Filipinas Palmoil Plantations, Inc. vs. Commissioner of Internal Revenue

DECISION

MINDARO-GRULLA, J.:

Submitted for decision is a Petition for Review for the Court en bone under Rule 8 of the 2005 Revised Rules of the Court of Tax Appeals, as amended, of the Decision 1 doted March 31, 2009, rendered by this Court's former Second Division2 in CTA Case No. 6429, and its Resolution3 doted October 06, 2009. 1 En bone Docket, pp. 24-48.

2 Penned by Associate Justice Juanita C. Castaneda,Jr., concurred in by Associate Justice Erlinda P. Uy and Associate Justice Olga Polanco-Enriquez. 3 En bane Docket, pp. 50-55. ( 984 •

I

Filipinos Palmoil Plantations, Inc. v. C/R

.

Petitioner Filipinos Polmoil Plantations, Inc. (" FPPI ") seeks reversal of both the aforesaid Dec ision and Resolution, the dispositive portions of which, respectively, read os follows:

Decision doted Marc h 31, 2009:

"WHEREFORE, the instant Petition for Review is DISMISSED for being filed beyond the reglementary period under Section 228 of the NIRC o f 1997 in relation (to) Section I I of RA I 125, as amended.

98S

'

I

Filipinos Po/moil Plontolions. Inc. v. CIR assessments, and holds office a t the BIR National Office Building, Agham Road, Diliman. Quezon City, where he may be served with summons and o ther legal processes. · On December 4, 1998, petit ioner was served with Letter o f Au thority No. 141790 da ted Dec.ember 2, 1998, whereby Revenue Officers Noli M. Perez and Lisa Tomameng were authorized to examine petitioner's books of accounts and other accounting records for VAT for the period from January l, 1996 to December 31, 1996.

On separate dates, the

BIR

issued three notices addressed to petitioner, wherein petitioner was required to submit the following documents: books of accoun ts, sales and purchase journals, subsidiary sales and purchase books. sales receipts/invoices, purchase invoices, inventory list, schedule stating the name o f seller/suppliers, schedule o f input taxes c laimed and all other pertinent documents and records relative to the period under audit.

On May 20. 1999, petitioner executed a WAIVER OF THE DEFENSE OF PRESCRIPTION UNDER THE STATUTE OF LIMITATIONS OF THE NATIONAL INTERNAL REVENUE CODE (waiver), which will expire on December 31, 1 999.

On October 22. 1999, the BIR issued a Pre-Assessment Notice covering the VAT liabilities for the year 1996 of petitioner. On December 2. 1999, the BIR received from petitioner a letter dated November 24, 1999 from petitioner. requesting for a reinvestigation or review of the finding of the BIR. On December 6, 1999, petitioner executed another Waiver to expire on December 31, 2000.

On

May

25, 2000, petitioner received from the respondent Assessmen t Notice No. 1 04-97-000 13-35 and Formal Letter of Demand both dated April 19, 2000 assessing Petitioner for deficiency VAT for taxable year 1996 in the amount of ~ 2,306,226.38 (inclusive of interest) broken down as follows:

Value-Added Tax

VAT Sales per audit Add: Other income per income sta tement Total Vo table Income

Output Tax

Less: Input Tax Per Audit

~ 529,224.459.03 4 480 109.00 ~ 533,704,568.03 ~ 53,370.456.80 2 096 947.42 (

98G

Filipinos Palmoil Plantations, Inc. v. CIR

VAT Due

~ 51 ,273,509.38 49 879 984.60

Less: VAT Payments

Deficiency VAT

Add: Interest from 1.21.97 to 4.30.00 To tal VAT Due and Payable j;1, 1 ,393,524.78 912 70 1.60 j;1, 2,306,226.38 The above deficiency VAT allegedly arose due to the following:

(i) Unrecorded

Votable

Soles

amounting to ~896,315.27 on the ground that said amount was not subjec ted to VAT; and (ii) Disallowance of input tax c laimed amounting to ~855,882.35 on the ground tha t total allowable input taxes per source document amounted only to ~2.096.947.42 while per return total input claimed was~ 2,952.829.77.

On June 16, 2000. within the 30-doy. period within which to formally protest any deficiency tax assessment. petitioner filed with the Office o f the Acting Regional Director of Revenue Region No. 17 (Butuon City) its protest letter doted June 5, 2000 pursuant to then Section 229 of the NIRC. as amended, specifying the factual and legal bases of the protest against the aforecited assessment, requesting the reinvestigation of the deficiency VAT assessment therein, and enclosing a copy of petitioner's letter to one of its major customers granting its request for a higher discount due to the very poor quality of c rude palm oil and copies o f the only available soles invoices (#s 577 and 578) .

In the said protest letter, petitioner, in port. stated- 1.

UnrecordE;;d votable soles xxxx We hove enclosed a copy of our letter to one of our major customers granting their request for a higher discount due to the very poor quality of the CPO and copies of the only available soles invoices (#s577 and 578) with the adjusted discounts reflected including the corresponding adjusting entries.

Our problem, however, is we lost some o f our records during the transfer of our office from Makoti City to Quezon City. Thus, we have been unable to produce a ll the o ther soles invoices (' 987 Filipinos Polmoil Plantations, Inc. v. CIR

.

which will account for the entire amount of the supposed unrecorded soles.

xxxx

Our

accountant presented all the original documents pertaining to the company's money placements to prove that port of other income shown in the income statement was already subjected to final withholding tax. However, it seems that this was not considered in the assessment.

2.

Unsupported input tax claimed Only the transactions o f the Manila office, which constitutes a small number o f transactions, hod no support for the some reason that records were lost. However, we submitted all the supports for the Aguson transactions plus a summary of the Manila office transactions. However, it seems that the entire assessment for deficiency covered transac tions of both offices.

xxxx On December 20, 2000, the BIR received from the petitioner another letter doted December 19, 2000, which were written by way of a supplemental protest to the above-stated June 5, 2000 protest letter, arguing that the Formal Letter of Demond doted April 19, 2000 was already barred by prescription, pursuant to Sections 203 and 222 (b) of the NIRC of 1997.

On January 4, 2001, after reinvestigation pursuant to the protest letter doted June 5, 2000, petitioner received from the respondent Assessment Notice No. 104-97-00013-35 doted December 18, 2000 assessing Petitioner for deficiency VAT for taxable year 1996 in the amount of ~2,369,262.94 (inclusive of interest ) broken down as follows:

Value-Added Tax

VAT Soles per audit Add: Other income per

Income Statement

Total Votable Income

Output Tax

~ 529,224,459.03 4 480 109.00 ~ 533,704,568.03 ------------- ------------- ~ 53,370,456.80 ~ 988 Filipinos Polmoil Plantations, Inc. v. CIR

Less: Input Tax per Audit

P 2,096,947.42 Additional input tax per investigation

VAT Due

Less: Y AT Payments

Deficiency VAT

69 048.48 Add: Interest from 1.21.97 to 12.31.00 2 165 995.90 ~ 51 ,204,460.90 49 879 984.60 1 ,324,47 6.30 1 044 786.64 2,369,262.94

Total VAT Due and Payable

The above deficiency Y AT allegedly arose due to the following:

(i) Unrecorded

Votable

Soles

amounting to ~896 , 315.27 on the ground that the said amount was not subjected to VAT; and (ii) Disallowance of input tax claimed amounting to j;/186,833.87 on the ground that total allowable input taxes per source document amounted only to P,2, 165,995.90 while per return total input claimed was ~2,952,829.77.

Said

Assessment

Notice No.

104-97-000 13-35 doted December 18, 2000, together with a Formal Demond Letter, also doted December 18, 2000 were released and sent by moil on December 22, 2000.

It must be noted that the Assessment Notice No. 104-97- 00013-35 doted December 18, 2000 raise the some issues and finding s, except that in the Iotter notice the BIR allowed input tax in the amount of P,69,048.48.

On January 27, 2001 , petitioner received a letter dated December 27, 2000 from Mr. Danilo Duncano, Acting Regional Director of Revenue Region No. 17- Butuan City, informing petitioner that the case has become final and demandable and was already forwarded to the respondent, and that any further action and/ or protest regarding the case should already be addressed to the same. (Emphasis supplied) On February 28, 2001, respondent received a letter from petitioner referring to the above-stated letter of Mr. Duncono. On March 11 , 2002, petitioner received from respondent a Final Notice Before Seizure (FNBS) doted January 23,2002, demanding petitioner to pay the deficiency VAT assessment for the taxable year 1996 in the total amount of j;f2,369,262.94. (' 989 Filipinos Polmoil Plantations, Inc. v. CIR

On March 21, 2002, petitioner also received from the respondent o Warrant of Distraint and/or Levy doted January 31, 2002 seeking to enforce collec tion measures for the deficiency VAT assessment for the taxable year 1996 in the total amount of fl.2,369,262.94.

On the some dote, petitioner was informed by the Philippine Notional Bonk, Aguson Del Sur Branch, that o Warrant of Garnishment doted January 31, 2002 was issued by the respondent against the deposit of petitioner in said Bonk. On April 10, 2002, the instant PETITION FOR REVIEW WITH MOTION FOR SUSPENSION OF COLLECTION OF TAX was filed with this Court."

On January 7, 2003, this Court's former Second Division issued a Resolution 4 ordering respondent to cease and desist from enforcing the Warrant of Distraint and/or Levy and the Warrant of Garnishment. After trial on the merits, this Court's former Second Division rendered the assailed Decisions , stating among others that the return filed by petitioner is a false return as defined in Aznar v. CTA, 58 SCRA 519 ( 197 4). Thus, the assessment within the ten ( 1 0) year period after the discovery of falsity will apply and not the three (3) year period after the lost day prescribed by low for the filing o f the return. Also, this Court's former Second Division held that the assessment has become final, executory and demandable considering that the petitioner foiled to appeal within thirty (30) days from receipt of the letter doted December 27, 2000 of the Acting Regional Director of Revenue Region 4 Second Division Docket, pp. l 03-l 04.

s Supra Note l. C..

990 Filipinos Polmoil Plantations. Inc. v.·ciR

No. 17-Butuan City which constitutes as the Final Disposition and not the Final Notice Before Seizure (FNBS).

Not satisfied, petitioner filed a Motion for Reconsideration 6 which was denied in a Resolution? doted October 06, 2009. Hence, ' petitioner filed the instant Petition for Review with the following assignment of errors:

1. WITH ALL DUE RESPECT, THE CIRCUMSTANCES IN THIS

CASE AND THE PRINCIPLES OF SUBSTANTIAL JUSTICE AND

EQUITY

WARRANT

THE

RELAXATION

OF

THE

RIGID

APPLICATION

OF

PROCEDURAL

RULES

AND

THE

ALLOWANCE OF FPPI'S APPEAL.

2. WITH ALL DUE RESPECT, THE SECOND DIVISION OF THIS

HONORABLE COURT ERRED IN RULING THAT THE SUBJECT

ASSESSMENTS ARE NOT YET BARRED BY PRESCRIPTION.

3. WITH ALL DUE RESPECT, THE SECOND DIVISION OF THIS HONORABLE COURT ERRED IN NOT RULING THAT FPPI IS

NOT LIABLE

FOR

THE

DEFICIENCY TAXES

ASSESSED

AGAINST IT."

We find no reversible error.

Suffice it to soy that the instant petition involves the assessment mode by respondent against petitioner for the taxable year 1996. When the demands to pay proved to be futile, respondent tried to enforce collection for the deficiency VAT assessment in the total 6 En bone Docket. pp. 126-141.

7 Supra. Note 3. { 991 Filipinos Polmoil Plantations, Inc. v . CIR amount of ~2 , 369,262.94, through a Warrant of Distraint and/or Levy. Thereafter, petitioner was informed by the Philippine National Bank, Agusan Del Sur Branch that a Warrant of Garnishment was issued against petitioner's deposit account. Hence, petitioner filed before this Court a Petition for Review with Motion for Suspension of Collection of Tax which was raffled to this Court's former Second Division. This Court's former Second Division held that petitioner filed a false return and that the assessment has become final, executory and demandable. Section 2288 of the Notional internal Revenue Code (NIRC), as amended, provides that a taxpayer has thirty (30) days from receipt of the decision of the protest, or from the lapse of the one hundred eighty ( 180) - day period to appeal before this Court. Otherwise the decision of the Commissioner of Internal Revenue or his duly authorized representative shall become final, executory and demandable. s SEC. 228. Protesting of Assessment .-xxx The taxpayer shall be informed in writing of the low and the facts on which the assessment is mode; otherwise, the assessment shall be void.

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Such assessment may be protested administratively by filing a request for reconsideration or reinvestigation within thirty (30) days from receipt of the assessment in such form and manner as may be prescribed by implementing rules and regulations. Within sixty (60) days from filing of the protest. all relevant supporting documents shall hove been submitted; otherwise, the assessment shall become final. If the protest is denied in whole or is not acted upon within one hundred eighty ( 180) days from submission of documents, the taxpayer adversely affected by the decision or inaction may appeal to the Courl of Tax Appeals within thirty (30) days from receipt o f the said decision; or from the lapse of the One Hundred Eighty ( 180)-doy period; otherwise, the decision shall become final, executory and demandable.

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992 Filipinos Polmoil Plantations, Inc. v. CIR

Page 10 o f 23 In the some vein, Section 3.1.5 of Revenue Regulation No. 12-999, states that if the taxpayer foils to elevate his protest to the Commissioner of Internal Revenue within thirty (30) days from receipt of the final decision o f the Commissioner's duly authorized representative, the Iotter's decision shall be final, executory and demandable. Consequently, within thirty (30) days from the final decision of the Commissioner's duly authorized representative, petitioner has the option to either appeal to this Court by way of a petition for review or 9 3.1 .5 Disputed Assessment.- The taxpayer or his duly authorized representative may protest administratively against the aforesaid formal letter o f demand and assessment notice within (30) days from dote of receipt, thereof. If there ore several issues involved in the formal le tter of demand and assessment notice but the taxpayer only disputes or protests against the vc:ilidily of some of the issues raised, the taxpayer shall be required to pay the deficiency tax or taxes attributable to the undisputed issues, in which case, a collec tion letter shall be issued to the taxpayer calling for payment of the said deficiency lox, inclusive of the applicable surcharge and/or interest. No action shall be Ioken on the taxpayer's disputed issues until the taxpayer has paid the deficiency lox or taxes attributable to the said undisputed issues. The prescriptive period for assessment or collec tion of the tax or taxes attributable to the disputed issues shall be suspended

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If the taxpayer foils to file a valid protest against the formal letter of demand and assessment notice within thirty (30) days from dote o f receipt thereof, the assessment shall become final, executory and demandable. If the protest is denied, in whole or in port, by the Commissioner, the taxpayer may appeal to the Court of Tax Appeals within thirty (30) days from dote of receipt of the said decision, otherwise, the assessment shall become final, executory and demandable.

In general, if the protest is denied, in whole or in port, by the Commissioner or his duly authorized representative, the taxpayer may appeal to the Court of Tax Appeals within thirty (30) days from dote of receipt of the said decision, otherwise, the assessment shall become final, executory and demandable: Provided, however. that if the taxpayer elevates his protest to the Commissioner within thirty (30) days from dote o f receipt of the final decision of the Commissioner's duly authorized representative, the Iotter's decision shall not be considered final, executory and demandable, in which case. the protest shall be decided by the Commissioner. If the Commissioner or his duly authorized representative fails to oct on the taxpayer's protest within one hundred eighty days from dote of submission, by the taxpayer. of the required documents in support of his protest. the taxpayer may appeal to the Court of Tax Appeals within thirty (30) days from the lapse of the said 180-doy period, otherwise, the assessment shall become final. executory and demandable. ( 99 3 Filipinos Polmoil Plantations, Inc . v. CIR elevate to the Commissioner of Internal Revenue its protest. Otherwise, the final decision of the Commissioner's duly authorized representative shall be final, executory and demandable.

Records disclose that on May 25, 2000, petitioner received from respondent the Assessment Notice No. 104-97-00013-35 and Formal Letter of Demand both dated April 19, 2000, assessing petitioner for deficiency VAT for taxable year 1996 in the amount of P2,306.226.38 (inclusive of interest). On June 16, 2000, petitioner filed w ith the Office of the Acting Regional Director of Revenue Region No. 17 (Butuan City) its first protest letter dated June 5, 2000 within the 30-day period.

Petitioner

submitted other documents and requested for a reinvestigation.

On December 20, 2000, the BIR received from petitioner another letter dated December 19, 2000 10 which was written by way of a supplemental protest (2nd protest) to the June 5, 2000 protest letter, arguing that the Formal Letter of Demand dated April 19, 2000 was already barred by prescription, pursuant to Sections 203 and 222(b) of the NIRC of 1997.

After reinvestigation pursuant to the protest letter dated June 5, 2000, petitioner received from respondent the Assessment Notice No. 104-97-00013-35 dated December 18, 2000 assessing petitioner for 1o Exhibit "C" ~ 994 Filipinos Palmoil Plantations, Inc. v. C/R deficiency VAT for taxable year 1996 in the amount of P2,369,262.94 9 (inclusive of interest).

This protest was denied upon receipt by petitioner on January 27, 2001, of a letter 11 from Mr. Danilo Duncano, Acting Regional Director o f Revenue Region No. 17-Butuan City, informing that the case has become final and demandable and that it was forwarded to the Commissioner of Internal Revenue, and that any further action and/or protest regardin g the case should likewise be addressed to the Commissioner of Internal Revenue. Based on the facts, from January 27, 2000, petitioner had until February 26, 200 1 to appeal to this Court by way of a petition for review or elevate to the Commissioner of Internal Revenue its third protest. Failure to do so would render the decision final, executory and demandable. Petitioner failed to avail of both remedies. Consequently, the decision of the Acting Regional Direc tor of Revenue Regio n No. 17- Butuan City has become final, executory and demandable. As aptly found by this Court's former Second Division: "Petitioner failed to exercise its right to bring the matter before this Court within the reglementary period upon receipt of the letter of Mr. Duncano dated December 27, 2000. Being a final disposition by the BIR, the same would have been a proper subject of an appeal. The period of thirty (30) days to appeal the adverse decision on petitioner's protest had already lapsed when the instant petition was filed with this Court (raffled to the second Division) only on April 1 0, 2002.

11 Exhibit "D"

(..

99 5 Filipinos Palmoil Plantations, Inc. v. CIR

On the other hand, when petitioner elevated its protest to the Commissioner of Internal Revenue, it was again filed out of time. It should be noted that it was on January 27, 2001 when petitioner received Mr. Duncono' s letter. Accordingly, petitioner has thirty (30) days from January 27, 2001 or until February 26, 2001 to elevate his case to the Commissioner. It was only on February 28, 2001 t,hot the Commissioner of Internal Revenue received o letter from petitioner referring to the letter of Mr. Duncono doted December 27,2000.

Clearly, petiiioner failed to avail of its right to bring the matter before this Court within the reglementary period upon receipt of the decision stating that the case has become fif!al and demandable and was forwarded to the Commissioner of Internal Revenue, which constituted the final determination on petitioner's protest. Being a final disposition, the same would have been a proper subject for appeal had petitioner filed the same within the reglementary period: Instead of filing a petition for review, petitioner filed a letter of protest (3rd protest) w hich was received by the Commissioner of Internal Revenue on February 28, 2001 . However, petitioner had o nly until February 26, 2001 to elevate to the Commissioner of Internal Revenue its protest. Said letter protest to the CIR was filed outside the thirty (30) day period. Evidently, it was filed out of time. Concomitantly, said belated protest does not change the fact that the assessment had become final, executory and demandable. Petitio ner's stubborn insistence that the thirty (30) day period should not have commenced on January 27, 2001 which is a Saturday C., 99 6 Filipinos Polmoil Plantations, Inc. v. CIR

Page 14 o f 23 (the day petitioner received Mr. Dunca no's letter) but rather on the next succeeding business day, or on January 29, 2001, deserves scant consideration. It is so o nly if the last day for doing an act required or permitted by law falls on a Saturday, Sunday or a legal holidays where the time shall not run until the next working ho liday and not on the day of the act or event from w hich the designated period of time begins in accordance w ith Section 1 Rule 22 of the Revised Rules O f Court 12. We will no longer belabor the obvious.

In Commissioner of Internal Revenue v. Bank of the Philippine Islands, 13 the Supreme Court held that - "Even if we considered the December 10, 1988 letter as a protest, BPI must nevertheless be deemed to hove failed to appeal the

CIR's

final decision regarding the disputed assessments within the 30-day period provided by low. The CIR, in his May 8, 1991 response, stated that it was his "final decision ... on the matter." BPI therefore had 30 days from the time it received the decision on June 27, 1991 to appeal but it did not. Instead it filed a request for reconsideration and lodged its appeal in I he CT A only on February 18, 1992, way beyond the reglementary period. BPI must now su ffer the repercussions of its omission."

In Rizal Commercial Banking Corporation v. Commissioner of Internal Revenue, 1 ~ the Supreme Court held that this 30-day period within which to file an appeal is jurisdictional and failure to comply 12 Section 1. How to compute time.- In computing any period of time prescribed or allowed by these Rules, or by order of the Court, or by any applicable statute, the day of the oct or event which the designated period of time begins to run is to be excluded and the dote of performance included. If the lost day o f the period, as thus computed, falls on a Saturday, a Sunday, or a legal holiday in the place where the court sits, the time shall not run until the next working day. 13 G .R. No. 134062. April 17, 2007.

14 G.R. No. 168498. April 24, 2007 .. ( 99 7 Filipinos Palmoil Plantations, Inc. v. CIR therewith would bar the appeal and deprive the Court o f Tax Appeals of its jurisdic tio n i o e ntertain a nd d e termine the correc tness o f the assessme nts; suc h perio d is not merely directory but mandatory and it is beyond the p ower o f the courts to exte nd the same. We quo te:

" Besides, tax assessments by lax examiners are presumed correct and made in good faith, and all presumptions are in favor of the correctness of a tax assessment unless proven otherwise.

Also, petitioner's fa ilure to file a petition for review with the Court of Tax Appeals within the sta tutory period re ndered the disputed assessment final, executory and demandable, thereby precluding it from interposing the defenses o f legality or validity of the assessment a nd prescription o f the Government's righ t to assess. The Court o f Tax Appeals is a court o f special jurisdic tion and c an o nly take cog nizance o f such matters as are c learly w ithin its jurisdic tion. Section 7 of Republic Ac t (R.A.) No. 9282, a mending R.A. No. 1125, otherwise known as the Law Creating the Court of Tax Appeals, provides:

Sec. 7. Jurisdic tion. - The CTA shall exercise:

(a ) Exclusive appella te jurisdic tion to review by appeal, as herein provided:

( 1)

Decisions of the Commissioner of Internal Revenue

in cases involving disputed assessments, refunds of internal revenue taxes, fees or o ther charges, penalties in rela tion thereto, or o ther ma tters arising under the Na tional Interna l Revenue or o ther laws administered by the Bureau o f Internal Revenue;

(2) Inactio n by the Commissioner of Interna l Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other c harges, penalties in rela tion thereto, or other ma tters arising under the National Internal Revenue Code or other laws administered by the Bureau o f Interna l Revenue, w here the National Internal Revenue Code provides a specific period of action, in whic h case the inaction sha ll be deemed a denial;

Also, Section 3, Rule 4 and Section 3 (a), Rule 8 of the Revised Rules of the Court o f Tax Appeals 6 sta te : ( 993 Filipinos Palmoil Plantations, Inc. v. CIR

XXX

RULE 4

Jurisdiction o f the Court

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Page 16 of 23

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SECTIO N 3. Cases Within the Jurisdiction o f the Court in Divisions.- The Court in Divisions sha ll exerc ise: (a ) Exclusive original or appella te jurisdiction to review by appeal the following:

( 1) Decisions of the Commissioner of Interna l Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other c harges, penalties in relation thereto, or other matters arising under the No tional Internal Revenue Code or o ther lows administered by the Bureau of Internal Revenue;

(2) Inaction by the Commissioner o f Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other c harges, penalties in relation thereto, or other matters arising under the No tional Internal Revenue Code or o ther lows a dministered by the Bureau of Internal Revenue, w here the Notiona l Internal Revenue Cod e or other applic able low provides a specific period for a c tion: Provided, tha t in case o f d isputed assessments, the inaction o f the Commissioner of Internal Revenue w ithin the one hundred eig hty d ay-period under Sec tion 228 o f the No tional Internal Revenue Code shall be deemed a denial for purposes of allowing the taxpayer to appeal his case to the Court a nd does not necessarily constitute a formal decisio n of the Commissioner o f Internal Revenue on the tax case; Provided , further, tha t should the taxpayer opt to await the final decision o f the Commissioner . of Internal Revenue o n the disp uted assessments beyond the one hundred eig hty day-period abovementio ned, the taxpayer may appeal such final decision to the Court under Section 3(o), Rule 8 o f these Rules; and Provided , still further, tha t in the case of c laims for re fund of taxes erroneously or illega lly collected, the taxpayer must file a pe tition for review with the Court prior to the expira tion o f the two-year period under Section 229 of the Notional Internal Revenue Code;

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RULE 8

Procedure in Civil Cases

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SECTION 3. Who May Appeal; Period to File Petitio n.- (a) A party adversely a ffected by a decision, ruling or the inaction o f the

Commissioner of Internal

Revenue

on d isputed assessments or c laims for re fund of internal revenue taxes, or by a dec ision or ruling o f the Commissioner of Customs, the ~ 999 Filipinos Palmoil Plantations, Inc. v. CIR

Sec retory o f Finance, the Secre tory o f Trade a nd Ind ustry, the Secretory of Agriculture, or a Regional Trial Court in the exercise o f its original jurisdiction may appeal to the Court by pe tition for review filed within thirty days a fter receipt o f a copy o f suc h decision or ruling, or expira tion of the period fixed by low for the Commissio ner of Internal Revenue to oct o n the disputed assessments. In case of inaction o f the Commissioner of Interna l Revenue on claims for refund of in ternal revenue taxes erroneously or illegally collected, the taxpayer must file a pe tition for review within the two-year period prescribed by low from payment or collection of the taxes. (n) From the foregoing, it is clear tha t the jurisdic tion of the Court of Tax Appeals has been expanded to inc lude not only d ecisio ns or rulings but inaction as well of the Commissioner o f Internal Revenue. The decisions, rulings or inaction of the Commissioner are necessary in order to vest the Court of Tax Appeals with jurisdiction to entertain the appeal, provided it is filed within 30 days after the receipt of such decision or ruling, or within 30 days after the expiration of the 180-day period fixed by law for the Commissioner to act on the disputed assessments. This 30-day period within which to file an appeal is jurisdictional and failure to comply therewith would bar the appeal and deprive the Court of Tax Appeals of its jurisdiction to entertain and determine the correctness of the assessments. Such period is not merely directory but mandatory and it is beyond the power of the courts to extend the same.

In case the Commissioner foiled to act on the d isputed assessment wi thin the 180-doy period from dote o f submissio n of documents, o taxpayer con either: 1) file o petition for review with the Court o f Tax Appeals wi thin 30 days a fter the expira tion o f the 180-doy period; or 2) await the fina l decision o f the Commissioner on the disputed assessments a nd a ppeal such fino! decision to the Court o f Tax Appeals within 30 d ays a fter receipt of a copy of such decision. However, these options ore mutually exclusive, and resort to one bars the applic ation of the other.

In the insta nt case, the Commissioner foiled to oct o n the disputed assessment w ithin 180 days from dote of submission o f documents. Thus, petitioner opted to file a petition for review before the Court o f Tax Appeals. Unfortuna tely, the petition for review was filed out of time, i.e., it was filed more than 30 days a fter the lapse of the 180-doy period. Consequently, it was dismissed by the Court of Tax Appeals for la te filing . Petitioner did no t file a motion for reconsidera tion or make on appeal; hence, the dispu ted assessment become final, demandable a nd executory." L 100 0 .· Filipinos Palmoil Plantations, Inc. v .· CIR

Poge 18 of 23

This now brings us to the crux of the matter as to whether this Court's former Second Division erred in finding that petitioner filed a false return. If petitioner did file a false return, the 1 0-year prescriptive period shall be in effect. O therwise. the Assessment Notice No. 104- 97-00013-35 and Formal Letter o f Demond both doted April 19, 2000 or the subsequent assessment mode after reinvestigation, Assessment Notice No. 104-97-00013-35 and Formal Demond Letter, both doted December 18, 2000, mode after the three-year prescriptive period, hove prescribed.

Petitioner claims that it did not conceal anything from the CIR as it submitted all the pertinent documents and records relative to the period of audit and that the unrecorded amount of P896,315. 27 was on honest belief that this amount refer to rebates deductible from the computation o f its gross soles.

Petitioner points out that hod it really filed a false VAT return. the CIR would hove assessed it 50% penalty but the CIR did not. Hence, this appears as on admission on the port of the CIR that the VAT Return is not a false return. Likewise. petitioner argues that reliance in the Aznar case is misplaced as it does not establish a hard and fast rule that every deviation from the truth necessarily brings a particular return C 100 1 Filipinos Palmoil Plantations, Inc. v. C/R under the coverage of Section 222 15 of the NIRC and that it should not be given a sweeping application in all cases. We are not p ersuaded.

In the Aznar Case, o false return merely implies o deviation from the truth or fact, whether intentional or not. We agree that the Aznar Case should no t be given a sweeping application in all cases as not every mistake or deviation from the truth nec.essarily brings o particular return under the coverage of Section 222 of the NIRC. However, inconsistencies in representation, non-recording of transactions, violation of the NIRC and among other factors as the circumstances would warrant should be put into considera tion. Petitioner claims to hove lost some of its records, yet in its appeal to this Court, petitioner presented additional evidence w hic h it could hove easily presented in the administrative level. Likewise, petitioner appears to have violated the invoicing requirements of Section 1 08(o) o f the NIRC. These circumstances convince us to apply the Aznar Case. Thus, we find the pertinent ruling of the Decision of this Court 's former Second Division to be correct.

15 Sec. 222. Exceptions as to Period of Limitation of Assessment and Collection of Taxes.- (a) In the case of a false or fraudulent return with intent to evade tax or of failure to file a return, the tax may be assessed, or a proceeding in court for the collec tio n of such tax may be filed without assessment, a t any time within ten ( 1 0) years after the discovery of the falsity, fraud or omission: Provided, That in a fraud assessment which has become final and executory, the fact of fraud shall be judicially taken cognizance of in the civil or criminal action for the collection thereof.

XXX

XXX

XXX C

1002 Filipinos Polmoil Plantations, Inc. v. CIR

We quote:

"In its protest letter dated June 5, 2000 or at the administrative level, petitioner made the following explanations in regard to the said " unrecorded votable sales"- xxx. You would note, therefore, that the supposed unrecorded sales occurred only in January with transactions for the rest of the year found in order. We have enclosed a copy of our letter to one of our major customers granting their request for a higher discount due to the very poor quality of the CPO and copies of the only available sales invoices (#s 577 and 578) with the adjusted discounts reflected including the corresponding adjusting entries.

Our problem, however, is we lost some o f our records during the transfer of our office from Makoti City to Quezon City.xxx.

Notwithstanding such explanation, petitioner, in this appeal was able to present and offer additional documentary evidence, viz: pages 4, 14, and 21 of petitioner's supposed general ledger for the year 1996, to prove that the said unrecorded sales had been adjusted or reversed in petitioner's financial records.

This cannot be allowed.

XXX

XXX

XXX

Suffice it to state, however, that the said sales invoices are inadequate to establish the fact o f recording of the transactions therein indicated.

For one thing, said sales invoices failed to comply with the invoicing requirements under Sec. 108 (a) o f the NIRC, as amended by not indica ting petitioner's VAT registration number or Tax identification Number. Thus, said invoices are invalid. For another, to be considered as "recorded", it must be shown that the transactions are reflec ted on ALL the books of accounts required to be kept by the taxpayer xxx xxx. Thus, for a sale to be considered as recorded, the taxpayer must present .not only the sales invoices, but also the journal, ledger, and subsidiary sales journal. {. 1003 Filipinos Polmoil Plantations, Inc. v. C/R

Furthermore, it is of no momenl that there ore, in soles .

.

invoices nos. 577 and 578, supposed "adjusting entries", since such entries ore not in its proper place. Accounting entries ore recorded in the above-stated books of accounts, not in the soles invoices.

XXX

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Thus, having foiled to refute the finding of "unrecorded votable soles" by the BIR, such finding stands. Correspondingly, the soles and the VAT thereon were never reflected in the VAT quarterly return of petitioner for the first quarter of 1996. Such being the case, such return is a false return as defined in Aznor." Indeed, there was a false return. The non-recording and non- compliance with the invoicing requirements puts the instant case under the coverage of Section 222 of the NIRC 16. CIR's non- assessment of the 50% penalty for filing a false return is of no consequence. Corollary, the assessments and formal demand have not prescribed and that the Decision of the Acting Regional Director of Revenue Region No. 17-Butuan City on petitioner's protest thereon has become final, executory and demandable. But unfortunately, the instant petition for review was filed out of time, i.e., it was not filed within 30 days after the receipt of said decision. We find it unnecessary to discuss the third assignment of error for being moot.

16ibid.

( 1004 Filipinos Palmoil Plantations, Inc. v. C/R

In fin e, we find no cogent reason to reverse the findings o f this Court's former Second Division .

WHEREFORE, the instant petition is DENIED. The Decision of this Court's former Second Division in CTA Case No. 6429, doted March 31,2009, and its Resolution doted October 6, 2009, ore AFFIRMED. No pronouncement as to costs.

WE CONCUR:

f'.·~~o:-t N . l\!1~~- G~ ~ N. MINDARO-GRULLA

Associate Justice

D~'-l- ~ ~NESTO D. ACOSTA

Presiding Justice

~~ Q. .~ \)_ JffANITO C . CASTANEDA/Jr. .

Associate Justice

ER~ . UY

Associate Justice

~~~

Associate Justice

CAESAR A. CASANOVA ~~ /- ~-~ &~lA R. ~-OT ANGCO-MANALAST AS

Associate Justice

l OOS Filipinos Polmoil Plantations, Inc. v. CIR

CERTIFICATION

Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that the conclusions in the above Decision were reached 'in consultation among the members of the Court En Bane before the case was assigned to the writer of the opinion of the Court En Bane ~~ ~.~ ERNESTO D. ACOSTA

Presiding Justice

1006