CTA Case No. 3070 (Decision)

. . KF.PU8Ur OF 'I H!i. PlllLJI'PJN'llll COURT OF TAX APPE.A!.S 01 "lti!.ON CiT'il' / osCAR F. SANTOS, In his Capacity as Duly Elected Assignee of Hotel Filipinas, Inc. (SP. PROC. No. 126046, CFI of Manila)'� Petitioner, - versus - C.T.A. CASE NO. 3070 The COMMISSIONER OF INTERNAL REVENUE, Respondent. X- - - - - - - - - - - - - X DE C I S I 0 N Jurisdiction over the subjec t matter is fundamental for a court to act on a given con- troversy. It is conferred by law, not by con s ent of the parties. It can be challenged at any stage of the proceedings and for lack of it, a court can d ls ~iss a case ex mero motu. To inquire into the existence of jurisdiction over the subject matte r is the primary concern of a court, for thereon would depend the validity of its entire proceedings. * Hence , because o f *Commissioner of Internal Revenue vs. Leonardo S. Villa and The Court of Tax Appeals, L-23988, January 2, 1928, 22 SCRA 4; citing 21 Corpus Juris Secundum, 127-128; Molina vs . De la Riva, 6 Phil. 12; Fuentebella vs. Negros Coal Co., 50 Phil. 69; Vega vs. San Carlos Milling Co., 51 Phil. 908; u.s. vs. De la Santa, 9 Phil. 22; Vda. e Hijos de Pedro Rojas vs. Rafferty, 37 Phil. 957.

DECISION - CTA CA~E NO . . 070 - 2 -� Lhe special and af~irm~Live defense of lR ~k of juri s diction raised b~ respondent Commis sion er of Internal Revenue in his answer to tho petition for :t. e v iew f il od by Oscar F. Santos, L1 h is capac ity as duly elected Assignee of the Hotel Filipinas, Inc. {Special Proceedings 1\Jo. 126046, CFI of Mdnila) , we shall proceed to inquire whether or not this Court has jurisd i clion to entertain the present appeal. The material antecedents of the cqsc as gathered from the pleadings , evidence adduced c1 ur ing the preliminary hea ring, and me,not:and:t of the parties may be narra t e d chronologically as fvllows: In a letter-assessment dated June 8, 1979, r � ,�;ond.::mt Commissioner of Internal Re 1 Ci ue 21sse:::s eL1 and dcm.:u;dc;d from the Ilotc l l�'ili.p inas , Inc . paymen t of the to tal amount oF ~1,538,676.12 �s defici enc y percentage, documenta::y Cllld s cience stamp taxes for the year 1976. ~ncloscd there- with was a prepared Busi ne s~ and Oc ~upa t io n Tax Receipt which shou ld be presented by petitioner to the collecting officPr when tend ering payment. (Annex "A", peti:.ion for review; Exhibit "1", p. 4 , CTA records.) ',-: .�_.)JU'.t

DECISION - CTA CASE NO. 3070 - 3- In a reply dated July 26, 1979, wherein it was acknowledged that respondent's assessment was received on July 24, 1979, the Hotel Filipinas, Inc., through its counsel, contested the assess- ment and requested that it be given a period of thirty (30) days within wh i ch to show that the assessment "is unfounded, unjustified and e rr oneous". (Annex "B", petition for review; Exhibit "2", p. 6, CTA records.) On August 23, 1979, in a follow-up letter to responde nt, the Hotel Filipinas, Inc. requested anothPr period o f thirty (30) days within which to su l,mit its letter-memorandum. (Annex "C" , petition for review; Exhibit "3", p. 7, CTA records . ) On the same day (August 23, 1979), Hotel Filipinas' president and director, Jose 0. Cobarrubias, f i led a petition for voluntary insolvenc y of said corporation with the Court of F1 r st Instance of M~nila in Special Proceedings No. 1 26046. On August 28, 1979, counsel of the Hotel Filipinas, Inc. sent respondent a letter-petition specifying the grounds why respondent's assessment should be reconsidered and set aside. (Annex "D", retition for review; Exhibi t "4", pp . 8-10, CTA records.)

DECISION - CTA CASE NO. 3070 - 4- On October 2, 1979, respondent received notice of said insolvency proceedings; hence, on December 26, 1979 (Exh. "5-A", p. 25, C'rA records)~ he filed with ~he Court of First Instance of Manila a "Motion For Allowance Of Claim and Fa An Order To Pay Taxes" (Exh. "5", pp. 25-26, CTA records)'� together with a "Proof of Claim", incorporating the tax assessment agai n ~t the Hotel Filipinas, Inc. and ~lleging that the latte r 's tax liability ~as not yet been paid and ~isfied in whole or in part. It appears that a copy of respondent's motion for allowance of claim and for an order to pay taxes, with the proof of claim, was sent to the counsel of the Hotel Filipinas, Inc. by registered mail and the same was received by him on January 7, 1980. (Exh. "6", p. 33, CTA records.) On March 20 , 1980, petitioner Oscar F. Santos, "In his Capacity as Duly Elected Assignee of Hotel Filipinas, Inc. (SP. PROC. No. 126046, C.F .I. of Manila)", fil ed the instant petition for review contesting the legality of respondent's assess- ment of percentage, documentary and science stamp taxes in the sum of ~1 , 538 , 676.12. (p . 1, CTA records.) i . i' .... J UU

- DECISION - CTA CASE NO. 3070 5- In his answer to the petition for review, respondent raised the special and affirmative defense of lack of jurisdiction of this Court, contending that the assessment involved herein has already become final , executory and demand- able. According to respondent, and citing Republic of the Philippines vs. Lim Tian Teng Sons & Co., Inc., L-21731, March 31 , 1966, 16 SC~A 584, as authority, the filing of his motion for albvance of clai:r.1 and for an order to pay taxes, together with the proof of claim,with the Court of First Instance of Manila in Special Proceedings No. 126046 for the collection of the taxes assessed against the insolvent corporation is tantamount to a denial of petitioner ' s request for reinvest- igation of the assessment. Consequently, from re~e ipt of a copy of said motion by p etitione r's counsel on January 7, 1980 , the appeal from the denial <.f. th e request fo.r reinvestigation oi t he ass~ssmcnt should have been filed with this Court with in the thirty-day period prescribed in Section ll of Republic Act No. 1125. Since the appe~ l to this Court was filed only on March 20, 1980, which i s obviously beyond the thirty-day statutory period, the assessment had already

- DECISION - CTA CASE NO. 3070 - 6- become final, executory and demandable and this Court has no longer jurisdiction to entertain the present case. Conversely, petitioner maintains that the thirly-day period for appeal commences to run only from the receipt of the decision of respon- dent on the disputed assessment. Since respondent has not yet rendered a decision o n petitioner's request for reinvestigation, there is no decision appealable to this Court. 'I'he "J'I1otion For Allow- ar:ce of Claim and Fen an Order to Pay Taxes", together with the "Proof of Claim", filed by respondent in the insolvency proceedings cannot be considered as a decision on the disputed assessme nt. Moreover, the grant of respondent's defense would be a denial of due process and would deprive petitioner of his right to prove that the assessment is unfounded, unjustified and erroneous. Was the motion for allowance of claim and for an order to pay taxes, together with the proof of claim, filed by {espondent with the Court of First Instance of Manila in Special Proceedings No. 126046 equivalent to a denial of petitioner's request for reinvestigation, so

.. DECISION - CTA CASE NO. 3070 - 7- that petitioner should have appealed therefrom to this Court within thi r ty days from the date he was notified of such action? Se t t l ed is the r ul e t hat i f a taxpaye r files a request for reconsideration or re:irvestigat i on of an assessment made by the Commissioner of Internal Revenue, but the latter without cate- gorically deciding the request for reconsideration or reinvestigatio1 instead seeks to enforce collection o f the tax assessed by h im against the taxpayer by means of distraint and levy, such action of the Commissioner is equivalent to a denial of the taxpayer's requesc f o r reconsider- ation or reinvestigation which the taxpayer must appeal therefrom to this Court within the thirty- day period provided for in Section 11 of Republic A �t No. 1125. (Philippine Planters Investment Co. vs. Commissioner of Internal Revenue , CTA Case No. 1266 , November l l, 1962; Hilado vs. Commissioner of Internal Revenue, CTA Case No. 1256 , October 20, 1962; Al gue Inc. vs. Commissioner of Internal Revenue, CTA Case No. 1620, January 16, 1968; Frederick L. Hahn vs. Commissioner of Internal' Rev e nu e , CTA Ca se No . 193 7, Apri l 30 , 1969 ; Gepte vs. Commissioner of Internal Revenue, CTA Case

DECISION - CTA CASE NO. 3070 - 8- No. 1151, October 29 , 1970, Certiorari denied in G.R. No. L-33674, June 29, 1971; Advertisin0 Associates, Inc. vs. Commissioner of Internal Revenue, CTA Case No. 3017, June 17, 1981.) Similarly, where the Commiss i oner of Internal Revenue, without replying to the request for reconsideration or reinvestigation of the taxpayer, institutes an action in the Court of First Instance for collection of the tax a ssessed against the taxpayer, such court ~ction amounts to a denial of the taxpayer's request for reconsider- at' c-.1 .r rr>i ;westigation, and his remedy is to app ~~l Lo L;li.3 Court wi t hin the statutory period. "For what is more indicative of the Commissioner's decision against reinvestigation than his insist- ence to collect the ta){?" (Republic vs. Lim Tian Teng Sons & Co., Inc., L-21731, March 31, 1966, 16 SCRA 584; Cirilo D. Constantino vs . Commissioner of In ernal Revenue, CTA Case No. 2084, April 29, 1971. The Commissioner of Internal Revenue is under no obliga tion to reply to or rule on the taxpaye r' s r eque2t for reconside r a tion or rein- vestigation of the assessment before collecting the tax assessed. (Republic vs. Lim Tiang Teng,

- . ISION - . CASE NO. 3070 - 9- ..:.:..!.�~_ra; Republic vs. Harsman, L-18956, April 27, v;�J2 , 4 4 SCRA 148.) I f, without categorically deciding the request of the taxpayer for recon- sideration or reinvestigation, the Commissioner collects the tax assessed by him through any of the means provided for in Section 302 (formerly Section 316) .of the National Internal Revenue Code, such action for collection is equivalent to che denial of the taxpayer's request and the latter's remc3y is to appeal to the Court of Tax Appeals within thirty (30) .days f r om the date he is no tified of such action. The "judicial uction" for the collection of delinquent taxes mentioned in Section 302 refers not only to actions instituted by the Government to collect internal revenue taxes in the ordinary courts (Republic vs. Del Rosario , 105 Phil. 227; Republic v s. Medrano, L-15477, October 22, 1960, 109 Phil. 762; Republic vs. Dy Chay, L-15705 , April 15, 1961, l SCRA 975; Republic vs. Gamboa, L-16504, October 27 , 1961, 3 SCRA 292 ; Republic vs. Albert, L-12961, December 28, 1961, 3 SCRA 717; Republic vs. Lopez, L-18007 I Harch 30 I 1963 I 7 SCI'�' ) r.) but also includes filing by the Gover r-, nt w~t h probate courts of claim~ against dec e 1 <-cxp ayers � . r�� � ) Ii

DL >-J l: ~~I ON . - C T~ LASE NO. 3070 - 10 - (Collector of Internal Revenue vs. Administratrix of the Estute of Lorenzo Echarri, 67 Phil. 502; Directo vs. Araneta, 102 Phil. 1178). As a matter of fact, the filing by the Commissioner of Internal Revenue with the probate court of a claim against the estate in the testate or intestate proceedings for unpaid taxes due from the deceased is considered an assessment , if no ussessment has been made during the lifetime of the deceased, and the denial by the hei r s of said tax obligation makes the claim of the Government a disputed assessment which is appealable to the Court of Tax Appeals. (Estate of Maria Lim Vda. de Uy vs. Pacita Uy, L-15386, April 29, 1961, 1 SCRA 1262.) And under the present law, criminal action is now considered a judicial action for collection of internal revenue taxes. (Sec. 302, Ibid.) Since the fili ng by the Commissioner of Internal Reve nue o f a motion for allowance of claim and for an order to pay taxes, together with proof of claim, with the Court or First Instance in an insolvency p roceedings instituted by an inso lvent corporation has for its purpose the collection of internal revenue taxes assessed against such corporation, it is

l ...::: IS ION - L''l':l. CASE NO. 307 0 - ll - axiomatic that cuch action of the Commissioner pa rta .~es of the nature of a "judicial action" within the purview o[ Section 302 of the ]:;:<.::. ' ''- Code. Here, in the case at bar , respondent Commissioner of Internal Rev e nue did not cate- gorically decide the request of petitioner for t he reinvestigation of the asse s sment of Pl,538 ,6 76.12 for percentage, documentary and science stamp taxes. Inste ad, upon being notified of l'1e in soJ 'Ie ney Jroceedings in s tituted by lhe Hotel Filipinus , Inc. with the Court of First Insl ~ nce of Manila in Special Proceedings No. 1260 46, re spondent f i led a motion for allowance of claim and for an orcter to pay taxes, t ogether with proof of claim, to enforce collection of the taxes assessed by him again s t the insolvent corporation. Since ~he p urpose of th e Commissioner of Internal Re ve nue i s to seek collection of the Pl,538,676.12 percentage, documen taty and stamp taxes asses s ed by him, suc h act i on of responde nt a ffo r ds no othe r more convincing ev i dence than an implied de n ial of p ,= t i tioner 's request fo r _cccrt - r.;ideration or rein ve s~ ig a.tion o[ t: 1e ass es sme n t a nd petitioner ' s r e med y is to appe d l to this Court wit hin t-h irty da ys from the date he is '). ?'' " l I ,)

- - UL~C IS ION - C ~h CASE NO. 3070 - 12 - no L-~lcd o f s ~c h action. Consequ 2ntly, as correc~ly argu e d by respon6ent , f rom receipt of notice f Lhe mo t i on for allo wance of cla im and for a n orde r to pay taxes, together wi th proof of cJ ai m, on January 7 , 1980, petitioner ' s petition for review should h ave been filed i n lhis Co~rt within the th i rty- day period provided for in Sect i on 1 1 of Republic AcL No. 1125, or on or before february 6 , 1 980, a nd not on Marc h 20 , 1980. Failure of peti t ioner to interpose his appea l on time makes the assessment in question final , executor y and demandable (Republic vs . Lim T ian TenS) Sons & Co . , Inc . �~P..Ii.t.l a nd deprives this Court of juri s diction t o entertain SRid appeal . (See Commissioner of Inte r nal Revenue vs. Western Pacific Corporation , L-18804 , May 27, 1965 , 1 4 SCRA 105 ; Filipinas Investment and Fina nce Corporation vs. Conu;1issioner of: Internal R~venue, L-23501, May 16 , 1967, 20 SC RA 50; Surigao Electric Co ., Inc. vs. Co urt of Tax App eals , L-25 289 , June 28 , 1974: 57 SCRA 253.) Nonetb2lc~ ss, granting ar9._~~n_2S?_ t.hat the motion for allowance of c laim and for a n order to pay taxes, as well as the proof of claim, fil ed in the insolvency p r oceedings could not

DECISION - CTA CASE NO . 3070 - 13 - be c on side red as a denial of petitioner ' s request for rein vestigation or reconsideration, or a d e cision o n a disputed assessment, still the juris d icti. o n ...~ l infi-mity in petitioner ' s appeal exists. tor without a decision of the Commissioner c ~ Internal Revenue on a disputed assessment as pr o vided for in Sectio n 7(1 ) _of Republic Act No. 1125, the appeal of petitioner to th1s Courc is premature and cannot therefore be e n tertained by the Court . (See Co mmissioner of Interna l Pevcnue vs . Leonardo S. Vi lla, et al., L-23988, January 2, 1968 , 22 SCRA 4; Commissioner of Internal Revenue vs. Lilia Yusay Gonzales, et al., L-19495, November 24, 1966, 18 SCRA 757.) WHERCFORE, the instant petition for review fi l ed by Oscar :C. Santos, in his capacity us duly elected Assignee of the Hotel Filipin.:ts, Inc. (Special Proceedings No. 126046, Court of First Instance of ,lanila), is hereby dismi s sed for lack of jurisdiction . With costs. SO ORDERED. Quezon City, Metro Manila, August 14 , 1981. a~H~p~ AMi\NTE fILLER VIE CON~ Presiding Judge COA;sSsToAcNiTa;t-~~�J~uOdAgQeUIN (;i)!?--~~-- 2~~~- R"�YES Assoclate Judg _' 9-