 (P1,445,561.50), corresponding to the difference between the Gross Receipts Tax Paid (pertaining to EBC Head Office and its Arranque, Magdalena, Ongpin, Reina Regente and Soler Branches) for the June 30, 1995 quarter (P19,092,791.83) and the Adjusted Gross Receipts Tax in the amount of PHILIPPINE PESOS: SEVENTEEN MILLION SIX HUNDRED FORTY SEVEN THOUSAND TWO HUNDRED THIRTY AND 33/100 (P17,647,230.33). xxx xxx xxx 5. The claim for refund is likewise premised on the principle that no one shall unjustly enrich himself at the expense of another and on Article 230 of the National Internal Revenue Code which allows for recovery of any national Internal revenue tax erroneously and illegally collected by the BIR. xxx xxx xxx 7. The Respondent has not acted upon EBC's claim for refund. The prescriptive period for filing the suit for refund for the excess GRT payments, as contained in the Petitioner's quarterly return for the period ending on June 30, 1995 and duly filed and paid on July 20, 1995 shall expire on July 20, 1997. To interrupt such prescriptive period, this petition for review is hereby filed. xxx xxx xxx 9.1 . . . Consistent with the decision of this Honorable Court in the abovecited case, as well as the above-quoted Supreme Court decision and BIR Regulations, it is unmistakably clear that there was overpayment of GRT to the extent of P1,445,561.50, the amount representing the 20% portion of the Petitioner's passive income for the quarter ending June 30, 1995 which was subjected to final tax. Under the principle of solutio indebiti that no one shall unjustly enrich himself at the expense of another and pursuant to Article 230 of the National Revenue Code of the Philippines, the respondent, in her official capacity; should order the refund or the issuance of tax credit in favor of the Petitioner" ( Annex "D", Petition; Rollo, pp. 54-59), and accordingly prayed for a judgment "ordering the respondent [Commissioner of Internal Revenue] to refund or issue tax credit to the EBC in the total amount of P1,415,561.50 as overpaid GRT ". In time, the Commissioner of Internal Revenue, through the Office of the Solicitor General, filed its answer to the petition, thereunder raising the following special and affirmative defenses: "11. The decision in Asia Bank Corporation vs. Commissioner of Internal Revenue (CTA Case No. 4720) is pending appeal with the Court of Appeals. Hence, invocation thereof at this point in time is premature. xxx xxx xxx 13. The petition does not state a cause of action as there is no allegation that the tax sought to be refunded was actually paid to the Bureau of Internal Revenue in accordance with the provisions of the Tax Code. 14. The claim for refund is pending administrative investigation. 15. Taxes are presumed to have been collected in accordance with law. Hence, petitioner must prove that the taxes sought to be refunded were erroneously or illegally collected. 16 Petitioner must show that it has complied with the provisions of Section 204(3) and 230 of the Tax Code. 17. Claims for refund of taxes are construed strictly against claimants, the same being in the nature of an exemption from taxation ( Manila Electric Co. vs. Commissioner of Internal Revenue, 67 SCRA 351 ) " (Annex "E", Petition; Rollo, pp., 72-75). Following the joinder of issues, the tax court heard the case, in the course of which EBC presented its witness in the person of one Mercelira Geollegue who testified and identified EBC's documentary evidence, all of which were duly marked in the course of the proceedings, after which the bank made its Formal Offer of evidence consisting of Exhibits "A" to "Z" and "AA" to "SS" and submarkings (Annex "F", Petition; Rollo . pp. 77-84). On June 2, 1998, the tax court resolved to admit petitioner's documentary exhibits "subject to the Court's final appreciation and/or evaluation of their purposes, materiality, relevancy and probative value to the issue involved in this case" (Annex "G", Petition; Rollo, pp. 85-86). Thereafter, the case was again heard, this time for the reception of evidence for the Commissioner of Internal Revenue. After the parties have submitted their respective memoranda, the tax court deemed the case as submitted for decision (Annex "I", Petition; Rollo, p. 90). Meanwhile, pending resolution of the case, EBC filed with the same court two (2) other similar petitions for review against the Commissioner of Internal Revenue, namely, CTA Case No. 5411 and CTA Case No. 5146 , which cases were heard simultaneously by the tax court. On July 15, 1998, the tax court dismissed CTA Case No. 5411, thereby virtually denying EBC's claim for refund. Says the court in its dismissal decision in that case: "Petitioner in computing for its overpaid gross receipts tax, deducted the amounts of P4,497,475.22 and P8,406,135.31, representing 20% portion of tax-paid income and income subjected to 20% final tax booked at gross, respectively (Exh. G-3). A careful scrutiny of the composition of said amount reveals that the P4,497,475.22 (Exh. G-4) represents interest income which are net of final tax and the sum of P8,406,135.31 represents petitioner's provision for final tax (Exh. G-5). It should be noted that what the Asian Bank case excluded in the computation of gross receipts tax was the 20% final withholding tax on interest income derived by the bank and not the 20% portion of tax-paid income net of final withholding tax nor a bank's provision for final tax. Petitioner failed to prove that the amounts of P4,497,475.22 and P8,406,135.31 were payments for 20% final withholding tax on its interest income as what the Asian Bank case excluded in the computation of gross receipts tax. Obviously, petitioner seems to have a wrong basis in its computation of overpaid gross receipts tax and it is highly possible that this is due to its wrong interpretation of Our decision in the aforequoted Asian Bank case. Since it appears that petitioner has no other evidence to show how much final withholding tax was paid on interest income it received during the calendar quarter ended June 30, 1994, we are constrained not to grant petitioner's prayer" (Annex "K", Petition; Rollo, p. 99). In yet another decision dated August 6, 1998, the same court dismissed CTA Case No. 5146 for lack of evidence (Annex "J", Petition; Rollo, p. 91). With the dismissal of both CTA Cases No. 5411 and 5146, EBC filed in the original case CTA Case No. 5547 a "Motion to Reopen Case and Allow EBC to Present Additional Evidence", thereunder contending, among other things, as follows: "2. Running parallel to said case are two cases. one, entitled `Equitable Banking Corporation, Petitioner, versus, The Commissioner of Internal Revenue, Respondent' docketed as C.T.A. Case No. 5146; and the second, entitled `Equitable Banking Corporation, Petitioner, versus, The Commissioner of Internal Revenue, Respondent' docketed as C.T.A. Case No. 5411. In the course of time, the first case was decided on August 8, 1998, and the second case on June 15, 1998 both judgment dismissing the claims of petitioner EBC for the reasons therein stated. xxx xxx xxx 5. No doubt, these decisions have far reaching implications in determining the factual issues and the dispensation of justice respecting the contending rights of the taxpayer EBC to a tax refund, and the respondent Commissioner, representing the sovereign of the land, to exercise a misplaced right of double taxation. 6. It is in the honest belief that, with the pieces of evidence it presented (Exhibits A' to 'Z' and 'AA' to 'SS' and their respective submarkings) in the course of the trial of the present case, petitioner EBC sufficiently discharged its burden of proving its claim. It is humbly submitted that counsel is not adept at the very difficult task of weighing whether or not the quantum of evidence presented to the Honorable Court of Tax Appeals sufficiently proved petitioner EBC's claim for a GRT Refund. This quandary is heightened by the fact that, except for the Asian Bank case, the GRT Refund case is without precedent not only as to the doctrine therein enunciated but also as to the manner of proving the claim. 7. If only to convince the Honorable Court of Tax Appeals to rule the merits of the present case in petitioner's favor, EBC deems it appropriate to stand by the Court's two new decisions quoted above and comply with the requirements of proof therein set forth. Thus, at this point in time, the only reasonable thing that remains to be done is to seek the Court's kind consideration that petitioner be allowed, in the highest interest of substantial justice, to present additional evidence to establish its claim, rather than to continue to soldier on with the old evidence which, although arguable, are not favored upon the tax Court. 8. An Order allowing reopening and presentation of EBC's additional evidence will not prejudice the substantial rights of the government that is in possession all the while of the money sought to be refunded. Moreover, it is the interest of the sovereign authority to govern under a rule of law and dispense justice with fairness and according to truth and reason. On the other hand, it is the interest of EBC also to know the truth of the overpayments it had on its Gross Receipts Taxes and determine the applicability of the Asian Bank ruling thru its own claim for GRT refund. 9. Indeed, it cannot be overemphasized that the outcome of this EBC GRT refund case now pending with the Honorable CTA will determine the Bank's future conduct with respect to its tax burden. The Asian Bank ruling had already put EBC in a quandary of whether it correctly complied with the law covering GRT, and whether the government owes it a refund. An order denying this motion for re-opening and the resulting decision on the merits probably dismissing the main petition, will subvert the path of law and will effectively deprive EBC of a valid basis of knowing the truth and for future guidance respecting its quarterly burden of GRT payments" ( Annex "L", Petition; Rollo, pp. 108-111). Expectedly, the Commissioner of Internal Revenue filed its Opposition to the motion (Annex "M", Petition; Rollo , pp. 112-114). In the herein assailed Resolution dated January 5, 1999 , the tax court denied EBC's motion to reopen. Explains the tax court in the same resolution: "Further, petitioner claims that the reopening will not prejudice the substantial rights of the government and will make the petitioner aware of its true overpayments of gross receipts tax. Indeed, the incidental questions presented in the cases at bar are similar, if not identical, to that raised in the case of Equitable Banking Corporation vs. Commissioner of Internal Revenue, C.T.A. Case No. 5521, promulgated on October 29, 1998, wherein petitioner's motion seeking a reopening of trial after the presentation of evidence had been closed and the case had been submitted for decision was adversely resolved against it by this Court, thus: 'Petitioner claims that there is a need to reopen this case and to present additional evidence in order to comply with the requirements of proof as laid down in the aforementioned cases (C.T.A. Case Nos. 5411 & 5416). In addition, petitioner contended that the reopening of this case will not prejudice the substantial rights of the government. Finally, the petitioner will become aware of its true overpayments of gross receipts tax. Upon that premise, therefore, is petitioner entitled to have this case be reopened in order to present additional evidence? We believe not. The presentation of additional evidence is allowed only when it is newly discovered, or where it has been omitted through inadvertence or mistake, or where the purpose of the evidence is to correct evidence previously offered (I Moran's Comments on the Rules of Court, 2nd. ed., 545, 64 C.J., 160-163; cited in Alegre v. Reyes, 161 SCRA 233 (1988); Agulto v. Court of Appeals, 181 SCRA 80 (1990)]. In addition, the Court, for good reasons, in the furtherance of justice, may permit them to offer evidence upon their original case, and its ruling will not be disturbed in the appellate court where no abuse of discretion appears. (Siuliong & Co., v. Ylagan, 43 Phil., 393; U.S. v. Alviar, 36 Phil. 804). It appears that the reason of petitioner for wanting to reopen this case is based solely in our decisions in the cases of Equitable Banking Corporation vs. Comm. of Internal Revenue, C.T.A. Case Nos. 511 and 5416, supra. Petitioner failed to specifically state the facts surrounding the alleged inadvertence or mistake or excusable negligence in the presentation of that alleged additional document except for the fact that it was raised in our previous decisions involving the same parties and subject matter. The Court cannot allow the presentation of piece-meal evidence, otherwise, there will be no end to litigation. The Supreme Court supports the stand when it ruled in Delfin vs. Court of Agrarian Relations, et al., G.R. No. L-23348, March 14, 1967 (19 SCRA 593), thus: '. . . Really, if a case may be reopened from time to time as a party or his lawyer remembers evidence which was overlooked, then litigation will suffer undue delay. Instead of giving relief, court suit may become intolerable. Here neither equity nor law sanctions reopening . . . ' From the foregoing pronouncements, this Court finds no plausible ground to depart." (Annex "A", Petition; Rollo , pp. 29-35). Its motion for reconsideration of the aforementioned resolution having been also denied by the tax court in its subsequent Resolution of April 30, 1999 , EBC is now with this Court through the present recourse on the following submissions: "A. THE CTA DOCTRINE IN ASIAN BANK CORPORATION VS. COMMISSIONER OF INTERNAL REVENUE, CTA CASE NO. 4720, HAS NO PRECEDENT. IT INVOLVED A DIFFICULT AND PERPLEXING QUESTION OF WHAT LAW APPLIES, AND WHAT MANNER OR QUANTUM OF PROOF TO SUPPORT THE CLAIM. IT WAS BY REASON OF HONEST MISTAKE ON A DIFFICULT LEGAL OR PROCEDURAL QUESTION THAT EBC WAS NOT ABLE TO PRESENT PROOF OF PAYMENT OF THE FINAL TAX BY ITS WITHHOLDING AGENTS. B. THE CTA'S GRAVE ABUSE OF DISCRETION IS EVEN EMPHASIZED BY (1) THE OBVIOUS SIMPLICITY OF EBC'S MOTION TO REOPEN TO COMPLY WITH A DECLARED CTA REQUIREMENT; (2) THE BASIC UNFAIRNESS OF PENALIZING EBC'S HONEST MISTAKE BY ALTOGETHER BARRING IT FROM PRESENTING EVIDENCE THAT ITS WITHHOLDING AGENT PAID THE FINAL TAXES; (3) THE INEQUITY OF REDUCING EBC TO A HELPLESS SUPPLICANT WAITING THE RELEASE OF A DECISION WHICH WILL ONLY DISMISS ITS CLAIM FOR LACK OF THE VERY EVIDENCE IT INTENDS TO PRESENT; AND (4) THE CTA'S FAILURE TO CONSIDER THAT EBC'S MOTION TO REOPEN WAS FILED BEFORE, AND NOT AFTER, ANY DECISION IN THE CASE. C. EBC'S MOTION TO REOPEN THE CASE WITH THE HONORABLE CTA WAS TIMELY FILED. D. THE CTA'S EXERCISE OF JUDICIAL DISCRETION IS CIRCUMSCRIBED BY THE DICTATES OF JUSTICE AND REASON AND THE BASIC REQUIREMENT OF SOUNDNESS. GRANTING EBC'S VERY SIMPLE MOTION TO REOPEN CASE (BEFORE JUDGMENT) IS WELL-WITHIN THE PARAMOUNT INTEREST OF JUSTICE, SOUND JUDICIAL DISCRETION, AND THE LIBERAL CONSTRUCTION OF THE RULES OF PROCEDURE. DENIAL OF THE MOTION CONSTITUTES GRAVE ABUSE OF DISCRETION, CONSIDERING FURTHERMORE THAT ALLOWING THE REOPENING WILL NOT PREJUDICE THE SUBSTANTIAL RIGHTS OF RESPONDENT COMMISSIONER OF INTERNAL REVENUE. E. THE CONCERN THAT GRANTING THIS SIMPLE AND REASONABLE MOTION BY EBC WOULD RESULT IN UNENDING LITIGATION AND UNDUE DELAY, IS SPECULATIVE AND BASELESS." The petition must have to be dismissed. Undoubtedly, the challenged resolutions of the respondent tax court are interlocutory in character. As such, they may not be the proper subject of a petition for certiorari. Petitioner's remedy is to allow the tax court to decide CTA Case No. 5547 on the merits and thereafter, should the decision be adverse, to take an appeal therefrom to this Court under Rule 43 of the 1997 Rules of Civil Procedure and raise in its appeal the denial of its earlier motion to reopen and to adduce additional evidence in the case ( Oro Cam Enterprises, Inc. vs. Court of Appeals, 319 SCRA 444). Of course, the rule proscribing resort to the extraordinary writ of certiorari from interlocutory orders admits of exceptions, as (1) when the tribunal issued the challenged order or resolution without or in excess of jurisdiction or with grave abuse of discretion; or (2) when the assailed interlocutory order or resolution is patently erroneous and the remedy of appeal would not afford adequate and expeditious relief to the party adversely affected ( Bernardo Construction vs. Court of Appeals, 324 SCRA 24). Here, the jurisdiction of the respondent tax court over CTA Case No. 5547 is not at all in issue in this case. For sure, it was petitioner no less which invoked that jurisdiction. Hence, petitioner's cause will either rise or fall on the question of whether grave abuse of discretion attended the respondent tax court's issuance of the impugned resolutions. And by grave abuse of discretion is meant such a capricious and whimsical exercise of judgment as in equivalent to lack of jurisdiction, or where the power is exercised in an arbitrary or despotic manner by reason of passion or personal hostility, and must be so patent and gross as to amount to an evasion of duty or to fail to act at all in contemplation of law ( Toyota Autoparts, Phil., Inc. vs. Director of Labor Relations , 304 SCRA 95). We have taken the pains of reviewing the proceedings taken in CTA Case No. 5547 and found nothing therein indicative of any grave abuse of discretion on the part of the respondent tax court in denying petitioner's motion to reopen. To stress, petitioner was given ample opportunity to adduce its evidence in support of its claim for refund. Indeed, it presented and offered several documents which were duly marked as its exhibits in support of its claim. And the case itself was declared submitted for decision only after the parties had filed their respective memoranda. Under this milieu, We are simply at a loss to understand how the respondent tax court may be said to have gravely abused its discretion in denying petitioner's motion to reopen and to present additional evidence in CTA Case No. 5547 . Besides, a perusal of petitioner's "Motion to Reopen Case and Allow EBC to Present Additional Evidence" shows a dismal failure on the part of petitioner to even define the additional evidence it seeks to present and which it allegedly failed to adduce during the hearing. Nor does the motion disclose the purpose for which the additional evidence are aimed at. As aptly pointed out by the respondent tax court in its assailed Resolution of April 30, 1999, quoting from its earlier resolutions in earlier similar cases, to which We are in full accord: "Having failed to state the subject of the additional evidence to be presented and the purpose for which they will be offered would in effect prejudice the rights of the respondent to a speedy disposition of this case. Thus, in effect petitioner's Motion to Reopen this case would be tantamount to a delay in the administration of justice. The Supreme Court has said, 'if a case may be reopened from time to time as a party or his lawyer remembers evidence which was overlooked, then litigation will suffer undue delay. Instead of giving relief, court suit may become intolerable. Here neither equity nor law sanctions a reopening' ( Delfin v. Court of Agrarian Relations, et al., G.R. No. L-23348, March 14, 1967 [19 SCRA 593]) . Hence, We see no valid reason to reconsider or modify our Resolution, promulgated on January 5, 1999, for otherwise it would unduly delay the resolution of this case. To do so would prejudice respondent's substantive right to a speedy disposition of this case ( People vs. Castro-Bartolome, 204 SCRA 38 [1991] )." What is more, the additional evidence which petitioner seeks to present are, in all likelihood, already available to it when CTA Case No. 5547 was still being heard. To reopen the case anew to give way to pieces of evidence which are in petitioner's possession right from the start of the proceedings is to give in to petitioner's whims and caprices, which this Court cannot countenance. If as claimed, petitioner's failed to adduce those evidence during the trial proper, it has no one to blame but itself or its counsel. WHEREFORE, for lack of merit, the instant petition is hereby DENIED and is accordingly DISMISSED. SO ORDERED. Buzon and De Los Santos, JJ . , concur.