SECOND DIVISION
[G.R. No. 240872. October 17, 2018.]
COMMISSIONER OF INTERNAL REVENUE, petitioner, vs.MINDANAO SANITARIUM AND HOSPITAL, INC., respondent.
NOTICE
Sirs/Mesdames :
Please take notice that the Court, Second Division, issued a Resolution dated17 October 2018which reads as follows:
"G.R. No. 240872 (Commissioner of Internal Revenue vs. Mindanao Sanitarium and Hospital, Inc.). — This is a Petition for Review 1 under Rule 45 of the Rules of Court assailing the March 21, 2018 Decision 2 and July 26, 2018 Resolution 3 of the Court of Tax Appeals (CTA) in CTA EB Case No. 1610, both of which affirmed the December 16, 2016 Amended Decision 4 of the CTA's Second Division in CTA Case No. 8700.
The Antecedent Facts
Through a letter of authority dated June 7, 2010, the Commissioner of Internal Revenue (CIR) ordered an examination of the accounting records of Mindanao Sanitarium and Hospital, Inc. (MSHI) for the year 2009. 5 Subsequently, the CIR issued a Preliminary Assessment Notice (PAN) on September 24, 2012. 6 Later, on October 17, 2012, the CIR sent MSHI a Formal Letter of Demand (FLD) informing the latter that its tax liabilities for 2009 totaled P2,897,610.48. 7
Thus, on November 29, 2012, MSHI filed a request for reconsideration of the assessment. 8
On May 23, 2013, the CIR, without acting on the request, allegedly issued a Final Notice Before Seizure (FNBS), which MSHI supposedly received on June 3, 2013. 9
On July 25, 2013, the CIR issued a Warrant of Distraint and/or Levy (WDL) against MSHI. This caused the latter to file a petition for review with the CTA assailing the CIR's denial of the request for reconsideration. MSHI filed the said petition on August 22, 2013. 10 cEaSHC
The Ruling of the CTA's Second Division
On August 8, 2016, the Second Division of the CTA denied MSHI's petition for review ruling that the protest was filed out of time. Noting that the CIR never furnished MSHI with a Final Decision on Disputed Assessment (FDDA), the tax court treated the FNBS as an FDDA 11 for purposes of determining whether MSHI timely filed its petition. Citing Sec. 228 of the Tax Code, which provides that taxpayers desiring to protest the CIR's assessments must appeal the same to the CTA within thirty (30) days from receipt of the FDDA, the Second Division of the CTA ruled that the petition was filed out of time. It was observed that MSHI received the FNBS on July 3, 2013 while the was petition was filed on August 22, 2013, or more than thirty (30) days thereafter. The petition was therefore dismissed, thus:
WHEREFORE, in view thereof, the instant Petition for Review is DENIED, for lack of jurisdiction.
SO ORDERED. 12
MSHI filed a motion for reconsideration, which was later granted after the Second Division of the CTA noticed that the CIR failed to formally offer into evidence the entire case record of the Bureau of Internal Revenue (BIR), including the FNBS, thus rendering the notice, inter alia, inadmissible. To the tax court, it was as if no FDDA was issued. Hence, the Second Division of the CTA treated the case as a timely appeal of the CIR's inaction. The case was therefore disposed, thus:
WHEREFORE, in view thereof, petitioner's Motion for Reconsideration is PARTIALLY GRANTED. Accordingly, the dispositive portion of the assailed Decision dated August 8, 2016 is AMENDED, as follows:
"WHEREFORE, in view thereof, the instant Petition for Review is PARTIALLY GRANTED. Accordingly, petitioner is liable for deficiency income tax and value added tax amounting to P45,493.75, inclusive of the 25% surcharge imposed under Section 248(A)(3) of the NIRC of 1997, as amended, summarized as follows:
|
|
BASIC TAX DUE |
SURCHARGE (25%) |
TOTAL |
|
Income Tax |
P16,543.18 |
P4,135.80 |
P20,678.98 |
|
VAT |
P19,851.82 |
P4,962.96 |
P24,814.78 |
|
Total |
P36,395.00 |
P9,098.75 |
P45,493.75 |
In addition, petitioner should be held liable to pay:
(a) Deficiency interest at the rate of 20% per annum pursuant to Section 249(B) of the NIRC of 1997, as amended, on the basic deficiency income tax and value-added tax, computed from April 15, 2010 and January 25, 2010, respectively, until full payment thereof; and
(b) Delinquency interest at the rate of 20% per annum on the total amount due of P45,493.75 and on the deficiency interest which have accrued as aforestated in (a), computed from December 5, 2012 until full payment thereof, pursuant to Section 249(c) of the NIRC of 1997, as amended." CTIEac
SO ORDERED. 13
The CIR then sought reconsideration, only to be denied by the Second Division of the CTA in its February 21, 2017 Resolution. 14
The Ruling of the CTA En Banc
Aggrieved, the CIR elevated the case to the CTA En Banc, which found no merit in the appeal. First, it was held that the Second Division of the CTA properly refused to consider the FNBS since the CIR failed to offer the same into evidence notwithstanding every opportunity to do so. 15 Second, the CTA En Banc ruled that the WDL could be considered an FDDA for purposes of determining whether MSHI timely filed its petition for review. Since the WDL was served on MSHI on July 25, 2013, pursuant to Section 228 of the Tax Code, it had thirty (30) days therefrom, or until August 24, 2013, to file its petition for review. Thus, when MSHI filed the petition on August 22, 2013, it did so within the reglementary period. The dispositive portion of the CTA En Banc's decision reads: DcHSEa
WHEREFORE, the instant Petition for Review is hereby DENIED for lack of merit.
SO ORDERED. 16
The CIR filed a motion for reconsideration that was subsequently denied by the CTA En Banc in its July 26, 2018 Resolution.
Hence, the instant petition.
The Issue
Whether or not MSHI's petition for review was filed on time.
The Court's Ruling
The Court rules in the affirmative.
Section 228 of the Tax Code relevantly provides that a taxpayer desiring to appeal the CIR's denial of a protest must do so within thirty (30) days from notice of such denial. The provision also states that if the CIR does not act on a protest within one hundred eighty (180) days, the taxpayer may appeal such inaction to the CTA within thirty (30) days from the lapse of the said one hundred eighty (180)-day period.
MSHI was notified of the WDL, considered by the CTA En Banc as the CIR's denial of the protest, on July 25, 2013. Thus, pursuant to Section 228, MSHI had until August 24, 2013 to file a petition for review. The CIR countered, arguing the CTA En Banc's treatment of the WDL is without legal basis. The CIR maintained that it did not act on MSHI's protest. Hence, since MSHI filed its protest on November 29, 2012, following Sec. 228, it only had until June 28, 2013 to appeal the CIR's inaction.
The resolution of the issue depends on whether or not the WDL was properly treated as the final action of the CIR appealable before the CTA.
To recall, the FNBS, which would be considered as the CIR's final action under ordinary circumstances, was not formally offered into evidence. In fact, the BIR's entire case record was not offered. However, the parties, in their joint stipulation of facts, agreed as to the existence and issuance of the WDL. Hence, the WDL is the only evidence on record that served to inform MSHI of the CIR's decision on the protest.
Considering the peculiar circumstances of this case, the Court finds no reversible error in the CTA En Banc's treatment of the WDL as the final action of the CIR, which is properly the subject of an appeal. SCaITA
It is axiomatic that the determination of whether the CIR's demand to pay is its final action on a taxpayer's protest is conditioned upon the language used in the said demand. 17 As a rule, the CIR should always indicate to the taxpayer in clear and unequivocal language what constitutes the final determination of the disputed assessment. 18
Hence, the Court has ruled that (1) a final letter of demand calling for the immediate payment of tax liabilities 19 and (2) an FNBS indicating that it is the final notice prior to seizure of property 20 may properly be considered as the CIR's final action on a disputed assessment, hence making them the proper subjects of an appeal before the CTA. These rulings were based on the CIR's representation that the letter and notice, in the respective cases, were its final actions denying the taxpayers' requests for reconsideration.
In this case, following the logic of the aforementioned rulings, the CTA En Banc committed no reversible error in treating the WDL as the CIR's final action on MSHI's request for reconsideration. The said warrant unmistakably informed MSHI of the CIR's denial of the protest. Since the CIR ordered the sale of MSHI's property, it reasonably followed that the request for reconsideration was denied outright. In no uncertain terms, the WDL directed the Acting Seizure Agent to "sell and/or forfeit in favor of the Republic of the Philippines so much of [MSHI's] personal/real property as may be necessary to satisfy in full the sum or sums due." 21 Thus, it cannot be gainsaid that the language of the warrant sufficiently appraised MSHI of the denial of its request for reconsideration. As such, the WDL was properly considered by the CTA En Banc as the CIR's final action.
To be sure, the Court has not lost sight of its dictum in Commissioner of Internal Revenue v. Union Shipping Corporation. 22 In that case, it was held that the WDL should not be considered as the CIR's final action on the taxpayer's protest, thus:
Much later, this Court reiterated the above-mentioned dictum in a ruling applicable on all fours to the issue in the case at bar, that the reviewable decision of the Bureau of Internal Revenue is that contained in the letter of its Commissioner, that such constitutes the final decision on the matter which may be appealed to the Court of Tax Appeals and not the warrants of distraint. 23 (Emphasis and underscoring from the original, citations omitted)
Nevertheless, since the facts of the instant case are fundamentally distinct from those of Union Shipping, the ruling in the latter cannot be made to apply here. In Union Shipping, the CIR filed a collection case after issuing the WDL. The Court considered the filing of the case as the CIR's final denial of the taxpayer's request for reconsideration. Thus, the period to appeal to the CTA commenced to run only from the time the taxpayer received the summons in the collection case. aTHCSE
Here, there is no evidence of any action on the part of the CIR subsequent to the issuance of the WDL. As stated earlier, the BIR's record of the case was not formally offered into evidence and was therefore rendered inadmissible. Due to the CIR's omission, the WDL, which the parties included in their joint stipulation of facts, served as the only evidence of any action taken by the CIR on MSHI's protest. Accordingly, no error can be ascribed to the CTA En Banc for treating the WDL as the CIR's final action on MSHI's request for reconsideration in this case.
On a final note, the Court deems it appropriate to reiterate the oft-cited rule that the conclusions reached by the CTA, the court dedicated exclusively to the resolution of tax problems, should not lightly be set aside unless there has been a clear abuse or improvident exercise of authority. 24 In Toshiba Information Equipment (Phils.), Inc. v. Commissioner of Internal Revenue, 25 it was ruled that:
[The] Court recognizes that the CTA, which by the very nature of its function is dedicated exclusively to the consideration of tax problems, has necessarily developed an expertise on the subject, and its conclusions will not be overturned unless there has been an abuse or improvident exercise of authority. Such findings can only be disturbed on appeal if they are not supported by substantial evidence or there is a showing of gross error or abuse on the part of the Tax Court. In the absence of any clear and convincing proof to the contrary, this Court must presume that the CTA rendered a decision which is valid in every respect. 26 (Emphasis and underscoring supplied)
WHEREFORE, the petition is DENIED. AHDacC
SO ORDERED." (Reyes, J., Jr.,J., designated as additional Member per S.O. No. 2587 dated August 28, 2018)
Very truly yours,
MARIA LOURDES C. PERFECTODivision Clerk of CourtBy:(SGD.) TERESITA AQUINO TUAZONDeputy Division Clerk of Court
Footnotes
1.Rollo, pp. 13-26.
2. The assailed decision was penned by Associate Justice Lovell R. Bautista and arrived at unanimously by the Justices of the Court of Tax Appeals sitting en banc; id. at 36-54.
3.Id. at 56-59.
4.Id. at 174-187.
5.Id. at 37.
6.Id. at 37-38.
7.Id. at 38.
8.Id.
9.Id. at 142.
10.Id. at 38.
11.Id. at 148.
12.Id. at 150.
13.Id. at 186-187.
14.Id. at 40.
15.Id. at 48.
16.Id. at 53.
17.Oceanic Wireless Network v. Commissioner of Internal Revenue, 513 Phil. 317, 323 (2005).
18. Advertising Associates, Inc. v. Court of Appeals, 218 Phil. 730, 736 (1984).
19. Commissioner of Internal Revenue v. Ayala Securities Corporation, 162 Phil. 287, 295 (1976).
20. Commissioner of Internal Revenue v. Isabela Cultural Corporation, 413 Phil. 376, 381 (2001).
21. Rollo, p. 233.
22. 263 Phil. 132 (1990).
23. Id. at 138.
24. Commissioner of Internal Revenue v. Hambrecht & Quist Philippines, Inc., 649 Phil. 446, 459 (2010).
25. 628 Phil. 430 (2010).
26. Id. at 468.