CTA Case No. 3894 (Decision)

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY RODOLFO PI S ON, Petitioner, - v e rsus - C.T.A. CASE NO. 3 894 COMMISSIONER OF INTERNAL REVENUE, Respondent. X- - - - - ---X DEC I s I0 N Thi s c <\:Sf.? about respondent 's decision holding liablE? for� the amount P70,456.52 as deficiency income tax for 1974 , in c lusive of interest a nd penalties. � I t do e f.-; <':\ppr-.::oa.r th.:.:\t: .in <::\ n investigatio n of p f.?t.i. t ..inrH?r.. �~,� .income ta:�: r-�e t.L.tr'Tl fo( t h e year-� 197 4~ it. W<:3.S a~:.cr.:~r�� t;:3..i n ed t h at t h e a mo un t of P98~85 4.41 r� f~PI'" E~~:;e n t .ing pa tr�e~ nage d i v j ..dends and i n ter� es t fot- c:r-op year.. 1969-. �1974, .in c lu ~.:; .ive, was r� eceived fro m u6

PF:C J H J Ul\1 ClG CASE NO. ~894 .,.:,. the First F armers Mill i ng a nd Mark e ting Coo perative As soc iati o n , Inc., d etailed as follow s ~ Cr()p Year pate R~ceiy~q Diyige.nd JDJer.e.?t Tpt~! 1969 - 1970 April 29, 1974 p 5,783.37 p 302.67 p 4,036.04 1970-1971 31, 485.58 1971-1972 Ma y 24, 197 4 31,425 .58 252.14 5,842.71 1972-1973 132.41 16,171.38 1972-197 3 Ju ne 14, 1974 5,842.71 ' 4.,0~1...~~ 22,085.76 1974-1974 19.,244.Q 4 August 7' 1974 15,919.84 f1 ,7.99��Q7 P,98,B~~J1 September 7, 19 74 21,901.35 December 20 , 1974 15,1~3. 99 f94, os.~~. ~4 I r1 h .i. '"' J (;?7'1� .i l"lC::DmE�~ t .<'l >: !'" F:�' tu r.. n , p 1;., t .i. t:. :.i. u r1 e r� t .ot.:,, 1 t~ muun +�. l"lf I'" e c: f�' i. v e d patronage di v idends a nd interest 0 ~r ta i ni ng to five ( ~�", ) c: t'" U p YF' <:�\ ,,.. ,,:; , 1 ~��~E:I v :i. r1 c:.1 1.1 r 1cl E'C 1 ,.,, I'" F>d t:. h f�~ ,;,, mou nt. o �f In �fn ''"IPr�:�r:l ,::,r lrl q .i.vc,n l�.�.hc' Clp p o t'" 'i:�. un:.i. t y t: n qn ovPt'" '\"hr.> I''E�'( : (') r� r:J nf <::; ;;,,:.i.'c:l f .i nd .inc: s�; by l' �er:; pon cl r~ n t .' s; t i:. ht'" DUq h hi <;: i':\U t h O I" i. Z f') ci l'" f') p I'"E'~::.f> fl 'l:i:'l t :i.VC' Ul"l d Pr" J. E? tE~I'" r:: <.I i':\ 1�. E! c:l C 1:"�1'' 1...1 ;�, I'" Y !J , l97D ::; t:. r"\ t f:? d t htl t:. t.l �tF! Ul l I'" E~ pur�tE?cl NonE! t hf�? .1. f."SS , . ;�:~ !::; c:lefic::.i. t:�~ncy :i.ncom<-:;.> t ..:.1:-: fnl'" l cr7ll. , inc lu si ve of penalti es und e r Ass essment Notice dated March 2 8, 19 80~ comp ut ed as fo llow s =

DEC I S ION ����� CTA CASE NO. 3 8 9 4 3 N..-=~ t Inc. . ~TI(2 pe r� l'�etUI'Tl f i l ed F'115 ' ::=:.?7 � 23 A:Jd: A:.:ld.i tio..lal inc orrK"-:?��f :�atrcoa ge Di v :i.ck .'fld n'?l::ei VE::"CI 'f'n:m F.ir�st F'ar �iTlei'"S 1'1i. J. 1ing Co. Net Incc:xne per� .i.rwestigati.c:n F'194,552.15 l...!'?.~:;s: E:-:empb.o�1s Net Incorne subj ec:t to ta:-: �-. ....1 ~ <.~.~.=.~=~...<.!<.~> F'191,552.15 Ta:-: duE~ tt�en:.".>CJf'l p 96,249.00 L ess : T a :-: paid per return .......% ,�9:�.~ .<.:.~?. DE?f i.e :i.f-.?r�1cy ta:-: F' 4�9,406.00 A:.Jd: .1.41.. annual inh~ r-es t fn:xn 4�/16/'75 to 3n:11BO (42"/. rna::. ) 20, 7~1(). 52 Co mpn::xnise pen <.\ J. ties for: 1.. f e:li.l UI'"E~ to s ubmit ~;c: hl.:?.du.l e o �f t.:n:es e( l icen ses F'!OO.OO 2" f a .i.lt.lr-e to ~5Ltt:>t1li t l is t cJ'f .i.ncc:xre pn:�Jduc:ing prop. 100.00 3. f ai lL,w�e to submit m B F01'-m 1701 B _+_<,!<.~~.....<;,~~> .. . . . . . . -. .. 1{~!~~.?. TOTPL r-t'O..NT DlE PND CO.J.....ECTI R.E G_~,Z:E~,!!,1,~,~!I~ F'eti ticmer on "' Apr i 1 22, .1980 protested the s aid assessment which respondent denied in a letter dated July 18, 1984, received by the petitioner on August 30, 1984. F'et.i tioner.. s ought the reconsideration of res pondent' s denial in a letter dated September 5, .1984 r.. ecei. pt thel~ eof acknm"--ledged in the office on .� De tober� 14� ' 1984 but apparently wa s not given due course. On January 8, 1985 a warra nt of levy on real property was served the petition e r for enforcement of collection.

DECISIDI\I CTA CASE 1\10 . 3894 ..... 4 -- On .J a nu e\: I'"Y 2 5!' p e t i t:i.o n er� �f i l e d t h e in s t a nt a pp r.:!a 1. r::.t.r.~.?. �~, ~" h ether�� t h e p e t i t i o n few n ?view i s t i me t R t::~s pcmd Em ur� ge s that t h e petition f i l e d o n Jan u ar y 2 5, 1985 was more t h a n t h irty d ay s f ro m rece ipt of r�es pondent 's d e n i a l on Aug u st 3 0, 1984. Un ci E~ I�- Sf.'!c t. i , n 1.1. i n r�� r.'! l ,:t tion to Sf.?ctio n 7 o �f Fi . A . 1\io. .1..1. 25 t. h r:-? d e ci s ion o"f th e Comm .i ~:;s i on f:? r� of F~ e venu e on di s p ut e d <'~ ~:;~:; F.~ss m ent mu ~:; t. b E? f i l e d wit h i n t h i t�� ty d ,::\y s f r o m r ��(::' C f.'! i pt. d ec i s ion. A r.:c: or-�ding l y, t h e b e e: OITH? fin ,::\1 , incontes tabl e , ex ec uto r y a nd the Court. h a s no juri s dict ion . Fu ,...t 1�1 f.~ l' rn or� E', pE~ t i t i on tO? r� � ~; 1 e t t. e r of Septe mber� ~'5 , .1. 9 84 f el l'.. .::\ t�� ec::D n s ic:IE' I'"<':\t.i. o n ''w c'.\ s r�e c::eived at th e BIR Sec tor Ope rat i on s Offi ce on Dctober 14, 1984 or 3 (> day s A u gust 3 ()' 1984 . Con seq u e n t l y, s ince t he reques t for r� ec:o n si d erati on , i t se l f , wa s f i l e d outsid e the th i rty - d a y period~ ~ther e was n o more period to s u s p e nd" . Mo n :? o v Gr , "pe t i tioner� s letter d i d not a d van ce r1 E? W gl~ o und s for r� econ s id e r a t i on of n 2 s p o nd e n t.: � s d ecisi on , h e n ce , P...!..<L ..L!:.~L..!JU.!, t. h e r.. e f o r"e,

DFCI S IOI\I -- C TA CA S E 1\1 ( ' �. :38 94 - !:'\ ..... i t did not ~:; u ~'. pend th e r. unning o �f the thir- ty - day p e r-iod" . F' E~ titi cme r appr.. i se~~ Us .that hi s S e pt e mber 5~ 1.984 lett e r. se nt by air- mail under� Re gi s try No. 8 3 68 to De puty Commi ssi oner Vi ll a ~o.J as "d e l i v e r e d to a nd re ce i ve d by th e of 'f i c ia 1 messEmger- o 'f t h e:-? B I R Offi ce , Mr- . Zo s imo <lam a i~::; al o n ~3e pt E~ mb e r .14, 1984" p e r � ce r. t i f i ca t i o n of th e F'o s tm a~-5 ter- of the Bure a u of F' os t, Bac olod�City". (Anne:�: Z; �.) In ~:; t. e ad of a r e ply h e was se rved a levy on real l warrant of p r operty on J anua!- Y,. 8, 1985 wh ic h he considered ta ntamount to a deni a l, h e nce~ the in s tant petition fil e d o n J a n ua ry 25 , 1985 wi thin the prescribe d 3 0 - d a y period fo r a ppea l. Be th at as i t may , We ar e a li t tl e s tru c k by t he a pparen t qu i bbl e o n the r ecei pt of s a i d reques t fo r rec:o n si c:l c~ r- ~3 t. i o n r.r f th e r es pcmd e n t ' s d e nial. on t h E.~ p n.1 t r~~:; t. as would e 'f �f ec: t th e s u ~; p e n s ion of the r unning of t he 3 0 - day pe r iod fo r a n a ppe al to this Cour-t . Und er the c ircums tan c e s obtaining the was duly ac knowledged by the -� r es pond e nt' s offi ce on October .14, 1984 vis a vi s Se pt e mb e r 14, 1984 as c J. aimed by the pet.i tioner. \ We think a nd b e li eve that s u c h a kind of

DEC I ~3 I Cl!\1 CTA CASE NCJ . 3 8 9 4 -- 6 -- d.i. s qui <:?ting <:\ s pec:: t c oupled with the common knm'll e dge th r3t mail s er-vicE? has consider-ably in r-ecent. year-s the delay cannot wholly be ~ tt.r-ibuted to the petitioner- who must be t. le pr-e s umption that his letter- was i n the cour-se the mail ~:; uf �ficient to at��� ,~ e s t the s t a t u t o r-y pel'��iod. In E? :�: plicably, on J a nuar-y 8, 1985 without h a ving r�ec e .i ved a f r-cJm the r-espcmden t Commi ss ioner- a wa r-r-ant of levy wa s se r-ved the p E~ t i t.i.on e r-. While a war-r-ant of di s tr-aint and levy may not, st r-i c tly s pe aking, s tand for- a for-mal d 1"? ni .:~l o �f t h e p E?t:i. t io n �f o r�� r� E?c: on s .id e r- a ti o n of the d ecis i o n o n th e di s put e d assess me nt , it i s pr-oof of th P fin <:\ lit y of the asSE'}SS fTH?. nt bec au se it is th E? mo ~; t. dr. a s ti c of a 11 me dia of enfon: ing the c oll e ction ta:-:, and i s "tantamount to an Dutr�� ight d e nial" - ther-eo �f ~ makes the said n ?quest "c.h�=e med r-ejected". Petitioner-'s appeal the r-efor-e on Januar-y 25, 1985 did not fail for- lack �of time1inf."' ss . The Cour-t. takes jur-isdiction. The ��'c:;...P.0.9.. --is sue to the petitioner-'s liability for. the amount of P70,456.52 as to

DEC I S I CJN �-- CTA CASE NO . 3894 ..... 7 -� d!:~f.i.cienc:y .i.ncOmt~ t a :�: 1971.:1� ~ inclusive of .i.n ter- r:~s t an d penaltie s~ respondent Commissioner doe~3 po s.i t a n unvc:\t-� y.ing .:1sse1~ tion that the amount of P98~854.41 representing patronage dividends and .inten::?st c t-� op years 1969 �- 1974~ inclusive, payment of which ~a~ received by the p~titioner in 1974 a re reportable income for 1974. Th f:: accrual method u sed b y the petitioner as basi s .in the 1�- epor�ti.ng of income �for� 1970 to 1974 can not prevail ~ over the fact that havi ng u sed the cas h method .in dec::lar��i.ng thE� 197:3��- 17' -ll.:l� d.iv.idt'? nd a nd inter-e st of Pl9~679.92, th�? sa me ca~> h m E~t h oc:l s hould have been appl .iec:l �for� the t- e mai nd e t-� of P79,174.92 like~~i se r� t.:c:E�ived in .1.97/.f� . Con se qu e n tly , ;;incr:~ the amount of P79,.1. 7 4.9 2 wa s ear n e d in 1 97 4~ �� � it is beyond the coverage of the various tax a mn esty dec~ees availed of by the petitioner whic~~ a ppl y to unta xe d income or wealt h ear n ed or acqui r e d .in 197 3 or prior ye<'.H '""S. F'eti ticm e r� c.u�� gues that as ,:~ sugar� p 1 an ter he has cons is � .e n t 1 y f i 1 ed his income ta:�: under the accr��ual metl1od or crop year basis. The questioned unreported dividend income of P79~174.92 allocated for crop years 1 69 to 1973 inclusive, was covered ~

DECISION CTA CASE NO. 3894 - 8 �- by certific ates of indebtedness for the period, to ~-.Ji t : Q?x:.t.,t.JJ~;�t~ p_~.t.� ~- 1969- 70 F' 3,7B3.37 777 June ::!~), 1970 1.97<)--71. .1021 1.971- 72 31!1425.28 12::!0 June ::::o' 197.1 .1972- 73 16:!'4 5,843.71 June ::::~), 1972 37 ,820.'�7 June ::::.o, 1973 The certificates of indebtedness were received 'f I'" Om the First Far-mers Milling and Market .ing Cooper-ative Association~ Inc:. on the dates specified but were redeemed and paid only in 1974. Mo1r� eover� , the same ~-.Jere r-eported and covered by 'four- ( 4) ta:�: amnesty r�etut-� ns! _to wit: Apr�i 1 2, .,--- 1973 ( E:�: h. A) ' June 27, 1974 ( E:-: h. B) ' June 29, 1.973 ( E:-: h. C) and Februat-� y ..... t " .1975 ( E:-:h . D) ..::. J ' ---....... availed unc r Presidential Decrees 2 4' 1.974) (Janu c:\r�y 9, j::lr"OV ide th .:-'\t (J,/ uat- y 6, 1.975), wh:i.c h e:�: pr-ess 1 y ~he confidential natur-e of the ta :-: payer� ' s dE?c 1 ara tion made pLli"'Suan t to the said decrees and the payment made. thereon shall forever be held inviolate and no government official, 01'" o�f f ice may t.her-efa f ter requir-e the declarant to disclose any information relative thereto in any form or manner whatsoever.

DE CI S ION �-� CTA CA SE NO . 3 894 -� 9 --� Th e c .. ~:; e b e �for-e Us t1 a rdly pr ese nt s a gr-ipping q LH �?S t i CH"l � l"h e mat e rial fact s a re relatively s imple s o i s the i ssue under res olve . Going by the pe t.itinner r�ea 1 i zed income upon c on s tr-u e t.i ve re ce ipt. of th e in c ome t- epre s en ted by I C: l? rt i "fi ca t e <; of indebtedn e s s e sse n tia 11 y with an The s ubject patronage d ivi d e nd s an d int e t-e ~; t ea n1 e d and acc ru e d during t h e p e t�- i o d 1969 to 197 3 , i n c lu s iv e , c annot be tr ea t e d as in c om e for 19 7 4 wh e n th e y were red e emed a nd p ai d n or fo r a ny l a t e r y e ar s. As a r. ul e under- t h e accr ual method o"f re porting income, ta:�:able i n co me c om e s into e :�:i s t e n c e when a ll th e e vents h ave o cc ur-t- e d wh.i c h �f i :-: t h e r igh t to n "? cei ve th e - .:. in co me a nd th e a mount c an be d e t e r-min e d with r-eas on a b 1 e acc ur-acy. Cl ea r.. ly, the qu f::s tioned di v id e nd s are in c ome of the crop y ea r alloc ate d to a nd a r e unre po rted income for purpos e s of the In c om e Ta x Amne s ty De c rees. Petitioner 's availment of the benefits of the � t a :-: amn es ty by having voluntarily disclose d s u c h unta:-:e d di vi d e nd earned � and reali z ed in 1973 and pr :i. ot- c ondons th e c ot�: responding tax l i a bi 1 i ti r.:?s a nd p e n a lti es It .is no

DECISION CTA CASE NO. 3894 �- 10 - trivial purs uit for petitioner to have invoked the s tatu tot- y pr�osc r i pt.i.on that "the ta:-: payet�� sha 11 not be s ubject to any investigation whether civil, adrnin i. s trt:-\ t i ve insofar as such pr�ev.i.ou s ly unta:-:ed income and /or�� wealth is c oncel'. ned :-: x a nd s uch declaration shall not be e:-: arnin e d, inquir e d at�- looked intn by any person, go v ernrn E": nt o �fficial, bur� eau ot�� office:-: ,~.1, II (PD 2 3 as am e nd e d.) And, ~Any r e v e nue official who would inqu i r e , que stion or attempt to inquire into th E> ta :-: amrH~ s; ty n ? turn �filed by any \ ta:-:payer shall b e guilty of gr�a v e mi ~;c ondu c t for which he may s ummar� iJ. y d is mi sse d fr�om the s-.e r�-v .i c e". (I bid. as Ther�e i s nothing ambiguous in t.h P l c-~nqu a q !'? of the pl- ov.i s.i on in s of a r� the same pe titioner i n the cas e at bar. It 1...,ou l. d s eem un fot- tuna te for the respondent to hav e �fa i led to r� ecognize � the compelling import dnd �forc e o f the cave~a t wh.ic h po s es no n igg 1 ing barrier for him to stampede yet into a precipitate inve ~-;tigation and s ubsequent d<=?f iciency assess ment on an incom e I'll!:-? 11 en s conced by the ta:�: a mn esty . Suc h kind of r es pondent's action erodes the policy r:: (\ l .V L -

DECISIOf'.l � �� CTA CASE NO . 3894 ..... .t 1 ..... rnoo I" in q ~; nullif y the manifes t presidential i ntend ment . l-\l t::~ t h E" I'" e 'f orE~ �find f o t.. pet.i t.ion e r- as a matter- of fa c t i�:\ 1"1 . l aw. WH EREFO RE~ res pond e n t ' s decision is hereby set as:i. d ('~ the~ dE��f ic: .i.ency a gainst petitioner c an c e ll ed. No costs. f:30 ORm:: RED .. Due;~ 0 11 C .it.y, t ~1 t:.:> t� u t"li:\ n i J a, Septe mber- .t 4 ~ 1988. z.>2v Associate Judge WE CONCUR: AMANTE F � n Pt-�e ~;.id b ... ....___ . ROAQUIN

DECISIOI\I -��� CTA CASE NO. 3894 .... 12 ��- CERT I F I CAT t 0 N I hereby certify t~at thi s decision was reached after due con su ltation a mong the members of the Cour� t of Ta>: , Appea 1s in accordance with Section 13~ Article VIII of the Constitutio n. ~~.Q_ _ / AMANTE AL~~L/ Pr�esid .i.ng Judge Court of Tax Appeals '( \..) \..