Manuel A. Cantos Development Corp. v. Bureau of Internal Revenue

SPECIAL TWELFTH DIVISION [CA-G.R. SP No. 64321. September 3, 2001.] MANUEL A. CANTOS DEVELOPMENT CORPORATION , petitioner , vs . BUREAU OF INTERNAL REVENUE and COURT OF TAX APPEALS, ET AL. , respondents . D E C I S I O N VILLARAMA , JR. , J p : The central issue to be resolved in this petition for review under Rule 43 of the 1997 Rules of Civil Procedure , as amended, is whether or not the Court of Tax Appeals (CTA) has jurisdiction over an action for nullity of distraint, levy and sale of petitioner's properties in view of the fact that the notices of assessment sent by respondent Bureau of Internal Revenue (BIR) to petitioner on March 24, 1997 for the year 1993 were not disputed by the former. The fact of the case are as follows: Sometime in 1994, respondent BIR, through its agents conducted an examination of petitioner's tax liabilities for the year 1993. On March 24, 1997, respondent BIR sent petitioner a copy of two (2) Notices of Assessment (Nos. 81-IT-13-93-97-3 and 81-DST-13-93-97-3) both dated March 18, 1997 for the year 1993 whereby demand was made upon the latter to pay deficiency income tax in the amount of P4,880,446.50 and deficiency documentary stamp tax in the amount of P28,562.50. On March 27, 1997, petitioner received said Notices of Assessment. 1 Petitioner did not file any protest arising from said Notices of Assessment. Thus, respondent BIR proceeded to distrain two (2) of petitioner's properties: (1) Condominium Unit No. 1403, 14th Floor, Monte de Piedad Center, Cebu City with an area of 163.49 square meters covered by OCT No. C-1380 and (2) Condominium Unit No. PH 205, 16th Floor, Monte de Piedad Center, Cebu City with an area of 140.20 square meters covered by OCT No. C-1409. An auction sale was scheduled by respondent BIR of the said properties on February 26, 1999. On February 25, 1999, petitioner filed an action for injunction with the Regional Trial Court of Cebu City, Branch 10. The trial court initially issued a temporary restraining order and a preliminary injunction which was later on lifted in view of its Order dated April 10, 2000 dismissing the case for lack of jurisdiction. In view of the dismissal of the injunction suit, respondent BIR again scheduled an auction sale of petitioner's real properties on August 11, 2000 at 9 o'clock in the morning. To preclude the sale of its properties, petitioner filed a petition for injunction with respondent CTA on August 7, 2000. No temporary restraining order was issued, thus, the auction sale proceeded as scheduled with Visayan Surety and Insurance Corporation, the sole bidder of petitioner's properties, purchasing the same in the total amount of P6,000,000.00. Considering the sale of the properties, petitioner filed a motion to amend its petition, this time praying for the annulment of the foreclosure sale on August 11, 2000 on the ground that the right of the government to assess and collect taxes against it have already prescribed. 2 Mention was made by petitioner of the fact that no other action for collection was instituted by respondent BIR against it. Respondent BIR moved to dismiss the petition on the ground of lack of jurisdiction as the Notices of Assessment sent to petitioner became final and unappealable since the same were never disputed. 3 Petitioner filed its Comment 4 on November 21, 2000 asseverating that respondent CTA has jurisdiction to entertain its petition under Section 7 (1) of Republic Act No. 1125 which granted jurisdiction to the CTA over "other matters arising under the National Internal Revenue Code or other laws administered by the Bureau of Internal Revenue." It further argued that the determination of whether the government has lost its right to collect taxes by reason of prescription is within the jurisdiction of respondent CTA as well as the validity of the warrant of distraint, levy and sale of properties to satisfy its alleged deficiency taxes. On January 8, 2001, respondent CTA issued a Resolution 5 dismissing the petition for lack of jurisdiction. Respondent CTA ruled that the Notices of Assessment issued by respondent BIR were within the three (3)-year reglementary period prescribed under Section 203 of the National Internal Revenue Code of 1997 (1997 Tax Code) and considering that no protest was lodged by petitioner to question said assessments made against it, the same became final and unappealable under Section 229 of the 1997 Tax Code. Consequently, the government can very well proceed to collect the deficiency taxes due from petitioner by means of (1) distraint and levy and/or (2) a collection suit either civil or criminal. On February 2, 2001, petitioner filed a Motion for Reconsideration 6 thereof reiterating that respondent CTA has jurisdiction over the petition. Further, petitioner alleged that even if respondent BIR issued the subject assessments within the three (3)-year period, it is now precluded from issuing the same on the ground that it was already barred by laches. Opposing petitioner's motion, respondent averred that the former did not raise any new issue for consideration by respondent CTA. Thus, the motion for reconsideration should be denied for lack of merit. 7 On March 23, 2001, respondent CTA issued a Resolution 8 denying petitioner's motion for reconsideration for lack of merit. Hence, this petition. As stated at the outset, the central issue to be resolved in this petition for review under Rule 43 of the 1997 Rules of Civil Procedure , as amended, is whether or not the Court of Tax Appeals (CTA) has jurisdiction over an action for nullity of distraint, levy and sale of petitioner's properties in view of the fact that the notices of assessment sent by respondent Bureau of Internal Revenue (BIR) to petitioner on March 24, 1997 for the year 1993 were not disputed by the former. aTcIAS We find the petition bereft of merit. Section 203 of the 1997 Tax Code , provides: "SEC. 203. Period of limitation upon assessment and collection . Except as provided in Section 222, internal revenue taxes shall be assessed within three (3) years after the last day prescribed by law for the filing of the return , and no proceeding in court without assessment for the collection of such taxes shall be begun after the expiration of such period; provided , that in a case where a return is filed beyond the period prescribed by law, the three (3)-year period shall be counted from the day the return was filed. For purposes of this Section, a return filed before the last day prescribed by law for the filing thereof shall be considered as filed on such last day." (emphasis supplied) Applying the above provision to the case at bar, respondent CTA correctly ruled that absent any income tax return filed for the year 1993, petitioner is presumed to have filed the same on April 15, 1994, the last day to file said return. Pursuant to section 203, it is on this date that the three (3)-year period to assess and collect internal revenue taxes begins to run. Thus, petitioner's position that the three (3)-year period is to be counted from 1993 is therefore erroneous in view of the clear provision of the law. Moreover, the argument of laches is without doubt inapplicable to the case at bar in view of the fact that the three (3)-year period has yet to prescribe. Accordingly, respondent BIR issued the subject Notices of Assessment within the three (3)-year reglementary period as it had until April 15, 1997 within which to assess petitioner deficiency taxes for the year 1993. Anent the jurisdiction of respondent CTA in view of petitioner's failure to protest the assessments made by respondent BIR, Section 228 of the 1997 Tax Code is explicit on the matter, to wit: "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 pre-assessment notice shall not be required in the following cases: (a) When a finding for any deficiency tax is the result of mathematical error in the computation of the tax as 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 the 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 180-day period; otherwise, the decision shall become final, executory and demandable." (emphasis supplied) Section 7 of Republic Act No. 1125 (An Act Creating the Court of Tax Appeals) provides in turn: "SEC. 7. Jurisdiction. The Court of Tax Appeals shall exercise exclusive appellate jurisdiction to review by appeal, as herein provided (1) Decisions of the Commissioner of Internal Revenue in cases involving disputed assessment, refunds of internal revenue taxes, fees or other charges, penalties imposed in relation thereto, or other matters arising under the National Internal Revenue Code or other law or part of law administered by the Bureau of Internal Revenue; (2) Decisions of the Commissioner of Customs in cases involving liability for customs duties, fees or other money charges, seizure, detention or release of property affected; fines, forfeitures or other penalties imposed in relation thereto; or other matters arising under the Customs Law or other law or part of law administered by the Bureau of Customs; and (3) Decisions of provincial or city Board of Assessment Appeals in cases involving the assessment and taxation of real property or other matters arising under the Assessment Law, including rules and regulations relative thereto." (emphasis supplied) The records of the case do not show any protest filed by petitioner of the assessments made by respondent BIR against it. Thus, for its failure to file a protest within thirty (30) days from receipt of the Notices of Assessment issued by respondent BIR, the same became final. Thus and so, under Section 7 of Republic Act No. 1125, there is no decision of the Commissioner of Internal Revenue which can be subject of an appeal before respondent CTA. It is settled that assessments are not decisions of the Commissioner, and an assessment which remains undisputed is necessarily outside the jurisdiction of respondent CTA. Hence, while a petition for nullity of the distraint and levy being a collection matter is without doubt within the "other matters" mentioned under Section 7, the same is still outside the jurisdiction of respondent CTA as the propriety of said action (distraint and levy) was likewise never made a subject of any protest filed before respondent BIR. Finally, We would like to stress that there is no need for respondent BIR to take any other action aside from distraint and levy as intimated by petitioner as any action taken by the former is within its discretion as stated in Section 205 of the 1997 Tax Code , viz.: SEC. 205. Remedies for the collection of delinquent taxes. The civil remedies for the collection of internal revenue taxes, fees, or charges, and any increment thereto resulting from delinquency shall be: (a) By distraint of goods, chattels, or effects, and other personal property of whatever character, including stocks and other securities, debts, credits, bank accounts, and interest in and rights to personal property, and by levy upon real property and interest in or rights to real property; and (b) By civil or criminal action. Either of these remedies or both simultaneously may be pursued in the discretion of the authorities charged with the collection of such taxes; provided, however, that the remedies of distraint and levy shall not be availed of where the amount of tax involved is not more than one hundred pesos (P100). AHECcT xxx xxx xxx WHEREFORE, premises considered, the present petition is hereby DENIED DUE COURSE, and accordingly DISMISSED, for lack of merit. The resolutions dated January 8, 2001 and March 23, 2001 of respondent Court of Tax Appeals are hereby AFFIRMED and UPHELD. With costs against the petitioner. SO ORDERED. Vasquez, Jr. and De Los Santos, JJ ., concur. Footnotes 1. Refer to resolution dated January 8, 2001 of the Court of Tax Appeals, Rollo , p. 20. 2. Refer to Amended Petition, Rollo , p. 33. 3. Refer to Motion to Dismiss, Rollo , p. 27. 4. Rollo , p. 30. 5. Supra. 6. Rollo , p. 41. 7. Refer to Opposition, Rollo , p. 46. 8. Rollo , p. 25.