The United States Life Insurance Company in the City of New York vs. Commissioner Ofinternal Revenue, et al.

THE UNITED ST TES LIFE INSUR NCE

COMP NY IN THE CITY OF HE\v YORK, Petitioner, - versus - C. T •• CASE NO . 1267 COMHISSIONER OFINTERNAL REVENUE , Respondent .

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D E C I S I 0 N

This is an appeal by the petitioner from the res - pondent ' s demand for the payment of i>300o00 as "compro- mise penalty" for alleged violation of Section 4- of the Bookkeeping Regulations (Revenue Regulations No o V- 1 , as amended) in relation to Section 352 of the National Internal Revenue Code o Petitioner is a corporation organized and exist- ing under the laws of the State of New York and licensed to do life insurance business in the Philippines . On February 20, 1958 , petitioner wrote a letter to the Col- lector (now Commissioner) of Internal Revenue certify- ing the number of loose- leaf sheets used in its cash receipts and general ledger for the year l957o As the number of loose- leaf sheets used did not tally with that stated in the certification and that petitioner failed to have the certification under oath, respondent sug- gested that petitioner pay a "compromise penalty" in the amount of P6oo. oo in extra- judicial settlement of its penal liability under Section 352 of the Revenue Code . The discrepancy was explained by peti~ioner and res - pendent agreed to reduce the alleged penalty to P300o00 . 40

DECI GIOM

GeToAe CASE NO, 1267 viously, respondent seeks to exercise his power to compromise criminal violations of the invenue Code aa, ond _regubstions whieh are panelised wien Seation 257 purguant to Section 309 of the same Code, «In @ letter deted October 10, 1958, petitioner requested that the penalty of 730).00 be set aside which request wae denied by respondent, thru the Negional _ ~Dlreetor ef then “egional “strict No. 3, Manila, who reiterated his demand for peyment of F300,00, Peti- — 7 tloner's request for reconsideration of respondent's r ruling was denied in a letter dated July 17, 1962. . Hence, this appeal, .

In this appeal, respondent, citing Olleda v. Court of Tax Apcesls, GR. No, L-8978, July 24, 1956, Uol- lector v4. UsS.T.y et a1., GR. Nos. t-11274 & 11260, Zz November 28, 1958, and Collector v. Savtista, et ele, GaRe Mo. L=29BSO % 1-12258, ‘Vay 27, 1959, contends that The same question was retsed hy respondent in Mitht Me Bayan Cooperntive Marketing Asssetetlon, tne. ve Je Antonio Araneta, C.T.A, Mo. 79, August 14, 1958, af~ Firned in GuR, No. 1=14575, July 31, 1961, wherein it

DFCIS TON

>, tea, CASE HO, IT267 —— - 3 7 the question was raised, we Invariably assumed jurisdiction and held that the Collector of Internal Sevenue has cower to impose and collect tie seecalied “compromise penalties" in the absence of a comprani4s4e acreement validly entered bate between the taxpayers and the Gel- ector. :

Counsel for the Government apparently admtt the Jurisdiecton of this Court over cases involvine peraitles tmooged and col- lected by respondent. Ye quote from thelr memoraniume "Tt te stenivicent to aote in oe connection thet under re ante 1) of seetion * of Sepublie <t!

1125 the Gourt of Tax Anpenls has Jurisdiction tc review 'tesislons of

the Collecter of Internal Tevenve in

Cages involving iiepiwted ossessmenta, refunds of internal revenue taxes, fees or otter cheryes, it~ Ss Px Cusac pr@visieon in offewt recognizes the authority of the Cel- lector of [atermel Acvenve to Lm ise ne collect penalties."

Page 26, Femorancus for “eapoocen:. !

Moe, os slieces, tne "c Compromi s+ aenalty” collected from metitioner in this cose coves under “penalties Lmotsed in relation tieceta” in Section 7 of “eoublic Act No. 1195, we see no reason for the claie thet thie oeurt Pere no jurtedictlon over cases involving the col- lection by yearehent of the se-co lind ‘oute "romise nmenelties", We find no plsusible reason to depert fram the above-mentioned ruling. Gonsequently, we hold that this

Court

bar, ized hag jurisdiction te take coanizrance of the case at +” the question whether or not respondent is author to impose a “compromise penalty," Lt has been con- en eet sistently held in a lone line of decisions that he has no such cower, Ae wae etated in Ren I. Chuy, et al. Ws a 410 _—

OFCISiLON

CeT.As CASE nO, 1267 wo 4 = Sellecter of Internal “evenue, “angssinan (C.F.I.)

Civil Case Mo. 12623, decided by this Ceurt on July 16,

1O%Rs

| “hile. _fgwe. thet the Col- lector ple 48 S68 oner) of Internal Revenue is empowered to compromise any ' civil or other case erising under the tovenue Gots by Virtue of Section 399 thereof, : :

- the power te compronise conferred woon the defendant has never been intended to vest in him the abe solute cower te flix any amount in set- tlement of 2 supposed criminal viole- tion withowt the consent of the taxe payer concerned. Thut would not he an exercise of the power to conpraonise; would b xe Ve TiAts%a , » versity of Sto. Tomes v. Coll. of ete ASV ey CTA. NOw 1, Sept. 29, 1996, tf defendant insists on imposing or exacting fines or senpalties tn the sulse of par phgrowe. he mioght exonge himae!f to the charge of et of he judict corferres upen e generel jurisdiction.” (\moted with approvel in B.1.8, ruling Mo, 62-

M022 of the Commissioner of Internal

Mevenue, dated Jan. 17, 1962.)

ag As stated by the Supreme Court tn Collector ef Internal Revenue v. University of Sto. Tomas, supra, “fer the —— Colleeter to arbitrarily imposa a (compromise) penalty is Clearly Lllegal and unsuthorized." (See also The hilippines International fair, Inc. v. The Coll. of Internal ‘evenue, ©. BR. Nos, Lel2928 & [-12922, Merch 31, 1962.)

The deciston appesled from is, therefore, hereby ee 7 nan nn

DECTS ION =

C.TsA. GASH NO, 1967 os 5S ws ' Set aside, without pronouncement ag to costes.

Assoclate Judge

I CONCtR,