CTA Case No. 5211 (Decision)

"' .f1.;-{,t1..�:0r . ~ .� '� REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY ISABELA CULTURAL CORPORATION, C.T.A. CASE NO. 5211 Petitioner, Promulgated: \ - versus - DEC 151997% COMMISSIONER OF INTERNAL REVENUE, Respondent. --------X DECISION This Is an assessment case .involving the amounts of "P333,196.86 and P4,879.79 as deficiency income tax and -. ~'"' expanded� � w Ithho 1dIng tax, inc I us i ve� of surcharge and Interest, respectively, for the t~xable period from January 1, 1986 to December 31, 1986. Petitioner Is a duly registered corporation with off.Jce address at Xavier Hduse, 2307 Pedro Gi I St., Sta. Ana, Manila. Pursuant to its Amended Articles of �IncorporatIon,� paragraph 8, page 3 thereof ( p...., 8' BIR � rec. >, it Is a corporatIon so Ie, "organized, exc I us i ve I y for the properties, real and personal, belonging to the Society of Jesus in the Phi I ippines, collecting income therefrom and turning over the entire amount thereof, less expenses, to col leges, schools, house of studies, churches, parsonages, Ieprosar Ia, hospitals, cemeteries and rei lglous missions Including community development, scientific and sociological projects xxx."

�DECISION - C.T.A. CASE NO. 5211 - 2- In an investigation conducted on the 1986 books of ~account of petitioner, respondent had the pre~iminary findings that petitioner Incurred a total income tax de~lclency o~ P9,985~392.15, inclusive of increments. Up.~n- ����protest by petitioner's counsel, the said pret lmlnary assessment was reduced to the amount of ..... P325.,869�.44, a breakdown� of whIch fo I Iows: � Deficiency Income Tax P321,022.68 Deficiency Expanded 4,846.76 WI� t hho Id I ng Tax .~,�Total .. P325, 869. 44 (pp. 187-189, BIR records) On February 23, 1990, petitioner received from respondent an assessment Ietter, dated February 9, 1990, demanding payment of the amounts of P333,196.86 and � P4,897. 79 as deficiency Income tax and expanded withholding tax inclusive of surcharge and interest, respectively, for the taxable period from January~1, 1986 -- to� December 31, 1986 . . (pp. 204 and 205, BJR rec. > In a Jette~, dated March 22, 1990, fi ted with the respondent's office on March 23, 1990 (pp. 296-311, BIR rec.), petitioner requested for a reconsideration of the subject assessment. Supplemental to Its protest was a tetter, dated Apr I I 2, 1990, fl led with the respondent's office on �,. April 18, 1990 (pp. 224 & 225, BIR rec.), to which letter 1 d. \-..-~ L l ..

�DECISION - � �C.T.A. CASE NO. 5211 - 3- were attached certain documents supportive of its -�protest, as wei I ~s a Waiver of Statute of Limitation, dated Apri I 17' 1990, where it was indicated that respondent would only have unti I Apr I I 5, 1991 within wnlch to assess and collect the taxes that may be found " du� from petitioner after the re-Investigation.� On February 9, 1995, petitioner received from resp6ndent a F~nal Notice Before Seizure, dated December 22, 1994 (p. 340, BIR rec.). In said letter, respondent demanded payment of cthe subject assessment within ten (10) days from receipt thereof. Otherwise, failure on its part would constrain respondent to collect the subject assessment through summary remedies. Petitioner considered said final notice of seizure as respondent's final decision. Hence, the instant petition for review filed with this Court on March 9, 1995. "1 Respondent's Answer (pp. 32-36, CTA rec.) was filed on Apri I 16, 1995. It alleged as Special and Affirmative Defenses, the following: ~7. Th� assessment is valid and correct and the taxpayer has the burden of proof to impugn its val idlty <Behn Meyer & Co. v. Collector of Internal Revenue, 27 Phil. 647). Petitioner misera~ly failed to present concrete evidence to overcome the presumption of validity and correctness attached to the assessment;

DECISION - . � C. T .A. CASE NO. 5211 - 4- 8. The assessment was made in accordance with law based on facts, as a result of the Investigation conducted against petitioner by therevenue officers�of respondent; 9. The petition is premature and without basis as there Is no final decision yet on the protest of petitioner, the notice sent to petitioner being just a demand-letter caused by , the Revenue Officer to whom the case was "' devolved in view of the devolution of cases/functions from the National Office to the Regional Offices; 10. The Waiver of the Statute of Limitations presented and signed by petitioner was not accepted by respondent, hence, of no legal force and effect whatsoever and wi I I not, In... any way, bInd the respondent (Sect Ion 223(b), Tax Code;' Boise Cascade Phi Is., Inc. v. CIA, Case No; 1858 [ 19871); 11. The case against petitioner has not prescribed as the running of the statute of I lmltatfons for collection was suspended when petitioner requested for a reinvestigation in a letter dated 22 March 1990 x x x; 12. Assuming that the notice constitutes the final decision of respondent on the protest as treated by petitioner, definitely and clearly the government's right to collect has not as yet prescribed." The Issues raised by the parties in this caseare: 1. Whether �or not the "final notice before seizure" received by petitioner on February 9, �1995 constitutes the final decision- of respondent which Is appealable to this Court; and 2.- Whether �or not respondent's right to collect the subject assessment has already prescribed. Petitioner holds the view that the "final notice before seizure" Is the final decision of respondent re 1-at Ive to its request for reconsideration and/or

DECISION - -C.T.A. CASE NO. 5211 - 5- reinvestigation. To support its view, petitioner cited the Suprem� Court decision in the case of Commissioner of Internal Revenue v. Ayala Securities Corporation (31 March 1976, 70 SCRA 204), which held that: "The letter of February 18, 1963 is tantamount to a denial of the reconsideration or protest of the respondent corporation on the assessment made by the petitioner, considering that the said letter is In itself a reiteration of the demand by the Bureau of Internal Revenue for the settlement of the assessment already -made, and -for the-Immediate payment of the sum '" �- �� of P-15 8 , 6 8 7 � 0 4 I ns p It e of t he ve hem en t p rot est -'�Of���the responde'nt corporation on April 21, 1961. This certainly Is a clear Indication of the� firm stand oj petitioner agaInst the reconsideration of the disputed assessment, in view of the continued refusal of the respondent corporation to execute the waiver of the period -of I ImItatIon upon the assessment in quest� Ion. This being so, the said letter amounts to a �decision on a disputed or protested assessmentr" The Court cannot uphold petitioner's view. The facts of the above-quoted case are not in alI f04JS with the� facts of the Instant case. The taxpayer in the aforequoted case did not execute a waiver of the period of I imitation as i�t bel leved that the assessment in question had already prescribed. In the instant case, ... petitioner/taxpayer executed a waiver of the statute of -limitation where It was provided that respondent Commissioner of Internal Revenue would have unti I Apr I I 15, 1991 within which to collect the disputed assessment.

DECISION - ��� C. T. A. �CASE NO. 5211 - 6- This Court understands the logic why taxpayer in the. above-cited case continuously refused to execute a waiver of the statute of limitations. Obviously and true . enough, as the decision stated, the right to collect of the Commissioner of Internal Revenue had already "' prescribed. The pertinent portion of said decision is quoted hereunder, to wit: "Under Section 46{d) of the National Internal Revenue Code, the Ayala Securities Corporation. designated September 30, 1955, as the last day of the closing of its fiscal year, I. and under Section� 46{b) the income tax returns for the said corporation shal I be fl led on or before the fifteenth {15th> day of the fourth (4th) month following the close of Its fiscal year. The Ayala Securities Corporation could, therefore, fl le Its income tax returns on or before .January 15, 1956.. The assessment by the Commissioner of Internal Revenue shal I be made -within five {5) years from� January 15, 1956, or not Iater than January 15, 1961, in accordance with Section 331 of the National Internal Revenue Code herein above-quoted. As the assessment Issued on February 21, 1961, which was receIved by the Aya Ia Secur it t,es Corporation on March 22, 1961, was made beyond . ,., the five-year period prescribed under Section ' 331 of said Code, the same was made after the .' ~ prescriptive period had expired and, therefore, was no longer binding on the Ayala Securities Corporation." <Underscoring suppl led; Commissioner of Internal Revenue v. Ayala Securities Corp., 70 SCRA 204, p. 210)) Thus, In another portion of same decision, It was narrated that: lJGU L.

DECISION - C.T.A. CASE NO. 5211 - 7- ... "On May 30, 1961, petitioner wrote respondent corporation's auditing and accounting firm with the "advise that your request for reconsideration wi I I be the subject matter of further reinvestigation and a thorough analysis of the Issue involved condItIoned, however, upon the execution of ',.;-; your cl lent of the enclosed form for waiver of the defense of prescription". <Exh. F> However, respondent corporation did not execute the requested waiver of the statute of I Imitations, considering Its claim that the assessment in question had already prescribed." .( I b Id. , p. 206) Evidently, from all the foregoing, it has been shown that the facts of the aforequoted case are not identical to the Instant case. -Therefore, it is highly improper for petitioner to apply to the case at bar the ruling laid down In the cited case. The Court bel leves that what should properly apply to the instant case Is the decision of the Supreme Court in the case of "Commissioner of Internal Revenue v. Union . Shipping Corporation and the Court Tax Appeals," G.R. No. 66160, May 21, 1990, which held that: ~ "x x x the reviewable decision of the Bureau of Internal Revenue Is that contained In the letter of Its Commissione~ that such constitutes the final decision on the matter which may be appealed to the Court of Tax Appeals x x x." <Underscoring suppl led) From the above quota~lon in the Union Shipping Corp. case-, It. can be gleaned that the final decision appealable to this Court is a letter of the Commissioner lJC.1

�DECISION - -C.T.A. CASE NO. 5211 - 8- of Internal Revenue clearly stating that it Is her final decision. Therefore, as the "final notice before seizure" was merely signed by the Assistant Chief of the Accounts Receivable Division of the Bureau of Internal Re~enue, and the same did not state that it is the final "' decision appealable to Us, this Court concurs with the respondent's stance that the instant case was prematurely f I I ed. It would have been different however, if respondent upon Issuance of said final notice, subsequently Issued the warrant of seizure which pursuant to the Supreme Court decision entitled CIR vs. Algue, Inc., L-28896, February 17, 1988, was considered as final decision appealable to this Court. As it is, no final decision has as yet been rendered by the Commissioner of Internal Revenue. And there be~ng no final decision, this Court has no jurisdiction to tackle or resolve the other issue on the merits. WHEREFORE, In view of the foregoing, the instant petition Is hereby DISMISSED, without prejudice to the fi I ing of another petition upon receipt by petitioner of the final decision of respondent former's protest. SO ORDERED. RA:;�O~~J( Associate Ju~A

DECISION - C.T.A. CASE NO. 5211 - 9- ' ' OWE CONCUR: ~((2. ~ ERNESTO D. ACOSTA Presiding Judge -~�~ Associate Judge� � CERTIFICATION I hereby certify that the above decision was reached after due consultation,with the members of the Court of Tax Appeals in accordance with Section 13, Article VI I I ���,of the Constitution.� ~~.~ ERNESTO D. ACOSTA Presiding Judge Court of Tax Appeals 1JG3 _ _}