CTA Case No. 3113 (Decision)

,~ V.POlU..lf... Of Ttl I rWLJPPOO.:t. - ouRT ,.0.,1..:,.,Tf.A, Xr.1A-PPEAL! CARLOS O. YSMAEL , SR ., Petitioner, - ver sus - C. T.A. CASE NO. 3113 COMMI SSIONER OF INTERNAL REVENUE , Respondent . X- - - - .X DE C I S I 0 N This is an appeal fr om the decision of respondent Commis sioner of I nterna l Revenue assessing against and demand ing fr om petitioner the paymen t of defic i ency income tax f or 19�67, 1968 and 1969 in the respective amounts of Pl90 , 517 .04, Pl ,096,119.36, and P686,819 .52, or a total of Pl,973,455.92 . On July 31, 1970, in a sworn statement filed with the office of respond en t Comm is sioner of Internal Revenue, an informe r denqunced therein petitioner for having sold real estate properties without payi ng the t ax on ga ins realized therefrom. (p. 35 , BIR rec. ) In the denunc ia tion, the i n- f orme r submit ted photostat c opie s of th e deeds of \ sale ev idencing the ttansactions. (pp. 8-34 , BIR rec. ) . Act ing on the confident ial i nformat ion by said i nf or mer, a gr oup of revenue examine rs

DECISION - CTA CASE NOe 3113 -2 conducted an investigation, and thereafter sub- mitted their report and r ecommendation dated March 3, 1972., (pp . 96-9.7, BIR rec.) . It was ascertained in the investigati on that petitioner have not reported in his 1 967 i ncome tax r eturn, his income derived from (1 ) ~he sale of a Makati proper ty to Gonzales Lao & Co. 1 and (2) .the sale of a San Lazaro property to Fernando Busuego .. It was further ascertained in the i nvest i- gation that in 19 68 , petitioner had realized on ~ the sale of r ea l properties a gain of ~832,892 .38, but instead of reporting said amount, he r eported only gain i n that year of only ~57,714.00. It was found out in the investigation that in the same year, 1 968 , petitioner had an understated i ncome in his c urrent account in the amount of ~264,619.94 � . Finally, it was also shown in the r eport t hat for the year 1969, he has understated his income in his current account in the amount of ~681,399 . 42 . Based on this report and fi ndings , respondent , . in a l etter d ated March 16, 1972 (p . lOS , BIR rec e) ~ i nvited petitioner for a conference, which was twice rese t. After the secopd resetting of the conference, petitioner'~ c ounsel, in a letter dated August 18,

DECISION - CTA CASE NO. 3113 - 3- 1973, i nformed respondent that petitioner had availed of the tax amnesty under Presidential Decree No. 23 on April 1, 1973, which availment had been confir med by the Tax Amnesty I mp lement- ation Officer of the Bureau of Internal Revenue . (pp. 121, 136, BIR rec.) . Notwithstanding the information given by petitioner to the effect that he had availed of Presidential Decree No. 23 which provided f o r tax amne sty to certain taxpayers, respondent se n t on March 16, 19 78 , a letter of assessment and ~emand holding peti tioner liable for deficiency income tax for 1 96 7, 1 968 a nd 19 69 in the total amount of ~1,973,455.92, inclusive of surcharge and in- terest and requesting petitioner to pay t he amount not later tha n April 17, 1978. (PP~ 154-~57, BIR rec.) _ A li ttle over two months after t he issuance of the a foresaid assessment, a warrant of distra int and levy was issued on July 24, 1978 against the real properties of petitioner to effect the summary c ollection of the aforesaid deficiency i ncome tax liabilities and which was served on petitioner's. c ounse l on August 23, 1978 . (p. 168, BIR r ec. ) On September 20, l9 78 (pp. 1 78 - ~79 , BIR rec.) ~ petitioner , thru counsel, protested the assessment

DECISION - CTA CASE NO. 3113 - .4 - i nsisting t hat he should not be held liable for the deficiency income t axes as he had availed of the tax amnesty under Presidential Decree Noo 23 , as amended, which protest was denied by r espondent in his letter-~ecision of April 28 , 19 80 . (pp.l89- 190 , BIR rec.) �. Hence , petitioner appealed to this Court. The only issue raised in this appea l is whether or not respondent could validly assess and demand from petitioner deficiency i ncome t ax for 19 67 , 1968 and 1969 in the amount of ~~,973,455.92 despite the fact that petitioner availed of the tax amnesty provided under Presidential Decree Noo23, as amended. Petitioner contends that having availed of the immunities granted under Presidential Decree No. 23, as amended, from all investigat i ons, both civil and crimina~ with resp ec t t o previous ly un- taxed i ncome earned or re al ized prior to 1972, the deficiency income tax assessment issued against him for the years 1967 , 1968 and 1969 in question is in violation of said decree, and hence, is i llegal . Pet itioner also cites , in suppor t of his s tand, a l etter of respondent cancelling the deficiency i ncome tax assessed against him f or

DECISION - CTA CASE NO. 3113 - 5- 1967 in the amount of ~47 ,2 35.40 on the ground of his havin g availed of Presidentia l Decree No g 23 , as amended ., Respondent c ontends otherwise , asseting i n effect, that petitioner c annot avail of the bene- fits granted under Pr esidentia l Decree No~ 23 , a s amended by Pr esiden ti a l De cree No . 67 , because t axpayers against whom a valid informat i on under Republic Act No . 2338 1 denom i na ted as Con fi dential Information Noo 3 81-~ in t h is i nstant case, has been fil ed as early as July 31 , 1 970 , or p~io r to t he effe ctiv ity on October 20 , 19 72 of Re venue Regulation No. 8-72 1 which i mpleme nts Presidential Decree No. 23 . We agree with the cl ai m of r espondent . To this end, t his Cour t takes the privileg e of quoting verbatim, the pertinent portion of re sponden t's memorandum (pp. 5-8 , "Memorandum for Respondent", at PPo 58-~1 , CTA re c. )~ to which we . are in f ullest agreement : Be ne fits grante d by Presidential Decree 23 , as amended , not avail- a ble to petition~r . Petitioner contends that s ubject deficiency income t ax assessments for 1967 , 1968 and 1969 are violative of t he provisions of President ial Decree No o 23, as amended, whic h expressly

DECISION - CTA CASE NO . 3113 - 6- grants immunity fr om all investigat ions , whe the r civil or criminal, to t hose who availed of the t ax amnesty under the decree with respect to previously un- . taxed income earned or realized prior to 1972. It is claimed that since peti- tioner took advantage of the privileges granted by the decree, respondent erred in issuing subject assessments. In f urther suppor t of his stand , petitioner cites a letter dated 15 February 1978 whereby respondent cancelled t he defi- . ciency income tax assessed agains t peti- . tioner f or 196 7 in the a moun t of ~47 ,235. 40 , upon his availment of Presidential Decree23, as amended . The contention is without merit . Presidential Decree 23 was issued on 16 October 1972. Pertinent portion t hereof is hereunder quoted: � . I s .ection 3. After the tax imposed under this Decree shall have been paid, the taxpayer shall be cleared of all investigations , whether civil or criminal, insofar . as such previously untaxed i ncome is concerned.' On 20 October 1972, Revenue Regulation No. 8- 72, i mplement ing Presidential Decree .No. 23, was issued, pertinent po rtion of which is quoted as follows: �s~ction 2. The term " pre - viously untaxed income" means : (a) In the case of an indi- vidual, al l gains, profits or / " income which he, knowingly or unknowingly, fa iled to declare for income tax purposes i n any year prior to 1972. If such be incapable of exact determi nation t hen the t otal increase i n his equity or networth up to calendar year ending December 31 , 1971 which c annot be explai ned by the

DECISION ~ CTA CASE NO . 311 3 - 7- t ota l amount of income r epo r te d in his prev i ous i ncome tax r eturns, after exc luding there- fr om all i tems of income not subject t o income tax and acqui- sit�ons by gif t or i nher itance , shall be deemed t o be his "pre- . viou!i!,Y.:.~e. " XX X XXX xxx� On 24 November 1 97 2, Presidential Decree No . 67 , ame ndin g par agraphs 1 and 3 of Pre s iden t ia l Decr ee No . 23 , was issued. Parag raph 2 thereof i s here quo ted, to wit : ' a. Paragraph 3 of t he same Decr ee is hereby amended to read as foll ows : � 1 3.� After t he tax i m- . � posed unde r the decree shall have been paid, the taxpayer s hall no t be subject t o an_y: i nvestigation, whether c ivil , criminal or administrative insofar as such previously untaxed wealth and/o r i ncome is concer ned and shall not be used as evidence against, or to t he prejudice of , t he declarant in any proceeding befo re any co urt o( l aw o r body , whe ther j udicial , q uas i- j udicia l or a dm inistrative in whic h he is a de fe ndant or respondent, and such declara- tion s hall not be examined, i nqu ired or l ooked i nto by any person , government , offi- c ial, bureau or offic e x x x . � (Unde rscori ng s upplied ) On 11 December 1 972, Revenue Reg ulation No 8 1s-r2, i mpleme nting Pres i de nt i al Decr e e No 8 67 was i ssued . Sect ion 4 thereof read s :

DECISION - CTA CASE NO . 3113 - 8- ws .ection 4 .. Who may not avail of the amnesty. - All taxpayers, natural or jurid i cal ag ainst whom a valid information under Republic Act No. 2338 has been filed x x x prior to the effectivity of Revenue Regulations Noo 8-1 2, as amended , may not avail of t he i mmunit y pro- vided for in Presidenti al Decree Noo 23, as amended by Presidential Decree No. 67�. ' . It is thus clear that Section 4 of Revenue Regulation No . 15-7 2 e xpressly ex- cludes from the immunity granted by Pres- . idential Decree No. 23, as amended by Presidential Decree Noo 67, t axpayers against whom a valid information unde r Republic Act No. 2338, denominated as Confidential I nform- ation Noo 381-~, has been filed prior to the effectivity of Revenue Re gu la tions No. 8-12 on 20 October 1972. � In this case, a valid i nfor mation under Re public Act No. 2338 was filed against petitioner as early as 31 July 1970. Petitioner availed of the t ax amnesty unde r Presidential Decree 23 as. amended by Presidential Decree No . 67 on April 1, 1973. Subject def iciency assess- ments, therefore, issued against pe titioner subsist notwithstanding his availment of the tax amnesty on Apr il 1, 1973 under .Presidential Decree No . 23 , as amended. With r espect t o the reference made to respondent'~ letter dated 15 February 1978, r elieving him of tax l iability for hav i ng availed of Presidentia l Decree No . 23, the same is not applicable t o subject assessments as.the said letter r efers specifically to the deficie ncy income tax assessment of P47,235.40 , which is not c overed by a valid information unde r Republic Ac t No. ' 2338. With re spec t to the 50% s urcharge imposed in this case , the fact that t he gains realized in the sale of pet i tioner '~ properties and we re no t re ported

DECISION - CTA CASE NO. 3113 - .9 - in his returns for 1967 , 1968 and 1969, making the said retu rns false and knowing it to be so, such r eturns were, therefore, filed with the evident intention to evade the payment of the c or rect taxe~ (Juan D. Nassr vs. Comm . of I nt . Rev. , CTA Case Nos 1668 , July 24 , 1970; Jose B. AzDar vso Court of Appeals & Coll. of Int. Rev. , GR L-2 0569 , August 23, 1 974, 58 SCRA 519)~ This fact was not the l east disputed by petitioner by showing contrary evidence, except only to r ely on the immunity provided under Presidential D~cree No. 23, as amended. We hold petitioner therefore liable fo r 50% surcharge f o r the years 1967, 19 68 and 1969 in question. WHEREFORE, petitioner Carlos o. Ysmael, Sr . is hereby ordered to pay deficiency inc ome tax for 1967, 1968 and 19 69 i n the amount of ~1 , 973,455.92 , plus 10% surcharge , and interest at 14 % per a nnum from March 16, 1978 to J uly 31, 1980, and at 20% per annum f rom August 1, 1980, to the date of full payment, provided that the maximum amount that maybe collected as interest on the deficiency shall in no case exceed the amount corresponding to a period of t hree (3) .Years pursuant to Section 51 (e) of

DECISION - CTA CASE NO ~ 3113 - 10 - the National Internal Revenue Code o f 1977 , as amended ., SO ORDERED. Quezon City , Metro Manila , Decembe r 4 , 1 982 . r- � ROAQUIN ssociate J udge WE CONCUR : �