CTA Case No. 3551 (Decision)

rtia>um .ac O P rH� fl.jU..IJ'I't Hl!b '"'~OUR'f OF 'TAX ArP�:W QU�ZOft ~ LIBERTY INSURANCE CORPORATION, Petiti oner , - ver s us - C.T.A. CASES NOS. 3551 and 3599 THE HON. COMMISSIONER OF INTERNAL REVENUE, Respondent. X- - - - - - - - - - - - - - X DECI S I 0 N These are two (2) consolidated cases (CTA Cases Nos. 3551 and 3599), concerning appeals from decisions of respondent Commissioner of Internal Revenue, assess- ing against and demanding from petitioner Liberty In- surance Corporation a l leged unpaid fornium tax , inclusive and~rnentary of surcharge, stamp taxes a nd insurance policies issued for the year 1975 (CTA Case No . 3551), and years 1976 and 1977 (CTA Case No. 3599) , in the s um of e2 , 122.05 premium tax and surcharge, and e131 , 135.87 documentary and science stamp taxes for 1975, and e526.51 premium tax and surcharge, and ell8,542.75 documentary and science stamp taxes f or 1976 and 1977, exclusive of the compromise penalties of 8400 and 8650, respectively. In the heari ng of these two (2) cases, petitioner has complied with the burden of proof by presenting 22 1

DECISION - CTA CASES NOS. 3551 and 35 9 9 - 2- documentary and test i monial evidence. On the other hand, respondent, after the burden of proof is shifted to him, his counsel had failed in presenting counter- vailing evidence in defense of its above assessments. CTA CASE NO. 3551 It appears ~hat in a letter dated August 31, 1981, received by pe ti tioner o n September 7, 1981 (Admitted, par. 2 of Answer), respondent assessed against peti- tioner and demanded payment from it allegedly unpaid premium and documentary and science stamp taxes in the sums of e2,122 . 05 and el31,135 . 87, exclusive of e400 as compromise penalty. (Annex "A", Petition f or Reviev<, CTA Case No. 3551, pp . 3- 4, CTA rec.) On Sept e mber 9, 1981 , petitioner, thru its Chief Accountant Myrna C. Pascua, sent a lette r pr otesting the above assessment for premium and document a ry and science stamp taxes for the year 1975 (Annex , " 811 -ib-i-d' p. 5, CTA rec.), stating therein that petitioner is willing to pay the premium tax of 82,122.03 but requested for reconsideration of t he payment of el31,135.87 docu- mentary and science stamp taxe s since the documentary and science stamp t axes in question were properly affixed on the insurance policies in that year. Thi s 22 8

DECISION - CTA CASES NOS. 3551 and 3599 - 3- protest was followed up by another letter of co unsel June 30, 1982 to res pondent reiterating petitioner's protest or request for reconsideration (Annex "C" , ibiq_ , p. 6, CT.'\ rec . ) asserting that the documentary stamp taxes were proper l y affixed and the as s essment is not correct . On November. 1 5 , 1982, petitioner 1 s counsel re- ceived a letter from resp ondent dated October 5, 1982, denying petitioner's request for reconsideration. Hence, petitioner appealed to this Court on November 29 , 1982 and the case herein was docketed as CTA Case No . 3551. CTA CASE NO. 3599 In the compa n ion case , CTA Case No . 3599, herein petitioner was assessed by respo ndent Commissioner of Internal Revenue the payment of premium tax and docu- mentary and science stamp taxes in the sums of 8526.51 and Ell8,542.75, exclusive of compromise penalty of E650.00 for the years 1976, 1976 and 1977, respectively. (Annex A, CTA Case No. 3599, pp . 4-5, CTA rec.) On September 9 , 1981, petitioner's Chief Accountant, Myrna C. Pascua , sent a l etter to respondent Commissioner 22 9

DECISION - CTA CASES NOS. 3551 and 3599 - L~ - of Internal Revenue expressing its willingness to pay premium tax and surcharge of e526.51, but requested for reconsideration of the assessment for the document- ary and science stamp ~axes because it had affixed the required stamps on the insurance policies it iBsued for the years 1976 and 1977 in question (Annex "8", CTA Case No. 3599, p.� 6, CTA rec.) On June 30, 1982, petitioner's counsel followed up the above request for reconsideration insisting that the documentary stamp taxes were properly affixed and, hence, the assessment was not correct and asserting that the assessment had already prescribed. (Annex C, ibi~ 9 p. 7, CTA rec.) On October 5, 1982, respondent Commissioner denied the petitioner's request for reconsideration but only of the 1975 assessment for premium and documentary and science stamp taxes, which was received by petitioner on November 15, 1982, but which denial did not touch on the 1976 and ~977 assessments for documentary and science stamp taxes. In other words, no action was taken by respondent on the request for reconsideration of peti- tioner Qn the 1976 and 1977 assessments for premium and documentary and science stamp taxes. 230

DECISION - CTA CASES NOS . 3551 and 3599 - 5- On February 24, 1983 , petitioner received res- pendent's warrant of distraint on personal property dated August 13, 1982, relative to the assessments of premium and documentary and science stamp taxes for 1976, 1976 and 1977 , respectively. (Annex E, ibi~-' p. 9, CTA rec.) Hence, peti.tioner filed its appeal on March 17, 1983 and docketed as CTA Case No. 3599. During the administrative exchanges of communi- ca t ions, petitioner offered and expressed with dofi- nite~ ess its wi l lingness to pay the assessed premium tax and surcharge of e2,122.05 for 1975 (CTA Case No. 3551) and premiu m tax and s u rcharge of E526.51 for 1976. However, it appears that payment thereof had never been made by petitioner and had remained unsettl ed. But petitioner never also,d uring th o hearing in this case, seriously disputed its apparent liability or these said deficiency premium taxes for 1975 and 1976. The issues in these two (2) cases are as follows: ~t-1 1 . Whether or not thi s Court ha / j urisd i ction over the two (2) cases; ( ~. Whether or not petitioner is liable fo r d e f i c i e nc ~-r em i um t a xe s , i n c l us i. v e o f 25 ~~ s ur c h a r g e , in the amounts of e2,122.05, and e526.5l, for the years 231

DECISION - CTA CASES NOS. 3551 and 3599 - 6- 1975 and 1976, respectively; 3. Whether or not petit i oner is liable for deficiency ~umentary and science stamp taxes on the insurance policies it issued in the amounts of ,131,135.87 and ei18,542.75 for the years 1975, 1976 and 1977 , respectively; and 4. Whethe r or not petitioner is liable for extra judicial or/ompromise penalties in the surns of e400.00 and 2650 . 00? for CTA Cases Nos. 3551 and 3599, respectively. Coming to the first issue of jurisdiction, we agree with petit i oner that this Court has .jurisdiction over these cases. In CTA 3551, petitioner had pro- tested the assessment on September 9~ 1981, and it was only on November 15 , 1982 , when petitioner's counsel received the denial of lhe request for recon- sideration on the disputed assessment which denial is the final decision of respondent Commissioner of Internal Revenue to be oppealed to this Court. (St. Stephen's Association, etc. vs. Call. G.R. L-11238, Aug. 21 , 1958.) From the receipt of the decision on November 15, 1982 to the f iling of appeal or the petition 23 2

DECISION - CTA CASES NOS. 3551 and 3599 - 7- for review on November 29, 1982, only 14 days had elapsed; hence, we have ' appe1late jurisdiction over the sai d CT/l. Case No. 3 551 o With regard to CTA Case No. 3599, we also agree with petitioner that this case was appealed on time . On September 7, 1981, petitioner rec e ived the letter of assessment dated August 31 , 1981. This was pro- tested by petitioner's chi ef accountant, Myrna C. Pascua, who requested for a reconsideration of the documentary and science stamp taxe s on September 9, 19 81. Peti tioner did not get any fo rmal denial of its request for reconsideration for the 1976, and 1976 a nd 1977 premium and documentary a nd scie nce stamp taxes, re sp ectively, but i nstead had issued against petitioner a warrant of distrant on person al property against petitioner and which was recei ve d by the latter on February 24, 1983 . (Annex E, p. 9, CTA rec.) This warrant of distraint on personal property is tan tamo unt to the outright denial of the petitioner's request for re c onsideration (Vicente Hilado v. Comm., CT/l. 1256, Feb . 24, 1964) a nd is proof of the finality of the assessment or decision (Algue, Inc. VB. Comrn. of 23 3 ,.---.

DECISION�- CTA CASES NOS . 3551 and 3599 - 8- Int. Rev., CTA 16 20, Jan. 16, 1968; Phil. Planters Co. Inc. v s . Actg. Comm. of Int. Rev., CTA 1266, Nov. 11, 1962) because it is t he most drastic action among all media of enfor c ing the collection of the tax. (Hahn v. Comm. of In t . Rev., CTA 1987, April 30, 1969.) This de nial of the request for reconsideration is, t heref ore, th e decision of the Commissioner from which appeal should be ta ke n. (St. Stephen's Ass ociation, etc. vs. c0 ll � ' �E. � .c i t.. ) Petitioner having fil ed its appeal on t~arch 17, 19B3, only 21 day s of the 30-day period of appeal was consumed . Hence , we have jurisdiction over CTA Case No. 3599 . Anent the second issue of whether or not petitioner i~ liable for deficiency premium ta xes in the a mounts of E2,122.05 an d E526.51 for the year s 1975 and 1976, re spe ctiv e ly, the rule is that it is incumbent up o n petitioner or it is duty bound to prove that it is not liable, therefore. Not only did it not come forward and produc e it~ evidence that it has paid the same, it neverthele ss had, through its chief accountant , Myrna C. Pascua 1 in fact, asserted its "w il ling (ness) to pay the premium tax of 82,122.03"(Ann ex B, CTA 3551 rec., 234

DECISION - CTA CASES NOS. 3551 a nd 3599 - 9- p. 5) for 1975 9 which liability it impliedly admit- ted and, hence, petitio ner is consequently liable and for which we so hold. In the same vein , petitioner equally did not introd u~e evidence to assail the legality of this portion of the assessment , but had again asserted, thru its said chief accountant, its "willing(ness) to pay the premium tax of E526.51" (Annex B, CTA 3599 rec., p. 6) , which it had implied- ly admitted and,hence , is consequently liable, there- fore, and which we do hereby equally so hold. With respect to the third issue, petitioner had satisfied us with overwhelming proofs, which are not only convincing but satisfactory, and which renders t~e assessment against it without force and effect in so far as the documentary and science stamp taxes for the years 1975, 1976 and 1977 i n the amounts of el31,135.87 and ell8,547.75, respectively, are con- cerned. The or i g i nal of all the insurance policies issued by peti~ioner for 1975, and 1976 and 1977 in question were presented, t'ogether 1vi th the cor res-- ponding documentary and science stamps affixBd thereon (Exhibits A to SS-90-a; Exh. E) were duly identified and testified to by Myrna Pascua, chiGf accountant 23 5

DECISION - CTA CASES NOS. 3551 and 3599 - 10 - of petitioner. (pp. 7-8, t.s.n., June 3, 1985) Documentary stamp taxes are deemed paid by the affix- ture of documentary stamp to the document or instru- ment taxed. (Fireman's Fund Insurance v. Comm. of Int. Rev., CTA 1629, May 24, 1969.) With these abundant evidence on hand, the burden of prqof during the hearing of these cases had shifted to respondent Commissioner of Internal Revenue. It was thereafter the turn of respondent to present his evidence but these documentary and testimonial evidence presented by petitioner were never rebutted by him. No iota of evidence was ever shown by respondent. He did not even formally present the reports of Editha L. Pe~a, S~nior Revenue Examiner, dated July 6, 1981 (p . 41 , BIR rec . in CTA Case No. 3551; p. 51, BIR rec. in CTA Case No. 3599), or called the latter to personally testify on the veracity and truth of the contents of such reports and also on t he other supporting documents . These cases having been submitted for Ollr decision based only on the records a nd the pleadings by counsel for respondent Commissioner of Internal Revenue, the latter had not complied with his burden of adequately ~ 23 6

DECISION - CTA CASES NOS . 3551 and 3599 - 11 - and legally sustaining or supporting his assessment by actual facts thru the media of compelling an d satis f actory evidence, with respect to the document- ary and science stamp ta xes deman ded to be paid by petitio ner for the years 1975, and 1976 a nd 1977, in the respe cti ve amounts of 8131 9 135 , 87 and ell8 , 547 . 75. This Court cannot presume a taxpayer's liability simply be cause of th e existence of an assessment against it without mor e , si nce an assessment which is not based on ac tu a l fa cts es tnbli sl1ed by evidence presented by r esp ondent cannot stand th e searching test of judicial inquiry and scrutiny. (Benipayo vs. Call. of Int . Revenue, G.R. L-13656, Jan. 31 , 1962.) In respondentvs assessment against petitioner f or 1975 (Exh. A), it appears that the premiums collected on the insurance policies issued in that year is 83,347, 917 . 56 and documentary and ccie nce stam p ta xes due amounted to 8100 , 437.52 . In petitioner's summary of doc umentary .an d science stamp taxes for 1975 and 1976 and 1977 affixed on th e insurance policies (Exh . E, P� 53, CTA 3551 rec.), it i ss ued insurance policies on which the pr emiu m tax collected i n the amount of e3,347,917 . 56 a nd th e corre spo nding documentary 23 7

'� DECISION -~ CTA CASES NOS. 3551 and 3599 - 12 - and science stamp taxes affixed thereon amounted to 810D,t-l 37.52 (p. 6, t.s.n., June 3, 1985) and is exactly in the amount as assessed by petitioner. With regard to that portion of the assessment of ~90,698.35, documentary and science s t amp tax alleged to ~e "payable (on) J an. 1 , 1975", this obviously refer, as correctly observed by petitioner's counsel, to year 1974 and prior years which is therefore not in issue in this dase, since the issues in these cases refer to liabilities for documentary and science stamp taxes for 1975, 1976 ond 1977, and there is no basis. of that assessment as in fact respondent has not pre- sented any evidence to sustain the same. It has no factual foundation therefore upon which it can stand. In respondent ' s assessment for 1976 and 1977 (Exh. A-1) , the premiums collected per investigation by respondent f or insurance po l icies is~ued in 1976 is 83,646,409.38 and the doc umentary and science stamp taxes due is el09 , 39?.29, while for 1977, .the ta~able amount due per investigation is e3,620,798.53 and documentary and science stamps due is el08,623.96. On the insurance policies actually issued by petitioner in 1976 (Exh. E) on which premiums collected 23 8

DEC I S I 0 N �� CTA CASES NOS. 3551 and 3599 - 13 - / amounted to e3,612,237.95 and documentnry and science stamp taxes affixed amounted to e10B,367.17 (p. 6, t.s.n., June 3, 1985) there is a discrepancy of El,Ol6.12, against the assessed liability of document- ary and science stamp taxes of El09,392.28 for 1976. However, not only is this amo un t of discrepancy neg- ligible, from the evidence presented, the amount paid by petitioner as documentary and science stamp taxes for 1976 stands as correct, there being no contrary evidence of respondent to sustain his finding of El09,392.28. Hence, the documentary and science stamp taxes for 1976 is deemed paid. On the issued insurance policies for 1977, on which the premiums actually collected amounted to ~3,620,798.53 and the documentary and science stamps actually affixed thereon amounted to Bl08 , 623 . 96, the insurance policies actually issued by petitioner for 1977, on which the corresponding documentary and science stamp taxes due and affixed thereon amounted to !:!108,623.96 (p. 7, tsn, .June 3, 1985), is exactly the same figure a pp earing in the assessment for the year 1977. This assessed documentary and 23 9

DECISION �- CTA CASES NOS . 355 1 and 3599 - 14 - science st a mp taxes fo r 1977 is accordingly deemed paid in full. In all these taxable years 1975, 1976 and 1977 in q uestion, we are fully satisfied with the over - whelming and satis f acto r y evidence a s aforesaid showi ng the pr o per issua nce o f the insurance policies and the collecti o ns from and payments made by peti- tioner, among others, of the documentary a nd scienc~ stamp taxes thereon and , hence, said assessments in question, insofar as the documentar y and stamp tax es are concerned , are hereby modified accordingly. The defense asserted by respondent in hi s "Manifestation" , filed wit h t his Court on September 18, 1986, after the iss ues have been joine d by hi s filing of his answer, t o t he e f fect that petitioner ha s no t affixed the required documentary and science stamp taxes in the policies petitioner issued during the years 1975, 1976 a nd 1977 and that t he documentary and science stamps in denominations of e10 and above, u sed by petitio ne r , were withdrawn from circulation and are without value under P.O. No . 1045 as imp1e- ment.ed by Rev . Reg. No. 9-76 1 i s without merit. This defense must ha ve been only an afterthought inasmuch 240

DECISION - CTA CASES NOS . 3551 and 3599 - 15 - as it was never pleaded in the Answer to the herein petitions for review or even in a motion to di s mi s s. It is to be borne in mind that defens e s such a s the ab ove which is not pl eaded in th e pleadings ar e deemed \vaived . (Sec. 2, Rule 9, Revi s ed Ru l e s of Court.) And the " lvlanifes t ation" of p e tition e r is not one of those �"Pleadings" al l owed and contemplated under the Ru l es of Court. (Sec. 2, Rule 6, Re vi se d Rules of Court . ) This defense not ha ving been pro- perly ple a ded , therefo re , it is deem ed waived . At any rate , no evidence was ever pre s ented by respon- dent's coun s el i n the hearing of the ca s e s before this Court to establish t h is belabored def e nse wh ich r~ises an issue of fact. As s tated heretofore, this Court has once pr onou nced that docum e ntary stamp taxes are deemed paid wh e n affixed to the docum e nt and instrument taxed. ( Fir eman' s Fund Insurance vs . Comm. of Int. Rev., .�E� ci_t.) Finally, with r esp e ct to the compromi s e penalties demanded from petitioner in the s u ms of E400 and e650 in CTA Cases Nos. 3551 a nd 3599, respectively, by r e spondent Commissioner of I nt e rnal Revenue , it 24 1

.� DECISIO~J - CTJ\ CASES i\l i.JS. )55 .... Hnu :3599 - 16 - has been judicially held that compromise penalties being an imposition based upon mutual agreement or consent by petitioner, and not h aving a ~jr�ed to this impositions, petitioner lS not liable to pay these compromise penalties of 8400 and e650 or a total sum of el,050. (Ph il. Int. Fair Inc. vs . Coil. of Int . Rev., 4 SCRA 774 , 78 1-78 2 ; Call . of Int. Rev. vs. USTJ G.R. L-11274, Nov . 28, 1958; Rizal Motors Inc. vs . Comm. o f Int. Rev., CTA 1985, Dec . 27, 1972.) WHEREFORE, in v i ew of the foregoing findings, the assessments arrived at jn the decisions of respondent Commissioner of Internal Revenue appealed from are hereby modified. Petitioner is hereby ord.red to pay only t he sums of e2,122 . 05 and es26.5l as deficiency premium t ax es, inclusive of the 25% penalty thereon for late payment, fpr the yenrs 1975 and 1976, to the respondent Com- missioner of I nternal f~evenue withi.n 50 days from the date this decision becomes fin ~ l and executory. No costs. SO ORDLHED. October 15, 1986./; / Quezon City, ~p_ "z7~??~t?7 ~-� cor-vfrANTr /.. fWf\QUIN ? s sociate .Judge ..... , �*"' '