COMMISSIONER OF INTERNAL REVENUE v. WESTERN GUARANTY CORPORATION

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY EN BANG ********* COMMISSIONER OF CTA EB No. 2437 (CTA Case No. 9338) INTERNAL REVENUE, Present: Petitioner, -versus- DEL ROSARIO, P.J. , CASTANEDA, JR., UY, RINGPIS-LIBAN , MANAHAN , BACORRO-VILLENA, MODESTO-SAN PEDRO, REYES-FAJARDO, and CUI -DAVID, JJ. WESTERN GUARANTY Promulgated: CORPORATION, .APR 2 0 2022 Respondent. 7n /0'-<-~ ~ �-~� i)JT_---: -- X - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - DECISION UY, J.: Before this Court is the Petition for Review1 filed on February 26, 2021 by petitioner, Commissioner of Internal Revenue (CIR), against respondent, Western Guaranty Corporation (WGC), praying that the Decision2 dated July 24, 2020 and Resolution3 dated January 21 , 2021 , rendered by the First Division of this Court in CTA Case No. 9338, entitled , "Western Guaranty Corporation, Petitioner vs. Commissioner of Internal Revenue, Respondent" be reversed and set aside and another one be rendered ordering respondent to pay petitioner the assessed deficiency value-added tax (VAT), expanded ~ withholding tax (EWT), final withholding VAT (FWVAT), and (fV 1 E B Docket, pp. 6 to 12. 2 EB Docket, pp. 17 to 41. 3 EB Docket, pp. 42 to 45.

DECISION CTA EB No. 2437 (CTA Case No. 9338) documentary stamp tax (DST). The dispositive portions thereof respectively read as follows: Decision dated July 24, 2020: "WHEREFORE, in light of the foregoing considerations, the instant Petition for Review is PARTIALLY GRANTED. The assessment issued by respondent against petitioner for TY 2011 covering the compromise penalty is CANCELLED and SET ASIDE while the assessments for deficiency VAT and DST and penalties on deficiency EWT and FWVAT are UPHELD. Accordingly, petitioner is ORDERED TO PAY respondent the amount of P82,121,697.84 representing: (1) the basic deficiency VAT and DST for TY 2011, inclusive of the 25% surcharge, 20% deficiency interest and 20% delinquency interest imposed under Sections 248 (A) (3), 249 (B) and (C) of the National Internal Revenue Code (NIRC) of 1997, as amended, respectively; and, (2) the 25% surcharge on the basic deficiency EWT and FWVAT for TY 2011, inclusive of the 20% delinquency interest imposed under Section 249 (C) of the NIRC of 1997, as amended, computed until December 31, 2017, less the payments that have been made by petitioner, as shown below: --� - - - - � - : - - - - - - - - - - � �--- �--~- ~--���--�-�-��--�����- Basic tax VAT EWT FWVAT DST Total Surcharge (25%) Deficiency interest 1"15,456,297.06 I" . I" - 1"14, 160,478.66 1"29,616 775.72 3,864,074.27 VAT- 861,573.20 11,145.91 3,540,119.67 --~_8,276,913 05_ 26-Jan-2012 to 29-Dec-2015 .. - - � - � - - - - ~---- .......... (1"15,456,297.06 12,144,838.35 . . 12,144,838.35 X 20% 762,156 51 x 1,434/365 days) - ----- �-� ---~ - - - - - - - - �����- --------~ --~ VAT- . ~---- 30-Dec-2015 to . 762,156.51 31-Mar-2016 - - - - -[---~--- ------ -----f-----.-- ���-�1---�---- --� [(1'15,456,297 .06 I - 500,000.00) x20% 2,301,934.75 .. - 2,301,934.75 x 93/365 days] ____ ____, EWT- ---- ---~ 16-Jan-2012 to 14,873.59 I~ 14,873.59 18-May-2015 (1"3,446,292.80 x20% x 1,219/365 days) EWT- 19-May-2015 to 29-Jun-2015 [(1"3,446,292.80-

DECISION CTA EB No. 2437 (CTA Case No. 9338) 2,800,000) X 20% .------~+==--~ -----~------�--� r--~---�------ x 42/365 days] FWVAT- 29,608.42 29,608.42 11-Jan-2012 to 06-Mav-2015 -~---- (f'44,583.63 X 20% - - - 10,102,434.64 10,102,434.64 x 1,212/365 days] - - - 201,914.19 201,914.19 DST- -- -----~----- 06-Jan-2012 to 30-Jul-2015 - - - 189,291.11 189,291.11 (f'14, 160,478.66 ---- x20% - - - 134,144.85 134,144.85 x 1,302/365 days) DST- - - - 117,530.63 117,530.63 31-Jul-2015 to , 27-Auq-2015 [(f'14, 160,478.66 --- -+---~--- - 1,000,000.00) - - - 456,197.17 456,197.17 X 20% x 28/365 davsl 32,227,366.19 3,178,381.54 40,754.33 28,902,110.92 64,348,612.98 DST- -- ]--- 28-Aug-2015 to 30-Sep-2015 - -----� --- -- --~------- . ----~------ ' [(P14, 160,478.66 - 1,000,000 00 5,244,948.01 - - - 5,244,948.01 - 3,000,000.00) --�-� �j~j X 20% x 34/365 davsl DST- 01-0ct-2015 to 30-0ct-2015 [(P14, 160,478.66 - 1,000,000.00 - 3,000,000.00 - 2,000,000.00) X 20% x 30/365 days] DST- 31-0ct-2015 to 27 -Nov-2015 [(f'14, 160,478.66 - 1,000,000.00 - 3,000,000.00 - 2,000,000.00 - 500,000.00) x20% x 28/365 davsl DST- 28-Nov-2015 to 31-Mar-2016 [(f'14, 160,478.66 - 1,000,000.00 - 3,000,000.00 - 2,000,000.00 - 500,000.00 - 1,000,000.00) X 20% x 125/365 days] Total amount due as of March 31, 2016 Deficiency interest VAT- 01-Apr- I 2016 to 31-Dec- 2017 [(P15,456,297.06 - 500,000.00) x20% x 640/365 days]

DECISION CTA EB No. 2437 (CTA Case No. 9338) DST- -------- ..----~----- -------------- -- 01-Apr-2016 to - - 31-Dec-2017 I [(P14,160,478.66 2,335,729.50 2,335,729.50 - 1,000,000.00 - 3,000,000.00 11,301,651.70 -�--� - -- --- - -- - 2,000,000.00 11,301,651.70 - - 500,000.00 - 1,000,000.00) - 339,800.80 - - 339,800.80 x20% I x 640/365 days) I' Delinquency interest ---- VAT- - - 4,226.24 - 4,226.24 01-Apr-2016 to - 31-Dec-2017 (P32,227,366. 19 - - -� - 9,784,849.86 9,784,849.86 x20% 48,773,965.90 3,518,182.34 44,980.57 41,022,690.28 93,359,819.09 x 640/365 days) ---- --------i---- --- . -- - --- - - - - - - - - - - - ------ ---�--- -------- EWT- 01-Apr-2016 to I 31-Dec-2017 500,000.00 - - - 500,000.00 [P3, 178,381.54- 2,209,418.31 �- ---- --- 2,209,418.31) - - - �-�� ---- 2,209,418.31 X 20% - x 640/365 days] - - 28,702.94 - FWVAT- - 01-Apr-2016 to - - --- - �----- - - - 28,702.94 31-Dec-2017 - - 1,000,000.00 1 ,000,000.00 [(1'40,754.33- - - - 2,209,418.31 3,000,000.00 3,000,000.00 28,702.94) X 20% - x 640/365 days] - - 2,000,000.00 2,000,000.00 - DST- 28,702.94 1,500,000.00 1,500,000 00_ 01-Apr-2016 to 500,000.00 31-Dec-2017 1,000,000.00 1,000,000.00 [(1"28,902,110.92 - 1,000,000.00) 8,500,000.00 11,238,121.25 x20% P48,273,965.90 P1 ,308,764.03 P16,277.63 P32,522,690.28 P82,121,697.84 x 640/365 daysl Deficiency tax due as of December 31, 2017 Less: Payments made on the followinq dates 29-Dec-2015 29-Jun-2015 06-May-2015 30-Jul-2015 27-Aug-2015 30-Sep-2015 30-0ct-2015 27-Nov-2015 Total payments made Remaining amount due as of December 31, 2017 In addition, petitioner is liable to pay delinquency interest at the rate of twelve percent (12%) per annum on the total amount due as of March 31, 20161ess payments made before March 31,2016 totaling 1"'53,110,491.73, a~

DECISION CTA EB No. 2437 (CTA Case No. 9338) summarized below, computed from January 1, 2018 until full payment thereof pursuant to Section 249 (C) of the NIRC of 1997, as amended by Republic Act No. 10963, also known as Tax Reform for Acceleration and Inclusion (TRAIN) Law, and as implemented by Revenue Regulations No. 21-2018. VAT EWT FWVAT DST Total Total amount 1"32,227,366.19 1"3,178,381.54 1"40,754.33 1"28,902,110.92 1"64,348,612.98 due as of March 31, 500,000.00 2,209,418.31 28,702.94 8,500,000.00 11,238,121.25 2016 Less: 1"31,727,366.19 1"968,963.23 1"12,051.39 1"20,402,110.92 1"53,110,491.73 Payments -- . ------------ -- ---- made before March 31, 2016 Base amount of12% delinquency interest �-~--------- ------~------~--- SO ORDERED." Resolution dated January 21, 2021: "WHEREFORE, premises considered, petitioner's Motion for Reconsideration and respondent's Motion for Partial Reconsideration Re: Decision dated 24 July 2020 are hereby DENIED for lack of merit. SO ORDERED." THE PARTIES Petitioner is the Commissioner of the Bureau of Internal Revenue (BIR), with office address at the BIR, Agham Road, Diliman, Quezon City, Philippines. Respondent WGC is a domestic corporation duly organized and existing under Philippine laws, with principal office at Suite 508 BPI Office Condominium, Plaza Cervantes, Binondo, Manila, Philippines. THE FACTS The CIR issued the Letter of Authority (LOA) No. 125-2013- 000001 03/SN eLA2011 00007176 dated May 29, 2013, authorizing Revenue Officer Agnes Sison and Group Supervisor Edenny Linga/t'O

DECISION CTA EB No. 2437 (CTA Case No. 9338) of the BIR's Large Taxpayers Regular Audit Division 2, to examine WGC's books of accounts and other accounting records for all internal revenue taxes, for the period covering January 1, 2011 to December 31, 2011. On October 22, 2014, WGC received the Preliminary Assessment Notice (PAN) dated October 21, 2014, finding due from WGC deficiency income tax (IT), VAT, EWT, withholding tax on compensation (WTC), FWVAT and DST, including interests and compromise penalties, for taxable year 2011, in the total amount of 1"82,543,396.96, broken down as follows: Income tax 1"24,503,517.64 24,211,553.48 VAT 10,263.14 5,597,482.91 Percentage tax 5,823,444.04 78,367.01 EWT --~-- 22,318,768.74 WTC _!82,543,396.96 FVAT DST Grand Total ~- On November 5, 2014, WGC filed a letter rebutting the findings stated in the PAN. Subsequently, on March 10, 2015, WGC received the CIR's Final Assessment Notice (FAN) dated March 5, 2015 with attached Assessment Notices and Details of Discrepancies, all dated March 5, 2015, assessing WGC with deficiency IT, VAT, percentage tax, EWT, FWVAT, and DST, including interests and compromise penalties, for taxable year 2011, in the total amount of 1"68,415,353.83, computed as follows: -In-c-o-me tax ---1-~J4,Q~Q._1�_~_1_Z_ VAT 25,305,31_Qj7_ Percentage tax --~_�,654.QJ_ EWT ~- 5,655, 711._:1_1~ FWVAT DST , ___ 81,786.57 J!!:and Total --~~��- . 23,323,724.40 P68,415,353.83 On March 16, 2015, WGC filed a Request for Reconsideration/Alii Reinvestigation to the said FAN. /' U

DECISION CTA EB No. 2437 (CTA Case No. 9338) On March 29, 2016, WGC received the Final Decision on Disputed Assessment (FDDA) with Details of Discrepancies and Audit Results/Assessment Notices, all dated March 18, 2016, finding WGC liable for deficiency VAT and DST, compromise penalty, interests and surcharges for EWT and FWVAT for taxable year 2011 in the total amount of P53,434,094.30, broken down as follows: _YJSL_ .~. ___ .. -1-~31 ,74~2~.QJ4_ DST I 20,687,133.33 EWT 989,144.86 FWVAT 12,025.37 Grand Total P53,434,094.30 The IT and percentage tax were not anymore included in the abovementioned FDDA because of the adjustments made by the CIR and WGC, respectively. WGC also made a series of partial payments on several deficiency taxes in the FAN. Thereafter, WGC filed a Petition for Review before the Court in Division on April 28, 2016 docketed as CTA Case No. 9338 entitled "Western Guaranty Corporation, petitioner, vs. Commissioner of Internal Revenue, respondent.". In his Answer in CTA Case No. 9338 filed on June 20, 2016, the CIR interposed the following special and affirmative defenses: 1) The formal assessment notice is valid for having informed WGC of the factual and legal bases of the assessment; 2) The CIR substantially complied with the requirements for assessment as provided in Section 228 of the Tax Code; 3) WGC was given ample opportunity to challenge the assessments in its protests against the PAN, FAN, and FDDA; 4) With regard to the assessed EWT and FWVAT, WGC already paid the assessed taxes. Only the interests and surcharges for delinquency are due from WGC; 5) WGC is estopped from contesting the assessment for EWT and FVAT; and 6) The assessment issued against WGC is valid and lawful. After the pre-trial conference in CTA Case No. 9338 on October 11, 2016, and by agreement of the parties, they filed their Joint Stipulation of Facts and Issues (JFSI) on November 10, 2016. In t~

DECISION CTA EB No. 2437 (CTA Case No. 9338) Pre- Trial Order dated December 14, 2016, the Court approved and adopted the said JFSI, and deemed the Pre-Trial terminated. During trial, WGC presented its lone witness, Johnson Kwan, WGC's Vice-President. On March 28, 2018, WGC filed its Formal Offer of Evidence while the CIR filed his Comment Re: Petitioner's Formal Offer of Evidence on April 23, 2018. In the Resolution dated May 25, 2018, the Court admitted WGC's exhibits, but denied admission of the following exhibits, to wit: 1. Exhibits "P-3," and "P-5," for failure to identify the same during trial; 2 Exhibits "P-6 " "P-7 " "P-8 " and "P-9 " for failure to�'1,J submit the duly marked exhibits; and 3. Exhibits "P-10," and "P-11," for failure to present the originals for comparison. On August 7, 2018, the CIR presented his sole witness, Revenue Officer Agnes I. Sison. The CIR then filed his Formal Offer of Evidence on August 17, 2018. On December 19, 2018, WGC filed its Comment on Respondent's Formal Offer of Evidence. In the Resolution dated January 30, 2019, the Court in Division admitted the CIR's exhibits. Subsequently, counsel for WGC manifested on May 2, 2019 that he would no longer present any rebuttal evidence and would rest his case. Accordingly, the Court in Division gave the parties a period of thirty (30) days or until June 1, 2019, within which to file their respective memorandum. The CIR filed his Memorandum on June 3, 2019, while WGC's Memorandum for the Petitioner was filed on June 24, 2019. In the Resolution dated July 3, 2019, CTA Case No. 9338 was submitted for decision. In the assailed Decision4 dated July 24, 2020, the Court in Division partially granted the Petition for Review. The assessment issued against WGC for TY 2011 covering the compromise penalty was cancelled and set aside, but the assessments for deficiency VAT and DST and penalties on deficiency EWT and FWVAT were uphe~

DECISION CTA EB No. 2437 (CTA Case No. 9338) WGC filed its Motion for Reconsideration on August 24, 2020, with the CIR's Opposition (To Petitioner's Motion for Reconsideration dated 24 August 2020) on September 28, 2020. Meanwhile, the CIR filed his Motion for Partial Reconsideration Re: Decision dated 24 July 2020 on August 18, 2020, without WGC's Comment. In the assailed Resolution5 dated January 21, 2021, the Court in Division denied both parties' respective Motions for lack of merit. Undaunted, the CIR filed a Motion for Extension of Time to File Petition for Review on February 10,2021.6 In the Minute Resolution 7 dated February 11, 2021, the subject Motion was granted and the CIR was given a final and non-extendible period of fifteen (15) days from February 12, 2021, or until February 27, 2021, within which to file his Petition for Review. Thereafter, the CIR filed the instant Petition for Revie,.J3 on February 26, 2021 praying that the assailed Decision dated June 30, 2020 be reversed and set aside and another one be rendered ordering WGC to pay petitioner the assessed deficiency VAT, EWT, FWVAT and DST, including compromise penalty for taxable yar 2011. On March 16, 2021, WGC was directed to file its comment to the instant Petition for Review, within ten (10) days from noticeB WGC, however, failed to file its comment, as per Records Verification 10 dated June 14, 2021. Thereafter, the instant Petition for Review was submitted for Decision on June 23, 2021. 11 Hence, this decision. THE ISSUE The CIR raises a sole ground in the instant Petition for Review, to wit: "WITH ALL DUE RESPECT, THE HONORABLE COURT ERRED WHEN IT CANCELLED AND SEU 5 EB Docket, pp. 42 to 45. 6 EB Docket, pp. I to 4. 7 EB Docket, p. 5. 8 EB Docket, pp. 6 to 12. 9 EB Docket, pp. 47 to 48. 10 EB Docket, p. 49. 11 EB Docket, pp. 51 to 52.

DECISION CTA EB No. 2437 (CTA Case No. 9338) ASIDE THE COMPROMISE PENALTY FOR TAXABLE YEAR 2011."12 Petitioner's argument: The CIR contends that the Court in Division erred when it cancelled and set aside the compromise penalty for taxable year 2011. According to petitioner, the imposition of the compromise penalty is legally mandated pursuant to Section 249 of the Tax Code. Moreover, in the case of Commissioner of Internal Revenue vs. Filinvest Development Corporation13 (or the Filinvest case) the Honorable Supreme Court affirmed the imposition of surcharge, interest, and even the compromise penalty, viz: " x x x The imposition of deficiency interest is justified under Sec. 249 (a) and (b) of the NIRC which authorizes the assessment of the same 'at the rate of twenty percent (20%), or such higher rate as may be prescribed by regulations', from the date prescribed for the payment of the unpaid amount of tax until full payment. The imposition of the compromise penalty is, in turn, warranted under Sec. 250 of the NIRC which prescribes the imposition thereof 'in case of each failure to file an information or return, statement or list, or keep any record or supply any information required' on the date prescribed therefor." Hence, petitioner submits that the imposition of the compromise penalty is legal and warranted by the National Internal Revenue Code (NIRC) of 1997, as amended, in the instant case. THE COURT EN BANG'S RULING The instant Petition for Review lacks merit. WGC cannot be held liable for the compromise penalty. The CIR avers that WGC should be held liable for compromise penalties, citing Section 249 of the Tax Code, and the Filinvest cas~ 12 EB Docket, p. 8. 13 G.R. No. 163653, July 19,2011.

DECISION CTA EB No. 2437 (CTA Case No. 9338) We disagree. A compromise penalty is a penalty imposed for violation of the provisions of the Tax Code. 14 In other words, a compromise penalty is paid by the taxpayer, in order to avoid prosecution for violations of the Tax Code. The nature of a compromise penalty is explained in the case of Commissioner of Internal Revenue vs. Armando L. Abad, 15 to wit: "(A) compromise implies agreement. One party cannot impose it upon the other. If an offer of compromise is rejected by the taxpayer, as in this case, the Commissioner of Internal Revenue should file a criminal action if he believes that the taxpayer is criminally liable for violation of the tax law as the only way to enforce a penalty. As penalty can be imposed only on a finding of criminal liability." (Emphasis supplied.) From the foregoing, two (2) things are made clear: (a) there can be no compromise if there is no agreement between the parties; and (b) a compromise penalty can only be imposed on a finding of criminal liability. Accordingly, it is a well-settled rule that a compromise penalty cannot be imposed or collected without the agreement or conformity of the taxpayer. 16 A compromise, after all, by its nature, is mutual in essence. 17 It cannot be imposed without a predicate agreement. Thus, the fact that the taxpayer protested the assessment could only signify that there was no agreement to speak of. 18 In fact, the imposition of compromise penalties without the conformity of the taxpayer is considered illegal and unauthorized. 19 ~ 14 The Philippine International Fair, Inc. vs. The Collector ofInternal Revenue, G.R. Nos. L- 12928 & L- 12932, March 31, 1962. 15 G.R. No. L- 19627, June 27, 1968. 16 Wonder Mechanical Engineering Corporation. etc., vs. Court ()/'Tax Appeals. et a/., G.R. No. L-22805 & L-27858, June 30, 1975; 17 Dr. Felisa L. Vda. De San Agustin, eta/, vs. Commissioner of Internal Revenue. G.R. No. 138485, September 10,2001. 18 Manila Bankers' Life Insurance Corporation vs. Commissioner of Internal Revenue, G.R. Nos. 199729-30 and 199732-33, February 27, 2019. 19 Commissioner of Internal Revenue vs. Lianga Bay Logging Co, Inc. and the CTA, G.R. No. L-35266, January 21,1991.

DECISION CTA EB No. 2437 (CTA Case No. 9338) Applying the foregoing jurisprudential principles to this case, this Court agrees with the factual findings of the Court in Division that there is no showing that WGC ever consented to the compromise penalty. As a matter of fact, the point that WGC consistently protested the subject assessments meant that there was never any agreement to speak of. In the absence of proof that WGC expressly consented or gave its conformity to the collection or payment of compromise penalties, there would be no basis for the imposition of compromise penalties in this case. Hence, the imposition of compromise penalties was correctly deleted by the Court in Division, as the imposition thereof is illegal, unauthorized, and done without WGC's conformity. Anent petitioner's reliance on the Filinvest case, this Court finds the same to be misguided. In the said case, the Supreme Court did not squarely pass upon the issue of whether or not compromise penalties can be imposed, even without the consent of the taxpayer. Considering that the propriety of the imposition of compromise penalties was not raised as an issue in the Filinvest case, the same cannot be considered as a binding precedent with regard to the issue at hand. In the case of Procter and Gamble Asia Pte Ltd. v. Commissioner of Internal Revenue, 20 it was held that the doctrine of stare decisis does not apply when the Court does not make a categorical ruling on an issue expressly raised by the parties: "The basic rule is that past decisions of this Court be followed in the adjudication of cases. However, for a ruling of this Court to come within this rule (known as stare decisis), the Court must categorically rule on an issue expressly raised by the parties; it must be a ruling on an issue directly raised. When the court resolves an issue merely sub silentio, stare decisis does not apply on the issue touched upon. In fact, the same argument was struck down by this court in San Roque-Taganito. There, we held that, "[a]ny issue, whether raised or not by the parties, but not passed r upon by the court, does not have any value as a _til\ \1 precedent." 20 G.R. No. 204277, May 30, 2016.

DECISION CTA EB No. 2437 (CTA Case No. 9338) At this juncture, this Court notes that the CIR's own issuances, from 1986 until the most recent one in 2018, are all consistent in recognizing that compromise penalties are in fact, consensual in nature, and may not therefore be imposed or exacted on the taxpayer, to wit: BIR Issuance Subject Pertinent portion/s "Com12romise 12enalties are onll� amounts suggested bl� the BIR in BIR Memorandum Surcharge, settlement of criminal liabilitll for No. 016-2018 Interest, and violations committed bl� tax!;!al�ers, dated Compromise the payment of which is consensual in March 15, 2018 Penalty on nature, and mal� not therefore be Amended im12osed or exacted on the tax12al�er. Returns Thus, in the event that a taxpayer refuses to pay the suggested compromise penalty, the violation shall be referred to the appropriate office for criminal action." Circularizing BIR Memorandum No. 016-2018 was Memorandum circularized and all internal revenue Revenue No. 016-2018 officials and employees were enjoined Memorandum dated March 15, to be guided accordingly. Circular No. 2018 Regarding 021-18 dated the Imposition of April 2, 2018 Surcharge, Interest and Compromise Penalty for Filing of an Amended Tax Return "x x x the Schedule of Compromise Revenue Clarifying the Penalties specified in RMO No. 19- Memorandum Imposition of 2007, are only amounts suggested bl� Circular No. Penalties and the Bureau of Internal Revenue in 054-18 dated Interest on the settlement of criminal liabilitll for May 29, 2018 Filing of an violations committed bl� tax12al�ers, Amended Return the payment of which are consensual in nature, and mall not therefore be imoosed or exacted on the taxpayer." Computation of the "A compromise in extra-judicial Civil Penalties, settlement of the taxpayer's criminal Revenue Consisting of liability for his violation is consensual Memorandum Surcharge and in character, hence, mal� not be Circular No.46- Interest, Incident to im12osed on the tax12aller without his 99 dated June Deficiency or consent. The BIR mal� onll� suggest 18, 1999 Delinquency settlement of the taxpayer's liability Internal Revenue through a compromise." Taxes, Pursuant to __ ~

DECISION CTA EB No. 2437 (CTA Case No. 9338) Section 248 and 249 of the National Internal Revenue Code, as Amended by R.A No. 8424; and Suggested Compromise Penalty in Extra- I Judicial Settlement of a Taxpayer's Criminal Liability Incident to his Violation of Certain Provision of the Code, or any of its Implementing Revenue Regulations, Pursuant to Section 204 thereof "5. Since comgromise genalties are The Revised onl:i amounts suaaested in Revenue Consolidated settlement of criminal liabilit:i, and Memorandum Order No. 007-15 Schedule of ma:i not therefore be imgosed or dated Compromise exacted on the taxga:ier, the violation January 22, 2015 Penalties for shall be referred to the appropriate Revenue Memorandum Violations of the office for criminal action in the event Order No. 19-07 National Internal that a taxpayer refuses to pay the dated August 8, 2007 Revenue Code suggested compromise penalty." Revenue The Consolidated "5. Since comgromise genalties are Memorandum Order No. 01-90 Revised Schedule onl:i amounts suggested in dated November of Compromise settlement of criminal liabilit:i, and 28, 1989 Penalties for ma:i not therefore be im12osed or Revenue Violations of the exacted on the tax12a:ier, the violation National Internal shall be referred to the appropriate Revenue Code office for criminal action in the event that a taxpayer refuses to pay the suggested com[:>romise f>enalt~ " -� "Since com12romise 12enalties are onl:i Amendments to amounts suggested in settlement of the Provisions of a criminal liabilit:i, and ma:i not "Revised Schedule therefore be im12osed or exacted on of Compromise the tax12a:ier in the event that a Penalties" for taxpayer refuses to pay the suggested Internal Revenue compromise penalty, the violation shall Violations as be referred for criminal action as Prescribed in RMO heretofore mentioned." 26-86 "Since com12romise 12enalties are onl:i -� Adoption and amounts suggested in settlement of Implementation of criminal liabilit:i, and ma:i not 7ft)

DECISION CTA EB No. 2437 (CTA Case No. 9338) Page 15 ofl6 Memorandum a "Revised therefore be im12osed or exacted on Order No. 26-86 Schedule of the tax12ayer (Collector v. UST, supra; Compromise also Collector v. Bautista, 105 Phil. dated Penalties" for 1326; Phil. lnt'l. Fair v. Collector, 4 August 18, 1986 Internal Revenue SCRA 774), x x x." Violations Accordingly, in the absence of any legal basis to support petitioner's contention that compromise penalties should be imposed, even in the absence of the taxpayer's acquiescence, this Court upholds the cancellation of the same. In view of the foregoing disquisition, this Court finds no compelling reason to reverse or modify the findings of the court a quo in the assailed Decision and Resolution. WHEREFORE, in light of the foregoing considerations, the instant Petition for Review is hereby DENIED for lack of merit. The assailed Decision dated July 24, 2020 and the Resolution dated January 21, 2021 rendered by the First Division of this Court in CTA Case No. 9338 are hereby AFFIRMED. SO ORDERED. ER~.UY Associate Justice WE CONCUR: Presiding Justice J�SA2..cNr..I.T...cO-z:-Cc. C.AQS.Tr.A..N..E;,D-.,,t,I.f.,Q~J, R. Associate Justice fb.~ ..(__ A MA. BELEN M. RINGPIS-LIBAN Associate Justice

DECISION CTA EB No. 2437 (CTA Case No. 9338) Page\6ofl6 t:a~Ju-.t' f. ~...Jv.. ~ CATHERINE~MANAHAN Associate Justice ~ m:coRl~S..�V.ILLENA MARIA ~~t~.r~ MARIAN IVY F.(p{EYES-~AJAriDO Associate Justice LAN!E:wE SM. CdUDI-?D.A'~D Associate Justice CERTIFICATION Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court. ROMAN G. DELROSARIO Presiding Justice