CTA Case No. 4372 (Decision)

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY ROQUE C. GONZALEZ, JR. C.T.A. CASE NO. 4372 Petitioner, - versus - COMMISSIONER OF INTERNAL REVENUE, Respondent. X- - - - - - - - - - - - - X DE CI S I 0 N In the case at bar, petitioner prays for the canc ell at ion of Assessment No. 25 - 3- 04A-191301 - 81, for a ll e ged 1981 deficiency income tax in the amount of P437, 289.60. On July 12, 1986, petitioner, a resident of Que z on City, received a demand letter dated July 3, 1986 fr om the chief of the Receivable Accounts Divi s i on of the Bureau of Internal Revenue (BIR), Eduardo M. Pamittan, covering the amount herein involved (Exhibit "A"; CTA Records, p. 89). In a letter-protest addressed to respondent, da ted July 31, 1986 and received by the BIR on the s a me d a y, petitioner, through counsel , prayed that "sai d asse ssment (Asse s sment No . 25-3 - 04A-191301 - 81) 554

DECISION CTA CASE NO. 4372 - 2- be withdrawn and that in lieu there of~ a post- reporting notice and/or pre -assessment notice be sent to (petitioner), in conformity with Revenue Regulations No. 12-85" (Exhibit "8"1 CTA Records, pp. 90-91). Mr. Pamittan responded in a letter to petitoner's counsel dated August 26, 1986 (Exhibit "C"; CTA Records, p. 92), which states, in part, that: "xxx (O)n June 28, 1983 a letter was sent to your client (petitioner herein) requestin g the presentation of ce rtain documents to substantiate your claims for deductions in your 1981 income tax returns . A fo llow-up letter dated June 6, 1984 was also sent you but unfortunately, in spite of these requests, your client (p eti tioner herein) failed to present the documents required of him. The allegation, therefore, that your client (petitioner herein) was not informed of the proposed assessment is not s upported by the records of the case, hen ce , your request for cancellation of the a ss essment i s h ere by denied." Failing to have the assessment in question withdrawn, petitioner, on September 25, 1986, availed of the income tax amnesty granted under Executive �' Order No. 41 (dated August 22, 1986) and its impleme nting Revenue Regulations No. 14-86 (dated August 27, 1986), by filing a Tax Amne st y Return with File No. 25-I ( 7 ) 00003 - 41 (Exhib i t "D"1 CTA 555

DECISION _, CTA CASE NO. 4372 Records, p. 9 3 ), and ~ak in g a ~full paym e nt~ of t he tax duq u n d~~ the a mnest y ,! Hr. raroit~!:ln ~ ent another le t t er ( dated January 23, 1986) to p@ titi5ft@r, dem an~ing D ym en t of his ta x li ability su bjec t matt er of Aseess ment No. 25-3- 04A - 191301-81, and informing him that if he fails to settle sai d liability, the BIR "shall b e constrained to enforce the collection of the afore stated liability, plus the statutory increments up to the date of payment, thru the issuance of Warrants of Distraint and/or Levy against your perso nal or real property" (Exhibit "E"; CTA Records, p. 95). In a letter dated January 30, 1987 a nd received b y th e BIR on February 3, 1987, petitioner, through co unsel, informed the BIR, through Mr . Pamittan, of hi s avail ment of tax amnesty under Ex ec utive Order No. 41 (Exhibit "F"; CTA Records, p . 96). On May 24, 1989, petitioner's counsel received a lette i dated April 28, 1989 from respondent (signed by Act ing Assistant Commissioner [Colle cticn Office] Themis toclm ~ Montalban), which st a tes thus : "T h1 5 r- fers to yo ur lett e dat ed Jan u ar y 31, 19S7 requesti n~ ~1at the ta x Sue h p 5 y!lle t is eviden d@~ by 8IR Payment Ord er No, B -,89 1 530~ a nd BIR CoP f1rma t 1on Receipt No. B- 9909243, b (;)th (Exhibits "D-1" and dated ~~ ~ ta mb e ~ 25, 1986 Records, p. 94). " D- 2 " , respective ly; CTA -� 556

DECISION ' CTA CASE NO. 4372 - 4- liability of your client, Mr. ROQUE C. GONZALEZ, JR., involving the amount of P437,289.60 as defi ciency income tax for the year 1981, under the letter of demand dated November 8, 1985 be considered closed by virtue of his availment of E.O. 41. In reply thereto, please be informed that E. 0. No. 41 only cove rs tax liabi lities assessed or issued after Augu st 22, 1986, the date said Order took effect. Sinc e the assessment of your client was issued on Novemb er 8, 1985, the said tax liability subsists notwithstanding his availme nt of the aforesaid decree: In view th ereof , you are requested to urge your client (petitioner herein) to pay to the Chief, Colle c tion Enforcemen t Div i sion, Rm. 10 2, BIR Bldg., Diliman, Q. C. , the amount of P437, 289. 60, plus the in c rements incident to delinquency, within ten (10) days from your receipt hereof in order that his case can be closed. Failing in it, this office much to our regret will enforc e the collection of the amount by all mea ns provided for by law without further notice." (Exhibit "G"; CTA Records, p. 97) Th e issue whi c h faces the Court in this case is whether, notwithstanding petitioner's availment of t ax a mn es ty under E.O. No. 41, his liability fo ~ al l eged 1981 deficiency income tax in the amount of P437,289.60 still subsists. In other words, the Court must settle whether or not petitioner's deficiency tax liability falls within the purview of the said E.O., thus allowing him to avail of the tax amnesty of fered . therein. A preliminary issue involving the lack of jurisdiction of this Court over the instant petition 557

DECISION CTA CASE NO. 4372 - 5- f or review on th e ground of the alleg e d fin a lity of th e qu es tioned assessment must, howev e r, first be s e t t led by the Court. Res pondent contends in his Answer (CTA Records, pp. 48- 51), among other things, that: "4 . Records of this case show tha t l e t t ers dated June 28, 1983 and June 6, 1984 were issued by respondent requesting p etit ioner to present do c um e nts to s ub s tantiate his claims for deductions in h is 1981 income tax returns, but failed to do so ; 5. The deficiency tax asse ss me nt was � i ss u e d on November 8, 1985 , which was not howe ver protested within thirty ( 30) days f ro m receipt as requir e d by Sect i on 31 9- A o f the 1977 Tax Code; hen c e, said asse ssment had become final and e xecutory. Th is Honorable Court therefore h as no j uri s diction on the Petition for Review; XXX XXX xxx" By way of rebuttal, petitioner submits in his Me mo ra n dum that: "The f a ct i s that n o su c h ass es s me nt or l e tter of demand supposedly i ss ue d by th e Respondent on November 8, 1985 wa s e ver recei ved by Petitioner. As testified to by th e Petitioner in open c ourt (t.s.n. of July 18, 1990, pp ; 4 - 5) and which testimony re mai ns uncontrovert e d, the first tim e he b ec ame aware of an assessment ag a in s t him f or alleged 1981 deficiency income ta x wa s wh e n he received Respondent' s oth e r c ommunications to Petitioner date d August 26, 1986 (E x hibit "C", Petitioner) a nd J an u a ry 23, 1987 (Exhibit "E", Petitioner), which facts remain undisputed. It i s lik ew ise undisputed that it was only upon Pet itoner's receipt on May 24, 1989 o f Res pondent's letter dated April 2 8, 1 9 89 558

DECISION CTA CASE NO. 4372 - 6- (Exhibit "G", Petitioner), denying Petitioner's ~equest for the canc e llation of the assessment agains t him by reason of his availment of the tax amnesty, that any me ntion was ever made of a suppo s ed a s sessment and letter of demand dated November 8, 1985." (Memora ndum, pp. 2 - 3; CTA Records, pp. 108-109). At this juncture, the Court find s it most appropriate to point out the fact that respondent, de spite repeated requests for him to submit, through his counse l, the BIR Records of the instant case, has failed and/or refused to transmit the sa me to Us. This, despite the clear provisions of Section 2, Rule 7 of the Rules o f The Court of Tax Appeal s , which states that: "Sec. 2. .T.......h.....e.......................C.........o.......l....l....e......c......t....o......r.................o......f.................I....n.......t.....e.......r.....n.......a.......l.... .~. ~..Y. ~.r::t.\1.~. , the Com mi s s i one r o f Customs , and the respondent provincial or city Board of Assessment Appe a l s, shall certif and f o ~.~. ~.~.?. .. .....!:.9 ...!:.�1.~..... . .~.9.\l. ~.:t:......\.'!..t..:t:..h.t.n.......:t:..~.n.. . J..~.Q. ) .... Ai?.:Y.:>.. a f:t:..~X. . ....~ .t..!. t..r:t. 9.... h. t..:>..... ~.r::t. l?..\.'!..~E. . r.........~.J.! .. !:.h~ ....E~. <?9.E9 9 ::>...... ~. t h e ............~..~. ::>.. ~ .....t..r::t.............h. t..:>. ...J?.9. :>..:>..~. :>..:>..t..<?...l!..t.........\.'!. t. !:.h.....!:}~ ~ ......1?...~..9..~.:>.. .sl. \l .~�......... r::t .\l.~.l.?. ~X.~. 9...t. ......~.r::t. 9....... A.g .:t:..h. ~ ..... .E.~S9 E9. .~ . ~E~......... ~ .!! .~ ~. P.~.E~. :t:. .~.............~9. t9..~.E.~...t :t:. .............. .h.~..r::t..............:t:..h. ~...... J9. ~9.~. ~. ~ . . . . . .~.t..!J a 1~.9................lJ ~..... r::t.'::l.~.l.?.~.E. ~.?..� The Court may , on motion, and for good cause shown, grant an e x tensio n o f time within which t o submit the aforesai d records of the case." (Underscori ng supplied) Hore importantly, respondent failed in his ob ligation , notwithstanding the fact that on June 27, 1989, when the Bureau of Internal Revenue received 559

DECISION CTA CASE NO. 4372 - 7- the summons2 issued by Us in thi s case, respo ndent's co unsel was formally and expressly direc te d to co mply with said Sec. 2, Rule 7 of Our Rules. Th erefo re, the Court finds itself constrained to dec ide the case at bar without benefit of studying ~ BIR re cords. We have been more than liberal with respo nd ent's counsels in the past regarding the transmittal of such records, and have in fact been very acco mmodating to respondent in the present case. 3 This is because the Court rea lizes and re c ogni zes the importance of taxes to th e government, for whi c h reason respondent is treated with more ltni e ncy than any ordin ary party appearing before Us. HoHever , even the government's good must be 2 CTA Record s, p. 21. The second paragraph of sa id summons reads as follows: "You are likewise hereby required to comply with Secti o n 2, Rule 7 of the Rul es of the Court of Tax Appeals, whic h provides that the Commissioner of Interna l Rev en ue and the Commissioner of Customs shall certify and forward to the Court within ten (10) days after filing his answer, all the re co rds of the case in his possession, with the pages duly numbered, and if the records are in separate f o lders, then the folders will also be numbered." 3 It must. be noted that, although the instant c ase was deemed submitted for decision by the Court on J anuary 8, 1992 (Order dated January 9, 1992; CTA Reco rds, p. 115), the Court has held off d ec iding the case for six months, awaiting the transm ittal of the case's BIR Records. 560

DECISION CTA CASE NO. 4372 - 8- subjugated to the cause of justice; and in the case at bar, the Court believes that justice will not be s e rved by waiting any longer for respondent's counsel to comply with his obligation and submit the BIR r ec ords for this case. More than two - and-a-ha lf y e ars have passed since respondent filed his answer4 to the instant petition for review with Us ; to wait any further for the transmittal of said records would be to sac rifice justice, which the Court is bound to uphold. The Court cannot rely merely on respondent's unsub s t a ntiated allegation that petitioner had been issued a notice dated November 8, 1985. Respondent, in order to prove his allegations, had merely to pre s ent a copy of the said alleged assessment, which is well wit hin his competence to do. Hi s counsel's failure/refusal to make such presentation or to transmit the BIR Records of the case, from which We c an as c ertain independently the existence of said assessment, must be seen by Us in the light of Section 3{e ), Rule 131 of the Revised Rules of Court whi c h sta tes that: 4 Said answer was filed with the Court on De cember 20, 1989. 56 1

DECISION CTA CASE NO . 4372 - 9- .... "S e . 3, P.~. f.'.l?~.:t:..?..!?.. � .~ EE.! . f.il.~.~.l?.......~.9..!.1. :?,. � -- The fo ll ow in g pr es umpti ons ar e satisfac ory if u n contrad icted, bu t ma y b~ contradic ed an overcome by othe r evi den ces XXX XXX (e ) That ev id ence wi llfully s u pp r o~1qd wo uld be adverse if pro . u ce d; XXX ." Furtherrno r ~ ~ v ew of the transcr i pt of petiti oner 's testimony in open cotrt s h ows that while he de c lared unconditionally that the fir s t assessment n o tice f o r 1981 deficiency income tax h e received is the on e dated July 3,1986,s respondent never put such state ment in issue during cross-examination, G which We hereunder quote in full: ' C...R....O...S...S........E...X...A....M.....I..N....A..T..I.O....N.........B...Y........A..,T..T...Y...........C...APONONG Q. Mr. Witness, what is your present address? A. 56 Scou t de Guia, Quezon City. Q. Is that your address sin ce 1981 until the present? A. No. Q. Will you please tell th is Honorabl e Court if, what are you r add res es are or is as the case may be? A. !iy address was 1922 Dr. M. Carreon St., Sta. An a, Ma nila. Q. And is that the address you pla ce d in your in come tax return? A. Yes. s .~.~. ~. T . S . N . , J u 1 y 1 8 , 1 9 9 0 , p p 3 - 4 . 6 T.S.N., July 18, 1990, pp. 6-7. 562

DECISION CTA CASE NO. 4372 - 10 - Q. Wh en did yo u move fr om th at sai d addr es s in Sta. An a to another pla ce? A. 198 7. That address, Your Honor, is of my residen ce and my office. Q. So you me an to say that yo ur address sin ce 1981 until 1987 have be en the same? A. Yes. ATTY. CAPONONG No further questi ons, Your Honors ." Therefore .. in .the absence of any evidence presented by respondent regarding the existence of the alleged deficiency tax assessment dated November 8, 1985, and in the face of the uncontradicted t es tim o ny of petitioner in open court, We hold that the thi r ty - day prescription period for protesting the as s e s sment for alleged 1981 deficiency income taxes � issued against petitioner must be counted from July 12, 198 6 , when petitioner received the notice dated July 3 , 1986. Since petitioner protested said a ssess m ~ nt on July 31, 1986, the same has not yet become final and executory. Having disposed of the preliminary issue of jurisdi c tion, We now proceed to discuss the main question in the case at bar. Respondent submits that "(t)he tax amnesty under Exec utiv e Order No. 41 covers only assessments after August 22, 1986, effectivity date of the Executive Ord e r" (Ans\-Ter, p. 2 ,. CTA Records, p. 49), and, 563

DECISION CTA CASE NO. 4372 - 11 - therefore, does not cover the assessment involved in the instant case. This is specifically controverted by p e titioner in his memorandum. 7 .) The Court has had occasion to rule on the issue of the coverage of Executive Order No. 41 in the case o f .'J.'. ! .~!~.~.~.~ .!.~....! .~.~.':!.~.!E! .~. ~.. L . ...........!..~.~ .~.... .Y..~. .~.........~ .9..~~.!..~. ~. !.9..~.~�....... ...9..~ Internal Revenue (CTA Case No. 4266). In Our decision in that case dated January 31, 1991, We a ptly stated that: "By and large, petitioner posits the p ro position this wise: xxx The very nature of a tax a mn e sty, plus the very title of EO 41 i se lf, as expanded by EO No . 64 ' De claring a One-Time Tax Amnesty Covering In c ome Tax, xxx and the Tax on Business Und e r Chapter II, Title V of the National Internal Revenue Code, as amended, for the ye ars 1981-1986' clearly and obviously imply that the tax amnesty has to be given r e troactive effect so as to include in its c overage unpaid income and business taxes fo r the past years specifically mentioned, namely, 1981 to 1985. Moreover, Section 4 of EO No. 41, as expanded by EO No. 64, specifically enumerates those excepted from the coverage of the tax amnesty and cle a rly, tax assessments issued prior to August 22, 1986 are not among the exceptions. Under the ru 1 e of ' .~~ .I?..E.~. ~ .~. ~.9.. ................1:1.~. ~1:1 .~. .....~ .~. !: .. ..~ :X:~~.1:1. ~. ~..9. .a.....l...t....e......r....i.....u........s. ' 'where a statute enumerates the subjects or things on which it is to op e rate, it is to be construed as excluding from its .effects all those not expressly me ntioned. xxx Hence, since Section 4 of 7 See Petitioner's Memorandum, pp. 4-7; CTA Rec o rds, pp. 110-113. 564

DECISION CTA CASE NO. 4372 - 12 - EO 41 expressly mentions the exceptions from the intended converage of the tax amnesty, it follows that others not mentioned such as assessments issued prior to August 21, 1986 are not included. XXX XXX XXX Petitioner could not have said it better. We agree." On appeal to the Court of Appeals, Our above-quoted decisi on was affirmed, thus: "The interpretation forced up o n us by the petitioner with respect to the coverage of those who can avail of the tax amnesty under the provisions of E.O. 41 as amended is erroneous. Petitioner also insists that E.O. 41 as amended must be given only pros pective application. Obviously, the title of E.O. 4 1 itself as amended by E.O . 64 - - 'Declaring a One - Time Amnesty Covering Income Taxe s , x x x and the Tax on Business under Ch a pter II, Title V of the National Internal Revenue Code, as amended, for the years 1981 - 1986', suggests that the tax amnesty ha s to be given retroactive effect so to include in its coverage unpaid income and business taxes for the past years specifically mentioned, namely, 1981 to 1985. It is a basic tenet in our jurisprudence that generally all laws must be given prospective application. The same principle applies to rules and regulations promulgated by administrative authorities as held by the Supreme Court in ABS-CBN vs. Court of Tax Appeals 108 SCRA 142. XXX XXX XXX By analogy, the aforecited rule may be applied . to rules and regulation s promulgated by the Secretary of Finance. Conversely, a rule or regulation may be given retroactive application if the same 56 5

DECISION CTA CASE NO. 43 7 2 - 13 - wou ld be beneficial to the taxpayer , as in th e ca se at bar. Furthermore, Section 1 of Ex e cutive Orde r No. 41 unequivocally enumerates those t ax payers who may not avail themselves of the tax amnesty, and evidently private resp ondent is not one of them. The execeptions enumerated in Sec. 4 of E.O. 41 reads as follows: X XX XXX XX X It is well to stress that taxpayers wh ose tax assessments were issued prior to Augu s t 22 , 1986 are not among the exce ptions. Under the rule of '~- ~- PE .~ .~ ~- ~..9.. .~l..f.1:..'-:l. ~ .f3 - ~ -~!: ..~~<:: .~ .~--~ -~(? ....?.J.!:. ~ .~-~~~,' (sic) 'where a s tatute enumerates the subjects or thing s o n which it is to operate, it is to be co n st rued as excluding from its effects all th ose not expressly mentioned.' (Davis Plac e vs. Liquor Control Commission, 269 N.vl., p. 594). Likewise, it i s an e l e me ntary rule in statutory c on s tructi o n th a t 'an express exception, exemption or saving cl a use exc ludes the others.' (Lewis Suther land, Statutory Canst. p. 494). He n ce , since Section 4 of E.O. 41 s p ec ifically mentions the exceptions from the c overage of the tax amnesty, it ne ces s a rily follows that othe r s not me nti o n e d, such a s ta x payers who we re i ssu e d assessments prior to August 21, 1986 , a re not included in the exce p tions." (C o mmi ss ioner of Internal Revenue vs. Tiki c raft Indu s tries, Inc., CA-G.R. No. SP -2 4488, August 26, 1991, pp. 5-7 ) Therefore, the Court finds that petitioner's alleged 1981 deficiency income tax falls within the purvi e t;l o f Executive Order No. 41, and that, therefor e , his avail me n t of the am n esty under the sa me has s ettled his liability for said taxes. 566 )

DECISION CTA CASE NO . 4372 - 14 - WHEREFORE, finding the petition impressed with merit, t h e Court hare by gr nts the same and orders the can e e ll at ' o n o~ A ~sess ment No, 25 - 3-04A-191 301 - 81, for al le ged 198 1 deficiency income tax in the amount of P43?,2a~ .6 0. No eos ts. SO ORDI!!Rf;D . Quezon City , M~tro Mm ila, u9 u s t 7 , 1992. ~ \-..lu l(,, ~ ERNESTO D. ACOSTA Presiding Judge I CONCUR; DADIVAS -FA RALES As eoeiate -udge Cf.'lRTIFICllTION I hereby certify that th i~ decision was reac hed after due co n s ul tatio n b etwe en the m~mbers of the Court of Tax Appeals in acc ordance with Section 13, Article VIII of the ConGtitution. u-~~ ERNESTO D. ACOSTA Presiding Judge Court of Ta x Appeals 567