Commissioner of Internal Revenue v. Philippine Journalists, Inc.

SPECIAL SECOND DIVISION [CA-G.R. SP No. 72128. August 5, 2003.] COMMISSIONER OF INTERNAL REVENUE , petitioner , vs . PHILIPPINE JOURNALISTS, INC. , respondent . D E C I S I O N GUERRERO , J p : Before Us is a petition for review of the resolution of the Court of Tax Appeals dated 02 August 2002, and its decision dated 14 May 2002, cancelling the deficiency income, value-added and expanded withholding tax assessments issued by the Commissioner of Internal Revenue for having been filed beyond the prescriptive period. The pertinent facts: On 17 April 1995, Philippine Journalists, Inc. (hereafter, Phil. Journalists) a duly organized corporation, filed its annual corporate income tax for the calendar year ending on 31 December 1994. On 10 August 1995, the Revenue District Officer of Revenue District Office No. 33 of Revenue Region No. 6 issued Letter of Authority No. 87120, instructing Revenue Officer Federico de Vera, Jr. and Group Supervisor Vivencio Gapasin to examine the accounting records of Phil. Journalists for all internal revenue taxes. 1 On 10 June 1997, Phil. Journalists was informed of the results of the above investigation, which showed the following deficiency taxes including surcharges, interest and compromise penalty, to wit: "Value Added Tax P229,627.90 Income Tax 125,002,892.95 Withholding Tax 2,748,012.35" 2 On 29 August 1997, Revenue District Officer Jaime Concepcion invited Phil. Journalists to an informal conference on 15 September 1997 to allow the latter to air its side on the proposed assessment. 3 In connection with the ongoing investigations, Phil. Journalists, through its comptroller Lorenza Tolentino, executed a waiver of the statute of limitations under the tax code on 22 September 1997 4 , to wit: "The Philippine Journalists, Inc., by virtue of the approval by the Commissioner of Internal Revenue of my/its request for extension of the period of examination of income and business tax return for the year 1994, do hereby waive the running of the prescriptive period provided for by Sections 223 and 224 and other relevant provisions of the National Internal Revenue Code, and consent to the assessment and collection of taxes which may be found due after the examination at any time after the lapse of the period of limitations fixed by said Sections 223 and 224 and other relevant provisions of the National Internal Revenue Code, until the completion of the said investigation. DTEcSa The intent and purpose of this waiver is to afford the examiner ample time to carefully examine my books of accounts and other records which I cannot all produce for examination at the present time. It is understood, however, that the undersigned taxpayer does not, by the execution of this waiver, admit in advance the correctness of the assessment which may be made against it; nor does it waive its right to use any of the legal remedies afforded by law to secure a credit refund on such tax they may be assessed and paid for the same period pursuant to Sections 209 and 212 of the National Internal Revenue Code. Executed this 22nd day of September 1997 in Manila, Philippines. (Sgd.) LORENZA T. TOLENTINO, Comptroller Signature of Taxpayer Journal Bldg., Railroad St., Port Area, Manila" 5 On 02 July 1998, Revenue Officer De Vera submitted his audit report, with the following findings: "Income Tax P133,806,778.70 Value Added Tax 240,603.13 Withholding Tax 2,905,027.14" 6 On 05 October 1998, the Bureau of Internal Revenue (hereafter, BIR) informed Phil. Journalists of the above findings by issuing Pre-assessment Notices. On 09 December 1998, the BIR issued Assessment Notices with the following tax liability including interest and compromise penalty: "Income Tax P108,743,694.88 Value Added Tax 184,299.20 Expanded Withholding Tax 2,363,220.38 Total P111,291,214.46" 7 ============= On 15 March 1999, the BIR, through Deputy Commissioner Romeo Panganiban sent a preliminary collection letter, giving Phil. Journalists ten (10) days from receipt to pay its tax liabilities. On 10 November 1999, Panganiban issued a Final Notice Before Seizure, giving Phil. Journalists ten (10) days from receipt to pay. On 29 November 1999, Phil. Journalists sought clarification as to how its liability was computed; it also sought an extension of thirty (30) days from receipt of such request for clarification to reply. On 02 December 1999, Phil. Journalists wrote a follow-up letter to the BIR, informing the latter that Phil. Journalists had not received the copies of the Assessment Notices. 8 On 28 March 2000, Phil. Journalists received Warrant of Distraint and Levy No. 33-06-046. On 26 April 2000, Phil. Journalists filed a petition for review with the Court of Tax Appeals (hereafter, CTA). 9 On 14 May 2002, the CTA rendered a decision, in this wise: "As to whether or not the assessment notices were received by the petitioner, this Court rules in the affirmative. To disprove petitioner's allegation of non-receipt of the aforesaid assessment notices, respondent presented a certification issued by the Post Master of the Central Post Office, Manila to the effect that Registered Letter No. 76134 sent by the BIR, Region No. 6, Manila on December 15, 1998 addressed to Phil. Journalists, Inc. at Journal Bldg., Railroad St., Manila was duly delivered to and received by a certain Alfonso Sanchez, Jr. (Authorized Representative) on January 8, 1999. Respondent also showed proof that in claiming Registered Letter No. 76134, Mr. Sanchez presented three identification cards, one of which is his company ID with herein petitioner. xxx xxx xxx After carefully examining the questioned Waiver of the Statute of Limitations, this Court considers the same to be without any binding effect on the petitioner for the following reasons: The waiver is an unlimited waiver. It does not contain a definite expiration date. Under RMO No. 20-90, the phrase indicating the expiry date of the period agreed upon to assess/collect the tax free after the regular three-year period of prescription should be filled up. In this case, the waiver not only failed to fill up the phrase "but not after _______" but even deviated from the prescribed form. Moreover, Section 223 of the NIRC provides that if before the expiration of the time prescribed for the assessment of the tax, both the Commissioner and the taxpayer have agreed in writing to its assessment after such time, the tax may be assessed within the period agreed upon. Verily, even under the NIRC, there has to be an agreement as to the expiry date of the period to assess or collect. xxx xxx xxx Secondly, the waiver failed to state the date of the acceptance by the Bureau which under the aforequoted RMO should likewise be indicated. We, therefore, cannot determine with certainty if the waiver was actually accepted before the expiration of the three-year assessment period considering that it was accepted by Revenue District Officer Delia Sarmiento who was assigned in RDO#33 only on January 16, 1998. . . . SaHIEA xxx xxx xxx Finally, petitioner was not furnished a copy of the waiver. It is to be noted that under RMO No. 20-90, the waiver must be executed in three (3) copies the second copy of which is for the taxpayer. It is likewise required that the fact of receipt by the taxpayer of his/her file copy be indicated in the original copy. Again, respondent failed to comply. xxx xxx xxx Thus, finding the waiver executed by the petitioner on September 22, 1997 to be suffering from legal infirmities, rendering the same invalid and ineffective, the Court finds Assessment/Demand No. 33-1-000757-94 issued on December 5, 1998 to be time-barred. Consequently, the Warrant of Distraint and/or Levy issued pursuant thereto is considered null and void. WHEREFORE, in view of all the foregoing, the instant Petition for Review is hereby GRANTED. Accordingly, the deficiency income, value-added and expanded withholding tax assessments issued by the respondent against the petitioner on December 9, 1998, in the total amount of P111,291,214.46 for the year 1994 are hereby declared CANCELLED, WITHDRAWN and WITH NO FORCE AND EFFECT. Likewise, Warrant of Distraint and/or Levy No. 33-06-046 is hereby declared NULL and VOID. "SO ORDERED." 10 Hence, this petition based on this ground: "I. THE COURT OF TAX APPEALS GRAVELY ERRED IN DECLARING THAT THE WAIVER OF STATUTE OF LIMITATIONS EXECUTED BY RESPONDENT SUFFERED LEGAL INFIRMITIES DUE TO THE ALLEGED NON-OBSERVANCE OF THE PROVISIONS OF REVENUE MEMORANDUM ORDER NO. 20-90, THUS, THE SUBJECT ASSESSMENTS WERE ASSUMED TO BE TIME-BARRED DUE TO THE ALLEGED DEFECTIVE WAIVER OF STATUTE OF LIMITATIONS DATED September 23, 1997 AND THAT THE SUBJECT ASSESSMENTS WERE DECLARED CANCELLED, WITHDRAWN AND WITH NO FORCE AND EFFECT." 11 We grant the petition. In the proceedings before the CTA, Phil. Journalists attacked the Assessment Notices issued by the BIR, which imposed an aggregate tax liability of P111,291,214.46, on two (2) essential grounds: (1) that Phil. Journalists did not receive copies of the Assessment Notices; and (2) that such notices were issued beyond the three (3)-year prescriptive period. Under the procedure then in effect, an assessment notice may be protested administratively by filing a request for reconsideration or reinvestigation within thirty (30) days from receipt of the notice, otherwise the assessment shall become final and unappealable. 12 From this point on, the government may collect the taxes due, by distraint of personal property or by levy of real property, among others. In the instant case, since the taxpayer, Phil. Journalists allegedly never received copies of the assessment notices, the government would appear to have no right to collect the taxes, not just yet. However, as correctly pointed out by the CTA, Phil. Journalists did receive the copies of the assessment notices. At the back of the registry notice, Alfonso Sanches, Jr., a representative of Phil. Journalists, signed his name on 08 January 1999, thereby proving receipt of the notice by Phil. Journalists. 13 This was corroborated by a certification issued by the Central Post Office on 11 May 2000 to this effect. 14 Now, since Phil. Journalists did not file a request for reconsideration or reinvestigation within thirty (30) days from 08 January 1999, the assessment notices became final and unappealable. The petition for review filed on 26 April 2000 with CTA was neither timely filed nor the proper remedy. Only decisions of the BIR, denying the request for reconsideration or reinvestigation may be appealed to the CTA. Mere assessment notices which have become final after the lapse of the thirty (30)-day reglementary period are not appealable. 15 Thus, the CTA should not have entertained the petition at all. caIACE As to the contention that the assessment notices were void for having been filed beyond the three (3)-year prescriptive period for making an assessment, this will be discussed only for its academic value since the concerned assessment notices were found to be beyond review. Under the tax code then in effect, an assessment must be made within three (3) years after the date the return was due or filed, whichever is later. In the instant case, the return was filed on 17 April 1995, while the assessment notices were issued on 09 December 1998, which is clearly beyond the three (3)-year period. However, on 22 September 1997, while investigations on Phil. Journalists' tax liability were on-going, it executed a waiver of the statute of limitations. As far as the BIR was concerned, this waiver enable it to finish the investigation and validly issue the assessment notices even after the lapse of the prescriptive period. But the CTA had a different view. Citing Revenue Memorandum Order (RMO) No. 20-90, the CTA found the waiver executed by Phil. Journalists to be invalid for the following reasons: (1) it does not indicate a definite expiration date 16 ; (2) it does not state the date of acceptance by the BIR 17 ; and (3) Phil. Journalist, the taxpayer, was not furnished a copy of the waiver. 18 These grounds are merely formal in nature. The date of acceptance by the BIR does not categorically appear in the document but it states at the bottom page that the BIR "accepted and agreed to:" . . ., followed by the signature of the BIR's authorized representative. Although the date of acceptance was not stated, the document was dated 22 September 1997. This date could reasonably be understood as the same date of acceptance by the BIR since a different date was not otherwise indicated. As to the allegation that Phil. Journalists was not furnished a copy of the waiver, this requirement appears ridiculous. Phil. Journalists, through its comptroller, Lorenza Tolentino, signed the waiver. Why would it need a copy of the document it knowingly executed when the reason why copies are furnished to a party is to notify it of the existence of a document, event or proceeding? It is superfluous to give a copy to the very person who executed a document since such person would obviously be aware of the existence of the document. Besides, the person executing the document would naturally retain a copy of the document. If we invalidate a document just because the person accepting the waiver failed to furnish a copy to the one executing said waiver, we would be giving too much emphasis on form and technicality that serve no useful purpose. As regards the need for a definite expiration date, this is the biggest flaw of the decision. The period of prescription for the assessment of taxes may be extended provided that the extension be made in writing and that it be made prior to the expiration of the period of prescription. 19 These are the requirements for a valid extension of the prescriptive period. To these requirements provided by law, the memorandum order adds that the length of the extension be specified by indicating its expiration date. This requirement could be reasonably construed from the rule on extension of the prescriptive period. But this requirement does not apply in the instant case because what we have here is not an extension of the prescriptive period but a waiver thereof. These are two (2) very different things. What Phil Journalists executed was a renunciation of its right to invoke defense of prescription. This is a valid waiver. 20 When one waives the prescriptive period, it is no longer necessary to indicate the length of the extension of the prescriptive period since the person waiving may no longer use this defense. WHEREFORE, the 02 August 2002 resolution and 14 May 2002 decision of the CTA are hereby SET ASIDE. Respondent Phil. Journalists is ordered pay its assessed tax liability of P111,291,214.46. IAEcCT SO ORDERED. Del Castillo and Tolentino, JJ ., concur. Footnotes 1. Exhibit "13". 2. Rollo , p. 20. 3. Ibid . 4. Exhibit "11". 5. Exhibit "11". 6. Rollo , p. 9. 7. Ibid . 8. Rollo , p. 9. 9. Id ., p. 40. 10. Rollo , pp. 25, 2829, 3132. 11. Id ., p. 11. 12. Aban, Benjamin, Law of Basic Taxation in the Phil., 1994 Ed., p. 202. 13. Exhibit "16-a". 14. Exh. "14". 15. Commissioner v. Villa , 2 SCRA 3. 16. Rollo , p. 28. 17. Id ., p. 29. 18. Id ., p. 31. 19. Alca v. CTA , 26 SCRA 167, 140 [1968]; Cordero v. Gonda , 18 SCRA 331, 335336 [1966]; Rep. v. Lim De Yu , 10 SCRA 737, 741 [1964]. 20. see Alca v. CTA, supra , pp. 140141.