Commissioner of Internal Revenue v. Court of Tax Appeals

THIRD DIVISION [CA-G.R. SP No. 82621. September 21, 2005.] COMMISSIONER OF INTERNAL REVENUE , petitioner , vs . COURT OF TAX APPEALS and ESTATE AND HEIRS OF PONCIANO L. ALMEDA , respondents . D E C I S I O N VIDALLON-MAGTOLIS , J p : The issue of whether or not respondent Court of Tax Appeals (CTA) has jurisdiction over the private respondents' petition for review is brought to the fore in this petition for certiorari and prohibition under Rule 65 of the 1997 Rules of Civil Procedure, which seeks to reverse and set aside the following issuances of the respondent court: 1) resolution dated September 9, 2003 denying the petitioner's motion to dismiss; 1 and 2) resolution dated December 9, 2003 denying the petitioner's motion for reconsideration of the foregoing resolution. 2 THE ANTECEDENT FACTS The private respondents are the surviving heirs of the late Ponciano L. Almeda who died intestate on October 16, 1997. On April 2, 1998, the said respondents wrote a letter 3 to then Commissioner of Internal Revenue Liwayway Vinzons-Chato, requesting the following: a) a 30-day extension within which to file the estate tax return; b) an extension of two (2) years within which to extrajudicially settle the estate tax due; and c) a waiver of the 25% surcharge imposable on the estate tax due. Such request was granted by the said Commissioner in BIR Ruling No. 066-98 dated May 21, 1998. 4 On August 31, 1998, Regional Director Virginia L. Trinidad issued a letter of authority 5 in favor of Omar Mustari and Macalandong Balindong in order for the latter to examine the books of accounts and other accounting records of the estate of the late Ponciano Almeda. On September 23, 1998, Revenue District Officer (RDO) Leonardo Albar issued a memorandum 6 for the Regional Director, wherein the deficiency tax of the said estate was computed at P199,518,745.23. The private respondents then wrote a letter to former Commissioner of Internal Revenue Beethoven Rualo dated December 5, 1998, 7 wherein the former proposed that an 800-square meter parcel of land together with its two-storey improvement titled under TCT No. 65898 and located at 1014 Pasay Road, San Lorenzo, Makati City, be accepted as payment of their tax obligation. The private respondents further acknowledged their receipt of the preliminary assessment notice 8 and accordingly filed a protest thereto on February 10, 1999. 9 On February 12, 1999, various assessment notices 10 were issued by the Bureau of Internal Revenue (BIR) through Commissioner Rualo. All the said notices stated that the amounts due therein should be paid on or before March 15, 1999. On March 8, 1999, the private respondents wrote a letter 11 to Commissioner Rualo, wherein they reiterated their proposal to pay their tax obligation in the form of real property and they indicated their own computation of their tax obligation. This was followed by another letter dated March 26, 1999 12 clarifying the assessment. On May 21, 1999, Commissioner Rualo denied the proposal of the private respondents to pay the tax liability of the respondent estate in the form of four (4) floors of Marvin Plaza. 13 Commissioner Rualo further stated therein that unless the tax liability is paid on or before June 25, 1999, the collection thereof would proceed through the administrative processes of warrant of distraint and/or levy. 14 A "Final Notice Before Seizure" 15 was likewise issued on the same date against the private respondents. In response thereto, the private respondents wrote another letter 16 dated June 7, 1999 to Commissioner Rualo, stating therein that their protest letter was acted upon by RR8-Assessment Division by referring back their docket to RDO-48, BIR West Makati. Laurence Almeda, Deputy Administrator of the respondent estate, further wrote to Commissioner Rualo on June 10, 1999, 17 and indicated therein that a letter protesting the assessment was submitted to the Office of the Commissioner on March 12, 1999. In a letter dated August 25, 1999, 18 RDO Ner Alfredo Plana wrote the private respondents regarding their stance on the tax assessments issued on the estate of the late Ponciano Almeda. The said RDO likewise sent the private respondents a copy of the report submitted by Assistant Revenue District Officer Manuel San Pedro concerning the review of the collection cases bearing on the estate tax, income taxes from 1994 to 1997 and value added taxes for 1996 to 1997. 19 On April 14, 2000, the counsel of the subject estate filed a petition for the issuance of letters of administration, in preparation for the judicial settlement of the estate, 20 which has been docketed as Special Proceeding No. M-5024. 21 The counsel of the said estate subsequently requested the Office of the Commissioner for an extension of another three (3) years from May 16, 2000, within which to pay the estate tax liabilities of P344,000,000.00, without prejudice to the protest filed in February 1999. 22 In a memorandum dated May 10, 2000, Deputy Commissioner Romeo S. Panganiban granted such request for extension. 23 On June 15, 2001, a warrant of distraint and/or levy 24 for the sum of P57,142,050.12 was issued by Commissioner Rene G. Baez against the respondent estate. The private respondents then requested that such warrant be recalled in a letter dated September 5, 2001. 25 On April 4, 2003, counsel for the private respondents wrote a letter 26 to Commissioner Guillermo Parayno, requesting that a re-assessment be made on the respondent estate. A follow-up letter was written on April 11, 2003. 27 Commissioner Parayno then issued a notice of denial on May 21, 2003, 28 informing the private respondents that their offer of compromise settlement in the amount of P120,000,000.00 has been denied. The private respondents accordingly filed before the respondent court a petition for review on June 4, 2003, 29 questioning the inclusion of several properties as part of the respondent estate and praying for the modification of the said estate's tax liabilities. Instead of filing an answer, the petitioner filed a motion to dismiss, 30 arguing therein that the final assessment notices issued on February 12, 1999 against the respondent estate have long been final and executory, such that there is no disputed assessment to question before the respondent court. On September 9, 2003, respondent CTA issued the first assailed resolution, 31 the dispositive portion of which reads: "WHEREFORE, in the light of the foregoing, the instant Motion to Dismiss is hereby DENIED for lack of merit. Accordingly, respondent is hereby ORDERED to submit his answer within ten (10) days upon receipt of this resolution. "SO ORDERED." 32 The petitioner thereafter filed a motion for reconsideration, 33 but the same was denied in the second assailed resolution dated December 9, 2003. 34 THE ISSUE Hence this petition, where the petitioner imputes a single error to the respondent court: RESPONDENT COURT OF TAX APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN DENYING PETITIONER'S MOTION THAT THE COURT HAS NO JURISDICTION TO TAKE COGNIZANCE THE PRIVATE RESPONDENTS' PETITION FOR REVIEW, THE SAME BEING PATENTLY CONTRARY TO THE PROVISION OF SECTION 228 OF THE TAX CODE, AS AMENDED, AND APPLICABLE JURISPRUDENCE ON THE MATTER. ARGUMENTS OF THE PETITIONER The petitioner contends that the exclusive appellate jurisdiction of the CTA arises only in cases of disputed assessments, which occur when an assessment has been protested or contested within thirty (30) days from receipt thereof. If no protest has been filed within such period, the assessment becomes final and unappealable. And if the protest is denied or is not acted upon within one hundred eighty (180) days, the decision or inaction may be appealed to the CTA within thirty (30) days from receipt of the said decision or from the lapse of 180 days. The petitioner points out that in the instant case, the private respondents received the various assessment notices and demand letters on February 12, 1999, such that the latter had only until March 14, 1999 within which to file their protest. However, instead of filing a protest, the private respondents, through Laurence P. Almeda, Deputy Administrator of the respondent estate, filed a letter dated March 8, 1999, signifying their desire to settle their tax liabilities by offering four (4) floors of the Marvin Plaza building as payment through a dacion en pago . According to the petitioner, such letter is not a protest to the tax assessments dated February 12, 1999 as it merely offers real property as payment of the tax obligations of the private respondents. It can be gleaned from such letter that there was no intention to contest the assessment and that the private respondents simply wanted to settle their tax liabilities. It follows then that the respondent court erred in considering the said letter as a protest to the assessment notices dated February 12, 1999. The petitioner further argues that the letter of the private respondents dated September 5, 2001 cannot be considered as another letter-protest because the latter did not attack or assail the assessments as invalid or contrary to law. In the said letter, private respondents merely expressed their willingness to pay the taxes within the soonest possible time and simply prayed that the warrant of distraint and levy be recalled. The petitioner likewise submits that the said warrant is proof of the finality of the assessment and forecloses all avenues for reconsideration. The private respondents should have thus filed a petition for review with the respondent court within thirty (30) days from August 30, 2001, their date of receipt of the said warrant. But they filed their petition for review only on June 4, 2003, or more than two (2) years thereafter. Clearly then, respondent CTA had no jurisdiction to take cognizance of the same. Lastly, the petitioner claims that the respondent court erred in interpreting that the appealable decision is the petitioner's notice of denial dated May 21, 2003. Such notice of denial is a notification denying the offer of compromise by the private respondents and is not a decision on the protest allegedly filed by the latter. Hence, the petitioner avers that the respondent court overstepped its authority in acquiring jurisdiction over the petition for review of the private respondents. The assailed resolutions should accordingly be declared null and void. PROCEDURAL DEVELOPMENT On May 13, 2004, this Court directed the private respondents to file their comment to the petition within ten (10) days from notice. 35 On September 23, 2004, it was noted that no comment was filed by the private respondents. 36 This Court thus declared the instant petition submitted for decision sans comment on June 2, 2005. 37 THE COURT'S RULING The petition is bereft of merit. A close perusal of the letter of the respondent estate dated March 8, 1999 reveals that while it is denominated as "Real Property as Payment for Internal Revenue Taxes", its contents show contested amounts of their tax obligations. In fact, the following chart and explanation were included: "These are our tax obligations Fig. 1 Basic Taxes Per review (Annex C) Per protest A. Income tax 1994-96 * 8,349,382 9,071,793 B. VAT deemed sale 14,699,643 8,339,168 C. VAT rental deposit 1,550,953 1,550,953 D. VAT 1997 4,021,775 806,674 E. VAT 1996 * 3,465,518 3,350,412 F. Estate tax 239,344,350 225,105,614 G. Income tax 1997 4,829,292 4,200,619 Total tax obligation 276,260,913 252,425,233 "We availed of the (*) VAP and consequently, strongly believe in our entitlement to the VAP's benefits. The VAP should particularly ease our tax burden with regard to interest and surcharges. Further, the implementing rules and regulations of the VAP are bereft of any proviso that would deny taxpayers of its benefits, notwithstanding the taxpayer's inability to comply with all of the procedures set for the VAP's availment. . . "xxx xxx xxx "We hereby declare our true and correct income to be as shown above. Presentation and inclusion of the interest, penalty and compromise fees in the aforesaid documents was not performed, as it is believed that these amounts are waivable in our favor. . . ." It can be gleaned from the foregoing that the private respondents questioned the tax obligations imposed upon them, indicating the amounts they were contesting and the bases thereof. We can thus consider the said letter as a protest to the various assessments dated February 12, 1999 even if it was not denominated as such. It follows then that the respondent court did not err in treating such letter as a protest. As for the petitioner's argument that the notice of denial dated May 21, 2003 issued by Commissioner Guillermo Parayno, Jr. is not a decision on the protest but a denial of the private respondents' offer of compromise, jurisprudence dictates that a final demand letter for payment of delinquent taxes may be considered a decision on a disputed or protested assessment. 38 In this regard, the Supreme Court has held: "The letter of February 18, 1963. (Exh. G), in the view of the Court, is tantamount to a denial of the reconsideration or [respondent corporation's] . . . protest o[f] the assessment made by the petitioner, considering that the said letter [was] in itself a reiteration of the demand by the Bureau of Internal Revenue for the settlement of the assessment already made, and for the immediate payment of the sum of P758,687.04 in spite of the vehement protest of the respondent corporation on April 21, 1961. This certainly is a clear indication of the firm stand of petitioner against the reconsideration of the disputed assessment, in view of the continued refusal of the respondent corporation to execute the waiver of the period of limitation upon the assessment in question. "This being so, the said letter amount[ed] to a decision on a disputed or protested assessment and, therefore, the court a quo did not err in taking cognizance of this case." 39 In the instant case, the said notice of denial reads: "This is to inform you that your offer of compromise settlement pursuant to Revenue Regulations No. 7-2001 dated July 31, 2001 in the amount of Php120,000,000.00 for delinquent Estate Tax on the estate of Ponciano L. Almeda, who died last October 16, 1997 under Assessment No. RO8 EA-48-341-97-99-480 dated 12 February 1999, is hereby DENIED. "You are, therefore, requested to present this notice to the Revenue Regional Director of Revenue Region (RR) No. 8 at 4th floor, Atrium Building, Makati Avenue, Makati City for computation of additional interest and surcharges. "Within seven (7) days upon receipt of this Notice, you are, likewise, requested to pay the basic amount due, Php239,344,949.67 plus the additional interest and surcharges as computed by RR No. 8, to any Authorized Agent Bank (AAB) housed at the same BIR regional office building." 40 In line with the foregoing jurisprudential principle, we agree with the respondent court when it declared that "the finality of the assessment became effective only upon receipt of petitioners of the Notice of Denial . . ." 41 Consequently, we hold that the respondent court did not err in taking cognizance of the private respondents' petition for review. After all, it should be remembered that under Section 7(1) of Republic Act No. 1125, otherwise known as "An Act Creating the Court of Tax Appeals", the jurisdiction of the respondent court has been defined as follows: "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 assessments, 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 laws or part of law administered by the Bureau of Internal Revenue. . . " (Emphasis ours.) This was reiterated in Section 7 of Republic Act No. 9282 which reads in part: "SECTION 7. Section 7 of the same Act is hereby amended to read as follows: 'Sec. 7. Jurisdiction . The CTA shall exercise: '(a) Exclusive appellate jurisdiction to review by appeal, as herein provided: (1) Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the National Internal Revenue or other laws administered by the Bureau of Internal Revenue; . . ." (Emphasis ours.) In interpreting such provision, the Supreme Court ruled: "The appellate jurisdiction of the CTA is not limited to cases which involve decisions of the Commissioner of Internal Revenue on matters relating to assessments or refunds. The second part of the provision covers other cases that arise out of the NIRC or related laws administered by the Bureau of Internal Revenue. The wording of the provision is clear and simple. It gives the CTA the jurisdiction to determine if the warrant of distraint and levy issued by the BIR is valid and to rule if the Waiver of Statute of Limitations was validly effected." 42 All told, we find that the respondent court did not commit any grave abuse of discretion in rendering the assailed resolutions denying the petitioner's motion to dismiss and motion for reconsideration. "By grave abuse of discretion is meant such capricious and whimsical exercise of judgment equivalent to lack of jurisdiction. Mere abuse of discretion is not enough. It must be grave, as when it is exercised arbitrarily or despotically by reason of passion or personal hostility. Such abuse must be so patent and so gross as to amount to an evasion of a positive duty or to a virtual refusal to perform the duty enjoined or to act at all in contemplation of law." 43 WHEREFORE, the instant petition is hereby DISMISSED for lack of merit. SO ORDERED. Guevara Salonga and Lampas Peralta, JJ., concur. Footnotes 1. Rollo , p. 18. 2. Id. at p. 25. 3. Id . at p. 37. 4. Id . at p. 39. 5. Id . at p. 41. 6. Id . at p. 42. 7. Id . at p. 45. 8. Id . at p. 47. 9. Id . at p. 48. 10. Id . at pp. 51-60. 11. Id . at p. 61. 12. Id . at p. 64. 13. Id . at p. 69. 14. Ibid . 15. Id . at p. 70. 16. Id . at p. 71. 17. Id . at p. 72. 18. Id . at p. 73. 19. Id . at p. 76. 20. Please see par. 4, Id . at p. 86. 21. Id . at p. 117. 22. Please see par. 5, Id . at p. 86. 23. Id . at p. 84. 24. Id . at p. 133. 25. Id . at p. 131. 26. Id . at p. 89. 27. Id . at p. 92. 28. Id . at p. 125. 29. Id . at p. 27. 30. Id . at p. 93. 31. Id . at p. 18. 32. Id . at p. 24. 33. Id . at p. 103. 34. Id. at p. 25. 35. Id . at p. 136. 36. Id . at p. 142. 37. Id . at p. 143. 38. Commissioner of Internal Revenue vs. Isabela Cultural Corporation , 361 SCRA 71, 77. 39. Id . at pp. 77-78, citing Commissioner of Internal Revenue vs. Ayala Securities Corporation , 70 SCRA 204, 209. 40. Rollo , p. 125. 41. Id . at p. 23. 42. Philippine Journalists, Inc. vs. Commissioner of Internal Revenue , 447 SCRA 214, 224. 43. Cantoria vs. Commission on Elections , 444 SCRA 538, 543.