Commissioner of Internal Revenue v. Lascona Land Co., Inc.

FOURTEENTH DIVISION [CA-G.R. SP No. 58061. October 25, 2005.] COMMISSIONER OF INTERNAL REVENUE , petitioner , vs . LASCONA LAND CO., INC. , respondent . D E C I S I O N PERLAS-BERNABE, E., J p : Before the Court is a Petition for Review which seeks to annul and set aside the Decision 1 dated January 4, 2000 issued by the Court of Tax Appeals in C.T.A. Case No. 5777 and its Resolution 2 dated March 3, 2000 denying the motion for reconsideration. The dispositive portion of the assailed Decision states: "WHEREFORE, in the light of all the foregoing, the Court finds the instant petition meritorious. Accordingly, the collection letter issued by the Respondent dated March 3, 1999 ordering Petitioner to pay its 1993 deficiency income tax liability in the amount of P753,266.56 is considered WITHDRAWN and of NO EFFECT. SO ORDERED." The undisputed facts of the case are as follows: On March 27, 1998, the Commissioner of Internal Revenue (herein petitioner) issued Assessment Notice No. 0000047-93-407 against Lascona Land Co., Inc. (herein respondent) informing the latter of its alleged deficiency income tax for the year 1993 in the amount of P753,266.56. 3 As a consequence, respondent filed a letter protest on April 20, 1998 which was denied by Norberto R. Odulio, OIC, Regional Director, Bureau of Internal Revenue (BIR), Revenue Region No. 8, Makati City, in his letter-decision 4 dated March 3, 1999, thus: "xxx xxx xxx Subject: LASCONA LAND CO., INC. 1993 Deficiency Income Tax Madam : Anent the 1993 tax case of subject taxpayer, please be informed that while we agree with the arguments advanced in your letter of protest, we regret however that we cannot give due course to your request to cancel or set aside the assessment notice issued to your client for the reason that the case was not elevated to the Court of Tax Appeals as mandated by the provisions of the last paragraph of Section 228 of the Tax Code. By virtue thereof, the said assessment notice has become final, executory and demandable. In view of the foregoing, please advise your client to pay its 1993 deficiency income tax liability in the amount of P753,266.56. xxx xxx xxx" Aggrieved, respondent appealed the foregoing decision to the Court of Tax Appeals on April 12, 1999, which case was docketed as C.T.A. Case No. 5777, alleging that the above-named Regional Director erred in ruling that the disputed assessment had already become final, executory and demandable contrary to the mandate of Section 228 of the National Internal Revenue Code of 1997. 5 In its Answer, petitioner countered that its questioned finding was proper considering respondent's failure to timely file an appeal with the CTA after the lapse of the 180 day reglementary period provided under Section 228 of the Tax Code. 6 After due proceedings, the CTA rendered the assailed Decision dated January 4, 2000 nullifying the subject assessment. In seeking reconsideration thereof, petitioner further justified its action declaring the said assessment final, executory and demandable on the basis of Section 3 (3.1.5) of Revenue Regulations No. 12-99 dated September 6, 1999 which provides in part that "If the Commissioner or his duly authorized representative fails to act on the taxpayer's protest within one hundred eighty (180) days from date of submission, by the taxpayer, of the required documents in support of his protest, the taxpayer may appeal to the Court of Tax Appeals within thirty (30) days from the lapse of the said 180-day period, otherwise, the assessment shall become final, executory and demandable." 7 However, the foregoing motion was denied by the CTA for lack of merit in a Resolution dated March 3, 2000. HCDaAS Hence, this petition anchored on the following grounds, to wit: "1. THE COURT OF TAX APPEALS ERRED IN NOT DECLARING THAT THE ASSESSMENT DATED MARCH 27, 1998 AGAINST RESPONDENT AS FINAL, EXECUTORY AND DEMANDABLE PURSUANT TO THE PROVISION OF SECTION 228 OF THE NATIONAL INTERNAL REVENUE CODE, AS AMENDED. 2. THE COURT OF TAX APPEALS ERRED IN NOT UPHOLDING PETITIONER'S REVENUE REGULATIONS NO. 12-99 DATED SEPTEMBER 6, 1999 IMPLEMENTING THE TAX CODE OF 1997 GOVERNING THE RULES ON ASSESSMENT OF NATIONAL INTERNAL REVENUE TAXES." 8 The petition is meritorious. Section 228 of the National Internal Revenue Code (NIRC) of 1997 provides: "SEC. 228. 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 preassessment notice shall not be required in the following cases: (a) When the finding for any deficiency tax is the result of mathematical error in the computation of the tax appearing on the face of the return; or (b) When a discrepancy has been determined between the tax withheld and the amount actually remitted by the withholding agent; or (c) When a taxpayer who opted to claim a refund or tax credit of excess creditable withholding tax for a taxable period was determined to have carried over and automatically applied the same amount claimed against the estimated tax liabilities for the taxable quarter or quarters of the succeeding taxable year; or (d) When the excise tax due on excisable articles has not been paid; or (e) When an article locally purchased or imported by an exempt person, such as, but not limited to, vehicles, capital equipment, machineries and spare parts, has been sold, traded or transferred to non-exempt persons. The taxpayer shall be informed in writing of the law and the facts on which the assessment is made; otherwise the assessment shall be void. 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 or 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. If the protest is denied in whole or in part, or is not acted upon within 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." EAcTDH From the foregoing, it can be inferred that if the protest was not acted upon within a period of 180 days from the submission of documents, such inaction allows the taxpayer to appeal to the Court of Tax Appeals (CTA). If there is no appeal within 30 days after the lapse of the 180-day period, the matter/decision under protest becomes final. On the other hand, any decision on a protest is appealable. 9 In the case at bar, it is undisputed that respondent filed its protest on April 20, 1998 10 and must have submitted its supporting documents within 60 days therefrom or until June 19, 1998. Thereafter, the petitioner has 180 days or until December 16, 1998 within which to act on the subject protest. In turn, respondent has another 30 days reckoned from its actual receipt of the latter's decision, if any, or the lapse of the 180-day period counted from December 17, 1998 or until January 16, 1999, whichever comes first, to elevate its appeal to the CTA. However, records show that respondent appealed to the said court only on April 12, 1999 11 , after almost three (3) months from the lapse of the 180-day period. As such, its appeal was clearly filed out of time rendering the disputed assessment final and demandable. 12 Since Section 228 of the NIRC of 1997 provides that a delinquent taxpayer may nevertheless directly appeal a disputed assessment, if its request for reconsideration remains unacted upon 180 days after submission thereof 13 , as what happened in this case, the taxpayer need not await the outcome of its protest with the petitioner before it can question the propriety of the assessment before the CTA. Consequently, the word "decision" in the last paragraph of the same cannot be strictly construed as referring only to the decision per se of the petitioner as found by the CTA but should be considered as synonymous with the disputed assessment as earlier indicated in its paragraph 4. As held in the case of Commissioner of Internal Revenue vs. S.C. Johnson and Son, Inc . 14 , "laws are just mere compositions, but have ends to be achieved and that the general purpose is a more important aid to the meaning of a law than any rule which grammar may lay down. It is the duty of the courts to look to the objective to be accomplished, the evils to be remedied, or the purpose to be subserved, and should give the law a reasonable or liberal construction which will best effectuate its purpose." Corollary thereto, the Court finds that the CTA committed reversible error in declaring Revenue Regulation No. 12-99 15 null and void because to sustain such ruling would allow the taxpayers to hamper the expedient collection of taxes by their failure to act within a reasonable period. 16 "Tax assessments made by tax examiners are presumed correct and made in good faith. A taxpayer has to prove otherwise. Failure of the petitioners (respondent herein) to appeal to the Court of Tax Appeals in due time made the assessments in question, final, executory and demandable. . . . Payment of taxes being admittedly a burden, taxpayers should not be left without any recourse when they feel aggrieved due to the erroneous and burdensome assessments made by a Bureau of Internal Revenue agent or by the Commissioner. Said right is vested upon adversely affected taxpayers under Republic Act No. 1125 (now The NIRC of 1997). It cannot be rendered nugatory through the Commissioner's act of immediately filing an action for collection without ruling beforehand on the disputed assessment. However, the remedy of an aggrieved taxpayer is not without any limitation. A taxpayer's right to contest assessments, particularly the right to appeal to the Court of Tax Appeals, may be waived or lost as in this case." 17 WHEREFORE, premises considered, the instant petition is GRANTED. The assailed Decision dated January 4, 2000 of the CTA in C.T.A. Case No. 5777 and its Resolution dated March 3, 2000 are REVERSED and SET ASIDE. Accordingly, Assessment Notice No. 0000047-93-407 dated March 27, 1998 is hereby declared final, executory and demandable. SO ORDERED. WE CONCUR: (SGD.) REMEDIOS SALAZAR-FERNANDO Associate Justice (SGD.) HAKIM S. ABDULWAHID Associate Justice Footnotes 1. Rollo , pp. 20-27. 2. Rollo , pp. 29-30. 3. Rollo , pp. 39-40. 4. Rollo , p. 38. 5. Rollo , pp. 31-37. 6. Rollo , pp. 42-44. 7. Rollo , pp. 48-49. 8. Rollo , pp. 8-9. 9. Rodelio T. Dascil, Esq., " The New Internal Revenue Code as amended by the Tax Reform Act of 1997 (Amendments Explained) ", 1988 First Ed., p. 222. 10. Rollo , p. 32. 11. Rollo , p. 31. 12. Republic of the Philippines vs. Court of Appeals, et al. , No. L-38540, April 30, 1987, Mambulao Lumber Company vs. Republic , No. L-37061, September 5, 1984. 13. Commissioner of Internal Revenue vs. Isabela Cultural Corp ., G.R. No. 135210, July 11, 2001. 14. G.R. No. 127105, June 25, 1999. 15. Rollo , pp. 51-62. 16. Cecilia Teodoro Dayrit, et al. vs. The Hon. Fernanda A. Cruz, etc., et al ., No. L-39910, September 26, 1988. 17. Ibid .