CTA Case No. 2581 (Decision)

--'�---�=:.---- -'"'�� =:. ~ ,.;. ............. ~-~ - .. �-, ;= - -..-~�� -----"--..:...--- ~---.:._.__ - � __;~~ � - .....;.,:..��._ _ _._ ___:. HEI'ti!: Ur. OF Trlt!: PIIIUPPINES COURT 0/ T.;x APPEALS OUEZO:"l CITV I .I Cfu'\LOS J. REYES I Petitioner, I - versus - C.T.A. CASE NO. 2581 �. I CCMMISSIONER OF ll'J'I'P__llliAL I! REVENUE, II Respondent. II X- - - - - - - - - - - X ,.I j DECISION A[.'pe21l from the decision of respondent Commissioner of Internal Revenue dated Hay 9, 1973, denying the claim of peti- tioner Carlos J. Reyes for refund of the sums of ~846.72 and P522.48 as alleged double payment of his deficiency income t ax liabilities ~1d penalties for the years 1952 and 1953, and re- iterating his demand against petitioner for payment of the amount of P327.53 as surcharge, delinquency interest and penal- ties for the same years. There is no dispute as to the facts of the case. As borne out by the pleadings and records, it appears that an anonymous letter (St~ictly Confidential) dated June 21, 1957 W3.S received by the Regional Director of the Bureau of Internal Revenue for Western Visayas, informing him of the tax evasion committed by Carlos J. Reyes, petitioner here in. (p. 3, BIR rec.) Because of the afo~esaid letter, an inves tigation and examination of the tax liabilities of petitioner was conducted by the Regional Distrir.t Office of Iloilo City. (pp. 8, 17 , 18 and 19, BIR 249

- - - __,,.. __, .. ----------------,-----~___,~-��-��- =-~0 ~~,. " ~ �-�-�' DECISION - CTA CASE NO. 2~81 - 2- rec . ) As a result tl1ereof, sometime on July 17, 1965, peti- tioner \vas assessed for deficiency income tax liabilities in the amounts of ~846.72 and :1?522.48 for the years 1952 and 1953, respectively. (Exh. "1", pp. 58-61, BIR rec.) On August 6, 1965, Jose Aclaro, brother-in-law of herein i' petitioner,was issued Official Receipts Nos. B-1651279 and I II B-1651280 in the amounts of :1?846.72 and :1?522.48 for the years I 1952 and 1953, respectively, by David n. Babol, the revenue ~ollection agent at Estanc ia, Iloilo, evidencing payment by peti- tioner of tl1e aforementioned assessment of respondent dated July 17, 1965. (Exh. "B" , p . 44; Exh. "A", p. 44 , CTA rec .) On Deceniller 6, 1966 petitioner himself made payment to the officer-in-charge, collection agent, at Estancia, n .oilo, the amounts of �1846.72 and 1?522.48 as evi(encedby Official Receipts Nos. B- 1651897 and B-1651898 involving the SC..";~2 assessment of respondent dated July 17, 1965. (Par. 4, Petition, admitted ln par. 3, P..nswer, pp . 1 and 35, CTA rec.) In a l etter dated July 18, 1967, the Assistant Regional Director, Revenue Region No. 15, Iloilo City, assessed and demanded f rom petitioner t he fur t her amount of :1?327. 53 by v1ay of interest from August 17, 1965 to December 6, 1966, compromise ') penalties and surcharges for late payment of the assessment of July 17, 1965 on the ground that the quadruplicate copies of iI Official Receipts Nos. B-1651280 for fl522.48 and B-1651279 for I �1846 . 72, both dated August 6, 1965, were cancelled by David !

llECISION - CTA CASE NO. 2581 - 3- B. Babol. (Exh. "2 � , p. 67, BIR rec.; Par. 5, Petition , admitted m par . l, A':lswer, pp . 2 and 35, CTA rec.) Petitioner instead of protesting to the aforementioned deficiency assessment for late payment, filed wit h the Regional Distric t No. 15 on July 29, 1967 a claim for refund of the amounts of P846.72 and P522.48 due t o double payment erroneously made by him on Decem- ber 6, 1966. (p. 1~7, BIR rec .; see also Par. 6, Petition, achnitted in par. 4, Ansv;er, pp. 2 and 36, CTA rec.) In a letter dec ision dated l,1ay 9�, 1973, hm1ever, respondent denied petition- er � s claim for refund and reiterated his demand for payment of +-he amount of lP327.53 as surcharge, delinquency interest and penalties for late payment of t-he assPssment of Ju1y 17, 1965. (Exh. "8", pp , 199-200, BIR rec . ) Consequently, on Febn~ary 2b, 1974, petitioner interl_Xlsed his appeal to this Cour t. Submit ted for resolution before us are the following: 1. \'ilhether or no+- petitioner is liable for the defic iency penalty assessment i n the amount of 1?327.53 on the basi s of late payment wade on December 6, 1966; and 2. 'V\lhet her or not petitioner's right to a refund has al- ready prescr ibed pursuant to Section 306 of the Tax Code. Should an internal r evenue collection agent be allowed to issue offic ial receipts evidencing payment of internal revenue taxes . lat�er cancel unilateral ly, without i nforming the ta."'-1;;- payer concer n, the dupl i cates, triplicates and quadruplicates t:hereof allegedly because no payments \vere ac tuallv tendered I i' 25 1

n.I:!CISION - C.TA CASE NO. 2581 - 4- a,11d received Dy hi.rn? The clear purpose of the issuance of an official receipt is to serve as evidence of payment of th~ tax indicated thereon. Issuing official receipts, therefore, with- out actual receipt of payment of the taxes reflected thereon does not only constitute grave abuse of discretion and gr~ss in- competence on the part of the collecting officer for which he should be held liable but destructive of the taxpayer:3' faith and confidence in their government � . It is alleged, however, in an ~ l?.�rte affidavit, "VJherein the Court or thP taxpayer (petitioner herein) "Vlas neve :~� given the opportunity to cross examine the affiant, revenue collection agent David B. Babol, as he was not presented: XXX XX XX XXX "4. That this carne about as a result i of an over confidence and good faith of the i I '' affiant on the person and character of Mr. Jose Aclaro , brother-in-law of CarloR Reyes, the taxpay-er aoove-mentioned~ "5. That it was sometime in the morning of August 6, 1965 when Mr. Jose Aclaro carne to the Office and told me that he wish to pay the deficiency of Mr. Carlos Reyes, his brother-in-law, for 1952 and 1953 , in the totar amount of Pl,369.20. He asked me 'co issue the corre~ponding receipts for the same; "6. That after issuing 0/R No. 1651279 for �1846.72 and 0/R No. 1651280 for P522.48, representing income tax deficiency for 1952 and 1953, (in the total amount of Pl,369.20), respectively, I handed over those receipts to ~tr. Jose Aclaro. Upon his receipt of those receipts however, Mr. Aclaro told me that he did not have the money with him at the moment but that if I can trust him, he'll just send 252

�----------�-- � ...... ......... --~���*�-~- ~ . ....... ...... ~- ~....-... � ...�... J uOCISION - CTA Cli.SE NO. 2581 -.5- it to me in the Office as soon as he gets home; "7. That net suspecting anything fishy and relying on the character and integrity of Mr. Aclaro, I took his word for it and d]_d not mind when he left the office with the hlo (2) herein referred receipts: XXX XX While much could be said of the trust or confidence or qood faith reposed on the person of Jose Aclaro, this Court could not look with favor on such actuations or motivations of inte"nal revenue collection officers as it would frustrate the very purpose of the issuance of official receipts and e::-q;::ose government revenues to misappropriation or malversation. More importantly , in viev1 of the nature of the official receipt 2s , .~ evidence of payment of taxes paid, involving as it does mon:::~y received into the public treasury, the Court cannot but doubt +-he credibility and good faith of internal revenue agent David B. Babol who issued the official receipts. Especially so when v;it-hont taking t he appropirab:: action for the recovery of the official receipts issued by him allegedly without recPipt oF payment, he unilaterally cancelled the duplicates, triplicates and quadruplicates without notifying petitioner herein or Jose Aclaro of his action. Against this backdrop, and on t he face of the genuineness and official character ot nfficiol Receipts Nos . B-1651260 a11d B-1651279 dated August 6, 1965 as public documents (U.S. vs.

DECISION - C1~ CASE NO. 2581 - E) - Leyson, 5 Phil. 447), the veracity and due issuance of which hc:.ve never been questioned by respondent, payment by petitioner Carlos J. Reyes of his deficiency income taxes and penalties for the years 1952 and 1953 in the to~l sum of PL 1 369.20 on August.� 6, 19h5 m~y not be disregarded in the absence of an affirmative showing that wha�,: i~3 ;�eflected there-on is not true. In the or- dinary and accepted course of official business, no collection agent, unless he is motivated v�lith selfish or dishonest in- tentions, will ever �issue official receipts evidencing payment of taxes due the government without actually receiving und verifying the correctness of the amount officially receipted. Neither will he cancel the duplicates, triplicates and quad- ruplicates of the official receipts without first informing the taxpayer concern of his action and pursuing appropriate steps for the recovery of the amount of Lhe tax COLlected or the ori- ginal of the receipts. The bare allegat-io"' in an affidav.:.t, the affiant of which has not been even presented in C""'urt for examination as to the truth of his stutements, that no payment wns tendered and r~ceived, unsupported and standing alone, should not theretore impair the faith and credence normally accorded to official receipts as evidence of payment. Some stress \vas placed by respondent upon petitioner claiming refw1d on the ground of doubl8 payment only after receipt of respondent's letter of July 18, 1967 qemanding pay- men of the Qmount o !1327.53 as de iciency penalties. And

DECISION - C1~ CASE NO. 2581 - 7� - surmising that petitioner's brother-in-_aw co" ld have effected the payment made on Augus 6, 1965 only upon specific instructions from herein petitioner, respondent would 'entertain some doubts on the veracity of petitioner's allegation of doub_e payment. Human memory suffers from lapse of time, and it is not inconceivable that the letter of respondent might have touched the chord which remir.ded petitioner, considering that the amount involved is not substantial, of the nouble payment. Petitioner v1as acting Hithin hi:s rig.,ts, and if he filed his claim for refund after receipt of respondent's demand-letter of the amount of P327.53 as delinquency penalties for late payment of tl1e principal assE:ssment, that is a matter whi.ch is not inconsistent with petitioner's defense that he had already paid his 1952 a~d 1953 income tax deficiencies on August 6, 1965 and entitled to t-he refund of the amount paid of the sarne li~bilities on Decemb~r 6~ 1966. The net result is that the deficiency income tax liabilities and penalties for the years 1952 and 1953 in the total Slun of Pl,369.20 of petitioner were duly paid on August 6, 1965 under Official Receipts Nos. B-1651280 and B-1651279 . T11e payment of the sa~e tax liabilities and penalties on Decewber 6, 1966 under Official Receipts Nos. B-1651897 and B-1651898 by peti- tioner \vas therefore a double pa~'111ent. Consequently, respondent's letter assessment of July 18, 1967, demanding from petitioner the pavrr.2�� t of 12~27 .53 ~ s dP.linqu-:.ncy penalties for late payment

TIECISION - CTA C~E NO. 2581 - 8- II of the principal assessment on December 6, 19b6 c~not be I: sustained. I Notwithstanding t!1e double payment of the same income I ta"<: liabilities, petitioner is not, ho\'lever, entitled to the I i refund of the second payment made by him on December 1965 because his right to the refund has alreaoy prescribed under SPction 306 (nov1 Section 292) of the National Internal Revenue code. Section 306 of the Code then reads as follovlS: "Sec. 306: Reco"Z~~of tax erron- eously__or illegally: collect:_~d. - No s uit or proceeding shall be maintained in any court for the recovery of any national internal revenue tax hereafter alleged to have been erroneously or illegally assessed or collected, or of any penalty ciaimPd to have bPen col- lected without authority, or of any SLun alleged to have been excessive or in ~ny manner wrong- fully collected, until a claim for refund or credit has been duly filed with the Corrmis- sioner of Internal Revenue; but such suit or proceeding may be maintained, whether oi" not such tax, penalty, or sum has been paid under protest or duress. In anv case, no such suit or proceeding shall be begun after the ~iration of two years from the dat~~ayment of the tax or penal."!:Y�" (Underlining supplied.) As stated earlier, petitioner seeks in this proceeding the refund of the payrnent rnade by him on De'CCJTlber 6, _1966 unr'ler Official Receip+-s Nos. B-1651897 and B-1651898 :i.n t..he 2.mounts of P-846.72 and P-522.48, respective_y. However, the rerords will show that peti�ioner s appeal to this Court for refund of t-he aforesaid amounts was instituted on February 26, 1974 or r~ftc.r a r.>eriod of exactly seven ('7) years, two (2) months 25G '

I I DECISION - CTA CASE NO. 2581 - 9- and twenty (20) days . Definitely, the right of petitioner to the refund has already prescribed . In the case of Collector of Internal Revenue vs. Court of 'Pax Appeal s and HLL11.e Pipe and Asbestos Co., Inc., L-11494, January 28, 1961, 1 SCRA 87, the Supreme Court held: In order t o confer jurisdiction upon the court, it is necessary, hov;ever, t hat in al l cases the suit must be brought within the s tatutory period of two years and the reguire- rnents provided for in section 306 must have been carnplied ~..;rith. Furt her, Pursuant to section J06 of the Tax Code, no suit or proceeding for refund or credit of any national internal revenue tax erro- neousl y or illegally assessed or collected shal l be begun after the expiration of two (2) years from the date of payment. This provision , which is mandatory , is not subjec t to any qualifications, and, hence, it appl i es regardless of the conditions under which the payment has been made. (Guagua Electric Light Plant Co., Inc., vs. Collector of Internal Revenue, L-14421, April 29, 1961 , 1 SCRA 1221.) He,accordingly, affirm the first portion of the decision of respondent denying the claim of petitioner Carlos J. Reyes f or refund of the sums of P846 . 72 and PS22 .48 as double payment of his deficiency income tax liabilities and penalties for the yeaml952 ~1d 1953; and reverse the second part thereof re- iterating his demand against him (petitioner) for payment of r he amount of PJ27 . 53 representing surchar ge, delinquency interest and penalties for l ate payment of the principal assess- I .~ I '

DECISION - CTA CASE lJO. 2581 -lu- ment of income ta~ deficiencies for the same years. \�\11-IEHEFO~, the dec ision appealed fro:n is hereby rr.odified as indicated in the above opinion of the Court. No pronounce- rnent as to costs. SO ORDFRED. Quezon City, Hetro Manila, July 31, 1979. J lf2wt?wi-"-~~W'J,_lI-,�1�, ;1 Al'I.W.NTE FriEH Acting Presiding Judge I CONCUR: C'O--N--S;lT//.A#NCTEbC.e~ �'-H/O'A-Q- UIN Associate Judge 8 ') r. � A.; ,_)