CTA Case No. 4393 (Decision)

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY PHILIPPINE BARK OF COftftURICATIORS, Petitioner, - versus - C.T.A. CASE NO. 4393 COKKISSIORER OF INTERNAL REVENUE, Respondent. X- - - - This is a petition for review seeking the nullification of two Warrants of Distraint of Personal Property and Levy on Real Property issued by respondent Commissioner of Internal Revenue against petitioner for enforcement of alfeged deficiency gross receipts tax for the year 1981 in the amount of P363,543.99. In its petition dated 12 October 1989 and filed with the Court on October 13, 1989, petitioner alleges that: <i> it is a banking corporation organized under Philippine lawsJ <ii> on January 21, 1982, it filed its gross receipts tax return for the year 1981 and paid a total of P18,554,103.00 in gross receipts taxJ (iii) after its financial statements were audited in 1982, it paid an additional amount of P683,277.45 as adjusted gross receipts taxJ <iv> sometime in 1984, it received a pre~assessment notice dated May 15, 1984 informing i t of Q t). UfU

DECISION - C.T.A. Case No. 4393- - 2- the �indings o� the Bureau o� Internal Revenue assessing de�iciency gross receipts taxes amounting to P363,543.99 for the year 1981; <v> upon receipt of said pre- assessment notice, it sent a letter dated October 16, 1984 to respondent Commissioner informing the latter that the proposed assessment for deficiency gross receipts tax had already been paid; <vi) more than 5 years later,� or on June 13, 1989, petitioner received a letter dated May 29, 1989 from respondent informing it that its tax liability of P363,543.99 representing deficiency� gross receipts tax for the year 1981 was still outstanding, and demanding payment of said amount within 10 days from petitioner's receipt o� said letter; <vii) while said letter of respondent made reference to a supposed notice o� assessment dated June 15, .1985; petitioner never received a copy of the same; <viii) on June 22, 1989 petitioner wrote to respondent informing the latter that petitioner never received the supposed assessment letter, and that in any event, it had already paid the alleged deficiency gross receipts tax in 1982; (ix) notwithstanding the foregoing, on September 14, 1989, petitioner received separate warrants of distraint and levy issued by respondent to enforce the collection of its supposed tax liability, prompting petitioner to file a formal protest dated October 10, 1989 against the action of respondent 879

DECISION - C.T.A. Case No. 4393 - -3- CommissionerJ and <x> until the filing of the instant petition, respondent Commissioner had failed to take action on petitioner's protest. In her Answer dated March 22, 1990 and filed with the Court on April 25, 1990, respondent interposed the following defenses: (i) that on July 17, 1984 it sent petitioner its Deficiency Tax Assessment No. SARD 81-BT-83-1165 under Postal Registry Receipt No. 1268, assessing against petitioner the amount of F363,543.99 as deficiency gross receipts tax for the year 1981; <ii> that said assessment notice had not been returned unclaimed to it; (iii) that the deficiency tax assessment was issued within the reglementary 5-year period counting from the filing by petitioner of its gross receipts tax return ; <iv> that the issuance of the warrants of distraint and levy on September 14, 1989 should be deemed a denial of petitioner's protest against said assessment; and (v) that the questioned assessment enjoys the legal presumption of correctness and validity which petitioner must successfully overcome. After issues were joined, trial was conducted and petitioner presented one witness who corroborated the factual allegations of the petition. On the other hand, respondent failed to present any witness and merely relied on certain documentary exhibits to substantiate ~80

DECISION - C.T.A. Case No. 4393 - - 4- her defenses. Petitioner's primary contention is that respondent's right to collect the alleged deficiency gross receipts tax has already prescribed considering that <i > it never received a copy of the supposed assessment notice dated June 15, 1984 sent by respondent, (ii) more than three years had already elapsed from the filing of its gross receipts tax return for the year 1981 until its receipt of respondent's letter dated June 13, 1989 informing it of its supposed outstanding tax liability, and <iii) more than 5 years had already elapsed from the actual filing of its gross receipts tax return for 1981 and the issuance on September 12, 1989 of the questioned warrants of distraint and levy. Alternatively, petitioner contends that, even assuming that the assessment and the warrants of distraint and levy had been properly issued, it had already fully paid the supposed deficiency gross receipts tax as early as 1982. After a careful perusal of the testimonial and documentary evidence presented by both parties in this case, We conclude the petitioner's contentions are meritorious. Accordingly, We vote to grant the petition. Firstly, the uncontroverted evidence on record is that, on October 16, 1984, petitioner wrote respondent a 881

DECISION - C.T.A. Case No. 4393 - -5- letter requesting�the reconsideration o� the suppos~d impending assessment against it �or de�iciency gross receipts tax. According to petitioner's lone witness Augusto Ong, said letter was prompted by petitioner's receipt o� the pre-assessment notice dated May 15, 1984, in�orming it o� the results o� the investigation conducted by the Bureau o� Internal Revenue to the e��ect that petitioner was liable �or the payment o� de�iciency gross receipts tax �or the year 1981. In its said letter, petitioner in�ormed respondent that the supposed de�iciency tax had already been paid in 1982 �allowing certain adjustments determined by its auditors in its �inancial statements �or the year 1981. Subsequently, on June 22, 1989, �allowing its receipt o� respondent's letter dated May 29, 1989 in�orming it that its supposed de�iciency tax liability was still unpaid, petitioner wrote respondent a letter reiterating its contention that it had already �ully paid the supposed de�iciency tax liability and �urther pointing out that respondent's right to collect the said de�iciency tax, i� any, had already prescribed. The records clearly indicate that petitioner �iled its gross receipts tax returns �or 1981 as early as January 21, 1982 <Exhibits H to K>. On the other hand, the warrants o� distraint and levy were issued by respondent only on September 12, 1989 <Exhibits D and 882

DECISION - C.T.A. Case No. 4393 - -6- E>, a:fter the lapse o� more than seven <7> years :from the date o� :filing o:f petitioner's gross receipts tax returns. Respondent's insistence that petitioner had been duly served a copy o� the assessment notice dated 1984 is not supported by the evidence on record. As correctly pointed out by petitioner, respondent in its Answer insisted that said assessment notice was sent to petitioner by registered mail on July 17, 1984 under Registry Receipt No. 1268. Yet, a care:ful perusal o� the BIR records submitted to this Court :fails to disclose the existence o� the supposed Registry Receipt No. 1268. For that matter, there is no indication that the tracer letters supposedly issued by respondent <Exhibits 4, 5 and 6> subsequent to the issuance o� the assessment notice were ever sent to and duly received by petitioner. Neither has respondent pro:f:fered any explanation why, a:fter strenuously asserting as a :fact the alleged due delivery to petitioner o:f the assessment letter. which is an essential pre-requisite to the validity o� its claim, .respondent :failed to present to this Court competent and credible proo:f o:f such supposed delivery. But even assuming, :for the sake o:f argument, that the alleged assessment notice had indeed been duly delivered to and received by respondent, the :fact is 883

DECISION - C.T.A. Case No. 4393- -7- that respondent still failed to take any action to enforce said assessment until the lapse of more than 5 years from issuance of the assessment notice. Under Sections 318 and 319 of the National Internal Revenue Code, the prescriptive period for the assessment of taxes is five <5> years from the date of filing of the return, while the prescriptive period for the collection of such taxes is five <5> years from the date of the assessment. In the instant case, even assuming that the assessment had been duly made within the five <5> year period prescribed under Section 318 of the Tax Code, still the right of respondent to enforce said assessment had already prescribed considering the lapse of more than five <5> years from the date of the supposed assessment on July 17, 1984 until the date of the issuance of the warrants of distraint and levy on September 14, 1989. Prescinding :from the :foregoing, there is an even more compelling reason why the petition should be granted. This is the :fact, duly alleged and proved by petitioner and glaringly uncontroverted by respondent, that petitioner had duly paid the supposed de:ficiency gross receipts taxes as-early as 1982, when it made an overpayment in its gross receipts tax for said year in the amount of F683,277.45. This payment was made by petitioner voluntarily upon the suggestion of its

DECISION - C.T.A. Case No. 4393- -8- auditors a�ter the latter had made certain adjustments in its �inancial statements �or the year 1981. In this regard, we �ind the �ollowing testimony o� petitioner's witness Augusto Ong to be relevant: "Q: So when SGV in�ormed you that you have an additionals taxes <sic> to pay �or the year 1981, what did you do'? A: We paid that in the 3rd quarter o� 1982. Q: How did you compute these taxes which have to be paid �or the year 1981, the additional taxes which have to be paid �or the year 1981'? A: It was included in the return o� 1982, �or the third quarter. Q: How did you compute it'? A: SGV have already the amount which we should pay to the BIR. Q: Do you know how SGV computed this'? A: Because it was in their audited �igures, they included additional income �or the year 1981 which be�ore the audit were not yet taken up. So a�ter the audited �igures, they add up additional income taken up on the audited FS and they multiply it by 5Y.." <TSN, August 12, 1991, pp. 10-11>. Signi�icantly, respondent �ailed to present any evidence to controvert the testimony o� petitioner's witness. In �act, respondent did not present any witness at all to support its de�enses. Instead, respondent chose to rely merely on certain documentary evidence which have little or no probative value 885

DECISION - C.T.A. Case No. 4393- -9- considering that they were not even properly identi�ied and authenticated. In case o� doubt, a statute levying a tax should be �interpreted in �avor o� the taxpayer <Commissioner o� Internal Revenue vs. Firemen's Fund Insurance Company 148, SCRA 315. > In case o� doubt, tax statutes are to be construed strictly against the government �or tax, being burdens, are to be presumed beyond what the applicable statute expressly and clearly declares. <Republic vs. Intermediate Appellate Court 196 SCRA 335> WHEREFORE. judgment is hereby rendered GRANTING the petition and setting aside and nulli�ying the questioned assessment in the amount o� ~363,543.99 �or alleged 1981 de�iciency gross receipts tax as well as the warrants o� distraint and levy �or the gross receipt tax assessment dated September 14, 1989 which was issued by respondent against the petitioner. No pronouncement as to costs. SO ORDERED. ~~K. GRUBA Assoc~te Judge 886

) DECISION - C.T.A. Case No. 4393- - 10 - WE CONCUR: CERTJ:FJ:CATJ:ON I hereby certify that this decision was reached after due consultation among the members of the Court of Tax Appeals in accordance with Section 13, Article VIII of the Constitutiion. tV'-L::Q, c~ ERNESTO D. ACOSTA Presiding Judge Court o� Tax Appeals ,