Benguet Corporation vs. Commissioner of Internal Revenue

DECISION

This refers to an assessment issued against Benguet, Corporation for alleged unremitted withholding taxes. on compensation covering several months in 1988 to 1991 involving the total amount of P10,314,577.51 inclusive of penalties.

Petitioner is a domestic corporation duly organized and existing under Phi I ippine laws. On January 16, 1992, petitioner received ,from respondent a I etter, dated January 10, 1992, demanding payment of the amount of P6,188,672.50, .excluding penalties for late payment, as unremitted withholding tax.es on compensation, computed as fo I I ows: 799 .-

- 2 -

*"LIST OF ALLEGED PAYMENTS OF WITHHOLDING

TAXES WITHOUT RECORDS IN THE BIR

Year Involved Month Amount Involved 1988 February p 99,419.56 1989 May 244,623.25 July 250,951.96 September 260,803.87 I October 271,676.00 November 259,970.75 December 466,052.22 1990 March p 225,979.42 Apr i I 217,960.62 May 220 1 1 7 4 o 42 ..-- June 226,847.18 Ju I y 224,038.21 August 223,851.42 September 2271850 o 67c October 226,052.50 November 231,806.28 December 166,553.62 1991 January 235,156.56 February 263,022.03 March 263,211.87 Apr i I 265,758.27 May 266,628.27 June 297,964.66 July 275,930.12 August 276,389.48 TOTAL P6,188,672.50 In the said letter, respondent stated that all the above- mentioned Payment Orders and Confirmation Receipts (P.O.'s and C.R.'s) as reflected in petitioner's Annual Return submitted to the former's Accounting Division, *attached to the demand letter;

pp.

13-14, CTA records 800

DECISION -

C.T.A. Case No.

were found to Bureau of records) / In a petitioner Internal 4795 be fake or spurious, letter dated filed on protested the had promptly remitted due dates as follows:

Period Covered 1988 1989 1990 1991 - July - May - July - September ~ October - Novenber - Decenber - March - April - May ~ June - July ~ August - September - October - Novenber - Decenber - January ~ Febrary - March - April - May - June - July - August Total Anount P 99,419.56 244 623,25 250,951.96 260,803.87 271,676.00 259,970.75 466,052.22 225,979.42 217,960.62 220,174.42 226,847.18 224,038.21 223,851.42 227,850.67 226,052.50 231,806.28 166,553.62 235, 156.56 263,022.03 263,211.87 265,758.27 266,628.27 297,964.66 275,930.12 276,389.48 P6, 188,673.21 the Revenue.

its withholding taxes within Payment Order No.

63561280 €5159861 65754532 (5905436 66259515 C6674582 (6691234 67583675 €7873934 68139372 68146010 08646668 68722924 ¢8730603 69097279 69135076 69507546 69572127 69967453 69986514 010964526 611002051 610521494 611478878 011721500 same January 24, assessment by Confirmation Number 815655277 B16987009 B16957188 B18047230 B18162932 B16213302 B18240012 B18968716 B19804496 Bi9911649 820221793 820352384 B20373171 820919098 B21218080 821022088 B21040301 B21052435 Bats7i7is B21590125 B22757202 822086397 B22091424 B22100984 B23012438 801 or not 1992 date (pp.

with the Receipt Date August 3, 1988 June 6, 1989 August 7, 1989 October 6, 1989 November 8, 1989 December 11, 1989 January 10, 1990 April 5, 1990 May 9, 1990 June 7, 1990 July 4, 1990 August 9, 1990 Septenber 7, 1990 October 9, 1990 Novenber 12, 1990 Decenber 7, 1990 January 10, 1991 February 8, 1991 March 6, 1991 April 8, 1991 May 8, 1991 June 7, 1994 July 8, 1991 August 7, 1991 September 9, 1991 issued by 15-16 stating that the CTA B.I.R.

it their Managers Check Nunber

MBTC 004121

MBTC 004775.

MBTC 004915

WBTC 005060

MBTC 005163

WBTC 005251

MBTC 005309

MBTC 005472

WBTC 005511

WBTC 005565

WBTC 005626

WBTC 005676

WBTC 005747

WBTC 005809

WBTC 005862

WBTC 005961

WBTC 006039

MBTC 006125

WBTC 006196

MBTC 006242

WBTC 006299

WBTC 006357

MBTC 006400

WBTC. 006490

MBTC 006559

- 4 - Petitioner asserted in its protest letter that the confirmation receipts were duly validated by the receiving banks, namely: Phi ltrust Bank and UCPB, among others.

It maintained further, that subject receipts are all accountable forms officially released by respondent's office.

Moreover, the allegation of respondent that subject receipts are fake or spurious is a sweeping conclusion against petitioner, for such issue is sti II under investigation by the NBI. Without answering petitioner's protest, on January 29, 1992, respondent's Collection S~rvice issued and served on petitioner a Warrant of Distraint and/or Levy to enforce collection of the subject assessment this time in the increased amount of P10,314,579.51 as this already included penalties for late payment.

Warrants of Garnishment were also served to the Central Bank and Metropolitan Bank, to garnish the proceeds from the sale of gold ~ars to the Central Bank, and the petitioner's deposits at the Metropolitan Bank. To prevent disruption of petitioner's business operation, petitioner filed with respondent a written request for the I ifting of the Warrant of Distraint and/or Levy and the Warrant of Garnishment.

As a guarantee for the payment of subject assessment, 802

- 5 - petitioner posted a surety bond in the amount of P10,500,000.00.

On account of the posting of said bond, respondent granted the I i ft i ng of the warrants. On Apri I 14, 1992, petitioner received respondent's letter, dated Apri I 3, 1992, with the information that the demand letter previously sent to petitioner "is now considered final and unappealable", and that if settlement is not made within ten (10) days from receipt of Apri I 3, 1992 letter, the bonding company (FGU Insurance Corporation) wi I I be obi iged to make the payment in accordance with the surety b9nd. Consequent I y, by reason of this I etter of Apr i I 3, 1992, on April 23, 1992, petitioner filed with this Court, the instant Petition for Review with Urgent Petition for Issuance of Injunction to Restrain Tax Collection Pending Appeal. In a Resolution, (pp. 33-37, CTA records) dated May 22, 1992, .this Court granted petitioner's request for the issuance of injunction to restrain tax collection pending appeal, provided, petitioner submits within fifteen (15) days from receipt of this resolution, a certification from the Supreme Court and the Court of Appeals, that FGU lnsunance Company is a surety company of good standing, before the Court can approve the bond already posted by

- 6 - petitioner.

The bond should be issued in favor of ~he Court of Tax Appeals and should have an indefinite term, that is, it sha I I remain enforceable while the case is pending in this Court. on, June 1 o, 1992, petitioner filed its Compl lance (pp.

39-40, CTA records).

Hence, this Court granted petitioner's motion and enjoined the Commissioner of Internal Revenue "to refrain from collecting the amount subject of this case through the warrant of distraint and/or levy and warrants of garnishment dated January 29, 1992 pending final adjudication of the merits of this case" (Resolution, pp. 50-51, CTA records). ·On October 21, 1992, respondent f i I ed his Answer (pp. 62-66, CTA records) and alleged the following as his special and affirmative defenses, to wit:

SPECIAL AND AFFIRMATIVE DEFENSES

7.

In an Investigation conducted by respondent's Special Projects Team, it was a s c e r.t a I n e d , d i s cove red a n d co n f i r me d t h at a I I the receipts (PO-CR) reflected in petitioner's Annual Return <W-3) submitted to respondent's Withholding Tax Division representing petitioner's alleged payments of withholding taxes on compensations qovering several months in 1988 to 1991 were fake/spurious, not issued by respondent's bureau; 8.

Contrary to petitioner's assertions, the Manager's Checks issued for the payment of the various withholding taxes on compensation for 1988 to 1991 were used in the purchase of loose stamps, as further verified and 804

DECISION -

¥C.T.A. Case No. 4795 - 7 - discovered by respondent's Team;

Special Projects 9.

There being no valid payment of the withholding taxes on the various dates that they were supposed to be paid and remitted by the petitioner as withholding agent thereof to the respondent, the assessments therefor which are embodied in the final withholding tax (self-assessing) filed by the petitioner with respondent's bureau is now final and unappealable thereby conferring no jurisdiction upon this Honorable Court to take cognizance of the case;

10.

The confirmation receipts issued by the authorized agent banks which accepted the alleged various payments for withholding tax made by the petitioner having been duly verified and confirmed as fake/spurious, said banks are therefore, responsible for what appears as their fraudulent acts and/or negligence and not the respondent's bureau which gave them the authority to accept petitioner's tax payment pursuant to Article ,1909 of the Civi I Code of the Phi I ippines which states:

"Art. 1909.

The agent is responsible not only for fraud but also for negligence, which shall be judged with more or less rigor by the Court, according to whether the agency, was or was not for a compensation."

hence, the instant petition is dismissible under Section 1 (g), Rule 16 of the Rules of Court, as it states no cause of action against the petitioner.

XXX XXX XXX Preparatory to its presentation of evidence, on January 28, 1993, petitioner filed a Request for .805 ‘DECISION - C.T.A. Case No Admission (pp.

following matt "4.

issued to BIR the following BIR payment Orders 02):

2.That Port Area, 3.That Remedios C.

Collection South Manil 4.That from August Cayanan was District 25, Luz N.

Region 4A, - 4795 72-76, ers:

That the Region 4A, District (CB Form No.

1. Cc

2. C

3. Cc

4. C

5. Cc

6. Cc

7. Cc

8. Cc

9. Cc

10. C¢

11. C

12. C

13. C

14. C i5. Cc

16. C

17. C

18. C

19. C

20. C 21 Cc

22 C

23 C

24 Cc CTA records) 11721500 5159861 5754532 6259515 6674582 6691234 7583675 7873934 -8139372 8146010 8646668 8722924 8730603 9097279 9135076 9507546 9572127 9967453 9986514 10964526 11002051 10521494 11478878 5905436 in August 1988, BIR employee assigned at BIR Region 4A, Manila;

from June Mr.

1989 by res 25, pondent of BiR-Accountable Forms Division South Manila 82-02- Rey T. Molina was a to July District 25, 1991, Ms.

Sandoval was the BIR Supervising Revenue at BIR Region 4A, Officer a;

1991 to September 1991, the BIR Collection 806 South Manila;

District 25, Ms.

Agent at BIR the

DECISION -

C.T.A. Case No.

5.That 4795 BIR Payment issued to BIR Region 4A,:

- 9 - Order District 24, No.

Area by the BIR-Accountabie Forms Division;

6.

7.That That OMONOARWBNY 25.

the issued to Philtrust Bank Receipts (Form CB 82-02~03), DUOWDWAWDWOIAOWDWIOWOVWIOWIWAIawvWIaWVIIWTwDwD the BIR BIR 15655277 16987009 16957188 18047230 18182932 18213302 18240012 18968716 19804496 19911649 20221793 20352384 20373171 20919098 21218080 21022088 21040301 21052435 21571715 21590125 22757202 22086397 22091424 22100984 23012438 deposited Accountable the following Confirmation to wit:

in following MBTC Manager Checks:

P 99,419.

244,623.

250,951.

260,803.

271,676.

259,970.

466,052.

225,979.

217,960.

220,174.

226,847.

224,038.

56 25 807 MBTC MBTC MBTC MBTC MBTC MBTC MBTC MBTC MBTC MBTC MBTC MBTC C. 3561280 was Manita - Port Forms Division its 004121 004775 004915 005060 005163 005251 005309 005472 005511 005565 005626 005676 account the

223,851.42 227,850.67 226,052.50 231,806.28 166,553.62 235,156.56 263,022.03 263,211.87 265,758.27 266,628.27 297,964.66 275,930.12 276,389.48 - 10 -

MBTC 005747

MBTC 005809

MBTC 005862

MBTC 005961

MBTC 006039

MBTC 006125

MBTC 006196

MBTC 006242

MBTC 006299

MBTC 006357

MBTC 006400

MBTC 006490

MBTC 006559

8.That the total sum of P6,188,672.50 representing these manager's checks was credited to the account of the Bureau of Internal Revenue and/or Nat i ona I Treasury-Phi I i pp i nes; and 9.That annotated checks <Annexes "A" following entries:

at the dorsal sides of these to "A-24") is any of the a.

For the Account of Benguet Corporation c/o L.C. Diaz and Company Tel. # 818-32-02 b.

For the Account of Benguet Corporation c/o L.C. Diaz & Company - Port Area, Mani Ia Tel. # 80-43-25 c.

For the Account of Benguet Corporation c/o L.C. Diaz & Company Tel. # 86-43-25 d.

For the Account of Benguet Corporation c/o L.C. Diaz & Company 3 F Don Jacinto Building Salcedo St., Legaspi Vi I lage Makati, Metro Mani Ia e.

Benguet Corporation·

ID -

31-048-04827

TAN -

B5236-F1856-A-8 c/o L.C. Diaz & Company 3 F Don Jacinto Building De I a Rosa St. , Legaspi Vi I I age Makatl, Metro Mani Ia Tel. # 86-43-25 808 llEC! t S I ON - C.I.A. Caoe No. 4795 .•.

11 "" f.

for th~ Aooount uf B8ngu•t Corporation a/o l.C. Diaz 3 Company 3 F Oon Jaolnto Butldtng Oele1 Aolll8 cnr·. Salf'H'HfD Sta •• t.~IJilUJ.lf VI I lagl!' Makatt, Metro Mantia lei. I lHl-·1€)··25 g.

for the Arcount of Bengu~t Corporation o/o L.C. Olaz 8 Company - 2nd ffr. LCU & Co. ·Union Butldtntl A. Ronlfaoto Ortve. Port Area. Mantia T~l. # S0··4a-?!L" Admission (see last page therAot; p. 76 CTA r~cordsJ. pett1toner also served upon regpondent the rotlowlng lnterro~atorles, to wtt1 "1.

ts Mr.

r .. l'l').' l.

Moltna still employed with the BIR7 If yes, what oapaottv and In what OIR offloo and address? ?

IR MI.

Hem8dlo~ u.

Sandoval sttft employed with the BIR1 If yes. what oapaotty and In wh~t BIR office und address?" 3.

IsM$. Luz N. Cayanan still employed with the SIR? If ye$, what oapaolty and In what SIR office and addr~$&1» Heply to pettttoner·~ Request for Admt~slon <pp.

11~-119, ClA r~oo~ds) was ftled by respondent on Maroh 26, 1993.

I n h I s rt e p I y , r .-, !t fl «'HH.I en t El t a t f.! d t h (I t t "1.

H'.l' AOM t 'J S t h& f aot 01 I SSt.HltlQft by respondent's Aooountable forms Olvlston to Revenue Region No.

4-A.~ Revenue Olstrtot Offlae 126 South Manila. of the various Payment Orders <PO's) enu~erat~d under paragraph 1 or the Requeat for admission.

as well aa SIR P~tyment Or-de-r No. C35612.8 stat ad 1 n rH.tr·agr·aph 5 whloh was tssued to Revenue Hegton No.

4-A, R~venu& Otetrtot Offtoe No.

24, North MantiA.

but ~tateR In oonneatton therewtth that sat~ Poyruent Orders although Gubsequently Issued by ~1.11d Rovf!llnue Otatr·lottl ·fot~ paytlHHlt of' 809

- 12 - unremitted withholding tax of the petitioner for the various amounts stated therein were thereafter verified by respondent's Special Projects Team to have been used by different taxpayers for the purchase of documentary stamps, the payments of which were effected elsewhere and for smal fer amounts compared to those stated in the Payments Orders issued to the petitioner, using the various MBTC Manager's Checks issued for the account of the petitioner.

2.

He ADMITS that in August 1988, Mr.

Rey T.

Mol ina was a BIR employee assigned at Revenue Region No. 4-A, Revenue District Office #25, Port Area, Man i I a, Ms.

Remedios C.

Sandoval as Supervising Revenue Col faction Officer at Revenue Region No.

4A, Revenue District No. 25, South Mani Ia from June 1989 to July 1991, and Ms. Luz C.

Cayanan, as BIR Col faction Agent at Revenue Region 4A, Revenue District No. 25, South Mani Ia, as stated in paragraphs 2, 3 and 4, respectively, of the Request for Admission; 3.

He ADMITS that respondent's Accountable Forms Division issued to PhiiTrust Bank the various Confirmation Receipts enumerated under paragraph 6 of the Request of Admission but states in connection therewith that the same were subsequently issued by the said bank to different taxpayers other than the petitioner herein for various payments of documentary stamps, said payments having been effected outside Revenue Region No. 4A, Mani Ia as verified by respondent's Special Projects Team;

4.

He ADMITS that respondent deposited in its account the various MBTC Manager Checks enumerated under paragraph 7 of the Request for Admission but states in connection therewith that said checks were used by different taxpayers other than the petitioner for the payment of documentary stamps and not for the unremitted withholding tax involved herein as verified by respondent's Special Projects Team; 810

- 13 - 5.

He ADMITS that the total amount of P6,188,672.50 representing the various MBTC Manager's Checks with the corresponding annotations at the dorsal sides thereof "For the account of Benguet Corporation, etc."

(Annexes "A" to "A-24", Request for Admission) stated in paragraphs 8 and 9, respectively, of the Request for Admission, was credited to the account of respondent's bureau and/or the National Treasury of the Phi I ippines, but states in connection therewith that said checks were actually and ultimately used by various taxpayers other than the petitioner to purchase documentary stamp, the payment of which were effected outside Revenue Region No.

4A as subsequently verified by respondent's Special Projects Team;

6.

Respondent, in interrogatories embodied Admission states that in the answer to the Request 201 Files respondent's Personnel Division indicate present respective positions and assignment the fo I I owing:

the for of the of (a) Rey T. Mol ina - Revenue Collection Officer, Collection Branch, Revenue Region 4A, Man i I a (b) Ms. Remedios C. Sandoval - Revenue Officer I I I, Co I I ect ion Branch, Revenue Region 4A, Man i I a (c) Ms. Luz N. Cayanan - Revenue Officer I, Collection Branch, Revenue Region 4A, Man i I a. "

On March 31, 1993, petitioner filed a Manifestation ( p.

121, CTA records) stating "that the qualifying statements in paragraphs 1, 3, 4 and 5 of the respondent's reply to request for admission dated March 811 1 J - 14 - 18 1 1993 are evidentiary· matters and therefore, not proper statements in the said reply." In the hearings conducted, petitioner presented witnesses in the persons of Ms. Amelita Senayo, Payrol I Manager of L.C. Diaz and Co., and Mr. Ferdinand Rabino, Section Manager of Corporate Accounting of Benguet Corporation.

Respondent, for his part, presented as his sole witness, Mr.

Leodegario Tenorio, Chief of the Collection Performance Audit Division of the B.I.R ..

Both parties submitted their respective Formal Offer of Evidence, Comment to Formal Offer, ~nd Memorandum in support of their cases. The issues to be adjudicated in this case are: 1.

Whether or not this Court has jurisdiction over the instant assessment; and 2.

Whether or not petitioner actually paid the alleged unremitted withholding taxes for the months of July 1988, May to December 1989, March to December 1990, and January to August 1991, and therefore, no longer I iable for the disputed withholding tax assessments.

The issue on jurisdiction was raised by respondent both in his answer and in his memorandum.

He asserts that the instant case refers to spurious/fake receipts and does not involve a disputed assessment.

Therefore, this Court has no jurisdiction to try the merits of the case.

812 '

- 15 - We disagree.

The case is clearly a disputed assessment.

The first letter of respondent to petitioner dated January 10, 1992, demanded payment of the amount therein stated which is already an assessment in itself.

It became a disputed assessment when it was protested by petitioner in its letter of January 24, 1992.

Respondent's I et t e r of Apr i I 3, 1992 was the final decision appealed to this Court by petitioner.

In said letter, respondent reiterated reiterated its demand for payment of the alleged unremitted withholding taxes on compensation within ten (10) days from receipt thereof, otherwise, collection wi II be enforced through the summary remedies.

It also stated that "the demand issued against Benguet Corporation is now considered final and unappealable".

As explained by Atty.

Benjamin Aban in his Law on Basic Taxation, 1994 edition, p. 223 thereof: ,"x x x a letter of the Commissioner reminding a taxpayer of his obligation to pay taxes which reiterates a previous demand for the settlement of an assessment is in effect a decision on disputed assessment which is appealable to the Court of Tax Appeals (Commissioner vs.

Ayala Securities Corp., L-29485, May 31, 1976).

This letter is tantamount to a denial of the request for reconsideration or protest of the respondent corporation on the assessment made by the petitioner, considering that the said letter is in itself a reiteration of the demand by the 813

- 16 - BIR for the settlement of the assessment already made (Ibid.)."· <Underscoring supplied) And even assuming, for the sake of argument, that the case at bar involves fake/spurious withholding tax and does not fa I I under the so-ca I I ed disputed assessment, the same is st iII beyond question as covered by this Court's jurisdiction it being under the classification of "other matters" involving the BIR and the Bu~eau of Customs.

Again, Atty.

Aban defined the term "other matters" in his book, p. 229-230 thereof, in this manner:

"Conformably with the princip-le of ejusdem generis, the term 'other matters' as regards the CTA's jurisdiction could be those cases which do not necessar i I y i nvo I ve disputed assessments or refunds in the case of the BIR or those related to Customs protest or forfeiture cases but controversies which are still within the functions of the BIR and Customs.

XXX XXX XXX It might also be possible that 'other matters' in the CTA's jurisdiction could also include questions relative to the propriety of tax collection as where the Commissioner' proceeds to co I! • . ..:;.:

an assessment tax by distraint and levy even before the expiration of the three-month period prescribed under Sec. 207 of the Tax Code.

Should this happen, the taxpayer could file a protest against the action taken and if this is denied, the taxpayer might consider the fi I ing of an appeal with the CTA. x x x." <Underscoring supplied) 814 1 - 17 - Viewed in the I ight of the foregoing, undoubtedly the case at bar is wei I within the jurisdiction of this Court.

Moreover, respondent appears already estopped from raising the issue on jurisdiction. As early as Apri I 23, 1992, the date of fi I ing of the instant petition for review, petitioner had also requested issuance of injunction to restrain co I I ect ion of the subject assessment pending appeal.

When this request was heard on May 15, 1992, respondent's counsel did not present any objection (see Minutes of Hearing, May 15, 1992, p.

28, CTA records), provided petitioner post a surety bond (p.

4, Resotution dated May 22, 1992; p.

35, CTA records).

Hence, withthe filing ofthe suretybond, the Court granted petitioner's request and directed the Commissioner of Internal Revenue, to refrain from collecting the amount subject of this case, through the warrant of distraint and/or levy and warrants of garnishment, pending adjudication of the merits of this case (Resolution dated June 24, 1992, pp.

50-51, CTA records).

Despite the issuance of the injunction order/resolution, respondent in his answer which was filed on October 21, 1992, or almost four (4) months after the order of injunction, respondent sti I I raised 815

- 18 - the issue that this Court· has no jurisdiction to take cognizance of the instant case. Clearly evident is the fact that prior to the fi I ing of respondent's answer, respondent had already participated actively in the proceedings before this Court.

First, as mentioned earlier, on May 13, 1992, when petitioner's urgent petition for issuance of injunction was heard, respondent did not Interpose any objection.

On the same date, he filed his first motion for extension of time to f i I e his answer.

The same was granted in an Order dated May 22, 1992.

The second motion for extension was filed on June 10, 1992 and the same was granted in an Order dated June 12, 1992.

On J u I y 20, 1992, the third motion for extension was filed by respondent and this was again granted by the Court in an Order dated July 22, 1992.

Then on September 15, 1992, respondent filed again his fourth request for extension ·of time of thirty days from September 10, 1992.

At this juncture, it must be noted that when respondent filed his fourth motion on September 15, 1992, the thirty

(30) day period of extension previously granted to it, had already expired on September 10, 1992. This was the reason why the Clerk of Court set the case for hearing on October 8, 1992 to find out why petitioner's counsel does 816

- 19 - not file any objection · to such delay in f iIi ng respondent's answer.

In that hearing, respondent's counsel had averred "that this case cannot yet be heard because he has not filed his Answer to the Petition for Review." (Minutes of Hearing on October 8, 1992; p.

60, CTA records).

After seeking this Court's approval on his four (4) motions for extension of time to file answer, respondent suddenly raised the issue on jurisdiction in his answer filed only on October 21, 1992. Obviously then, respondent's c!aim that this Court has no jurisdiction to take cognizanc~ of this case is untenable.

It runs counter to the we I 1-sett I ed ru I e that:

"While lack of jurisdiction may be assailed at any stage, a party's active participation in the proceedings before the court without jurisdiction wi II estop such party from assai I ing the lack of jurisdiction." (Echaus vs. Blanco, 179 SCRA 704; Romualdez vs.

Regional Trial Court, Br. 7 Tacloban City, 226 SCRA 408; (Underscoring supplied) We now come to the second issue: whether or not .petitioner actually paid the a I I eged unremitted withholding taxes for the months of July 1988, May to December 1989, March to December 1990 and January to August 1991, and therefore, no longer I iable for the disputed withholding tax assessment.

This issue was stated simply by respondent as:

whether or not 817

- 20 - petitioner's alleged payments of the herein unremitted, withholding taxes were valid. We answer in the negative.

We hold that there were no valid payments by petitioner of the herein unremitted withholding taxes.

This is supported by the various pieces of evidence presented by both parties as explained hereunder.

On the part of petitioner, it presented and formally offered the pertinent MBTC checks, Payment Orders (PO's) and Confirmation Receipts <CR's) to prove its alleged payments of the so-cal led unremitted ~ithholding taxes. Petitioner claims that the P.O.'s were duly issued by respondent's employees who were authorized to discharge such function.

Similarly, the C.R. 's were issued by the employees of banks accredited by the respondent for the purpose of accepting tax payments for the government.

On account that said P.O.'s and C.R. 's were duly issued by authorized employees both of the respondent and the banks, they should be presumed genuine according to petitioner, and not fake or spurious as claimed by respondent.

Petitioner describes such conclusion of respondent as "too sweeping," for it has not yet been confirmed by findings of experts on the matter, I ike the National Bureau of Investigation <NBI ). 818

- 21 - The P.O.'s and C.R.ts issued to petitioner are genuine, considering that respondent admitted in his Reply to Request for Admission (see pars.

and 3 thereof;

pp.

115-117, CTA records), that the P.O.'s enumerated under par.

1 of petitioner's Request, were issued by respondent's Accountable Forms Division to Revenue Region No.

4-A, and the latter subsequently issued the same to Revenue District Office (ROO) No. 25, South Mani Ia and ROO No. 24, North Mani Ia.

However, respondent made the qualifying statement that the said P.O.'s were later on verified by re$pondent's Special Projects Team as to have been used by different taxpayers for the purchase of documentary stamps <Exh.

" 1 ' " Respondent; p. 35, Folder I of BIR records). In the same way, respondent also admitted that his Accountable Forms Division issued to Phi !trust Bank the various C.R. 's enumerated in par. 6 of petitioner's Request, but again qual ifiedi.Y stated, that the said C. R. 's were subsequently issued to different taxpayers, other than the herein petitioner, for various payments of documentary stamps.

These facts were also verified by respondent's Special Projects Team.

At this point, it must be made clear that what is at issue in this case is whether or not there was actual payment of petitioner's 819

- 22 - unremitted withholding taxes.

Our answer is, there was no payment made for petitioner's withholding taxes. When checks are used for payments, in settling obi igations, the best evidence are the checls themselves. Thus, in the case at bar, considering that the P.O.'s and C.R.'s of petitioner, although seemingly genuine, do not appear in respondent's f i I es/ records, the best evidence in proving petitioner's alleged payments are the MBTC checks which were marked and offered as Exhibits "A", to "A-24", inclusive, of petitioner (pp.

149-173, CTA records).

Our view is shared by no less than the petitioner, when the latter repeatedly stated in its Formal Offer of Evidence (pp. 128-132, CTA records) that the purpose/s of presenting or offering the different check/s as exhibits was/were to prove that petitioner paid and remitted to the BIR the withholding taxes on the salaries of its executives for the different subject periods.

In the statement of the purpose of each check as exhibit, it was repeatedly indicated that it was remitted to the BIR for the payment of withholding tax.

A careful scrutiny of these checks, however, revealed that they were not used to pay withholding taxes.

The checks themselves confirm respondent's Special Projects Team's findings that they were used to purchase 820

- 23 - documentary stamps from the·BIR. For on the dorsal sides.

of the subject checks, are handwritten notes that they were used to pay documentary stamps.

As to how many pieces of documentary stamps were purchased for each denominations of P5.00 or P3.00, and even their respective serial numbers were also indicated at the back of each check.

These notations were written legibly, and could not be presumed as to have escaped the attention of petitioner.

They usually appeared side by side, with annotations "For the Account of Benguet Corporation c/o L.C.

Diaz and Co.-Port Area, Mani Ia .Tel No.

86-43-25" which were also marked as Exhibits "C" to "C-24" of petitioner (p. 137, CTA records).

Thus, the possibi I ity that it was not read by petitioner is truly unimaginable, if not totally unbelievable.

Oversight may be a defense for not having read it, if the annotation happened only in one check.

But if it appeared on several checks, oversight .w i I I no I onger hoI d water. The point deserving emphasis is the obvious fact that petitioner was fully aware as early as 1988, that its checks intended for payment of withholding taxes were actually used for the purchase of documentary stamps.

Yet during the hearings of the case, petitioner's witnesses never offered any explanation on how and why these things happened to its 821

- 24 - checks.

There being no oral or written explanation given. by petitioner's witnesses relative to the aforesaid annotations that the checks were used for payment of documentary stamps, said annotations are deemed admitted to be true by petitioner for they formed part of the exhibits it offered.

The checks speak for themselves.

They were used as payments for documentary stamps purchased from the B. I.R.

They cannot, therefore be considered as valid payments for the alleged unremitted withholding taxes.

Wei !-entrenched is the rule that: "For evidence to be believed_, it must not only proceed from the mouth of a credible witness but must be credible in itself such as the common experience and observation of mankind can approve as probable under the circumstances."

<People vs.

Amar, 232 SCRA 683; UnderscorIng supp I i ed} That petitioner's MBTC checks, Exhibits "A" to "A-24", are undeniably clear proofs of payments of documentary stamps, is corroborated by findings or written reports submitted by the Special Projects Team.

Thus, on page 53, Folder I, BIR records, We find the report of Mr.

Manuel J. Seijo, Revenue Collection Agent, stating, among others that the following MBTC checks: Check No.

Date Amount Exhibits 1 } 004915 7-24-89 P250,951.96 "A-2" 2} 005060 9-25-89 260,803.87 "A-3" 3} 005163 10-24-89 271,676.00 "A-4" 4} 005251 11-23-89 259,970.75 "A-5" 822

- 25 - 5) 005309 12-19-89 466,055.27 "A-6" 6) 005472 3-26-90 255,979.42 "A-7" 7) 005511 4-24-90 217,960.62 "A-8" were a II persona I I y handed to him by Mrs. Maria Bulaclac

0. Aniel, District Collection Supervisor, ADO No. 33 (now 51), Pasay City, as payment for documentary stamps tax. Another corroborating evidence, proving that the MBTC checks of petitioner were used to purchase loose documentary stamps, was the report, dated February 16, 1994, submitted by Mrs.

Rosario Beltran, found on page 34, Folder I, B.I.R. records, stating that the following checks were presented to her as payments for loose documentary stamps by the representative of L.C. Diaz and Co.

named "CANTRE"

OR "CASTRE"

on different dates, to wit:

1990.

Check No.

005626 005676 005747 005809 005862 005961 006039 006125 006196 006242 006299 006357 006400 006490 006559 Date 6-25-90 7-26-90 8-24-90 9-25-91 10-23-90 11-23-90 **12-26-90 1-25-91 2-22-91 3-20-91 4-25-91 5-26-91 6-24-91 7-25-91 8-23-91 Amount P226,847.18 224,038.21 223,851.42 227,850.67 226,052.50 227,052.50 166,553.62 235,156.56 230,022.03 263,211.87 265,758.27 266,628.27 297,964.66 275,930.12 276,398.48 Exhibits A-10" A-11" A-12" A-13" A-14" A-15" A-16" A-17" A-18" A-19" A-20" A-21" A-22" A-23" A-24" **Per file of petitioner, this date is December 18, 823 - 26 - The foregoing reports, in addition to the annotations appearing on the dorsal sides of the checks, substantially establish the fact that said checks were used in the purchase of documentary stamp taxes and not in payment of petitioner's unremitted withholding taxes.

It follows then, that petitioner failed to remit the withholding taxes on compensation of its employees. The reports were gathered by Mr.

Leodegario Tenorio, Assistant Chief of the Collection Performance and Audit Division of the BIR, who was also one of the members of the Special Projects Team that conducted the Investigation of the instant case.

Mr.

Tenorio was presented as witness for the respondent.

And in the hearing of May 19, 1994, he testified that in the course of his investigation, he discovered that "the checks which were used for payment of withholding taxes and wages of Benguet Corporation, were not rea I I y used and submitted as payment for withholding taxes and wages.

The same check was used in payment of documentary stamps of different denomination."

(p.

32, T.S.N., Hearing on May 19, 1994; Underscoring suppl led)

AI I

the documentary and testimonial evidence of respondent controverted petitioner's allegation that "the questioned tax payments ceased and was extinguished when 824 - 27 - it actually remitted the checks in payment thereof, xxx." As borne by the BIR records of the case, the MBTC checks of petitioner were indeed actua I I y remitted to the respondent's office, but they were not remitted as payment for the subject withholding taxes.

They were remitted as payment by different taxpayers for loose documentary stamps of different denominations. As to how this happened is not the concern anymore of this Court.

Although, it is Our honest opinion that L.C. Diaz and Co.

is the best party to shed I ight on _this, as it was such company which was authorized by Benguet Corporation to handle the latter's remittances of withholding taxes to the BIR.

This was confirmed by no Jess than Amelita Senayo, the Payrol I Head of the Payrol I Division of L.C.

Diaz and Co., when she was presented as witness for petitioner.

Pertinent portion of her testimony reads as fo I I ows:

"xxx a.

When you said you make payments for Benguet Corporation, what do you mean, to whom do you make payments?.

A.

Payment of different executives and their net pay; we deposited that to the bank and we just withdraw that and also some remittances we prepare I ike the SSS and the withholding taxes.

825 a.

And - 28 - when you remittances Corporation taxes, how do said of of you do you prepare Benguet withholding this7 A.

We requested a check from them or the total payroll fund for them, then they send us the check.

We prepare the corresponding remittance form an~ we personally remit that to the Bureau of Internal Revenue. a.

And this practice has been going on how long, can you remember? A.

Since I was ... Before I was with LC a.

A.

··XXX" So We Diaz and Co.

this practice has been going on since you can remember you were employed by LC D i a·z.

When you said you personally remit these manager's checks and withholding taxes to the Bureau of Internal Revenue, what do you mean by this7 How do you do the remittance?

~re~are the monthl't..

remittance form, then we send a messenger to the Bureau or the SSS and he just remit that.

(pp. 6-7, T.S.N. of hearing on Apri I 13, 1993; Underscoring suppl led) The above-quoted testimony jibed with the statements of Mrs. Rosario Beltran as contained in her report, which We have earlier mentioned. We repeat such statements for emphasis, thus:

"Please be informed also that the aforecited checks ***were presented to me as 826 - 29 - payments for loose documentary stamps by the representative of L.C.

Diaz and Co.

named 'CANTRE' OR 'CASTRE' on different dates and the respective amounts indicated. xxx Please be informed further that before accepted then deposited these checks, I first verified the genuineness and I iquidity of the amounts of said checks from the banks concerned with the emphasis that it was presented to purchase loose documentary stamps.

And the answer I got was to go ahead as the checks were good."

(Underscoring supp I i ed) To recapitulate on the second issued, the Court resolves the same in favor of the respondent, based on the following observations. The Official Receipts (O.R. 's) and the Confirmation Receipts (C.R.'s) presented by petitioner did not prove payments of subject withholding taxes.

Although they were admitted by respondent, as bearing serial numbers of O.R. 's and C.R. 's that were duly issued respectively by the B. I.A. to its collecting agents in Mani Ia, and to Phi ltrust also in Mani Ia, the clear annotations at the back side of the checks, revealed that they were not appl led as payments for withholding taxes.

Hence, even if respondent also admitted the signatories in the O.R.'s are employees of the B. I.A., such wi II not also support petitioner's contention of payment of withholding taxes in question.

Such signatories were never presented ***Referring to MBTC checks marked as Exhibits "A- 10" to "A-24" of petitioner. 827 in

- 30 - court to identify and/or admit their signatures on the O.R. 's.

Similarly, petitioner failed to present in court the signatories in the C.R.'s who were employees of the issuing bank for the purpose of identifying their signatures.

On the other hand, respondent was able to prove that the checks of petitioner were presented or remitted on different dates by the messenger of L.C.

Diaz, as payments by different taxpayers for the purchase of loose documentary stamps.

There were reports submitted by the collecting agents to the Special Proj~cts Team (S.P.T.)

of respondent's checks having been used by different taxpayers.

It was Mr. Tenorio who consolidated and/or incorporated said reports in his own report, containing all the results of the S.P.T.'s investigation.

Mr.

Tenorio was presented in court to testify on his report. That the checks used by different taxpayers were for the accoynt of petitioner is, I ikewise, no proof that they were used for payment of the withholding taxes in question.

The annotations that they were for payment of documentary stamps are more controlling.

Such annotations were confirmed as true by the reports of respondent's co I I ect i ng agents, as well as by the O.R. 's and C.R.'s on file with the respondent's office. 828

- 31 - Petitioner presented the Payrol I Head of L.C. Diaz, who testified that after withholding taxes, the same together with petitioner's manager's checks are handed to their messenger.

The I atter, in turn, presents the form and the check to the collecting agent of the B. I.R.

and later to the authorized bank. The messenger of L.C. Diaz was not presented to testify on this matter, or at least to rebut the reports of respondent's co I I ect i ng agents that he or she presented the manager's checks of petitioner for the purchase by other taxpayers of I oo·se documentary stamps.

Therefor, even if respondent also admitted that the checks were for the account of petitioner, said checks entered the coffers of the government not as Benguet's payments for withholding taxes, but as somebody else's payments for loose documentary stamps. No evidence was adduced as to how and why this happened. However, it is important · to mention that petitioner is a mere withholding agent of the B.I.R.

As such, it has the mandatory obi igation to remit without delay to the B. I .R.

such taxes withheld, which actually constitute advance payments by petitioner's employees, for taxes due on their income earned.

In the meantime that such funds, are still in the custody of petitioner, up to the time 828 ---

- 32 - they are actually turned over or remitted to the B. I.R., petitioner Is expected to exercise due di I igence, and extra vigilance in the handling of such funds.

Hence, when petitioner entrusted to L.C. Dlaz the remittance of said funds to the B.I.R.

as payments for withholding taxes, but for unknown reasons, L.C. Diaz failed to do so, petitioner should be held responsible for such act, omission or neg I igence.

For well-settled is the rule that:

"The negligence of the agent Is to the principal" (Shel I Co.

vs.

Insurance co., 100 Phil. 757). Imputable Firemen's Moreover, petitioner did not file any comment or objection to respondent's Formal Offer of Evidence (pp.

261-267, CTA records>.

Thus, in the Court's Resolution (pp.

271-272) promulgated on Apri I 1 1 1 1995, it was stated that:

"After respondent's on October a thorough consideration of 'Formal Offer of Evidence' filed 20, 1994, consisting of Exhibits "1", "1-A", "1-B", "1-C", "1-D", "1-E", "1-F", "1-G", "@", and"#", and it appeari-ng that petitioner failed to file its comment thereon within the time given by the court, thus implying Its lack of objection thereto, the court resolves to ADMIT alI said exhibits of respondent from "1" to "3" inclusive of the submarkings, subject to the Court's final evaluation of their purposes, materiality, relevancy and probative value in this case.

xxxx" 830 - 33 - Related to the above-cited resolution, is respondent's statement in her Memorandum, page 5 thereof (p. 307, CTA records), that: "xxx Said testimony of respondent's witness together with the corroborative documents/exhibits presented therefor were not controverted by the petitioner thereby indicating the latter's acquiescence thereto both as to their admissibi I ity and purpose as evidence in this I itigation. xxx" Finally, it is important to note that: "Findings and conclusions of government officials warrant the presumption of regularity and correctness in the absence. of proof to the contrary" (La Campana Food Products, I no. vs.

Court of Appeals, 221 SCRA 770).

WHEREFORE, in the I ight of all the foregoing, petition is hereby DISMISSED.

Petitioner is ordered to pay to the respondent the total amount of P10,314,579.50, inclusive of penalties incident to late payment, representing petitioner's unremitted withholding taxes for 1988, 1989, 1990 and 1991.

VI I I

of the Constitution.

832 ~-\Q.~o~ ERNESTO D. ACOSTA- Presiding Judge Court of Tax Appeals