Revised Rules and Regulations Implementing R.A. No. 8502

EN BANC [C.T.A. EB CASE NO. 587 . November 10, 2011.] (C.T.A. Case No. 7930) PHILIPPINE NATIONAL OIL COMPANY , petitioner , vs . COMMISSIONER SIXTO S. ESQUIVIAS IV of the BUREAU OF INTERNAL REVENUE , respondent . RESOLUTION COTANGCO-MANALASTAS , J p : For resolution is petitioner's Motion for Reconsideration of the Court En Banc' s Decision dated June 2, 2011, dismissing its petition for review for lack of merit. Petitioner argues that the right of respondent to assess petitioner for deficiency Value-Added Tax (VAT) for the year 2003 can no longer be enforced on the ground of prescription. 1 In this case, the alleged deficiency tax refers to VAT incurred for the year 2003. Under Section 114 of the NIRC of 1997, as amended, every person liable to pay the VAT shall file a quarterly return of the amount of his gross sales or receipts within twenty five (25) days following the close of each taxable quarter. Thus, for the year 2003, the last quarterly return was filed on January 2004. Therefore, respondent BIR had three (3) years from January 2004 or until January 2007 within which to formally assess petitioner of any deficiency tax. 2 Respondent BIR issued the Formal Assessment Notice on January 15, 2008, on the ground that a false return was filed by petitioner. Respondent invokes the 10-year prescriptive period under Section 222 of the 1997 Tax Code, as amended. 3 Petitioner filed its Letter-Protest against the said assessment, which remained unacted upon by respondent. Thus, petitioner filed with the Department of Justice (DOJ) a Petition for Review of BIR's Formal Assessment being a government owned/controlled corporation pursuant to P.D. No. 242. 4 It was only on May 20, 2009 that petitioner filed with the CTA its Motion to Admit Attached Petition for Review to assail the subject assessment of deficiency VAT for 2003 and prayed for the liberal interpretation of the prescribed reglementary period to appeal. 5 Petitioner posits that the exceptions to the law on prescription should be strictly construed in favor of the taxpayer considering that our tax law provides a statute of limitations in the collection of taxes for the purpose of safeguarding taxpayers from unreasonable examination, investigation or assessment. 6 Petitioner further argues that its situation is not one which would justify applying the 10-year prescriptive period. Petitioner explains that it did not intentionally file a false return since the under-declaration of income was not done deliberately. It reasons that its failure to report the intercompany advances as its income for the year 2003 was an omission in good faith and not done intentionally to evade taxes. 7 We disagree. ESTaHC As has been discussed by the Supreme Court in the case of Aznar vs. Court of Tax Appeals and Collector of Internal Revenue , 8 a false return is different from a fraudulent return, to wit: "We believe that the proper and reasonable interpretation of said provision should be that in the three different cases of (1) false return, (2) fraudulent return with intent to evade tax, (3) failure to file a return, the tax may be assessed, or a proceeding in court for the collection of such tax may be begun without assessment, at any time within ten years after the discovery of the (1) falsity, (2) fraud, (3) omission. Our stand that the law should be interpreted to mean a separation of the three different situations of false return, fraudulent return with intent to evade tax, and failure to file a return is strengthened immeasurably by the last portion of the provision which segregates the situations into three different classes, namely, 'falsity', 'fraud' and 'omission'. That there is a difference between 'false return' and 'fraudulent return' cannot be denied. While the first merely implies deviation from the truth, whether intentional or not, the second implies intentional or deceitful entry with intent to evade the taxes due." Thus, the intent to evade is immaterial in case of filing of false returns. As long as there is some deviation from the truth, whether it is due to mistake, ignorance or carelessness; falsity arises. 9 The allegation of "good faith" is an irrelevant mechanism to escape the applicability of the ten-year prescriptive period. 10 In the instant case, petitioner failed to declare in its VAT returns the taxable income amounting to P493,061,799.28. 11 This falsity arising in petitioner's VAT returns provides ample basis for the application of the 10-year prescriptive period. Based on the foregoing, the Court finds no reason for the liberal application of procedural rules. It is a matter of record that petitioner filed its letter-protest on February 13, 2008, contesting respondent's assessment for deficiency VAT. Applying the periods provided in Section 228 of the 1997 Tax Code, as amended, respondent had 180 days or until August 11, 2008 to resolve the protest. Counting thirty (30) days from the lapse of the 180 days, petitioner had until September 10, 2008 to file its appeal with the Court of Tax Appeals. Petitioner filed its Motion to Admit Attached Petition only on May 20, 2009 or nearly nine (9) months after the period when it should have filed its appeal with the CTA. Petitioner's appeal was clearly filed beyond the prescriptive period and was properly dismissed. HCITDc It has been settled that the right to appeal is merely statutory and one who seeks to avail of it must comply with the statute or rules. While the Courts may have relaxed the governing periods of appeal in order to serve substantial justice, the same has only been done in exceptional cases. A perusal of the records will reveal that the instant case is not one that will justify a relaxation of the rules. 12 We reiterate the ruling of the CTA First Division in its Resolution 13 dated August 24, 2009, as follows: "As a general principle, rules prescribing the time within which certain acts must be done, or certain proceedings taken, are considered absolutely indispensable to the prevention of needless delays and to the orderly and speedy discharge of judicial business. By their very nature, these rules are regarded as mandatory. In United Pulp and Paper Co., Inc. vs. United Pulp and Paper Chapter-Federation of Free Workers (G.R. No. 141117, March 25, 2004) , the Supreme Court held that: '(R)ules of procedure exist for purpose, and to disregard such rules in the guise of liberal construction would be to defeat such purpose. Procedural rules are not to be disdained as mere technicalities. They may not be ignored to suit the convenience of a party. Adjective law ensures the effective enforcement of substantive rights through the orderly and speedy administration of justice. Rules are not intended to hamper litigants or complicate litigation. But they help to provide for a vital system of justice where suitors may be heard in the correct form and manner, at the prescribed time in a peaceful though adversarial confrontation before a judge whose authority litigants acknowledge. Public order and our system of justice are well served by a conscientious observance of the rules of procedure, particularly by government officials and agencies.' In the instant case, it is undisputed that the Petition for Review was only filed on May 20, 2009, or after a lapse of about nine (9) months after the 180-day period to file Petition for Review has expired due to inaction of the said formal protest by the respondent. Moreover, petitioner has not shown any valid explanation why it initially filed a Petition for Review before the DOJ, instead of this Court as provided in the Tax Code. If there was such a mistake, the same has not been shown in the motion to be excusable as to warrant the liberal interpretation of the prescribed rules of procedure." WHEREFORE , premises considered, the instant Motion for Reconsideration is hereby DENIED for lack of merit. SO ORDERED . (SGD.) AMELIA R. COTANGCO-MANALASTAS Associate Justice Ernesto D. Acosta, P.J., Juanito C. Castaeda, Jr., Lovell R. Bautista, Caesar A. Casanova, Olga Palanca-Enriquez and Cielito N. Mindaro-Grulla, JJ., concur. Erlinda P. Uy, J., took no part. Esperanza R. Fabon-Victorino, J., is on leave. Footnotes 1. Rollo , C.T.A. EB Case No. 587, p. 331. 2. Rollo , p. 332. 3. Rollo , p. 333. 4. Rollo , p. 163. 5. Rollo , p. 164. 6. Rollo , p. 333. 7. Rollo , pp. 333-334. 8. G.R. No. L-20569, August 23, 1974. 9. Samar-I Electric Cooperative, Inc. vs. Commissioner of Internal Revenue, C.T.A. Case No. 6697, May 27, 2008. 10. Ibid. 11. Rollo , p. 22. 12. Rollo , p. 320 citing Apex Mining Co., Inc. vs. Commissioner of Internal Revenue, G.R. No. 122472, October 20, 2005. 13. Rollo , pp. 151-152.