DON LING GUTIERREZ and pacity as administrator. Of the estate OF TAXpeyer LINC GUTIERREZ vs. ~ HON. MISAEL P, et al.

DECISION —

-AR~334734-6

Net income per return . « « «© « «© © © e «© © BF 18,509,95 Add: Undeclared profit on sale of Calemba property . . ..e.« 21,237.82 (Selling price) Original cost 19,187.37 Less: Res. for de~ preciation . 2a 3h 986 16,869 ,.5) felt nes Wet income per final investigation > .

Less: Perscnal exemption ...e « Amount subject to tax ore Tax due thereon eoee#ee ee Less amount already assessed Balance eeceveee Add: 5% Surcharge ee @ @ @ e «8 ye mo. int. from 4-17-63 to 4-17-66 Compromise for violation of Sec. 72 of the Tax Code oe ¢ 6&6 &©@ Se 6&6 @ 00,00 TOTAL AMOUNT DUE & COLLECTIBIB . 2... os P_,862,.34 Sometime in the latter part of 1960, respon- 3,451.00 eaececee eeesee eeoveeereé e®es0e3#ee 524.50 188.82 eeeeeeeee dent Commissioner of Internal Revenue, through one of his revenue emminaxt, caused to be invest igated said Lino Gutierrez's income tax liability for the year 1958 and prior years. Upon investigation of his returns, it was found that for the years 19 56 to 1958 inclusive, he declared in his income tax returns only fifty (50) percent of the gains derived from the sale of his real properties instead of 100%, the properties sold by him being ordinary assets. (pp. 12 to 16, BIR rec.) On the basis of petitioner's declaration of only S0% gains or pro~ fits derived from the sale of his real properties, respondent Commissioner of Internal Revenue on Pebruary 1, 1962, sent a letter to petitioner •

D C

IO

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CASE

~ • 1952 - 4 - finding him liabl to , and demandin payment of, th tot 1 amount of 30, 303 . 18 r pre enting d - fici ncy income t xes du for th ye rs 1956, 1957 and 1958 .

(Exh . 2, pp. 17-19, Vol . I ,

IR

rec . )

Subsequently, on July 17, 1962, tel gram w s . sent to petitioner whdch sought to find out whether or not th taxes ssessed and demanded against him for the y ars in question w re al- r ady p id; and if not, the collection th reef shall be enforced through the summary rem dies provided by 1 w.

(Exh. 3, p . 20, Vol . I , BIR rec.)

Consequently, on ugust 27 , 1962, petitioner Lino Guti rrez requested for a reconsider tion of the ass ssment for said y ars 1956, 1957 and 1958 asserting the round th t hi s les of his pro- perties are s·les of c pital assets, and h nc hi declaration of 50% of the gain realiz d in th ·sales th reof ·is correct .

( xhs . F and 4, pp . 21 to 26, Vol . I , Bl rec . )

In reply thereto, res- pendent in his 1 tter dated Octob~r 18, 1962 , re- qu st d p titioner to Y cute a w iver of the statute of limitations in rder to give the for- m r a pl time to act on the latt r ' s request, otherwis , petitioner ' s f ilure to d so ill b deemed abandon ent of his r u st for recon ide-

DECISION «

ration and will cause the immediate collection of the aforesaid liabilities. (p. 27, Vol. I, BIR rec.)

On November 15, 1962 (pp. 28-29, Vol, I, BIR rec.) and December 27, 1962 (p. 32, Vol. I, BIR ‘vec.), two letters were sent by respondent to pe- titioner informing him thet his request for a re- investigation and seview will be given due course and consideration only upon oubadeston by him of said waiver of which he was given up to January 10, 1963, within which to submit the same. On _ February 4, 1963, another letter (Exh. 5, p. 33, Vol, I, BIR rec.) was sent to petitioner-taxpayer inviting attention of the latter that until this date of writing, the waiver of the statute of 1li- -mitations have not been duly accomplished and re- turned to respondent, which letter, is substantially quoted below:

"x x x your request for reinvesti- gation of your deficiency income tax lia- bility for the years 1956 to 1958 in the x x xX amount of P30,303.42 x x x you have been requested to accomplish the blank forms of the waiver for the defense of prescripticn under the National Internal Revenue Code which were inclosed in our ' letter to you of November 15, 1962, x x x x x * * xk x X a8 of this date the same hag not been returned to us, duly accomplished, In view thereof, it is ggain requested that you return the aforesaid waiver, duly accomplished, within five (5) days from

DECISIUN -

the receipt hereof. If x x x we do not hear from you, this Office ehh feel free to presume that you have already abandoned your request for reinveatigation, x x x x x x the immediate collection of the sum of P30,303.42, plus x x x x x x x by means of the remedies provided for by law.”

On March 18, 1963, respondent sent a letter te petitioner stating finally that for petitioner's failure to submit the required waiver of the statute of limitations, he considered the request of reconsideration as abandoned by petitioner, and, therefore, requested for the payment of the sum of P30, 303.18,. as deficiency income tax plus 5% surcharge and 1% monthly interest, otherwise the collection thereof will be enforced by summary remedies. (Exh. 6, De 34, Volf I, BIR rec.) The pertinent portion of the letter of respondent of March 18, 1963 is quoted hereunder:

"x x x x 4 x ‘ In view thereof, it is presumed that his request for reconsideration has been abendoned. It is, therefore, requested that the abovestated amount of P30,303.18 plus 5X surcharge end 1% monthly interest from Pebruary 1, 1962 be paid not later than April 18, 1963 otherwise its collec- tion will be immediately enforced by means of the summary remedies provided by law," After the death of taxpayer, respondent Com- missioner of Internal Revenue filed a claim for the payment of the said deficiency income taxes for the years 1956, 1957 and 1958 in the sum of P 30,303.18, in Special Proceedings No. 0-6832 entitled “Intestate Estate of Don Lino Gutierrez," which was pending before the Court of First Ins- tance of Quezon City. (Exhs. C and 12, p. 274, Vol, II, BIR rec.)

On April 29, 1964, an informer sent a letter to the Commissioner of Internal Revenue denoun- cing the late Lino Gutierrez for tax evasion. (p. 34, Vol, II, BIR rec.) As a consequence thereof,

the Special Investigetion Division of the Bureau

of Internal Revenue conducted another investigation of the income tax returns of the taxpayer for 1957, 1958, 1959, 1960 and 1962. On June 28, 1965, af- ter a thorough investigation into the case, an assessment was issued against and demanding from petitioner Don Lino Gutierrez & Sons, Inc. (Exhs.

B and 8, pp. 155-157, Vol. II, BIR rec.) the total amount of 170,730.81, as deficiency income tax for the years in question, inclusive of 50% sur- charge and \X monthly interest, itemized as follows:

9 ~17894~- 7 Net income per return . « « 0 «© « «© «© © « « « 950,783.87 Add: Undeclared 50% Gain ..e«esececeee 7 Net income per investigation ...s+e«-ee-e-e LS PRL Less: Personal & Addt'l exemptions . . « « e tt Amount subject to tax oserereeeve ee ee & ) 6 Tax due thereon eee 86 e & % © & 6 6 © « 6 Pad, 951.00 Less: Amount already assessed a ee tet Balance “se ese 8 ee © » we s © © » 913,622, Add: 50% surcharge eee eee © © @ 6,711.00 Se» monthly interest from

TOTAL AMOUNT DUE & COLLECTISLE

weet

DECISION «

- Be

OmAR~25057-64/58

Net income per return .. .

e e 2 e e e e e e P71, aa" 96 Adda: Undeclared 50% Gain eeeereee e@ e@ @& @ &,. 87 Net income per investigation .. . « « « « « P99, zi 83 Less: Personal & addt'] exemptions ....«e Amount subject to tax a oe ee ee ee ee ee ee 2) 6 Tax due thereon . .« « « © © © © © © 0 0 0 0 we 225,906.00 Less: Amount already assessed a ee aE Pear Balance ‘¢€*€6ee¢ewmwese@e4@e ees 6 w PAG, 30.00 Add: 50% surcharge eeese#eeee%ff #® e© eee¢ 5,065.00 \% monthly interest from 9 - i= Net income per return . «cc e = ee ce eee oP 18, 161.70

Adda:

(1) Undeclared 50% gain on sale of Mandaluyong & San Felipe.

Neri Land oe5neu35020«e © © © ' 8 @ 3,089.42

(2) Undeclared gain on Cristobal property oe eee © © 144,233.62

(3) Undeclared interest income per information eoeee#eee 220.990.0909 “Net income per investigation .. .

Less: Personal & addt*l exemptions ... « Amount subject to tax eee eeseeeee Tax due thereon ee5c5cee eeoeeee. Less: Amount already assessed eee 8 6 Balance eee see seeseveweseseas F 8.00 Add: 50% surcharge oeoeoevseer8 © © 8 @ @ 35, 889. 00 4% monthly interest from TOTAL AMOUNT DUE & COLLECTIBLE ...e.e.e P 7.0

DECISION «

CTA CASE NO. 1982.

20-AR=1-317066-64/60

Net income per return . « « « ° Adds Interest not declared as per information 2/2/60 HSBC No. 3325941 ~- 6,659.32 2/15/60 HSBC No. J332780 - 3,500.00 12/19/60 HSBC No. J344282 ~ 9,750.00 Net income per investigation ... Less: Personal & Addt*l exemptions Amount subject to tax ° Tax due thereon . . .« « © « & « ' Less: Amount already assessed Balance eeee#eesFfee Add: 50% surcharge ...+es-e 4% monthly interest from 4-18-61 to 4-18-64 ..

TOTAL AMOUNT DUE & COLLECTIBLE . , .

Net income per return 4. eo e e Add: Gain on sale of Calamba Property: Selling Price oeeeee Original Cost . P19,189.37 Less: Rea. forDep. .

Net income per investigation .. « Less: Personal & addt‘'l. exemptions Amount subject ‘to tax eeeee Tax due thereon ...«-se«eeee Less: Amount already assessed » Balance ee ° Add: 50% surcharge ..« «see e 4% monthly interest from e e e e e e ob TOTAL AMOUNT DUE & COLLECTIBLE .. ..

oeeoee#é#@®@ P21, 237.82 116, 869,51) @oeeseoeoes6+#+ @ @® P12,054.21 :

SSPE

P 6,169.00

P ELF

2,639.00 ee J-1' PAT I P 8,667.04 P18,509.95 r g7ea6 5

P 7 TUR

524.50 4.36237 P_},709,87

DECISION «

- 10 « Taxpayer's counsel, upon receipt of the above assessment, filed a protest, and requested for a re- investigation, in a letter dated Auguat 9, 1965, on the ground that the assessment is not based on facts and is contrary to lew. (Exh. 9, p. 162, Vol. II, BIR rec.) | “In subsequent letters dated August 30, 1965, December 10, 1965 and March 2, 1966, respectively, respondent Commissioner of Internal Revenue requested that taxpayer execute a waiver of the statute of limitations. On March 26, 1966, taxpayer executed an indefinite waiver of the defense of prescription. (Exh. 10, p. 182, Vol. II, BIR rec.)

Respondent, upon receipt of the waiver, gave due course to the protest. As a result of this investigation, respondent wrote petitioner, in his letter of June 19, 1968, that the assesscents per- g$aining to the years 1956, 1937 and 1958 have al- ready become final and executory, and that only the assessments for the yeara 1959, -1960 and 1962 shall be made the subject of the request for re~ investigation, involving the amounts of 120, 587,04, PS,867.04 and P1,709.87 under Assessment Nos. 90-AR-31923-64/59, 90-AR-1-317066-64/60 and 90-AR-334734-64/62, respectively. (p. 274, Vol.

II, BIR rec.)

DECISION =

« Vi

Before the resvondent rendered a decision on the said protested assessments for 1959, 1960 and 1962, and after considering the letter of June 19, 1968 of respondent as the decision on the afore- said protested assessments, taxpayer filed with this Court ita petition for review on July 22, 1968, In the answer filed on February 4, 1969, respondent prayed, among other things, that the petition or appeal be dismissed on the cround that this Court did not acquire jurisdiction over the same.

Six months later, respondent wrote petitioner in a letter dated August 29, 1969 (Exh. 15, pp. 338-340, Vol. II, BIR rec.), requesting the latter to.pay the total smount of P89,665.60 as defi- ciency income taxes, inclusive of the 50% surcharge for the years 1957, 1958, 1959 and 1962. Said detter was received by the petitioner on May 2i, 1970. (Exh, 16-B, p, 360, Vol. II, BIR rec.) | After more than three (3) youre hed elapsed from the receipt of the decision on petitioner's protest, dated August 29, 1969, petitioner filed an amended petition for review on August 18, 1971, alleging therein new matters, but which did not touch anything regerding the aforesaid decision of respondent dated August 29, 1969, requiring petitioner to pay P89,665.60 as deficiency income taxes, plus 50% surcharge, for the years 1957, 1958, 1959 and 1962.

The issues involved in this case are as follows:

1. Whether or not the instant petition for review was filed within the reglementary 30-day period from the receipt of the decision -of respondent Commissioner of Internal Revenue provided for under Section 11 of Republic Act No, 1125;

2. Whether or not the right of the Com missioner of Internal Revenue to collect the deficiency income taxes for the years in quea~- tion has. prescribed:

3. Whether the deficiency income tax assessments for the years in question is made in accordance with law; and 4, Whether or not the imposition of the 50% surcharge on the August 29, 1969 assessment is proper and legal, With regard to the first issue, counsel] for petitioner alleged that the assessment issued by respondent Commissioner of Internal Revenue on February 1, 1962 is null and void because no notice of any kind was received by petitioner, Counsel further alleged that the assessments for 1956, 1957 ané 1958 can never become final, executory and gemandable because the letter of respondent of June 19, 1968, which was received by petitioner on June 22, 1968, “produces no other effect than this @ecision on the Motion For Reconsideration filed

DECISICGN «

for and in behalf of tanpéryor Line Gutierrez, which was appealed to this Honorable Court within the . 30-day period prescribed by Republic Act No. 1125." (Par. 1, Opposition to Motion to Dismiss.) He concludes that the petition for review having been _ filed on July 22, 1968, the same was, therefore, filed on time, On the other hand, respondent Commissioner of Internal Revenue contends that the petition for review was filed beyond the 30-day reglemen- tary period prescribed under Republic Act No. 1125, He argued that the said petition for review having been filed only on July 22, 1968, it was filed more than five (5) years from the date of respon- _ dent*’s letter dated March 18, 1963 which he con- siders as his appealable decision, It was steted, heretofore, that per the records of the Bureau of Internal Revenue, it was on February 1, 1962 that respondent, after @ routinary investigation, sent to Don Lino Gutierrez the first letter assessing and demanding from the latter the total amount of P30, 303.18 as deficiency income taxes for the years 1956 to 1958. (pp. 17-19, Vol. I, SIR rec.) The said letter of assessment and demand of Pebruary 1, 1962, contrary to the assertion of petitioner's

DECISION ~

~ 14 « counsel to the effect that it was not received, was ectually received by petitioner, evidenced by his letter tc respondent dated August 27, 15962, when he requested for a review and reinvestigation of the assessment for the years 1956 to 1958. (pp. 21-26, Vol. I, BIR rec.)

Upon receipt by respondent of the above letter of petitioner for review and reinvestigation, he lost no time in writing petitioner twice, first, “on October 18, 1962, and, second, on November 15, 1962, requesting petitioner, in both instances, to accomplish enclosed blank forms for the purpose of waiving the defense of prescription, and to return the accomplished forms within five (5) days so that he may review and reinvestigate the cis- puted assessments, (pp. 27 and 26, Vol, I, BIR ree.) Nownvers no reply or action was taken there- on by petitioner, This was cons icered by respon- dent to mean as an act of abandonment by petitioner of his request for a review and reinvestigation of the deficiency income tax assessment for the taxable years 1956, 1957 end 1958, Consequently, respondent issued and served upon taxpayer his tnkcidenlubnn Geted March 18, 1963, pertinent ‘portions of which is hereunder waned once more for emphasis:

DECISION +

“x x x x x In view thereof, it is presumed that his request for reconsideration has been abandoned. it is, therefore, requested that the abovestated amount of #30,303.186 plus 5% surcharge and 1% monthly interest from February 1, 1962 be paid not later than April 18, 1963 otherwise its collec- tion will be immediately enforced by means of the summery remedies provided by lew," As can easily be noted, when the Commissioner of Internal Revenue states in effect in his letter to texpayer that the Bureau of Internal Revenue will proceed to collect the tax, such statement indicates the finality of his decision, The aforequoted letter of respondent states that the request for reco sideration has been abandoned and that if the said tax assessed in the amount of 30,303.18, plus surcharges, will not be paid, it will thus be immediately enforced by summary remedies provided by-law, is in effect a denial of the request for review and reinvestigation of the assessment, And when petitioner did net appeal this said decision, the same became final and executory,. This is in line with the ruling of the Supreme Court, cited by respondent, in the case of Dy Pac & Co., Inc. vs. Court of Tax Appeals, et 41, G.R. No, L-31369, October 18, 1977, 79 SCRA 442, thus:

DECISION -.

- 16 - “Paragraph 1 of Section ll of Re~ public Act No. 1125, in express terns, allows appeal from ‘decision or ruling: of the Commissioner of Internal Revenue, ‘ The word ‘decision: has been interpreted to mean decisions of the Commissioner of Internal Revenue on protests of taxpayers against assessments 1/ And, in computing the 30-day period for appeal to the Tax Court, counting should begin from the date or receipt of the decision of the Commissioner on the disputed assessment.

However, where several requests for ‘reconsideration have been filed with the Commissioner, it would appear that the communication from the latter overruling taxpayer's request for reconsideration and affirming the disputed assessment in terms clearly indicating finality of the action taken constitutes the eppealable decision or ruling," However, in 1964, another tex investigation ef the deficiency income taxes of petitioner also for the year 1957, and including the years 1960 and 1962, was conducted at the instance of an in- former who denounced the late Don Lino Gutierrez for tax evasion. (p. 34, Vol. iI, BIR rec.) Af- ter a more detailed and thorough investigation, another letter of asses ent and demand dated June 28, 1965 was issued anc sent to the taxpayer, (Exhs. B & 8, pp. 155 to 157, Vol, II, BIR rec.) It must be noted that this asses ment ana demand dated — 28, 1965 was subject of @ protest by counsel for petitioner, as per his letter dated August 9, 1965. (p. 162, Vol. I1, BIR rec.)

Considering the above protest, respondent fs

DECISION «=

‘ -~ 17 - 4 requested the taxpayer to execute the requisite waiver of the statute of Limitation. while waiting for said waiver, respondent Commissioner of Internal Revenue in the meantime wrote the taxpayer, through counsel, on November 19, 1965 (>. 36, Vol. I, BIR rec.), requesting the payment of the previous assessments, one was for the amount of ©11,338.00, plus statutory penalties adjudged against the ideae and in favor of res- pondent in the case of the lete Don Lino Gutierrez va. Collector (now Commissioner) of Internal Revenue, G.%. No, L-19537, and the other was for the amount of 30, 303,18, representing deficiency income taxes for the years 1956, 1957 and 1958, plus statutory penalties for late payment. This assessment was subject of respondent's claim in Special Proceedings No, 2-6832, Intestate Estate of the late Don Lino @atierren, ant which the deceased son and administrator of the estate, Antonio Gutierrez, promised to pay when the Sup~ reme Court decides the case in favor of the rea- pondent Commissioner of Internal Revenue in GR. L=-19537.

Finally, on March 26, 1966, taxpayer executed ‘an indefinite waiver of the statute of limitation in aceordance with Section 332 of the National

DECISION =

Internal Revenue Code. (Exh. 10, supra.) Imme- diately thereafter, a more detailed and thorcugh investigation of the income tax cases for the years in question was conducted. As a result therecf, respondent sent his letter of demand Gated June 16, 1966 assessing against and demanding from petitioner the payment of the total amount of 170,730.81, which represented deficiency income taxes for the years 1957 to 1960 and 1962, Howe ever, res-ondent Commissioner of Internal Revenue after realizing thet the taxpayer had already . been assessed on February 1, 1962, for the years 1956 to 1958, and that said assessments have ‘become final, wrote said letter dated June 19, 1968, stating in effect that the assessments for ' 1956, 1957. and 1958 against petitioner were those issued on Februdry 1, 1962 which were valid and subsisting. Pertinent portions of said letter is quotec herein below:

“x x x x, Please be informed that as per records of this Office, the 1956, 1957 and 1958 deficiency income taxes of your said client in the total amount of P30,303.18 were already assessed ‘on February 1, 1962 under essment Nos, AR~13987~61-56, AR=-178994-61/65 and AR- 25057-61/58, respectively. The said assessments for ©30,303.18 have already become fina] and executory and are the subject matter of a proof of claim by this Office in Special Proceedings No, 0-6832, entitled Intestate Estate of Don Lino Gutierrez pending before the

DECISION ~-

- 19 « Court of First Instance of Quezon City.

protest will pertain only to the contested 062, involving x x x.’ underlining ours) (Letter, >. 370, Vol. II, BIA rec.)

The above letter of Jume 19, 1965, received by ,petitioner on June 22, 1968, was not contested or protested by counsel for petitioner. Instead, considering the same as the decision of respon- dent Commissioner of Internal Revenue, it right away appealed the same to the Court of Tax Appeals on July 22, 1968.

On February 4, 1969, respondent filed his answer to the petition for review asserting that this Court has no jurisdiction over the case, and at the same time prayed for the dismissal thereof.

Six (6) months after the filing of his answer to the petition for review, respondent, on August 29, 1969, assessed against and demanded from petitioner deficiency income taxes in the amount of 89,665.60 inclusive of surcharge and interest for the years 1957, 1958, 1959 and 1962. (pp. 338-340, Vol. II, BIR rec.) With the exception of that assessment covering the yeers 1957 and .

- “Otetoa0

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DECISION «

/ CTA CASE NO. 1952 = 2])'-

CONSPANTE C/ROADUIN

sociate Judge

I CONCUR:

AMANTE YILLER

Acting Presiding Judge .

éy/