CTA Case No. 4318 (Decision)

., REPUBLIC Of THI PHILIPPIMIS COURT OF TAX APPEALS QUIZOM CITY R.O.H. AUTO PRODUCTS C.T.A. CASE NO. 4318 PHILIPPINES, INC., Petitioner~ - versus - THE COMMISSIONER OF INTERNAL REVENUE, Respondent. X- - - - - - - - - - X DE C s Cl N On August 13, 1986, respondent issued to petitioner assessment notices for deficiency come and taxes for the year 1982, totalling P1,410,157.71 including increments (Anrtex "A", p.7, CTA records.>. Petitioner protested the assessments and requested for their withdrawal and cancellation on the ground that petl tioner avai 1ed of the income ta>t amnesty on October 30, 1986 and the business tax amnesty on November 24, 1986, under E>:ec:Litive Order No. 41 as amended by E>tecutive Order No . 64 which grants amnesty for unpaid 1ike ta>tes for the years 1981-1985. The protest was denied with finality as respondent reasoned that availment of the amnesty did not result in the cancellation of the assessments by force of Revenue Memorandum Order No. 4-87 which

DECISION CTn cnsE NO- 4318 - 2- c;pec .i f i e s that only a s F>esS~~ments it~~sued an or ~fter Augu!=lt 2.1~ .1.986 may be cancP-llE?d and wi thdr~l'Hl by the amne s ty . Sin c E? t.he as se S~~~ment!'!l \'Jere iS!'!IUed on August .1.3' 1986, t .he Comm .i s s.i.oner c oncluded they sti.ll r,;ubsist. Th e gi s t of the c ontr-o ve r s y clearly refer� !!!! to the .i.rnpo r� t o �f Re v enue Memo ra ndum OrdP.r� No. 4 - 87 in relation to Exe c uti v e Order N o . 4.1 as amended by Executi ve Order No. 64. In a rgum e nt~ pP.titi o n e r in thP. main alleges that r~:e v enuF.? 1'1e morandum Or-d e r� 4 - 8 7 ca nnot amend or- modify the expl .i.r.: .it pr-ovi s i o n o n the .i.mmun.itieg; and fW iv.i.l eqec; (_:J r "'nt:. e d und e r � E>tF.? c ut.i.ve Order No 41 as F.\rn e nd e d . I t ad ve rts t o the .,;e pr-onouncements of th~ Supreme Court whe r e, c iting jurisprud e nce, the rule- of agencies was a mpl.i. �f .i e d: "Til e l"� e are h o\.'IF?V er� , l .i .mi t.ations to th!'t n..ll P. �-� ma ldng po we r� of adm.in .i.st.r�at.ive �~ g e n c :i. ec:; . A n .llF. s h ;"'ped out by ju r i s prud e n ce is that when Congres~ a utho ri zes pro mulg a t.ion of administrative rule s and regulati o ns to implement given leg.islatic>n, all that .i.s r�.equired is that thP. n~ gulation be not in contrad.ic:ti.on \'lith .it., but conform to thF.? standar-ds t .hat thtP. law prescribes v. (Dir~ctor o f For~stry Hunoz .~ .23 SCRA .t.t83). The rule deli.neatlng the extent of the binding force to be given to admin.i.strat.ive rules and regulation~ was e>:pla:l.ned by the Cour�� t i.n T~oxon v. Htt ber of thg Board of Adainistr8tors (33 SCRA 588) ~ t.hus'" The recogn i t..i.on of the power of administrative of �f .icials to pr-omulgate lbu

DECISION CTA CnSE NO. ~318 - 3- n ..llP ~ in the .impJ~mPnt.;:d:icm of the 8 t C~t ut~, CIS nPc:essar i 1 y 1 .i m.i ted to ll'lha t is pn)v ided �for� i n the leg.islC~t.i.ve enC~r.:t m P nt, m C~y be f~unrl as eAr ly C~s 1908 in the case of United StatP.s v. BArri;ts U1 Ph.il . 327)~ in 1914 U.S. v. Tupasi NolinA (2'.? Phi.l. 1.t'.?.l in 1936 People v. SAntos (63 Phil. 300), in .1951 Chin~r.se Flour IJtport~rs ltss. v. Pric~ StAbilization BoFtrd (8'.? Phi L 43 :?.>, and ln 1962 Victorias lfilling Co., Inc . v. Socii!tl Security Co.,JIItis!Cion ( 'J SCRA 6.27). The Cot.ll'' t held .in t h e case that "A r-ule .is binding on t:. ll e cr.n.lr- te; so long ar::~ the pro c:P dure fixed for it~ promulgation im �folln~tl e d And .i . te; cr.r.:ope .i .l"l w .i. th.in the statutP granted by the l egi.s lature, e ven if t h e c:oL.Ir- t: !'!', r.:\ Y"P not. in agr�eeme nt w.i th t .he policy stC~te d therein, or i t s innate "'li.s dom >: H >~. " "In case of r.:li.cr.cr�epancy bPt~tleen the b .""sir.: l a~�1 And a n . ll P or. t��p gul<:>.t.i.on issued to .i.mplement said la~tl, the b ac;.ic law pt�� eval l s b ecause sA.i.d n .tle or- r� egt..tlC~tion Ci::\ nnot. gn beyond tllP ter-m!'5 and pr� ovlsions of t il e b,"'\c:;ic l a1t1 (reople v. LiJ!t .� 108 Phil � .to�.?.t). RulP. s t h At subvPr" t the s t atu te Ci'\fHIOt be sa nctioned (University of' S~nto To'fiHI!'i '"� Board o f' Tax Appe a ls .� 93 Ph.i .l. 376; Del Nar v. Phil. VetP.rans ltd1'tinistFO'IItion� .5 .t SCR/1 340 ). E>tr.:e pt for� c:onst:Jtut.i.on,"\ 1 o'f'flr.:Jr~ l s v1 h o can tr- ace ttl~i t�� c: ornpl'~tenc:e tn act t.o the fundanu=mtal lA\fl iti:\Pl �f, a publlc of'fJcial muo;;t l oc"" t .e .i.n th~ stat ut e re l i ed upon a grant of power be f r.:we h e Ci''H1 e>ter� cJse .i.t. D~p a r� trnent zeal may not b P permitted t o outrun the authority c:onfP.rred by statute fRsdio Colltmunications of' the rllilippines, Inc. v. Santiago, L - 29236, Jlugu s t 2 .t, 1974, 58 SC RA 4'.?.3). " (Tayug Rural B a nk v. Central Bank o"f th~ Pldlippinf!ts G.R. No. L - 46158 .� Nov~mber .2 8, 1986, 146 SC RA 120, 1.29-130). Respondent, for� his part., 1 ays emphasis f i n!>t, on the pr�ov .i s.ion in 1.02 of Revenue Memorandum Order No. 4 - 87 to s tress that, in the

DECI S ION CTA CAS E NO. ~ 3 18 - ~- r� ec::;u l tc::; on l y fnr� ac::;ses~me n t n ot.lces a nd l e t t e r� !!'! o �f demand i c::;sued .:\ �f ter {)uqu!"! t 21 ~ .1. 98 6 . ".1..02. {) cer-tificat..i.on by t h e T el>: AmnP. s ty Irnplementati.on O f ficer o �f th e �f ac t n�f av ."'.i. lm e n t n�f t .he <=;i':'i d t a>t a mn e sty !!';ha l l be ~ sufficient basi5 f or : 1. 02 . .1. . 1.02.2. 1.02.3. In C\ prwo rw.i.ate case~ , t .h e c ~n c"' 1 l at :1. nn l l�d. thd r� a ~tl a1 o �f as5e55 me n t:. n ot:..i.ces t"'nr.i lettP. r� s o f dema nd .i. ~c::; u e d after� Auqu r.; t 2.1. ~ .1.986 fo1�� the cnl l ec t ..i.on o �f income P bu~~inec::;c::;" est:At�., or� d o r1o r ' m t .a>:e s due dur lnq the 5C'I me t:A >tAb 1 e yer:~r- 5. " I t .i.e:; poi n ted o u t th~t: Sec t i on 6 o �f E >t ec utive Clr� der� No. 4.1., "'~' t"'mencled e>tpress l y crJ nd i ti. o n s the .immun .i . til'?!"' t"'fHl privi J eqR!"! e num er C'It e d t h er�Pi n t.D comp 1 1 C'lnc e 1111 th the r� u 1 es e~ nd re qu 1 a ti.on s i s n ow RP.venue MP.tnorandum Order No. 4 - 8 7 . Se con dly~ r�e 5 ponde n t. posit~; t h at 111here th e n-? ls an assessment against a tC'Ixpayer ~ t h e bu r de n of proof .i.e::; on t.hli? l'"'tt.er� to pr� ove th~t the a5sess me nt i.s wanting from legal a nd /or fact u e l b as i s . Absen t proof, the presumption of va l id i t y rema in s . T h e ca s e o �f Sy Po v.!' .. CTA, ~t t .. al . (G.R. L - 81446, Au gu s t 18, .t 988.~ .tf..4 SCRA 5:'24) is .::~ d va n ce d in support cYf th is posltion wh erein it was s a i d: l tJ J

DECISION CTA CASE NO. ~318 -- 5 - " In till? c<:~c::.P. cd CollPctor o-f Internal Reve nue vs. Reye ~ , we r ul Pd: "l>lt1Pn"? t he t;:n:pAyer� i1"l "' Pr PA l .i .ng t .n the t..=u: C'JLtr" t on the gn:>und the:\ t. t.hP. co 11 ector� s A~;;,;pr-;s rn e nt .i.s p r - r- o n eoU!:. ~ .i.t .is :i.ncumb ent upon h j m t o pro ve ther�e II/ h A t .i . 5 the C 0 n � P. C t. And j LIS t li Ab.i l.i.ty by A full a nd fa.i r d.i.c::.c:lo!:.un=.> o f <:~ll p !?. l'" t..i.nent dat.:~ .i. n h is p o!;;sP.ssJo n . Ot.hen�d. se , i �f t h e �tA>tP<'~Y~""- con �fj. rlf~5 h.i.m sp l �f t:o f'Jr"OV.i. nq thAt th e:> tr.:llt ASSessment .i.e; vll"� n nq ~ tllP. t..o~H court prnr.:eP.di.n~.l!:'; \��lou ld !"'P.tt le nothing~ and t .llP. ~�l AY would be:> }p �f t opP.n �f nr !".ub r-;e qu e rlt. ,:~sses"'! m P. rlt.�.~ t:\nd np p P.<:~ l s in i.n ter-m.i.nab 1 e c::.uccess .i.on." " �r ;::\ >: Ac:;.se~;;.~nlP r1 t.~ by ta>t e >:Am.i.nP.r�c::; a l- e p rP.c:;U mP. d cor-r-ect a nd made :In gnod f A ith. The ta>: p aye r� h as the du t:y to prove ot: ll P.r�wise. In the absence o �f p roo f of Any i.rrPgularities i.n t h e p e r.. �f nr-mnnce o f dutie s , an """"' s~~ s".'l m e n t du 1 y mi=\de by a Bureau o �f l n tP ,.- n "" 1 r<evP.nue e >t <:~miner and ~ pp rove d b y hi s mupP.rJ or officers w.i.ll not he d.i .::; t.ur�bed. ( Guti err ez v. Villeg~s L- 17117, .1 u .l y .J t .� J ? 6 .3 .� 8 S CR/ 1 5 .2 7 ) � A 1 1 pn=.> .::;u mpt.i o n ~. An--! i.n fA vr.n- n �f the CDY" Y" P-C tnP55 o �f (Collector of Int er n~} Revenue v. Bolwl L~nd Tr~n~port .. tion Co., f_-- 13 0 '.?? ,'Ji L - 1.346 2 .� April 29 .~ 1 '?60 .~ 58 O.G . 2407)" The cited c:a .::;e of Tayug Rural Bank V!J. C�ntral Bank, supra leaves its mark well in the resolution of the impor�tance of Revenue Memorandum Order No. 4 - 87 v.i.::;-a - v is E xe cut.ive Order No. 41~ as a mended. lb.i

DECISION CTA CASE NO. ~318 - 6- ThP. .intent o �f t:llP. gJven leq.islat.ion~ as alw.=i\y!'ll, is telling. A readJnq of thi~ P.Mecutive ordP.r giving r.'lmne!'; ty s h clt-15 the per� .i.od c:oven-:>d - J r.'lnUot.>.r��y 1, 198.1. to December� 3.1. , .1985 (S~c:tiorr 1, Sect .iorr 6, Executive.> Order No, 4.1.~ A!> amended). P..:.\.r.:c::l_or)......9r:- _........f.9r.::9!Y!?Jli'?.!:S s ( .J Uor d $ n n d Ph r as e .~ 480 .~ c.iting ca.se$ ), o=\S hP.re pr� omi!':!P.d by the order for ~..Lt <"'ll J .i<,:l,b.,.iJit:Y. til"" t ha ve at~ i !"'P. n �from non - payment of te\Mes .i.n thP. o?.bovP. given per� iod. (U n der!;cori ng $U pplied) due 1-'l.i. th a demt'\nd for P""YmP.n t Cig~~tr,.ttP. Nfg. Co. v. Co.,..'lffis~ion~r .r 10.5 Phi l . 13.37 unrepo r t-ed). An can be or compr� om.i.sP.d on thP. adm .inist.rat.i.ve level ( Sec tion 29.5 .~ NationAl .lrdP.rrti'i .l Ret/ l!'rttH? Code.~ noN Sectio n 204} \.'lh .i le an ai!H1P-<:>ty is an c:1ct tJ'f sovP.reign grace lflhich nblJt.er� O'\tF>c; An of �fpnse (Hords and Phri'ises~ .~ llpra) ' or ,>;~s seen here~ an act t-lhich relegc:1tes into oblivion all unpaid income, estate, donor's t axes and busine~s te\xes incurred during a given period. The impression cree\ted thus is the\t considering the nature of ~ t~x assessment, its si.gn if icance could not be more than of amnesty properly availed of. An .-"'seessrnen t ~ even a def .ic iency assessment as in the

DEC I SION CTn Cn 9E NO. 4318 - 7- .i.n!:'ltant cr.=u=:;e, cr.\nnot defe,':\t t h e intend e d ef f e ct!ll o1 the arnnec;ty because precisely, l t is t h e pur po s e of the 1 at. tP-r to forgive the non - payment o f th e t B>t payer of his ta}: 1 ieb .i 1 i ties. The rP-spondent who see k s to duP- cannot demand !!".o met h i n g ~1hl c h, although previously due, is now non -� e>tis t e n t o r h as been obliterated as a consequP-nce of sovere i g n gr ac e. Is this ~ case of f i r s t impression th e n , a nd ~re t: hP-J'" e other� facton; that could t i l t t h e b a l a n ce on tile other� side? ThP- cesP- fr.:w t h e r� es p o nd ent a h ow!ll none. Th .t.s bur� den of JH��oCJ f or1 the peti t.ioner was created by th e clear end e>:pr�ess termr-=~ o �f the e>:ec u t .i ve or d e r 's intention - ~uelified eveilRrs of the amnesty may p ay en o"-'mnl?.sty t..">: .i.n l.ieu of sald unp.:=dd t .a>:e!:'l ~ll dc h a r �e �f o r g i v e n ( :::: e c t i o 7) 2 .~ S P. �:: t .i o n C" Execut� ive Ordt'! r No . ... 1 �' 4 .t .� amer,ded). Mon::? !5pP-cif.ice lly , th e plain prov .i s.ions .i.n the statute grant .ing ta>l a mn es ty for unpaid ti:\>:es for the period Ji:\nua ry 1, 1981 to Dece mber 31, 198~ shifted the bu r d e n o1 proof on qr:9.E!r.... <:::PU.ld .... bi:\Y._e _._._ c:l_ ..... r.easp n e b 1 E> __._.r_e.l at i go..____..._, iJ:.b....._..t._h~

DECISI ON CTO CASE NO. 4318 - 8- pI? t_i_t. i _one r :.. _ __!? t L1J . �--�an s lfl e r.�. A b 1 p.__ ..... .f..9.L ........ ~---���-��t.-~ >_: ____l J ~J~j.__l__t t.Y. ~J1 .-t. ch ,____ thr...ouq h ...... _the...... s _taJ: u te_,__ __s t.1 o_1Ll.<L . b~_yg__q_f.:1f'!?.D___g_r::.�I_�!?.Q. (Unders c oring our:.::). Arlr.Hti.ona ll y~ e>:cPption s i.n Section 4 o �f E>:ecutive Or-rler� No. 41~ as amended, do not ind.i.c::AtP to an o\'lssessment or p e nding investigation aside from o n e Arising from information furnished by an informe r. " Sect.ion 4. E>:cr>pt:Jon s.- The following t."' >: p Byer� tr::� may not. ava .i.l t h8m~. e 1ves of the Bmnest:y h er�eJ n gr� anted. a) Thor-;e fa l llng under the pl' �n v jo:;.ion !"; n �f E>:e r. ut.\ve Or �der Nos. 1, 2 .r.\nd 14. b) T h or.:tr? ~tli. tll income t: a>: C.=.\Se!"> all' �eBrly filed .in Cout�� t as n �f the effectivity h ereof. c ) Tllor.;P ~�1.it. ll r:r im.i.n a l Co\'\Sf?.S .ill v nl v .i.ng v in J at..ions of tile income ta>: 1 aw r~lr� pr~dy filPrl in cour� t: as of the P f �feet i v .i. ty ll pr�� eo f ~ d) Those th;:~.t h<:~. ve ~td. t .hholdinq t.a:-t l .i.ah .i liti er:-~ under the National In te r�nal f::r?venue Code~ o;~s F:'l me n dP.d ~ .inso �f o\'lr as the said liabilities ere concerned; e) Those with te:n: cases pe>nding investigat.i.on by the Btweo\'l u o �f In tern a 1 Revenue as of t .he Fd fee t.i vi ty hereof .\'IS a n'?sul t o �f information furnished under Section 3.1.6 of the National Internal Revenue Code, as amended J

DECISION CTA CASE NO. ~318 - 9- f) Tho~P with pending ca~es J.nvol v ing unexplained or unlawfully acquired wealth before the Sandiganbayana g) Tho!"!e liablP under Title Seve n~ ChRpter Three (Frauda~ Illegal Exactions and Tr� anr-=;ac tiona) and Chapter� Four (Malversation of Public Funds and Property) o �f the r<ev i. sed Pen a 1 Cocjp, a !II amended � Thu~:~, der>m that th�'? .in Revenue Memorandum OrdPr No . ~ - 87 promulgating that only asses!;ment !'!l ist=\ued aftel"' Auquat 21, 1986 shall bf!' abated by the amnesty ia beyond the contemplation of E >:ecut:i.ve Ur� der� No. 41, ar.< amP.ndP-cL To paraphrase the cited pn:� vioU!"; decl.:'lr� .r~tionc;; of the Su preme Court 1-'lhich ~>'11?.1'"1~ lil::et-dse n=~ca] led in the Tayug Rur11l Bank C<Jse ..-u rr �"l .� B rl m:l ,, i. 5 ~. r� "" t . i. v e and r-egulations pr� omulq i'\ t e d to .implement q.i. v r>n legislation l:=lhou ld not be cont. rr:~cHctor�� y \�d.th t:.he s t .::lt:ut.e but con fo rm to the stand ar-�ct r.; ~>'lhich .i. t pt�� er.; c r- ibPs (Director of Forestry nJle ltmulri b e b.i.nd.ing on the cour-� t~ i f the e;co pe is within th e ":", tat.ut.e e ve n i f th r-= courtro ar-e not .in c:~gr~ r:>ement 1t1it.h the policy thP.rein or itl:'l innate wisdom (Victori s /filling Co., Inc. v. SociAl . L - 16704 .� ,.,arch 1 7 1962, 4 SCRA 627). WHEREFORE, the pP.tition i!l GRANTED. Th� respondent Commi!llsionf!lr of RevenuP. ia lbv

DECISION CTA CASE NO. ~318 - 10 - ordered to de~i~t from coll~cting the deficiency are considerP.d cancPllP.d ~nd withdrawn with the proper AVA! lmt=mt o �f pet! tioner of the amn~sty undf!Pr Executive Order No. ~1, A~ ~mended. SO ORDERED. 1.99(1. Judge I COI'ICIJF:: C:RR~l" I F - . : C A T I O N I hP.t' P.by certify that: thJs decision was r-eached a �ftet- due consu l tati.on bet~tH?. P.n the members o �f the Cour�t ryf Ta >l ()ppe.cde:; .i.n 0:\cconiance ~td.th Secti.c:m 1.3, fkt .icle VIII of the Const.i.tution. Judge Appeals ll>u