Jose Y. Feria vs. Commisstoner of Internal Revenue, et al.

resolution

of t his Court are the follo wi ng :

1.

2 ..

Whether or jurisdiction not over this Court the case at bar.

has Whether of surcharqe , penalties have le1-Jal not t he imposition of interest and compromise amounting to P438,040.38 iustification.

Anent the first issue , respondent is of the view that lhi s Court has no jurisd iction over the instant petiti on f or r e vie w having failed to comply with the require ments p r escribed by Section 230 in relation to Section 204(3) of the Tax Code, as amended, in the matter of claims for refund of any national internal revenue tax alleged to have been illegally or erroneously assessed or c o l lected or of any penalty claimed to have been c oll e cted without authority.

Quoted herewith are the per tinent provision s of Section 230 and Section 204<3> of the Tax Code:

"SEC. 230.

Reccn;ery of tax erroneousl)'' or i.llef]ally collected.

Nq ___ ~uit or proceeding g J.J.Io! J._1. __ I.J__§' ____ ma_;!, _n..t..a:h~1§'SL_..i, _n _ --~Jl....Y _____ go tg::L _ .1Q.L._ :t_b._g :c_E;?_g_p_ye :[ y of an_y national interna_l__I.:.._E;?_y_~n ue~..£; he reafter alleged to have b~en ~Lf.Q.D..~OI..I§._.ly __ _gx i 11 ~q a l_~_y ___ ..si..S se_~!,?_eq ____ o _L.__Q.O ),_1 ec t eq.~ .2.£ o £ any Q.§:!J.f!.J.J:,_y_ggj,_.JllecJ___ to h a ve b&.?::..!!. collectt>d witho ut ~. u t.hori..1.Y.L-.9I"_ of <!I!Y_SUJ!!.... alleg§.'g _ __t_o_ })ave been ~xq_g_,.~§..i~_g_ __ QL i n any manne1- wrong_fuliY.

304

DECISION -

C.T.A CASE NO.

49~5 - 8 -- <;: q_.l:_J:..€g:t.~c;! _ , ~T1j:..:!-l _____ ~_ c1 .!=!.i~. ____ .fQI __ I.:":§'_;f_und o_:r __ cr_~ di t h .~ :s ____ p_~S'_ D ____ q_y_t._y ___ ;t;_~ L~_~:L ~j.

__ t_!:!_~_l}_e __ G:Q m m._i.l? s -!..9 n §'.I., but suc h s uit or proceeding may be maintained, whether or not such tax , penalty or sum has been ~aid under protest or duress. "

<Underscoring suppled. ) "In any case , no such suit or proceeding shall be begun a£ter the expiration o£ two years from the date of payment o£ the tax or penalty regardless of any supervening cause that may arise a fter payment :

Provided, however, that -t;,h~ _______ G_ornrn_:i,__g;si_oner may, ~ ~j._t. b.QJ,~J.,_ ___ a_ LJ,::_i _t, t.~n .... 91.§.~ _\!!. ___ t h ~r 9_f or:.~... . r ef und or cred.i,._~D_Y tax_,_ wh ~re o n the face of the return u_p_on _ whj._c_l} _p_~.Y!ll~D. .t. ... .W.s!.~-- ma g.§', such payment §.P.P.'?_~LG_Q.l ear J,_y_ i;;g __ _h§.y_G,>_~'? n err o n_eQ_\L~P.~.!-~ " <Underscoring supplied.) "SEC. 2 04.

Atd.hority of the Commissioner t.o com·promise, abat.e, and refund /credit tax es.

Th e Commissioner may - XXX XXX XXX (3) Credit or refund taxes erroneously or illegally received , penalties imposed without authority, re£und t h e value of internal r evenue stamps when they are returned in good condition by th e purchaser, and , in his discretion, redeem or change unused stamps that have been rendered unfit for use and refund thei r value upon proof of destruction. No cre~it or refund o :{_ taxes or p e I:t9J_t _j.._G,>_EL_q_h_§l_.l,_1_j;}_g___ a 11 owed u n 1 es s :the taxpaye~i l_E;'_S _ _i.!!_ ____ writing with the Q.!=!m!!!.L~sioner a 9l_a_j._\!!_ __ J._g_L_ refund within twg ye<;!n=~-- ~fter the payment of the tax or penalty. "

<Underscori ng s upplied. ) I n the case at b ar, there is no evidence on record t .o sho w that petitioner filed in writing with the Commissioner o f Internal Revenue a clairn for refund of ?438 , 040.38 as alleged erroneously or illegally paid surchar~:te, interests and penalties i mposed on the '• 305

DECISION ·-

C.T. A CASE NO.

49~6 - 9 - de:ficiency estate tax due on t h e transmission o£ the estate o:f the late Jose San Agustin.

Hence, respondent contended that this Court ha s no jurisdicti o n to t•ke cognizance o£ herein petition :for review. Wh ile it is not disputed that petitioner did not :file a written claim :for re:fund 0~ the amount of P438,040.38, a consideration o£ the circumstances o:f this case is in order.

Within ·ten(lO> days from receipt o:f the Pre- Assessment Notice by petit ioner o n September 23, 1991, a request that the surcharge, interest , etc.

be waived wa s :filed by pe titioner with respondent. When the f ormal assessment dated October 4, 1991 was issued by r espondent , petitioner, in a letter dated October 31, 1991 or within thirty<30> days from receipt thereof, reiterated its request ~or reconsideration o:f the assessment and waiver of the s u rcharge, interest, etc ..

Petitioner again requested for the waiver of surcharge and interest on April 2, 1992.

The denial o:f a:forementioned request was received by petitioner only on January 21, 1993 and on February 18, 1993, or within thir y<30) days from receipt thereof, petitioner filed the instant petition for review in this Court with the primary prayer that the Commissioner's decision denying t h e request for rebonsideration cd the deficiency 306 I

DECTSIDN -

I

~ - 1 0 - assessment be reversed .

In the interregnum , petitioner was const rained to pay under duress the amount o£ P438,040.3B on January 26 , 1993 because o£ responde nt' s re£usal, despite petitioner'~ persistent requests, to issue the ta x clearance required to be submitted to t h e Proba·t.e Court.

Petitioner s hould not be strictl y bound b y the requirements for claims for refund because at the very onset i t wa s the assessment that is being assailed . Th e petition for review that was filed , in the main sough t th e assessment's reversal and only as a necessary consequence the refund o f the payment made under duress.

The £act remains that it involves a disputed assessment , a reconsideration of which was sou g h t with i n t h e reqlementary period.

When it was turned d o wn , a ti mely appeal was made to this Court in order to reverse the d enial of the reconsideration of the deficiency assessment.

Jurisdiction over the subject matter is determined upon t he allegations made in the complaint, irrespecti ve of whether the plaintiff is enti t.lecl or not t .o recover upon the claims assert.ed therein - a matter resol v ed only after and as a result o£ the trial.

Neither can t h e jurisdiction of the court be made to depend upon t h e 307

DECISION --

- 11 pleas or defenses made by t he defendant in his answer or mot i on to di s miss .

If such were the r ule, the question of jur isdiction would depend almost e nti rely upon the defendant.

<Cardenas vs. Camus, G.R. No. L-17191 , July 30,

1952 .

The s ubject matter of an y given case is determined, not by the nature of the action which a party i s entitled under the fa c ts and the law t o bring , but by th e na ure and c hara c ter of the pleadings and issues su bmi tted by the parties t,o t he court fo r tri;:il and <Phili ppine Association of Free Labor Unions a nd Bautista vs.

Padilla, et.

al., G.R.

No .

L-11722, November 28, 1959.

In view of the circumstances pecul ia~ to this case, We find that it is within the j urisdiction of this Court t o take cognizance of the petition for revi ew at bar. On the issue c onc erning the l eqal justification for \ th e imposition of s urcharge, interest and compromise pe nalties in the total amount of P438 , 040.38, it would be bes t to have first an understanding of how it wa s a rrived a t.

The su r cha r ge in the amount of P134,527.38 represent 2 5~ of the bas ic deficiency estate tax of P538,509.50, which i s the differ e nce between t h e estate tax due per investiqatioo of P2, 2 14, 941 . =•0 less the estate tax pai d 308

- 12 - per return of ?1,676,432.00.

This was attributed to the di s cre~ a r1 c y in the zonal valuation used in determining th e gross e state.

An inter e s t of 20X per annum wa s charged for alleged delay in the payment of the estate tax per return of P1,676,432.00 and the sum total of the basic deficiency estate tax per investiqation of P538,509.50 and surcharge of P134,627.38.

The interest due on the estate tax per return i s P151,633.27 comput ed from September 25, 1990 or the 90~h day from. the death of the decedent to March 8, 1991 which i s the actual payment of the estate tax due per return .

Th e interest d ue on the deficiency estate tax per investigation and the s urcharge is P130,799.73, computed from September 25, 1990 to September 15, 1991 which is the date stipul ated in the Pre- Assessment Notice.

Added to the above a re the compromise penalty of P2 0 , 000.00 and penalty for having no CPA certificate of Pl,OOO.OO.

It i s respondent' s view that surcharge, interest and pen~lties on the deficiency estate tax is mandatory pursuant to Se ction 248 in relation to Section 249 of the Ta x Code .

Reproduced below a re t he pertinent portions of said provi s ions, viz: 309

DECTSION: -

O.T.A CASE NOL 4956 SEC. 24h Civil Penalties. - Ca) There shall be imposed, in addition ta the tax required toa be paid, penalty equivalent ta twenty-five perment (25%) af the amount due in the fullowing cases:

(1) Failure tno file any return required under the provisians af this Cade or regulations on the date prescribed; ar (?) Filing a return with an internal revenue afficer ather than those with whom the returns is required ta he filed;

(2) Failure ta pay the tax within the time prescrihed for its payment; ar

(4) Pailure ta pay the full amount af tax shawn on any return required ta be filed under the pravisians af this Code ar requlations, er the full amount of tax due for which na return is required ta be filed, an ar before the date prescribed for its payment.

Pos A ae MAM (ec) The penalties imposed hereunder shall focm part of the tax and the entire amount shall be subject to the interest prescribed in Sectian 249.

MRM HEX ME

Respondent imposed the surcharqe an the basic deficiency estate tax stating that it is mandatory gursuant ta Section 248(a) af the Tax Cade. The clear intent uf the law in imposing the statutory penalties is allegedly tea discourage delay in the vwayment af the taxes due the state. However, it daes not appear in the records an what qround of the four(4) cases enumerated in ~ ~ $810

DECISTON -

G.T.A CASE NO. 4956 Section 7AB(ayd of the Tax Code is the 25% surcharge being imposed.

Several questicns bearing an this case came ta mind. When there is ao finding of deficiency tax after investigation, is the 295% surcharge automatically imposed as done by the BIR in this case? What is the statutory basis for such imposition? What is the time prescribed for payment of a deficiency tax for purpases of determining when there is failure toa pay the same within the reqlementary periad?

A close reading af Section 248 af the Tax Code does not warrant a conclusion that whenever a deficiency tax is found due, the 25% surcharqe will be impased,. For the surcharge ta apply, it must fall within any of the four

(4) cases wentioned in Section 248la). Otherwise, it should be stricken down for having no legal leq ta stand en. The law does not permit of just any case ather than those mnravided therein. A carrect interpretation of Section 248(a) should incorporate Section 247(a) of the Tax Code which states:

SEC 247. General juovisions. ~ f(a) The prescribed in this Chapter shall apply to all taxes, fees and charges imposed in this Cade.

The amount so added to the tax shall he collected at the same time, in the same manner ane oo as part oof the tax. (Underscoring supplied. )

311

DECISION -

C.7.A CASE MO. 4956

ON MMM HMM

This ehonid he understood to mean that for the 25% penalby bo be aceoc to the defieiency tax found due, it ehould fall in any ef the four(4) cases enumerated in Bacbian B4ACad, Ay ausesamont fixes and determines the liability of os haxpayver (Commissioner of Internal Revenue vs. Garment Manufacturing Corp., '53 SCRA 665). A deficiency tax which ig nabodue to willful negleet aor Fraud, is known to taxpayer anly Log reeei pat of the assessment.

Cangeavently the time wreseribed for its payment is the periad proviract therain. Tt is only when taxpayer fails to pay the tlafiesijeney ax assessment within the time oreseribed in the assessment notice will the 25% sarcharge be imposed, The records of this case show that within the ten- day period given in the pre-assessment notice, petitioner already wrote respondent expressing readiness toa pay the hasic cefiriency estate tax of PSSB,509.50 as soon as the Probate Comet anproved the withdrawal of funds for the bursa Within thirty(30) days fram receipt of the assessment notice, petitioner infurned respondent af the meabebe Courk?s appreval of payment. However, it was anly ay December 1A, 1991 that the authority to accept ~ 312 DECTSTON C.F. A CASE NOL A956 GO payment wae received by oetitioner, without which no tax Rayment can be effected, Jumediately on December 19, 1991, the hasic deficiency emtate tax af FAB, 509.00 was padc.

Based on the fareqoing, We find na justification far imposing the 25% eurcharqe an the deficiency assessment. The delay, if any. in its payment cannot be attributed to petitioner. Reepandent is well-aware that the prabate Court’s authority is necessary hefoere payment can he can ’ be made from the fund of the estate. It can readily be seen from the vase records, that petitioner exerted cansiderable efforts in securing the immediate settlement of the estates’s tay obligations, As for the interest oan the estate tax due per return and the deficiency estate tax, the pertinent provisian af the National Internal Revenue Cade (NIRC) is reproduced below:

SEC. 249. interest. fad In aqeneral. = There shall be asseseed and collected on any unpaid amaunt af tax, interest at the rate af twenty percent (20%) per annum, ar such higher cate as may be prescribed by requlatiaong, fram the date prescribed for payment until the amount is fully paid.

th) Neficiency interest. ~ Any deficiency in the tax due, as| the lerm is defined in this Code, shall be snbjectl ta the interest prescribed in taraqcanh (a) hereagf, which interest shall be assessed and callected 313

- 17 frum the date prescrib~d for its payment until the full pavment thereof. <Underscori ng s upplied) (c) Delinquency .intel·"est. In case of f c\i l ttl"" e t o p a y :

( 1) Th e amount of the tax i··· e t tn" n t" e q 'J i 1··' e d t o LH?

f i l e d , o t' due on any The amount of the tax due for which no .,.., e t u Y'n i s r' e qui 1·' e d, ol·' (3) A deficiency t ax, or an y surcharge or i n t e 1' P. •; t t h. P.l·' r~ on , n n t h e d u e d at e ·a p peat' i n g i n.

the notice and demand of the Commissioner, sha ll be a s ses sed and collected on the unpaid .::~mount, intel·'est at the t•ate pt•escribed in paraqraph (a) hereof unti l the amoun t is fully pa id, wht~n inb-')rest shall fot•m pat·t ·of t h e ·L :n< • (d) .Tnt: f?l''e .s -t on ext ended pa _'y'ment. I f any p erson required to pa y the tax is qualifie d and el ect s to pay thQ tax on installment under the pt•o vi s:ions of thi s Code-? , but f ai ls to p.o<y the tax or any installment thereof, or any part of such .o<mount o 1~ installment on Dt' befot' e the date prescribed for its payment , or where the Commissione r h as authorized an extensi on of time within which to oa y a tax or a deficiency tax Ot" any pm't ttH?t'eof, thet'f!

s hall be a s sessed and collect ed interest at the rate h erei nabove prescribed un the tax ur deficiency t ax or anv part thereof unpaid from the date of noti ce and demand until it is paid.

<Und ~rsc oring supp lied) It rnust b~ noted that the notice of the decedent's dc? a l~h .=Js filed on August 30, 1990, well-·vlithin the two- months p~·ovided under Section 82 of the Tax Code while the est;.:d;e tax r'etun1 was filed on September 30, 1990, also within tl1e ninety <90) days prescribed by Secti on 83 314 . ,.

- 18 - ( b ) of th e Tax Code as rec kon ed from the decedent's death on -Tune C.:7, 1990.

A six month s extension was grat:~ t ed by the BIR Deputy Commissioner fur the payment of the estate tax due per return of P1 ,G76, 432.00 and this was paid on M.:n-ch B , 1991 or withi n t h e exten sion peri od and bat'e 1 y aft et' the probate Court 's a uthori t y for its pnyment wa ~ ubtainnd.

of the Ta>< Code provides that the Commission e r·'

a. uthor·iz~ . d an e xt ensio n of t ime within which to pay a t a >< , intet'est sha ll be imposed from the date of not ice c.~nc.l de mc.\T1d until it is paid.

In this case, payment o f the estate ta>< pet' t'et Ut' n was made b e f Ot'e the dat !)

of the e >< p i r' a t i o n of the period of extensi on and without notic e and demand .

no .interest should be charoed aqainst the petitioner. It may be argued that t he extens ion that was granted conditi oned up on the imposition of s twchat'ge a nd interost under Section 2 48 of th e Tax Cod e. Howeve t', the int et'pt' e t atio n o f said pro visi o n negat es said :i mposition as pre vio us ly discussed. With regards to the on the deficiency e s tate ta>< found due , Sect ion ;:::A9 (b) of the Tax Code is applicable.

I nterest s hall be charg ed from the date for' .its payme nt until the full payme;n t 315 \ .

/.1( .

·. ' ., I I . I

- 19 - fol·· the p ,::~ymPnt of F.t deficiency tax, not due to willf u l n e ~.ll rJct is the time fixed i n the assess ment notice ~-.J i t h

j. n it ~;h ould be paid.

In' the case at b.:n'., petit i orH.> r' has unt:i.l N nv~~mbet~ '+, 1991 <this is 30th day from receipt of the assessment notice on October 4 , 1':391 ) it was only paid on December~ 19, 1991.

Accot~d i ng 1 y , on tht?

deficie n cy estate ta>< shou.ld be recomputed as follows : Deficiency estate tax P538,50'3.50 = P131462.74 Inter·est Rate 201. per annuli Terll x 1~ •onth/12 onths (11\04\1991 to 12\1'3\1991 As to th e compromise pen alty of P20,000.00, , it is well-settl ed that tt1o taxpayor cannot be co mpelle d by the BIR Commission e l·~ to accept a compr~omise penalt y , compromis e bein g mutual in nat twe.

<Br inas Collec tor, CTA Case l\lo.

1 E,, Septe,mbet~ 14, Petitioner~ ' s payment does not acquiescence thereto as it wa s made under protest.

is t:het~ e f ot' P.

no basis fo r chat~ging the same absence of anv agreement pert aining thereto. 1955 ) .

\ signify The r e in the Certif icati on by a certified p ubli c accountant is required in estate t ax returns showing a gross value of 316 / ••• .

,, ·'• ·~~ I )

DECISION -

C.T.A CASE NO. 4955 - 20 - P50, 000 .. 00 o r' mon=~ CS1~ ct i. on f1.3 (a) , NI RC) .

A penalt y of Pl , OOO.OO was imposed in th is case for having no CPA ~-1it l· 1 n o s P fJ C :if i c o bj ec~ ion the pet :it; ion £~t~.

Based on the f orego ing , petiti oner's assessment f or und oU.let~ penalties should be accordinqly mod i fi ed.

petitioner has alread y paid, ulbLit under protest, the surcharge, iriterests ~nd other penalties tot all i ng P438,040.38 whereas h~ should only be liable fo r the interest o~ the deficiency estate tax du e amountinp to P13 , 462.74 and penal ty for ha v ing no CPA c er t i f ic~ t e o f P1,000.00 or an overpayment o f P423, 577 . EA.

WHEREFORE, respondent ' s de ficiency assessment ,.)

fat~ s twchat'g e, and other p~nalties is modi fi e d and since pet itioner has already paid the full .~ m o 1.1 nl;

of P'~38, 0't0. 38 ~ responden t is hereby ordered to refund to the Estate of Jo se San Agu sti n the overpayment a mount .i.nq to P4~"?3 ,577 .6't.

DECISION -

C.T.A CASE NG. 4956 to

WE CONCUR:

MWe! \K. GRUBA sYociake, Judge CERTIFICATION I hereby certify that this, decision was reached after due consultation among the members of the Court of Tax Appeals in accordance with Section 13, Article VIII of the Constitution.

2 ERNESTO D. ACOSTA Presiding Judge Court of Tax Appeals - 318