CTA Case No. EB CRIM-46 (Decision)

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY ENBANC ROMULO L. NERI, CTA EB CRIM. NO. 046 Petitioner, (CTA Crim. Ca s e Nos . 0 -25 1 & 0 -252) Present: -versus- DEL ROSARIO, P.J., CASTANEDA, JR., UY, F A B O N -VICTORINO , MINDARO-GRULLA, R I N G P I S -LIBAN , MANAHAN, BACORRO-VILLENA, and MODESTO-SAN PEDRO, JJ. Promulgated: PEOPLE OF THE PHILIPPINES, Respondent. A- I~IG- 27 ~ ){---------------------- - -- -- -~ DECISION MANAHAN, J .: Before the Court En Bane is a Petition for Review1 filed by petitioner Romulo L. Neri on January 10, 2018 praying for the reversal of the Decision2 dated August 30, 20 17 and Resolution3 dated December 6, 2017 of the Court ofT~ Appeals (CTA) Third Division, with respect to the Court's finding that petitioner is liable for deficiency income t~ in the amount ofPhp474,381.63 for t~able year 2009. The Facts The facts, as summarized by the Court in Division, are as fo llo w s : 1 Rollo, CTA EB Crim . No. 046, pp. 14-6 3. 2 Rollo, pp. 65- 128. 3 Rollo, pp. 130- 136 . ~

DECISION CTA EB CRIM. No. 046 (C.T.A. Crim. Case Nos. 0-251 & 0-252) [Petitioner] is registered with the Bureau of Internal Revenue ("BIR"), Revenue District Office ("RDO") No. 39, South Quezon City, with Tax Identification Number ("TIN") 102-764-852. For TYs 2008 to 2010, [petitioner] was the President and Chief Executive Officer ("CEO") of the Social Security System ("SSS"), SSS nominee director of Union Bank of the Philippines ("UBP") and Philex Mining Corporation ("Philex") for which SSS has investments. As such public official, [petitioner] received taxable income or compensation from SSS, UBP, Philex, Commission on Higher Education ("CHED"), and Philippine Health Insurance Corporation ("Philhealth"). For TY 2009, [petitioner] received income as director of Philhealth in the amount of Php290,625.00, and Php 1,400,000.00 as per diems for attendance during board meetings; and Php15,431,036.51 as profit share in UBP. [Petitioner] filed his amended ITRs for TYs 2008 and 2009 where he declared the amounts ofPhp1,352,614.00 and Php15,424, 164.73, respectively, as his gross income. He also filed his 20 10 ITR and declared a gross income of Php20, 913,786.67. On September 25, 2010, [petitioner] received Letter of Authority ("LOA")-211-2010-00000231 SN: eLA201000015025 dated September 24, 2010. On May 6, 2011, Asst. State Prosecutor ("ASP") Amor L. Robles ("ASP Robles"), Senior Deputy State Prosecutor Miguel F. Gudio, Jr., and Prosecutor General Claro A. Arellano ("PG Arellano"), all of the Department of Justice ("DOJ"), issued a Resolution recommending the filing of Informations for two (2) counts of violation of Section 255 of the 1997 NIRC against [petitioner], upon finding that [petitioner], a registered taxpayer required to pay any tax or supply correct and accurate information pertaining to all income and compensation received by him for TY's 2008 and 2009, under declared all his income in his ITRs, as a result of which, [petitioner] failed to pay his correct and accurate taxes for TYs 2008 and 2009, as follows: XXX XXX XXX_.,...-

DECISION CTA EB CRIM. No. 046 (C.T.A. Crim. Case Nos. 0-251 & 0-252) On November 16, 2011, a Resolution was promulgated by the DOJ, recommending the denial of the SIR's and [petitioner]'s Motions for Reconsideration. On November 24, 2011, [respondent], through ASP Robles and PG Arellano, filed two (2) separate Informations before the Court of Tax Appeals ("CTA"), docketed as CTA Crim. Case Nos. 0-251 and 0-252, the first was raffled to the Third Division, and the second to the Second Division, xxx XXX XXX xxx4 CTA Crim. Case No. 0-252 was consolidated with CTA Crim. Case No. 0-251, the latter bearing the lower docket number. Subsequently, petitioner-accused entered a plea of "Not Guilty" to the two (2) cases filed against him. After trial, the CTA Division ruled as follows: WHEREFORE, premises considered, accused ROMULO L. NERI is hereby ACQUITTED, for failure of the prosecution to prove his guilt beyond reasonable doubt. With regard to the civil liability, accused is ORDERED TO PAY deficiency income tax for TYs 2008 and 2009 in the amounts of Php3,267.12 and Php474,381.63, respectively, inclusive of the twenty-five percent (25%) surcharge imposed under Section 248(A)(3) ofthe 1997 NIRC. In addition, accused is ordered to pay: 1. Deficiency interest at the rate of twenty percent (20%) per annum on the basic deficiency income tax of Php2,613.70 and Php379,505.30 computed from April 15, 2009 and April 15, 2010, respectively, until full payment thereof pursuant to Section 249(B) of the 1997 NIRC; and 2. Delinquency interest at the rate of twenty percent (20%) per annum on the aggregate amount of Php477,648.75 (Php3,267.12 plus Php474,381.63), representing the basic deficiency mcome tax of 4 Rollo, Decision dated August 30, 2017, pp. 65-67. ~

DECISION CTA EB CRIM. No. 046 (C.T.A. Crim. Case Nos. 0-25 I & 0-252) Php382,119.00 (Php2,613.70 plus Php379,505.30) and twenty-five percent (25%) surcharge of Php95,529.75 (Php653.42 plus Php94,876.33) and on the twenty percent (20%) deficiency interest which have accrued as aforestated in (1), computed from July 26, 2011 until full payment thereof pursuant to Section 249(C) of the 1997 NIRC. SO ORDERED. The Motion for Partial Reconsideration filed by petitioner- accused was denied in the Resolutions dated December 6, 2017. On January 10, 2018,6 petitioner filed the instant Petition for Review appealing the Third Division's Decision dated December 6, 2017, only in regard to the civil liability for taxable year 2009 amounting to Php474,381.63. On April 24, 2018, respondent People of the Philippines, through the Office of the Solicitor General (OSG), filed its Comment.7 Said Comment was filed beyond April4, 2018 which was the extended period granted in the Minute Resolution dated March 16, 2018.8 On May 3, 2018, the Court required the parties to submit their respective memoranda within thirty (30) days from receipt of notice.9 On May 31, 2018, the Court received respondent's Manifestation and Motion (In Lieu of Memorandum) 10 stating that it is adopting its Comment as its Memorandum. On June 6, 2018, resolving respondent's Motion for Reconsideration11 filed on April 24, 20 18, the Court admitted respondent's Comment in the interest of justice. The Court reiterated that the parties have thirty (30) days from receipt of s Rollo. pp. 130-136. 6 Within the extended period granted by the Court En Bane in the Minute Resolution dated January 8, 2018. 7 Rollo, pp. 167-179. B Rollo, Minute Resolution dated March 16, 2018, p. 161. 9 Rollo, pp. 186-187. 1o Rollo, pp. 196-200. "Rollo, pp. 180-183.-

DECISION CTA EB CRIM. No. 046 (C.T.A. Crim. Case Nos. 0-251 & 0-252) the May 3, 2018 Resolution within which to submit their memoranda. On June 20, 2018, petitioner filed his Manifestation and Compliance with Motion to Admit Attached Memorandum,12 to which respondent interposed no objection. 13 On September 20, 2018, petitioner's Memorandum14 was admitted, and as such the case was deemed submitted for decision, also taking into consideration respondent's Manifestation that it is adopting its Comment as its Memorandum.Is Issues Petitioner submits the following issues: The principal issue in this petition is whether or not the petitioner had actually declared a Unionbank Profit Share (hereinafter, UBP) income of P4,472, 130.60 in his Amended 2009 Income Tax Return contrary to the finding of the Third Division of this Court that he only declared P3, 134,123.56. The corollary issue is whether or not the petitioner is liable to pay deficiency taxes amounting to P474,381.63 for the Taxable Year 2009.16 Ruling of the Court The Court will now look into the timeliness of the instant appeal, before delving into the substantive issues. The Petition for Review was timely filed. The Court in Division issued the assailed Decision on August 30, 2017. Further, the Court in Division issued the Resolution dated December 6, 2017 denying petitioner's Motion 12 Rollo, pp. 205-207. 13 Rollo, respondent's Manifestation (In lieu of Comment), pp. 257-260. ,. Rollo, pp. 208-253. Is Rollo, pp. 263-264. 16 Rollo, Petition for Review (PFR), p. 20. _ .

DECISION CTA EB CRIM. No. 046 (C.T.A. Crim. Case Nos. 0-251 & 0-252) Page 6 ofl2 for Partial Reconsideration filed on September 6, 2017. Said Resolution was received by petitioner on December 14, 2017. Under Rule 9, Section 9(b) of the Revised Rules of the Court of Tax Appeals (RRCTA), an appeal to the Court en bane in criminal cases decided by the Court in Division shall be taken by filing a petition for review within fifteen (15) days from receipt of the decision or resolution appealed from. The Court en bane may, for good cause, extend the time for filing of the petition for review for an additional period not exceeding fifteen (15) days. Thus, petitioner had fifteen (15) days from December 14, 2017, or until December 29, 2017 within which to file his petition for review. On December 27, 2017, petitioner filed his Motion for Extension of Time to File Petition for Review 17 praying for an extension of fifteen (15) days from December 29, 2017 or until January 13, 2018, within which to file his Petition for Review. Said extension was granted.lB On January 10, 2018, petitioner timely filed the subject Petition for Review. There is a compelling reason to reverse the Court in Division's findings as to petitioner's civil liability. The Court in Division computed petitioner's basic deficiency income tax for taxable year 2009, as follows: 19 DETAILS TY 2009 UBPincome: Php 5,872,130.66 Should Be Income 3, 134,123.56 Per ITR Income 2,738,007.10 Deficiency Income 32% Tax Rate DEFICIENCY INCOME TAX Php 876,162.27 Voluntary Payment 496,656.97 Basic Deficiency Income Tax Surcharge (25%) Php 379,505.30 TOTAL INCOME TAX DUE 94,876.33 Php 474,381.63 11 Rollo, pp. 1-6. 18 Rollo, Minute Resolution dated January 8, 2018, pp. 13-13A. 19 Rollo, Decision dated August 30,2017, pp. 126-127. __.-

DECISION CTA EB CRIM. No. 046 (C.T.A. Crim. Case Nos. 0-251 & 0-252) Petitioner argues that he actually declared Php4,472,130.60 and not the Php3, 134,123.56 in his annual income tax return (ITR) for taxable year 2009. Petitioner states that the amount of Php4,472,130.60 was already included in the Php14,117,945.36 reflected in Line 29 of his 2009 ITR. Petitioner also states that there was no need for further evidentiary proof of the breakdown of the declared Php14,117,945.36 stated in Line 29 of the ITR as this amount could be arrived at by adding the income figures already proven by the evidence. Petitioner also states that the difference of Php1,360,000.00 between Note 6 and Line 29 of the ITR (Php14,117,945.36- 12,757,945.00) has been explained by the testimony of witness Ms. Michaela Sophia E. Rubio from Union Bank of the Philippines (UBP). Petitioner further argues that the Division erred in holding him still liable for deficiency taxes when the total of the proven income items for 2009 was only Php14,095,952.45 but it was found that petitioner had actually declared more in the amount ofPhp14,117,945.36. Respondent, in its Comment, states that petitioner's taxable income for taxable year 2009 should be Php5,872,130.66 (Php1,400,000.00 per diem plus Php510,416.67, Php3,086,713.98, and Php875,000.00). However, petitioner only reported in his amended ITR the amount of Php3, 134,123.56 for taxable year 2009. Thus, petitioner had unreported income for taxable year 2009 amounting to Php2,738,007.10 (Php5,872,130.66 less Php3, 134, 123.56). Respondent states that the Court rightfully computed the total tax due amounting to Php474,381.63. Respondent further asserts that petitioner failed to prove that his unreported income from UBP pertains to the difference between the income he declared in his amended ITR and the total amount of income shown to have been received by him in 2009. The Petition for Review has merit. It is an elementary rule in criminal procedure that the extinction of the penal action does not carry with it the extinction of the civil liability where the acquittal is based on reasonable doubt as only preponderance of evidence is required in civil cases. Preponderance of evidence is defined as the weight, credit, and value of the aggregate evidence on either side--

DECISION CTA EB CRIM. No. 046 (C.T.A. Crim. Case Nos. 0-251 & 0-252) and is usually considered synonymous with the term greater weight of evidence or greater weight of credible evidence. It is evidence which is more convincing to the court as worthy of belief than that which is offered in opposition thereto.20 In this case, petitioner was acquitted of the crime of failure to supply correct and accurate information in his income tax return for taxable year 2009. However, the Court in Division found petitioner liable for civil liability for taxable year 2009 amounting to Php474,381.63, computed as follows: DETAILS TY 2009 UBPincome: Php 5,872,130.66 Should Be Income 3, 134,123.56 Per ITR Income 2, 738,007.10 Deficiency Income 32% Tax Rate DEFICIENCY INCOME TAX Php 876,162.27 Voluntary Payment 496,656.97 Basic Deficiency Income Tax Surcharge (25%) Php 379,505.30 TOTAL INCOME TAX DUE 94,876.33 Phi'_ 474,381.63 There is no dispute with the "should be" income amount of Php5,872, 130.66, which is composed of the following: AMOUNT DETAILS Per diems in 200921 Php 1,400,000.00 510,416.67 Profit share received b}' accused on February 27, 200922 3,086,713.99 Profit share received by accused on March 17, 200923 875,000.00 Profit share received b}' accused on December 18, 200924 Php5,872,130.66 Of these amounts, petitioner admitted that Php1,400,000.00 was not reported in his ITR, and thus, voluntarily paid deficiency taxes thereon on May 31, 2011. Thus, what remains to be reconciled is Php1,338,007.09, computed as follows: 20 Emilia Lim u. Mindanao Wines & Liquor Galleria, G.R. No. 175851, July 4, 2012. 21 Rollo, Decision dated August 30, 2017, p. 111. 22 Rollo, Decision dated August 30, 2017, p. 117. 23 Rollo, Decision dated August 30, 2017, p. 117. 24 Rollo, Decision dated August 30, 2017, p. 117. ~

DECISION CTA EB CRIM. No. 046 (C.T.A. Crim. Case Nos. 0-251 & 0-252) AMOUNT DETAILS 510,416.67 Profit share received by accused on February 27, 200925 Profit share received by_ accused on March 17, 200926 3,086,713.99 Profit share received by accused on December 18, 200927 875,000.00 Gross Income reported in Note 6 (Php510,416.67 + Php4,472, 130.65 2,623,706.8<)]28 3, 134,123.56 Php 1,338,007.09 A review of petitioner's arguments shows that petitioner explained this discrepancy as the tax withheld from Php3,086,713.99 amounting to Php463,007.10 (resulting to the Php2,623,706.89 reported in Note 6). These amounts of Php463,007.10 plus Php875,000.00 were allegedly not included in Note 6, but were included in the Php14, 117,945.36 reported in Line 29 of the amended ITR. After examining the documents presented by both the petitioner and respondent in the trial before the Court in Division, the Court En Bane finds that petitioner included the full amount ofPhp 4,472,130.65 in Line 29 of his amended ITR. The full amount of the UBP income was declared and reported to the BIR in petitioner's un-amended ITR for 2009, as shown in Note 6,29 portions of which are shown below: NOTE 6- SUMMARY OF INCOME 2009 FOR THE TAXABLE YEAR ENDED December 31, 2009 TAXABLE COMPENSATION INCOME TAX WITHHELD INCOME PERIOD GROSS BIR 2316 BIR FORM INCOME COVERED 2307 XXX SOCIAL SECURITY SYSTEM xxx 510,416.67 Union Bank Oct to dec. 09 76,562.50 XXX Xxx XXX XXX 3,961,713.93 Union Bank of the jan to mar 14,095,952.40 Phiis. 2009 594,257.09 2,114,392.86 TOTAL The total of Php510,416.67 and Php3,961,713.93 shown above is Php4,472,130.60 which is different by a mere five centavos (Php0.05) from the proven UBP income. 25 Rollo, Decision dated August 30, 2017, p. 117. 26 Rollo, Decision dated August 30, 20 17, p. 117. 27 Rollo, Decision dated August 30, 20 17, p. 117. 2s Docket, Vol. 3, Exhibit "Q-4", p. 1300. 29 Docket, Vol. 3, Exhibit "P-15", p. 1296.~to.--

DECISION CTA EB CRIM. No. 046 (C.T.A. Crim. Case Nos. 0-251 & 0-252) Page 10ofl2 When petitioner's ITR was amended, the supporting Note 6 was changed but only as to the amount of UBP income. The figures are presented for comparison below: Note 6 Un-amended ITRJo Note 6, Amended ITRJl Income Period covered Gross Income BIR Form 2307 Gross Income BIR Form 2307 Union Bank Oct to dec. 09 Union Bank of 510 416.67 76,562.50 510,416.67 76,562.50 the Phils. jan to mar Total 2009 3 961,713.93 594 257.09 2 623,706.89 594 257.09 4,472,130.60 3,134,123.56 It is notable that the amount of gross income was lowered in Note 6 of the amended ITR, but the corresponding tax withheld was not. The declared tax withheld of Php594,257.09 is 15% of Php3,961,713.93, and not of Php2,623,706.89. This bolsters the finding that the actual declared income in line 29 of the amended ITR is Php4,472,130.60 (510,416.67 plus 3,961,713.93) consistent with that declared in the un-amended ITR; and, that the modification of the Union Bank income from Php3,961,713.93 in the un-amended ITR to Php2,623,706.89 in Note 6 of the amended ITR is erroneous. Further, the prosecution, in the case before the Division, did not prove any other income of the accused in addition to the incomes received from the Social Security System (SSS), UBP, Philex Mining Corporation (Philex), Commission on Higher Education (CHED), and Philippine Health Insurance Corporation (Philhealth). Based on the foregoing, the Court En Bane finds that petitioner sufficiently explained the discrepancy in Note 6 and Line 29 of his amended ITR. The proven income items of the petitioner amount to Php14,095,952.4532 while that declared in Line 29 of the amended ITR is greater at Php14, 117,945.36. This warrants the reversal of the Court in Division's finding of civil liability against the accused for taxable year 2009. WHEREFORE, the instant Petition for Review is GRANTED. Accordingly, the imposition of civil liability amounting to Php474,381.63 for taxable year 2009 in the Decision dated August 30, 2017 and Resolution dated 30 Docket, Vol. 3, Exhibit "P-15", p. 1296. 31 Docket, Vol. 3, Exhibit "Q-4", p. 1300. 32 Php290,625.00 + Php9,333, 196.80 + Php4,472, 130.65 (consisting of Philhealth, Philex, and UBP incomes).,_,...--

DECISION CTA EB CRIM. No. 046 (C.T.A. Crim. Case Nos. 0-251 & 0-252) December 6, 2017, of the Court in Division in CTA Crim. Case Nos. 0-251 and 0-252, is hereby REVERSED. SO ORDERED. /.'~' 7~ CATHERINE T. MANAHAN Associate Justice WE CONCUR: Presiding Justice J~l c'1~i~6l.�JR. Associate Justice ERL~P.UY Associate Justice ~N.M~~-6'~ CIELITO N. MINDARO-GRULLA Associate Justice ~. ~ .4--- MA. BELEN M. RINGPIS-LIBAN Associate Justice JEANMA BACORRO-VILLENA

DECISION CTA EB CRIM. No. 046 (C.T.A. Crim. Case Nos. 0-251 & 0-252) CERTIFICATION Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court. Presiding Justice