Roque C. Gonzalez, Jr. vs. Commissioner of Internal Revenue

DECISION

- 2 - be withdrawn and that in lieu there of~ a post- reporting notice and/or pre -assessment notice be sent to (petitioner), in conformity with Revenue Regulations No. 12-85" (Exhibit "8"1 CTA Records, pp. 90-91).

Mr.

Pamittan responded in a letter to petitoner's counsel dated August 26, 1986 (Exhibit "C";

that:

CTA Records, p.

92), which states, in part, "xxx (O)n June 28, 1983 a letter was sent to your client (petitioner herein) requestin g the presentation of ce rtain documents to substantiate your claims for deductions in your 1981 income tax returns . A fo llow-up letter dated June 6, 1984 was also sent you but unfortunately, in spite of these requests, your client (peti tioner herein) failed to present the documents required of him.

The allegation, therefore, that your client (petitioner herein) was not informed of the proposed assessment is not s upported by the records of the case, hen ce , your request for cancellation of the a ss essment i s here by denied."

Failing to have the assessment in question withdrawn, petitioner, on September 25, 1986, availed of the income tax amnesty granted under Executive Order No.

41 (dated August 22, 1986) and its impleme nting Revenue Regulations No.

14-86 (dated August 27, 1986), by filing a Tax Amne sty Return with File No.

25-I ( 7 ) 00003 - 41 (Exhib i t "D"1 CTA 555 ·'

Records,

p. 93 ), and ~ak in g a ~full paym e nt~ of t he tax duq u n d~~ the a mnesty ,! Hr.

raroit~!:ln ~ ent another letter (dated January 23, 1986) to p@ titi5ft@r, dem an~ing D ymen t of his ta x liability subject matter of Aseessment No. 25-3- 04A - 191301-81, and informing him that if he fails to settle sai d liability, the BIR "shall b e constrained to enforce the collection of the afore stated liability, plus the statutory increments up to the date of payment, thru the issuance of Warrants of Distraint and/or Levy against your personal or real property" (Exhibit "E"; CTA Records, p. 95).

In a letter dated January 30, 1987 a nd received b y th e BIR on February 3, 1987, petitioner, through counsel, informed the BIR, through Mr . Pamittan, of hi s avail ment of tax amnesty under Executive Order No.

41 (Exhibit "F";

CTA Records, p . 96).

On May 24, 1989, petitioner's counsel received a lette i dated April 28, 1989 from respondent (signed by Acting Assistant Commissioner [Collecticn Office] Themis toclm ~ Montalban), which sta tes thus : "Th1 5 r- fers to your lette dated January 31, 19S7 requesti n~ ~1at the tax Sue h p 5 y!lle t Order No, B -,89 1 530~ No.

B- 9909243, b (;)th (Exhibits "D-1" and Records, p. 94).

is eviden d@~ by 8IR Payment a nd BIR CoP f1rma t 1on Receipt dated ~~ ~ ta mb e ~ 25, 1986 "D- 2" , respective ly;

CTA 556 _, -· '

- 4 - liability of your client, GONZALEZ, JR., involving P437,289.60 as defi ciency the year 1981, under the Mr.

ROQUE C.

the amount of income tax for letter of demand dated November 8, 1985 be considered closed by virtue of his availment of E.O. 41. In reply thereto, please be informed that E. 0.

No.

41 only cove rs tax liabi lities assessed or issued after August 22, 1986, the date said Order took effect. Sinc e the assessment of your client was issued on November 8, 1985, the said tax liability subsists notwithstanding his availme nt of the aforesaid decree: In view th ereof , you are requested to urge your client (petitioner herein) to pay to the Chief, Colle c tion Enforcemen t Div i sion, Rm.

10 2, BIR Bldg., Diliman, Q. C. , the amount of P437, 289. 60, plus the in c rements incident to delinquency, within ten

(10) days from your receipt hereof in or der that his case can be closed. Failing in it, this office much to our regret will enforc e the collection of the amount by all means provided for by law without further notice." (Exhibit "G"; CTA Records, p. 97) Th e issue whi c h faces the Court in this case is whether, notwithstanding petitioner's availment of t ax a mn es ty under E.O. No.

41, his liability fo ~ al l eged 1981 deficiency income tax in the amount of P437,289.60 still subsists.

In other words, the Court must settle whether or not petitioner's deficiency tax liability falls within the purview of the said E.O., thus allowing him to avail of the tax amnesty of fered . therein. A preliminary issue involving the lack of jurisdiction of this Court over the instant petition 557

- 5 - f or review on th e ground of the alleg e d fin a lity of th e ques tioned assessment must, howev e r, first be s e t t led by the Court. Respondent contends in his Answer (CTA Records, pp. 48- 51), among other things, that: "4 .

Records of this case sh ow tha t l e t t ers dated June 28, 1983 and June 6, 1984 were issued by respondent requesting petitioner to present do c um e nts to s ub s tantiate his claims for deductions in his 1981 income tax returns, but failed to do so ;

5.

The deficiency tax asse ss me nt was i ss u e d on November 8, 1985 , which was not howe ver protested within thirty ( 30) days f ro m receipt as requir e d by Sect i on 31 9- A o f the 1977 Tax Code;

hen c e, said asse ssment had become final and e xecutory. Th is Honorable Court therefore has no j uri s diction on the Petition for Review; XXX XXX xxx " • By way of rebuttal, petitioner submits in his Me mo ra n dum that:

"The f a ct i s that no su c h ass es s me nt or l e tter of demand supposedly i ss ue d by th e Respondent on November 8, 1985 wa s e ver recei ved by Petitioner.

As testified to by th e Petitioner in open c ourt (t.s.n.

of July 18, 1990, pp ; 4 - 5) and which testimony re mai ns uncontrovert e d, the first time he bec ame aware of an assessment ag a in s t him f or alleged 1981 deficiency income tax wa s wh e n he received Respondent' s oth e r c ommunications to Petitioner dat e d August 26, 1986 (E xhibit "C", Petitioner) a nd J an u a ry 23, 1987 (Exhibit "E", Petitioner), which facts remain undisputed.

It i s likewise undisputed that it was only upon Petitoner's receipt on May 24, 1989 o f Respondent's letter dated April 28, 1989 558

(Exhibit ry Petitioner), denying Petitioner’s request for the cancellation of the assessment against him by reason of his availment of the tax amnesty, that any mention was ever made of a’ supposed assessment and letter of demand dated November 8, 1985." (Memorandum, pp. 2-3;

CTA Records, pp. 108-109).

At this juncture, the Court finds it most appropriate to point out the fact that respondent, despite repeated requests for him to submit, through his counsel, the BIR Records of the instant case, has failed and/or refused to transmit the same to Us. This, despite the clear provisions of Section 2, Rule 7 of the Rules of The Court of Tax Appeals, which, states that:

"Sec. 2. The Collector of Internal ue, the Commissioner of Customs, the respondent provincial or city Board Assessment Appeals, forward to the duly Roepe also be numbered. ou may, on motion, and for good cause shown, grant an extension of time within which to submit the aforesaid records of the case." (Underscoring supplied) More importantly, respondent failed in his obligation, notwithstanding the fact that on June 27, 1989, when the Bureau of Internal Revenue’ received 9090

- 7 - the summons2 issued by Us in thi s case, respondent's co unsel was formally and expressly direc te d to comply with said Sec. 2, Rule 7 of Our Rules. Therefo re, the Court finds itself constrained to dec ide the case ~ BIR re cords.

at bar without benefit of studying We have been more than liberal with respo ndent's counsels in the past regarding the transmittal of such records, and have in fact been very acco mmodating to respondent in the present case. 3 This is because the Court realizes and re c ogni zes the importance of taxes to th e government, for whi c h reason respondent is treated with more ltni e ncy than any ordinar y party appearing before Us. HoHever , even the government's good must be 2 CTA Record s,

p. 21. The second paragraph of sa id summons reads as follows: "You are likewise hereby required to comply with Secti o n 2, Rule 7 of the Rul es of the Court of Tax Appeals, whic h provides that the Commissioner of Intern a l Rev en ue and the Commissioner of Customs shall certify and forward to the Court within ten (10) days after filing his answer, all the re co rds of the case in his possession, with the pages duly numbered, and if the records are in separate f o lders, then the folders will also be numbered." 3 It must. be noted that, although the instant c ase was deemed submitted for decision by the Court on J anuary 8, 1992 (Order dated January 9, 1992; CTA Reco rds,

p. 115), the Court has held off dec iding the case for six months, awaiting the transmittal of the case's BIR Records.

560

- 8 - subjugated to the cause of justice;

and in the case at bar, the Court believes that justice will not be s e rved by waiting any longer for respondent's counsel to comply with his obligation and submit the BIR r ecords for this case.

More than two - and-a-ha lf y e ars have passed since respondent filed his answer4 to the instant petition for review with Us ; to wait any further for the transmittal of said records would be to sac rifice justice, which the Court is bound to uphold.

The Court cannot rely merely on respondent's unsub s t a ntiated allegation that petitioner had been issued a notice dated November 8, 1985. Respondent, in order to prove his allegations, had merely to pre s ent a copy of the said alleged assessment, which is well within his competence to do.

Hi s counsel's failure/refusal to make such presentation or to transmit the BIR Records of the case, from which We c an as c ertain independently the existence of said assessment, must be Section 3{e ), Rule whi c h sta tes that: 4 Said De cember 20, answer 1989.

seen by Us in the light of 131 of the Revised Rules of Court was filed with the Court on 561 DECISION CTA CASE NO . 4372 - 9 - "S e .

3, P.~ .. f.'.l?~ .. :t:. .. ?..!?. .. ± .~ ....... EE .. ! .. f.il .. ~.~ .. l?. ...... ~ .. 9. .. !.1 .. :?,. • -- The fo ll owin g presumpti ons ar e satisfac ory if u n contrad icted, bu t ma y b~ contradic ed an overcome by othe r evi den ces XXX XXX (e ) That ev idence wi llfully s u pp r o~1qd would be adverse if pro .. u ce d; XXX ."

Furtherrno r ~ ~ v ew of the transcr i pt of petiti oner 's testimony in open cotrt s h ows that while he de c lared unconditionally that the fir s t assessment n o tice f o r 1981 deficiency income tax h e received is the o n e dated July 3,1986,s respondent never put such state ment in issue during cross-examination, G which We hereunder quote in full: ' CROSS EXAMINATION BY ATTY. CAPONONG ............................................ ............................. , ................. . Q.

Mr. Witness, what is your present address? A.

56 Scout de Guia, Quezon City. Q.

Is that your address since 1981 until the present? A.

No.

Q.

Will you please tell this Honorable Court if, what are your addreses are or is as the case may be? A.

!iy address was 1922 Dr. M. Carreon St., Sta. Ana, Manila. Q.

And is that the address you placed in your income tax return? A.

Yes.

s .~ .. ~ .. ~. T . S . N . , J u 1 y 1 8 , 1 9 9 0 , p p 3 - 4 . 6 T.S.N., July 18, 1990, pp. 6-7. 562

- 10 - Q.

Wh en did yo u move from that said addr ess in Sta. Ana to another place?

A.

1987.

That address, Your Honor, is of my residence and my office. Q.

So you mean to say that your address since 1981 until 1987 have been the same?

A.

Yes.

ATTY. CAPONONG No further questions, Your Honors ." Therefore ..

in .the absence of any evidence presented by respondent regarding the existence of the alleged deficiency tax assessment dated November 8, 1985, and in the face of the uncontradicted t es tim o ny of petitioner in open court, We hold that the thi r ty - day prescription period for protesting the as s e s sment for alleged 1981 deficiency income taxes · issued against petitioner must be counted from July 12, 198 6 , when petitioner received the notice dated July 3 , 1986.

Since petitioner protested said a ssess m ~ nt on July 31, 1986, the same has not yet become final and executory. Having disposed of the preliminary issue of jurisdi c tion, We now proceed to discuss the main question in the case at bar. Respondent submits that "(t)he tax amnesty under Executiv e Order No.

41 covers only assessments after August 22, 1986, effectivity date of the Executive Ord e r" (Ans\-Ter,

p. 2 . , CTA Records, p.

49), and, 563

- 11 - therefore, does not cover the assessment involved in the instant case.

This is specifically controverted by p e titioner in his memorandum. 7 The Court has had occasion to rule on the issue of the coverage of Executive Order No. 41 in the case o f .'J.'. ! .~!~ . ~ .~ .~ .! .~ .... ! .. ~ .~ .. ':! .~ .. !E! .~ .. ~ ... L ........... !..~ .~ ... ~ ..... .Y. .~ ...

~ ......... ~ .9. .~~.! .. ~ .. ~. !.9. . ~ .~£ ........... .9. . ~ Internal Revenue (CTA Case No.

4266).

In Our decision in that case dated January 31, 1991, a ptly stated that:

"By and large, petitioner posits the p ro position this wise: xxx The very nature of a tax a mn e sty, plus the very title of EO 41 i se lf, as expanded by EO No .

64 ' De claring a One-Time Tax Amnesty Covering In c ome Tax, xxx and the Tax on Business Und e r Chapter II, Title V of the National Internal Revenue Code, as amended, for the y e ars 1981-1986' clearly and obviously imply that the tax amnesty has to be given r e troactive effect so as to include in its c overage unpaid income and business taxes fo r the past years specifically mentioned, namely, 1981 to 1985. Moreover, Section 4 of EO No. 41, as expanded by EO No.

64, specifically enumerates those excepted from the coverage of the tax amnesty and cle a rly, tax assessments issued prior to August 22, 1986 are not among the exceptions.

Under the ru 1 e of ' .~~ .I?..E .~. ~ .~. ~ .. 9. .................. 1:1.~. ~1:1 .~ . ..... ~ .~. !: .... ~ :X:~~ .. 1:1 .. ~. ~..9. a lterius' 'where a statute enumerates the ..................................... subjects or things on which it is to op e rate, it is to be construed as excluding from its .effects all those not expressly me ntioned.

xxx Hence, since Section 4 of 7 See Petitioner's Memorandum, pp.

4-7;

Rec o rds, pp. 110-113. 564 We CTA .)

- 12 - EO 41 expressly mentions the exceptions from the intended converage of the tax amnesty, it follows that others not mentioned such as assessments issued prior to August 21, 1986 are not included. XXX XXX XXX Petitioner could not have said it better.

We agree."

On appeal to the Court of Appeals, Our above-quoted decisi on was affirmed, thus: "The interpretation forced up o n us by the petitioner with respect to the coverage of those who can avail of the tax amnesty under the provisions of E.O. 41 as amended is erroneous.

Petitioner also insists that E.O.

41 as amended must be given only pros pective application. Obviously, the title of E.O. 4 1 itself as amended by E.O . 64 - - 'Declaring a One - Time Amnesty Covering Income Taxe s ,

x x x

and the Tax on Business under Ch a pter II, Title V of the National Internal Revenue Code, as amended, for the years 1981 - 1986', suggests that the tax amnesty ha s to be given retroactive effect so to include in its coverage unpaid income and business taxes for the past years specifically mentioned, namely, 1981 to 1985. It is a basic tenet in our jurisprudence that generally all laws must be given prospective application. The same principle applies to rules and regulations promulgated by administrative authorities as held by the Supreme Court in ABS-CBN vs. Court of Tax Appeals 108 SCRA 142. XXX XXX XXX By analogy, the aforecited rule may be applied . to rules and regulation s promulgated by the Secretary of Finance.

Conversely, a rule or regulation may be given retroactive application if the same 565 DECISION CTA CASE NO. 43 7 2 - 13 - wou ld be beneficial to the taxpayer , as in th e ca se at bar.

Furthermore, Section 1 of Ex e cutive Orde r No. 41 unequivocally enumerates those t ax payers who may not avail themselves of the tax amnesty, and evidently private resp ondent is not one of them. The execeptions enumerated in Sec.

4 of E.O. 41 reads as follows: XXX XXX

XX X

It is well to stress that taxpayers wh ose tax assessments were issued prior to Augu s t 22 , 1986 are not among the exce ptions.

Under the rule of '~ - ~- PE .~ .~ ~--~ . .9. . . ~l .. f.1: .. '-:l. ~ . f3 - ~ -~!: .. ~~<:: .~ .~- -~ -~(? .... ?.J.!: .. ~ .~-~~~,' (sic) 'where a s tatute enumerates the subjects or thing s o n which it is to operate, it is to be co nst rued as excluding from its effects all those not expressly mentioned.' (Davis Plac e vs. Liquor Control Commission, 269 N.vl., p.

594).

Likewise, it i s an e l e me ntary rule in statutory c on s tructi o n th a t 'an express exception, exemption or saving cl a use ex c ludes the others.' (Lewis Suther land, Statutory Canst.

p.

494).

He n ce , since Section 4 of E.O.

41 s p ec ifically mentions the exceptions from the c overage of the tax amnesty, it ne ces s a rily follows that othe r s not me nti o n e d, such a s taxpayers who we re i ss u e d assessments prior to August 21,

1986 ,

a re not included in the exce ptions." (C ommi ss ioner of Internal Revenue vs.

Tiki c raft Indu s tries, Inc., CA-G.R.

No.

SP -2 4488, August 26, 1991, pp. 5-7 ) Therefore, the Court finds that petitioner's alleged 1981 deficiency income tax falls within the purvi e t;l o f Executive Order No.

41, and that, therefor e , his avail me n t of the amnesty under the sa me has s ettled his liability for said taxes. 566 ) DECISION CTA CASE NO . 4372 - 14 -

WHEREFORE, finding the petition impressed with merit, t h e Court hare by gr nts the same and orders the cane e ll at ' o n o~ A ~sess ment No,

25 - 3-04A-191 301 -

81, for al le ged 198 1 deficiency income tax in the amount of P43?,2a~ .6 0. No eos ts.

SO ORDI!!Rf;D .

Quezon City , M~tro Mm ila, u9u s t 7 , 1992.

I CONCUR;

DADIVAS-FA RALES

As eoeiate -udge Cf.'lRTIFICllTION ~ \-..lu l(,, ~ ERNESTO D. ACOSTA Presiding Judge I hereby certify that th i~ decision was reac hed after due co n s ultatio n betwe en the m~mbers of the Court of Tax Appeals in accordance with Section 13, Article VIII of the ConGtitution. 567 u-~~ ERNESTO D. ACOSTA Presiding Judge Court of Ta x Appeals