IBM Philippines, Inc. v. Court of Tax Appeals

THIRD DIVISION [CA-G.R. SP No. 78821. January 30, 2004.] IBM PHILIPPINES, INC. , petitioner , vs . COURT OF TAX APPEALS and the COMMISSIONER OF INTERNAL REVENUE , respondents . D E C I S I O N VERZOLA , E ., J p : Summary judgment "is a device for weeding out sham claims or defenses at an early stage of the litigation, thereby avoiding the expense and loss of time involved in a trial. The very object is 'to separate what is formal or pretended in denial or averment from what is genuine and substantial, so that only the latter may subject a suitor to the burden of trial.' The test, therefore, of a motion for summary judgment is whether the pleadings, affidavits, and exhibits in support of the motion are sufficient to overcome the opposing papers and to justify a finding as a matter of law that there is no defense to the action or the claim is clearly meritorious." 1 The only issue posed before this Court by petitioner is whether the respondent Court of Tax Appeals committed grave abuse of discretion in denying its motion for summary judgment. Is there really no genuine issue in this case whereby summary judgment may be issued? Before this Court is a Petition for Certiorari assailing the Resolutions of the respondent Court of Tax Appeals (CTA) dated 28 March 2003 2 and 8 July 2003 3 denying petitioner's Motion for Summary Judgment. 4 The parties admitted the following facts. 5 On 23 October 2001, petitioner's representative personally received from the Large Taxpayers Collection and Enforcement Division the Collection Letter 6 dated 19 October 2001 which is addressed to the petitioner at its present address. Attached to the aforesaid Collection Letter were the following: (i) Demand Letter; 7 (ii) Details of Discrepancies 8 and (iii) two Assessment Notices 9 both numbered 000668-95-01-833 for deficiency income tax and for deficiency expanded withholding tax. In the aforesaid Collection Letter, respondent Commissioner of Internal Revenue (CSR) demanded petitioner to pay an aggregate amount of P155,406,992.17 representing deficiency income tax and expanded withholding tax, inclusive of surcharge, interest and compromise penalties for the taxable year 1995 under Assessment/Demand No. 000668-95-01-833 allegedly issued on 18 July 2001. On 24 October 2001, petitioner protested 10 the deficiency assessments for income tax and expanded withholding tax on the ground that it did not receive a Preliminary Assessment Notice and it came to know of the Final Assessment Notices only upon receipt of the Collection Letter dated 19 October 2001. 11 Petitioner filed two supplemental protests on 19 November 2001 and "22 November 2001 12 with respondent CIR. Due to respondent CIR's failure to resolve petitioner's protest within the 180-day reglementary period, petitioner was constrain file a petition for Review 13 with the respondent CTA on 16 August 2002 questioning the deficiency income tax and expanded withholding tax assessments. After the Initial exchange of pleadings, the parties executed a Joint Stipulation of Facts and Issues dated 25 November 2002 that was however filed before the respondent CTA only on 2 December 2002. Respondent CTA approved the same by virtue of a Resolution 14 dated 9 December 2002, In the said Joint Stipulation of Facts and Issues, the parties agreed that the following issues are to be resolved by respondent CTA: "(1) Whether or not respondent observed due process in the issuance of the deficiency income tax and expanded withholding tax assessments. (2) Whether or not the deficiency income tax and expanded withholding tax assessments are barred by prescription. (3) Whether or not the deficiency income tax and expanded withholding tax assessments have factual and/or legal basis. (4) Whether or not the disallowed expenses can be subjected to both deficiency income tax and expanded withholding tax assessments." 15 Believing that there are no genuine issues as to any material fact with respect to issues 1, 2 and 4, petitioner filed a Motion for Summary Judgement on 10 January 2003. It argued that as to issues 1 and 2, they may be resolved by the respondent CTA based on the Joint Stipulation of Facts and Issues and the BIR Records. On the other hand, the facts necessary to resolve issue no. 4 are admitted and apparent on the face of the Formal Demand Letter. As stated earlier, the respondent CTA denied petitioner's Motion for Summary Judgment and its subsequent Motion for Reconsideration. Aggrieved by the resolution of respondent CTA, petitioner comes to this Court asking for relief. In this petition, petitioner anchors its arguments solely on its defense of prescription. It argues that all the facts necessary to resolve the issue of prescription are either admitted in the Answer or stipulated during the pre-trial. We agree with petitioner. It is settled that a summary judgment under Rule 35 of the Rules of Court is proper only if there is no genuine issue as to the existence of any material fact. It is intended to expedite or promptly dispose of cases where the facts appear undisputed and certain from the pleadings, depositions, admissions and affidavits on record. 16 By genuine issue is meant an issue of fact which calls for the presentation of evidence as distinguished from an issue which is fictitious and contrived, set up in bad faith and patently unsubstantial so as not to constitute a genuine issue for trial. The court can determine this on the basis of the pleadings and admissions, documents, affidavits and/or counter-affidavits submitted by the parties to the Court. Where the facts pleaded by the parties are disputed or contested, proceedings for a summary judgment cannot take the place of a trial. 17 The facts necessary to resolve the issue of prescription are apparent in the pleadings and documents filed before respondent CTA. Under Section 203 of the National Internal Revenue Code, internal revenue taxes shall be assessed within three (3) years after the last day prescribed by law for the filing of the return. 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. EIAScH In the instant case, it has been shown that petitioner filed its income tax return for 1995 on 15 April 1996 while its withholding tax return for December 1995 was filed on 25 January 1996. Thus, respondent CIR had only until 15 April 1999 and 25 January 1999 to issue a deficiency income tax and withholding tax assessment. However, based on the Waiver of the Defense of Prescription under the Statute of Limitations of the National Internal Revenue Code covering income tax and 3rd and 4th quarter business tax liabilities that petitioner executed, respondent CIR had until 31 July 2001 to issue said deficiency tax assessments. Respondent CIR admits that the Formal Demand Letter and the Assessment Notices were mailed to petitioner's old address at Paseo de Roxas, Makati City on 20 July 2001. This letter was returned to sender by the post office on 23 July 2001 on the ground that the addressee "MOVED OUT". Respondent CIR cannot, however, feign ignorance of petitioner's new address since petitioner filed a notice of change of address with the Large Taxpayers Service on 22 March 2001 and complied with the requirements for the change of its address. This fact is bolstered by the issuance of a new Certificate of Registration showing petitioner's new address. Thus, the only time petitioner received and had actual knowledge of respondent CIR's deficiency tax assessments was when it personally received the Collection Letter dated 23 October 2001. Based on the facts admitted, the case is thus ripe for summary judgment. Respondent CIR cannot oppose and respondent CTA cannot deny the motion for summary judgment based only on the ground that the factual basis of the deficiency tax assessments requires the presentation of evidence. The factual basis thereof is immaterial if the pleadings and documents before respondent CTA will show that the deficiency tax assessments were issued beyond the prescriptive period. To proceed with the presentation of evidence to prove the factual basis of the deficiency tax assessments is a practice in futility and will waste the time of the court if the facts at hand already show that the same have already prescribed. WHEREFORE, the instant Petition is hereby GRANTED. The Resolutions of the Court of Tax Appeals dated 28 March 2003 and 8 July 2003 are hereby ANNULLED AND SET ASIDE. The Court of Tax Appeals is ORDERED to GRANT petitioner's Motion for Summary Judgment and to render summary judgment thereon. SO ORDERED. Salazar-Fernando and Sundiam, JJ . , concur. Footnotes 1. Herrera, Comments on the 1997 Rules of Civil Procedure as Amended, 1997 Edition, p. 279 citing Estrada v. Hon. Consolacion, et al ., 71 SCRA 523 (1976) which was also cited in Natalia Realty Corp. v. Vallez , 173 SCRA 536 (1989). 2. Rollo , p. 61, Annex "C". 3. Rollo , p. 40, Annex "A". 4. Rollo , p. 131, Annex "H". 5. Rollo , p. 123, Annex "F", Joint Stipulation of Facts and issues. 6. Rollo , p. 82, Annex "A". 7. Rollo , pp. 8384, Annex "B". 8. Rollo , p. 85, Annex "C". 9. Rollo , pp. 8687, Annexes "D & E". 10. Rollo , p. 88, Letter addressed to the Large Taxpayers Service of the Bureau of Internal Revenue. 11. Rollo , p. 93. 12. Rollo , p. 110. 13. Rollo , p. 64, Annex "D". 14. Rollo , p. 130, Annex "G". 15. Rollo , p. 127, Annex "F". 16. Herrera, supra , p. 282. 17. Hererra, supra , p. 284, citing Paz v. Court of Appeals , 181 SCRA 26 (1990).