CTA Case No. 5203 (Resolution)

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY M.B. FINANCE CORPORATION, Petitioner, versus - C.T.A. CASE NO. 5203 COMMISSIONER OF INTERNAL -------- X REVENUE, Re~q.H:mdent. x - - -����-�-� RESOLUTION Presented before Us for resolution is respondent's Motion to Dismiss on the ground of lack of jurisdiction ~lleging, as a reason thereof, that no decision on petitioner's protest against the assessment has as yet In other words, respondent's theory is that petitioner's appeal is premature since there is no decision yet on a disputed assessment within the perview of Sec. 7(1} of R.A. No. 1125. It appears from the recorda of this case that on July 15, 1994, petitioner received a pre-assessment notice dated July 5, 1994 from the Bureau of Internal Reven ue <Bureau, for brevity> informing the petitioner of alleged deficiency income and business taxes for the taxable years 1990 and 1991. 98 1

RESOLUTION - C.T.A. CASE NO. 5203 - 2- The petitioner alleged that it was not ~ble to its side and evidence within the prescribed period of fifteen (15) days from receipt of the said pre- assessment notices because it was also on the same date that the assessment notices in the amount of P"l, 695, 657. 22 and P99,G89.00 as deficiency income and deficiency business taxes fo1~ the yeat" 1990 and PG, 953,858. 5 �7 and P92,592.09 as deficienc~' income and de �f'ici ency b1..tsiness taxes f01A the year 1 '::191' respectivel y, were received. On August 12, 1994, or within thirty (30) days ft'Om receipt of the formal assessments, petitioner protested the aforementioned aguessments. However, on January 1995, petitioner received a letter denying the protest and reiterating the assessment. Respondent requested the petitioner to pay the deficiency taxes on or before February 26, 1995 with a warning that "it will <the Bureau> take the necessary legal actions to protect the intet"�est of the govel ~ nment." The letter was dated January 10, 1995 and signed by Mr. Sixto S. Esquivias, IV, the Revenue District Officer of Revenue District Office No. 48. Petitionet' filed on Febt'uary 21, 1995 its appeal <Petition for Review) with this Court assailing the 982

RESOLUT ION - C.T.A. CASE NO. 5 2 0 3 �- 3 - vali d ity a nd legality of responden t's ass e ssment. On July 17, 1995, r�espondent filed her answet"'. Subsequently, Counsel for the respondent filed a Motion to Dismiss questioning the jurisdiction of this Court to take cognizance of the petition alleging that it was prematurely filed. It was argued by the respondent that the letter of the Revenue District Officer is not the fin a 1 dec :i. s i on on the pr� otest . To settle the issue, during the hearing on October 17, petitioner's counsel brought to the attention of the Court that a l though the assessment letter involving this case was signed by a Revenve Dit:;tt��ict Officer�, nevel~theless there was a threat on the la~t part of the assessment that the BIR will take necessary action to protect the interest of the govin�nment, hence the case was elevated to this And on November 21, 19':15, the issue of jurisdiction was submitted for resolution. Petitioner raises two arguments in its opposition to respondent's motion to dismiss, to witt 1. a motion tc1 dismiss filed by the respondent after answer is improper; and 2. Even assuming that the motion to dismins could the decitiion contained in the letter dated January 10, 1995 of the Revenue District Officer, RD No. 409 West Makati, is the final decision on disputed 983

RESOLUTION - C.T.A. CASE NO. 5203 - 4- a.sses'iments which is appealable to the Co�.n~t t"'lf Tax Appeals. It is an e 1 em en t a r' y rule that jurisdiction of the court over the subject matt el"~ is con f et�'r ed by the sovereign authority which organizes courts . <US vs. Dela Santa, 9 Phil. 22) and the law conferl"ing ja.trisdiction on the Court of Tax Appeal s is found in Section 7 of R.A. 1125, the pertinent part of which states: "S c. 7. Jurisdiction. The Cout�' t of Tax Appeals shall exercise exclusive appellate jurisdiction to review by appeal a� herein pl'~ov ided - 1> D�>cisions of the Collector <now Commissioner) of InLernal Revenue in cases involving disputed assesiments, refund of internal revenue taxes, fees or other charges, penalties jmposed in relation thereto, or other matters arising under the National Internal Revenue Code or other law or part of law administered by the Bureau of Internal Revenue. " J~n'i sd ict ion cannot be confet't�ed by laches or�' even by consent of the parties <Peo vs. Martinez, 76 phil. 599; Salandanan vs. Tizon, 62 SCRA 388). If under the law, the Court has no jurisdiction over the subject it cannot take cognizance of the notwithstanding the silence or acquiescence of the accused <US vs. Jay�e, 24 Phil. 90). It can be challenged at any stage of the proceedings and for lack 984

RESOLUTION - C.T.A. CASE NO. 5203 -� 5 - of it, a court can dismiss a case as men�o motu <Co��issioner of Internal Revenue vs. Villa, 22 SCRA 3>. The same interpretation finds support in Sec. 2 of Rule 9 of the Rules of Court, by way of an exception, to wit: Sec. 2. Defenses and objections not pl eaded dee�ed waived. Defenses and objections not pleaded either in a motion to dismiss or in the answer are deemed waived; Except the failure to state a cause of action which may be alleged in a later pleading, if one is permitted, or by motion for judgment on the p l eadings~ or at the trial at the merits; but in the last instance, the motion shall be disposed of as provided in Sec. 5 Rule 10 in the light of any evide n ce which may have been received. Whenever it appear$ that the court ha s no jut��isdiction j?Ven the subject m.:d;tet", it shall dismiss the a c tion. And in a case all fours with this c~se, Justice Ft"�mcisco, citing Union National Bank of Clarksburg vs. McDonald, (35 F. Supp. 46 and Render et. al vs. Conner, Co�'r Motor Vehicles , Dist. of Connecticut, Clark, c. J. Aug. 11, 1':339) state s that failure to plead lack of jurisdiction in the answer does not waive such defense. The defense of I ~"!d< of .1 �-n��i sd ict ion may be Y'ai sed fot~ the fir�r~t time by motion to di.smisH filed aftel~ answel ' <Sec. 2, Rule 9, Rules of Court hy V. Francisco, 1973 edition). ;(with respect to the arguments fo�Jnd in the Mot ion t0_ Dism iss, respondent categorically states that the office havi ng authority to resolve protests is the AssesGment I 98 5

RESOLUTION - C.T.A. CASE NO. 5203 - 6- Division and not the Revenue District Office, hence the decision of the Revenue District Officer which was i nt et��pret ed by the petitionet~ as the one finally appealable to thi s Com~ t, is not the final one contemplated by existing jurisprudence as a decision on the disputed assessment reviewable by Us. This believes that the afor�ement ioned declarations of the re s pondent with respect to an ~dministrative procedure of the Bureau which she herself heads, carries great weight than an interpretation made by the petitioner as to what constitutes a decision on the disputed assessment, appealable to the Court of Tax Appeal::~ pu r suant to the pro vi si ems ot� Section 7<1> of ~ Republic l.)ct 1125. cannot blam-~ petitioner for availing of the remedy of appeal upon receipt of the letter signed by the Revenue District Officer which on its face contains a tenor of finality pt�~ornpt i ng the taxpayer to seek -..~edress from this Court / le~t the 30- day prescriptive period sets in. If respondent say& that the protest filed by petitioner has not yet been finally acted upon by her office, so be i.t. After all, it is the respondent who is in a better position to know and decide on the procedures followed by the Bureau of Internal Revenue. It is to be observed howevEn~ that this "advent of devolution" brought 986

RESOLUTION - C.T.A. CASE NO . 5203 - 7- i n pat~t by RMO 37-94, crea ted and continues to creat e confusion as it relates to Section 7(1) of Republic Act 1125. With respect to the provision found in RMO 37-94 , the procedures laid down in dealing with protests filed by the taxpayer do not point to any person or office in particular who has the authority to decide on protests with finality. We believe that even the Revenue District Officer who signed the disputed letter in the instant case was himself under the mistaken belief that it was his office who has the final say on the protest filed by the petitioner judging by the tenor of finality by which he dismissed the said protest. !'he lack of .-a cateq ot"ical provision in said RMO 37-94 to cla1�ify whose decision is appealable to the Court of Tax Appeals leaves the taKpayers �qropinn in the dark" as correctly phrased by the petitiorH:n-�. Again, We say that the taxpayers cannot be blamed from availing of thP remedy of appeal from the receipt of the letter originating from the office of the Hev~nue ~ontaining a declaration rejecting their protests. This obscure situation created by the so�-callf:.>d "devolution", demands that respondent Commissioner of Internal Revenue and all of the officials concer��ned in deciding pr�otestB, shlnlld indicate to the taxpayer whenever a decision ls already final and :987

RESOLUTION - C. �r. A. CASE NO. 5203 - B- appealab l e to the Court of Tax Appea ls, o ther wise this kind of controversy will never end. In making this observation, We are guided by the wisdom enunciated by the Supreme Court in the case entitled Surigao El ectr ic Co., Inc. v . Court of Tax Appeals , 57 SCRA 5 23 when it Prescindinr.:t fl~om all the fot'egoi.ng, we deem it appropriate to state that the Cornmi~sicme�r'' of Intel'nal Revenue should ,alw<iilys indicate to the taxpayer in clear and unequivocal languaye whenever his action on an assessment questioned by a taxpayer constitutes his final determination on the disputed assessment, as contemplated by sections 7 and 11 of Republic Act 1125, as amended. On the basis of this indicium indubitably showing that the Commissioner's communicated action is his final decision on the contested assessment, the agg1~i eved tax payer' would then be able to take recourse to the tax court at the opportune time. Without needleB~ difficulty~ thf: taxpayer would be able to determine when his l"ight to appec\l to the tax cout��t acct�ues. Thi.s rule of conduct would also obviate all desire and opportunity on the part of the taxpayer to continually delay the finality of the assessment �- and, consequently , the collection of the amount demanded as taxes - by repeated requests for recomputation and reconsideration. On the part of the Commissioner, this would encourage his office to conduct a careful and thorough study of every questioned assessment and t ' �HidEH' a cot't''ect and definite decision thereon in the first instance. This would also deter� the Comm i 110 s i one1~ frO I'll J.tn f.;;d ,~ 1 y mak i ny the taxpayer grope in the dark and speculate as to which action constitut e s the decision appealab 1e to the tax court. Of great et~ import, thi~ rule of conduct would meet a pressing need for fair play, regu l arity, and ot~derliness in .adminisda..at:i.ve action. 988

RESOLUTI ON - C. T.A. CASE NO . 5203 - '3 -� WHEREFORE, i n v i ew o f t h e foregoing thi s Pe titio n for Review is hereby DISMISSED without prejud i ce t o recourse to this Court by the pet i ti on er if and when the protest filed on August 12, 1'395 is finally rejected b y the official of the Bureau of Internal Revenue who ha~ the corresponding authority to decis:i.on appea l able to this Court. If as represented by th e respondent that the P� ' oi-est of the petit:lonel~ w.as r e ferred to the Legal Divis1on of Revenue Region No. 8 fot' reception ot ev1dence, th1s case is remanded back t o her for further proc e edtngs. Pending final decision there of by the responde t Lorum1ssioner or her authorized re p r e sen t ative , ther� e shall be no en t orcement f ()~" collection of subJe t assessment. SO ORDERED. ERNESTO D. ACOSTA Pr-esiding .Tudqf' 989