Intervet Philippines, Inc. v. Commissioner of Internal Revenue

NINTH DIVISION [CA-G.R. SP NO. 77062. January 8, 2008.] INTERVET PHILIPPINES, INC. , petitioner , vs . COMMISSIONER OF INTERNAL REVENUE, DAKILA FONACIER and REGIONAL DIRECTOR OSCAR L. SEVILLA , respondents . D E C I S I O N CRUZ , J p : On June 11, 1998, Bureau of Internal Revenue (or "BIR") Regional Director Virginia L. Trinidad issued Letter of Authority (or "LOA") No. 170177 authorizing Revenue Officer Edwin T. Guzman of Revenue District Office No. 39, South Quezon City, to examine the books of accounts and other accounting records of Intervet Philippines, Inc. (or "petitioner") for all taxes, except VAT, for the period January 1, 1996 to December 31, 1996. To extend the period for assessment of the proper taxes, petitioner executed a Waiver of the Statute of Limitations on October 29, 1999. AECcTS On November 15, 1999, Revenue District Officer Corazon Pangcog (or "Pangcog") invited petitioner to an informal conference on November 17, 1999 regarding the report of the investigation on its 1996 corporate tax return. In response, petitioner wrote to Pangcog requesting for additional information that would help it in analyzing its alleged tax deficiencies and a deferment of the informal conference until such time that the requested information was made available. On January 19, 2000, Commissioner of Internal Revenue Dakila Fonacier, through Regional Director Oscar L. Sevilla (or "respondents," when collectively), issued a preliminary assessment notice informing petitioner that after investigation, it was found liable for deficiency income tax and deficiency withholding tax for the calendar year 1996 in the amounts of P2,259,251.48 and P177,026.56, respectively. DTAIaH In a letter dated February 28, 2000, petitioner stated that it could not fully present its side for lack of sufficient information regarding the basis of the assessment. In the same letter, however, petitioner agreed to pay the amount of P98,141.78 based on the computation which was attached as Schedule 1 of the Preliminary Assessment Notice. On May 23, 2000, petitioner received a demand letter from respondents together with two assessment notices, both dated May 5, 2000 and bearing Assessment No. 001113, for alleged deficiency expanded withholding tax and income tax for the fiscal year 1996 in the amounts of P184,406.35 and P2,342,869.06, respectively. The deficiency assessment arose from the disallowance of certain expense items deducted by petitioner from its gross income for the taxable year 1996 and the alleged non-deduction or non-remittance of certain withholding taxes for the same period. On June 23, 2000, petitioner filed a protest against the demand letter and assessment notice no. 001113, claiming that it was always complying with the BIR rules regarding substantiation of expenses and payment of the correct amount of taxes. Petitioner reiterated its request for details on the alleged unsubstantiated transactions which gave rise to the deficiency assessments. AaSTIH As respondents failed to act on petitioner's protest within the 180-day period prescribed by law, petitioner elevated the matter to the Court of Tax Appeals (or "CTA") via a petition for review on the following grounds: "1. The issuance of the assessment notices despite the obstinate refusal of respondents and/or their representatives to furnish (petitioner) with the requested information that will aid the latter in rebutting the alleged tax deficiencies is illegal and improper. 2. In any event, the amount of 1996 taxes declared and paid by (petitioner) is in accord with law and fully substantiated by its financial records." In their answer, respondents averred that the investigation of petitioner's internal tax liabilities for 1996 revealed tax obligations in the sums of P2,304,431.20 as deficiency income tax and P184,406.35 as deficiency withholding tax; that Assessment No. 001113 was issued in accordance with law and pertinent regulations and has substantially complied with the provisions of Sec. 228 of the Tax Reform Act relative to the taxpayer being informed in writing of the facts and law in which the assessment is based; that the 180-day period provided for in Sec. 3.1.5 of Revenue Regulations 12-99 and Sec. 228 of the Tax Code should be reckoned from the date of submission by the taxpayer of the required documents in support of his protest; that petitioner failed to submit documents containing vital and indispensable information necessary to arrive at a correct, judicious and final determination of its protest; that petitioner has no cause of action because the 180-day period within which respondents must act on the protest has not yet commenced to run; that petitioner's failure to submit supporting documents rendered the assessment final, executory and demandable; and that all presumptions are in favor of the correctness of tax assessments and the burden of proving otherwise is upon petitioner. HCATEa On December 3, 2002, the CTA rendered a decision denying the petition, viz .: " WHEREFORE , in view of all the foregoing, the instant Petition for Review is hereby denied for lack of merit. Accordingly, petitioner is hereby ORDERED to PAY deficiency withholding and income taxes in the amounts of P184,406.35 and P2,342,869.06, respectively. In addition, petitioner is also liable to pay respondent 20% delinquency interest on the total deficiency withholding and income taxes computed from June 13, 2000 until fully paid pursuant to Section 249 (a)(C)(3) of the 1997 Tax Code. SO ORDERED ." In arriving at its ruling, the CTA found that respondents substantially complied with the requirement under Sec. 228 of the Tax Code and that petitioner was sufficiently informed of the legal and factual bases of the assessments. The court a quo also observed that since petitioner failed to satisfactorily refute the findings of the tax examiners, the assessments against it are prima facie presumed correct and made in good faith. Petitioner sought reconsideration of the CTA's adverse decision but its motion was denied per resolution dated April 15, 2003. Hence, this petition for review citing the same grounds invoked before the court below. IaAHCE Petitioner argues that the assessments in question are illegal and void for lack of legal and factual bases; and that despite its repeated requests for additional information regarding the transactions which gave rise to its alleged tax deficiencies, respondents failed to furnish details that would enable it to effectively contest the tax assessments. Petitioner also maintains that it should be deemed to have exhausted its administrative remedies by the mere filing of the protest because it could not be expected to submit supporting documents without its request for particulars being acted upon by respondents; and that it paid the correct amount of taxes for the year 1996 and that all the expenses it declared in that year are properly substantiated by its financial records. The petition was submitted for resolution without the comment required of respondents. Nevertheless, We find the petition dismissible on both procedural and substantial grounds. Hence, We deny the petition. AHDaET On the procedural aspect, it is noteworthy that petitioner failed to effectively and validly protest the assessments issued against it. Sec. 228, fourth paragraph, of the National Internal Revenue Code provides: "SEC. 228. Protesting of Assessment. . . . . xxx xxx xxx 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 ." (Underscoring supplied). As petitioner failed to observe the rules on protesting tax assessments, particularly on submission of supporting documents, it is now too late to question Assessment No. 001113. Moreover, it is well settled that unless there has been an abuse or improvident exercise of authority, the reviewing court shall not set aside lightly the conclusion reached by the CTA which, by the very nature of its function, is dedicated exclusively to the consideration of tax problems and has necessarily developed an expertise on the subject ( Cyanamid Philippines, Inc. vs. Court of Appeals , 322 SCRA 639). This is all the more so when the findings and conclusions of the CTA are amply supported by the evidence on record, as in this case. Petitioner anchors its claim for relief on the allegation that the tax assessments in question do not state the law and the facts upon which they are based. It goes on to lament respondents' failure to act on its requests for additional information regarding said assessments. A cursory examination of the assessment notices and respondents' demand letter readily affirms the CTA's finding that petitioner was properly and adequately informed in writing of the law and the facts on which the assessments were made. To illustrate, respondents' demand letter contains an itemized list of the discrepancies found and/or disallowances made during the audit of petitioner's income tax liabilities for the year 1996. The deficiency regarding petitioner's expanded withholding tax was broken down to reflect the particular income payments against which it should have withheld taxes. Consequently, petitioner's request for additional information on the particulars of the assessments is superfluous. The details needed to effectively protest the tax assessment notices were already right under its nose. Faced with such tax findings, petitioner could have very well presented its records to refute, item by item, the tax deficiencies being claimed by the BIR. AEITDH Parenthetically, We note the CTA's observation that petitioner failed to attend the conference set by the BIR on November 17, 1999. If petitioner really wanted clarification of the matters which gave rise to the assessments in question, said conference would have been the best opportunity and venue to obtain the information it purportedly needed to file its protest. Anent the issue of whether petitioner is liable for deficiency income and withholding taxes for the year 1996, We find no cogent reason to reverse the CTA's findings on the matter. As the CTA correctly pointed out, assessments are prima facie presumed correct and made in good faith. Contrary to petitioner's theory, it is the taxpayer not the BIR who has the duty of proving otherwise. It is an elementary rule that in the absence of proof of irregularity in the performance of official duties, an assessment will not be disturbed. All presumptions are in favor of tax assessments. Certainly, failure to present proof of error in the assessment will justify judicial affirmance in said assessment ( Commissioner of Internal Revenue vs. Court of Appeals , 242 SCRA 289). Having failed to effectively controvert the tax findings against it, petitioner is bound to pay the deficiencies assessed by the BIR. CSHEca WHEREFORE, the instant petition is DISMISSED for lack of merit and the assailed decision and resolution of the Court of Tax Appeals are hereby AFFIRMED in toto. SO ORDERED. Lampas-Peralta and Pizarro, JJ., concur.