ROMULO L. NERI vs. ENBANC Petitioner, et al.

DECISION

MANAHAN, J .:

Before the Court En Bane is a Petition for Review1 filed by petitioner Romulo L. Neri on January 10, 2018 praying for the reversal of the Decision2 dated August 30, 20 17 and Resolution3 dated December 6, 2017 of the Court ofT~ Appeals (CTA) Third Division, with respect to the Court's finding that petitioner is liable for deficiency income t~ in the amount ofPhp474,381.63 for t~able year 2009.

The Facts

The facts, as summarized by the Court in Division, are as follows:

CTA EB CRIM. No. 046 (C.T.A. Crim. Case Nos. 0-251 & 0-252)

[Petitioner] is registered with the Bureau of Internal Revenue ("BIR"), Revenue District Office ("RDO") No. 39, South Quezon City, with Tax Identification Number ("TIN") 102-764-852.

For TYs 2008 to 2010, [petitioner] was the President and Chief Executive Officer ("CEO") of the Social Security System ("SSS"), SSS nominee director of Union Bank of

the Philippines ("UBP") and Philex Mining Corporation

("Philex") for which SSS has investments. As such public official, [petitioner] received taxable income or compensation from SSS, UBP, Philex, Commission on Higher Education ("CHED"), and Philippine Health Insurance Corporation ("Philhealth").

For TY 2009, [petitioner] received income as director of Philhealth in the amount of Php290,625.00, and Php 1,400,000.00 as per diems for attendance during board meetings; and Php15,431,036.51 as profit share in UBP.

[Petitioner] filed his amended ITRs for TYs 2008 and 2009 where he declared the amounts ofPhp1,352,614.00 and Php15,424, 164.73, respectively, as his gross income. He also filed his 20 10 ITR and declared a gross income of Php20, 913,786.67.

On September 25, 2010, [petitioner] received Letter of

Authority

("LOA")-211-2010-00000231

SN:

eLA201000015025 dated September 24, 2010. On May 6, 2011, Asst. State Prosecutor ("ASP") Amor L. Robles ("ASP Robles"), Senior Deputy State Prosecutor Miguel F. Gudio, Jr., and Prosecutor General Claro A. Arellano ("PG Arellano"), all of the Department of Justice ("DOJ"), issued a Resolution recommending the filing of Informations for two (2) counts of violation of Section 255 of the 1997 NIRC against [petitioner], upon finding that [petitioner], a registered taxpayer required to pay any tax or supply correct and accurate information pertaining to all income and compensation received by him for TY's 2008 and 2009, under declared all his income in his ITRs, as a result of which, [petitioner] failed to pay his correct and accurate taxes for TYs 2008 and 2009, as follows:

XXX

XXX

XXX_.,...-

CTA EB CRIM. No. 046 (C.T.A. Crim. Case Nos. 0-251 & 0-252)

On

November

16, 2011, a Resolution was promulgated by the DOJ, recommending the denial of the SIR's and [petitioner]'s Motions for Reconsideration. On November 24, 2011, [respondent], through ASP

Robles and

PG

Arellano, filed two (2) separate Informations before the Court of Tax Appeals ("CTA"), docketed as CTA Crim. Case Nos. 0-251 and 0-252, the first was raffled to the Third Division, and the second to the Second Division, xxx

XXX

XXX

xxx4 CTA Crim. Case No. 0-252 was consolidated with CTA Crim. Case No. 0-251, the latter bearing the lower docket number. Subsequently, petitioner-accused entered a plea of "Not Guilty" to the two (2) cases filed against him. After trial, the CTA Division ruled as follows:

WHEREFORE, premises considered, accused ROMULO L. NERI is hereby ACQUITTED, for failure of the prosecution to prove his guilt beyond reasonable doubt.

With regard to the civil liability, accused is ORDERED TO PAY deficiency income tax for TYs 2008 and 2009 in the amounts of Php3,267.12 and Php474,381.63, respectively, inclusive of the twenty-five percent (25%) surcharge imposed under Section 248(A)(3) ofthe 1997 NIRC.

In addition, accused is ordered to pay:

1. Deficiency interest at the rate of twenty percent (20%) per annum on the basic deficiency income tax of Php2,613.70 and Php379,505.30 computed from April 15, 2009 and April 15, 2010, respectively, until full payment thereof pursuant to Section 249(B) of the 1997 NIRC; and

2. Delinquency interest at the rate of twenty percent (20%) per annum on the aggregate amount of Php477,648.75 (Php3,267.12 plus Php474,381.63), representing the basic deficiency mcome tax of

CTA EB CRIM. No. 046 (C.T.A. Crim. Case Nos. 0-25 I & 0-252)

Php382,119.00 (Php2,613.70 plus Php379,505.30) and twenty-five percent (25%) surcharge of Php95,529.75 (Php653.42 plus Php94,876.33) and on the twenty percent (20%) deficiency interest which have accrued as aforestated in (1), computed from July 26, 2011 until full payment thereof pursuant to Section 249(C) of the 1997 NIRC.

Issues

Petitioner submits the following issues: The principal issue in this petition is whether or not the petitioner had actually declared a Unionbank Profit Share (hereinafter, UBP) income of P4,472, 130.60 in his Amended 2009 Income Tax Return contrary to the finding of the Third Division of this Court that he only declared P3, 134,123.56.

The corollary issue is whether or not the petitioner is liable to pay deficiency taxes amounting to P474,381.63 for the Taxable Year 2009.16

Ruling of the Court

The Court will now look into the timeliness of the instant appeal, before delving into the substantive issues.

The Petition for Review

was timely filed.

The Court in Division issued the assailed Decision on August 30, 2017. Further, the Court in Division issued the Resolution dated December 6, 2017 denying petitioner's Motion 12 Rollo, pp. 205-207.

13 Rollo, respondent's Manifestation (In lieu of Comment), pp. 257-260. ,. Rollo, pp. 208-253.

Is Rollo, pp. 263-264.

16 Rollo, Petition for Review (PFR), p. 20. _.

DECISION

CTA EB CRIM. No. 046 (C.T.A. Crim. Case Nos. 0-251 & 0-252) Page 6 ofl2 for Partial Reconsideration filed on September 6, 2017. Said Resolution was received by petitioner on December 14, 2017. Under Rule 9, Section 9(b) of the Revised Rules of the Court of Tax Appeals (RRCTA), an appeal to the Court en bane in criminal cases decided by the Court in Division shall be taken by filing a petition for review within fifteen ( 15) days from receipt of the decision or resolution appealed from. The Court en bane may, for good cause, extend the time for filing of the petition for review for an additional period not exceeding fifteen (15) days. Thus, petitioner had fifteen (15) days from December 14, 2017, or until December 29, 2017 within which to file his petition for review. On December 27, 2017, petitioner filed his Motion for Extension of Time to File Petition for Review 17 praying for an extension of fifteen (15) days from December 29, 2017 or until January 13, 2018, within which to file his Petition for Review. Said extension was granted.lB On January 10, 2018, petitioner timely filed the subject Petition for Review.

There is a compelling reason to reverse the

Court

in

Division's

findings as to petitioner's civil liability.

The Court in Division computed petitioner's basic deficiency income tax for taxable year 2009, as follows: 19

DETAILS

TY 2009

UBPincome:

Should Be Income

Php

Per ITR Income

Deficiency Income

Tax Rate

DEFICIENCY INCOME TAX

Php

Voluntary Payment

Basic Deficiency Income Tax

Php

Surcharge (25%)

TOTAL INCOME TAX DUE

Php

CTA EB CRIM. No. 046 (C.T.A. Crim. Case Nos. 0-251 & 0-252)

Petitioner

argues that he actually declared Php4,472,130.60 and not the Php3, 134,123.56 in his annual income tax return (ITR) for taxable year 2009. Petitioner states that the amount of Php4,472,130.60 was already included in the Php14,117,945.36 reflected in Line 29 of his 2009 ITR. Petitioner also states that there was no need for further evidentiary proof of the breakdown of the declared Php14,117,945.36 stated in Line 29 of the ITR as this amount could be arrived at by adding the income figures already proven by the evidence. Petitioner also states that the difference of Php1,360,000.00 between Note 6 and Line 29 of the ITR (Php14,117,945.36- 12,757,945.00) has been explained by the testimony of witness Ms. Michaela Sophia E. Rubio from Union Bank of the Philippines (UBP). Petitioner further argues that the Division erred in holding him still liable for deficiency taxes when the total of the proven income items for 2009 was only Php14,095,952.45 but it was found that petitioner had actually declared more in the amount ofPhp14,117,945.36. Respondent, in its Comment, states that petitioner's taxable income for taxable year 2009 should be Php5,872,130.66 (Php1,400,000.00 per diem plus Php510,416.67, Php3,086,713.98, and Php875,000.00).

However, petitioner only reported in his amended ITR the amount of Php3, 134,123.56 for taxable year 2009. Thus, petitioner had unreported income for taxable year 2009 amounting to Php2,738,007.10 (Php5,872,130.66 less Php3, 134, 123.56). Respondent states that the Court rightfully computed the total tax due amounting to Php474,381.63. Respondent further asserts that petitioner failed to prove that his unreported income from UBP pertains to the difference between the income he declared in his amended ITR and the total amount of income shown to have been received by him in 2009.

The Petition for Review has merit.

It is an elementary rule in criminal procedure that the extinction of the penal action does not carry with it the extinction of the civil liability where the acquittal is based on reasonable doubt as only preponderance of evidence is required in civil cases. Preponderance of evidence is defined as the weight, credit, and value of the aggregate evidence on either side--

CTA EB CRIM. No. 046 (C.T.A. Crim. Case Nos. 0-251 & 0-252) and is usually considered synonymous with the term greater weight of evidence or greater weight of credible evidence. It is evidence which is more convincing to the court as worthy of belief than that which is offered in opposition thereto. 20 In this case, petitioner was acquitted of the crime of failure to supply correct and accurate information in his income tax return for taxable year 2009. However, the Court in Division found petitioner liable for civil liability for taxable year 2009 amounting to Php474,381.63, computed as follows:

DETAILS

TY 2009

UBPincome:

Should Be Income

Php 5,872,130.66

Per ITR Income

3, 134,123.56

Deficiency Income

2, 738,007.10

Tax Rate

32%

DEFICIENCY INCOME TAX

Php

876,162.27

Voluntary Payment

496,656.97

Basic Deficiency Income Tax

Php

379,505.30

Surcharge (25%)

94,876.33

TOTAL INCOME TAX DUE

Phi'_ 474,381.63 There is no dispute with the "should be" income amount of Php5,872, 130.66, which is composed of the following:

AMOUNT

DETAILS

Php 1,400,000.00 Per diems in 200921 510,416.67 Profit share received b}' accused on February 27, 200922 3,086,713.99 Profit share received by accused on March 17, 200923 875,000.00 Profit share received b}' accused on December 18, 200924 Php5,872,130.66 Of these amounts, petitioner admitted that Php1,400,000.00 was not reported in his ITR, and thus, voluntarily paid deficiency taxes thereon on May 31, 2011. Thus, what remains to be reconciled is Php1,338,007.09, computed as follows:

CTA EB CRIM. No. 046 (C.T.A. Crim. Case Nos. 0-251 & 0-252)

AMOUNT

DETAILS

510,416.67 Profit share received by accused on February 27, 200925 3,086,713.99 Profit share received by_ accused on March 17, 200926 875,000.00 Profit share received by accused on December 18, 200927 Php4,472, 130.65 Gross Income reported in Note 6 (Php510,416.67 + 3, 134,123.56 2,623,706.8<)]28 Php 1,338,007.09 A review of petitioner's arguments shows that petitioner explained this discrepancy as the tax withheld from Php3,086,713.99 amounting to Php463,007.10 (resulting to the Php2,623,706.89 reported in Note 6). These amounts of Php463,007.10 plus Php875,000.00 were allegedly not included in Note 6, but were included in the Php14, 117,945.36 reported in Line 29 of the amended ITR.

After examining the documents presented by both the petitioner and respondent in the trial before the Court in Division, the Court En Bane finds that petitioner included the full amount ofPhp 4,472,130.65 in Line 29 of his amended ITR. The full amount of the UBP income was declared and reported to the BIR in petitioner's un-amended ITR for 2009, as shown in Note 6,29 portions of which are shown below:

NOTE 6- SUMMARY OF INCOME

FOR THE TAXABLE YEAR ENDED

December 31, 2009

TAXABLE COMPENSATION

INCOME

PERIOD

COVERED

SOCIAL SECURITY SYSTEM

xxx

Union Bank

Oct to dec. 09

Xxx

XXX

Union Bank of the

Phiis.

TOTAL

jan to mar 2009

GROSS

INCOME

XXX

510,416.67

XXX

3,961,713.93 14,095,952.40 2009

INCOME TAX WITHHELD

BIR 2316

BIR FORM

2307 76,562.50

XXX

594,257.09 2,114,392.86 The total of Php510,416.67 and Php3,961,713.93 shown above is Php4,472,130.60 which is different by a mere five centavos (Php0.05) from the proven UBP income. 25 Rollo, Decision dated August 30, 2017, p. 117. 26 Rollo, Decision dated August 30, 20 17, p. 117. 27 Rollo, Decision dated August 30, 20 17, p. 117. 2s Docket, Vol. 3, Exhibit "Q-4", p. 1300. 29 Docket, Vol. 3, Exhibit "P-15", p. 1296.~to.--

DECISION

CTA EB CRIM. No. 046 (C.T.A. Crim. Case Nos. 0-251 & 0-252) Page 10ofl2 When petitioner's ITR was amended, the supporting Note 6 was changed but only as to the amount of UBP income. The figures are presented for comparison below:

Note 6 Un-amended ITRJo

Note 6, Amended ITRJl

Income

Period covered

Gross Income

BIR Form 2307

Gross Income

BIR Form 2307

Union Bank

Oct to dec. 09 510 416.67 76,562.50 510,416.67 76,562.50 Union Bank of jan to mar the Phils.

2009 3 961,713.93 594 257.09 2 623,706.89 594 257.09

Total

4,472,130.60 3,134,123.56 It is notable that the amount of gross income was lowered in Note 6 of the amended ITR, but the corresponding tax withheld was not. The declared tax withheld of Php594,257.09 is 15% of Php3,961,713.93, and not of Php2,623,706.89. This bolsters the finding that the actual declared income in line 29 of the amended ITR is Php4,472,130.60 (510,416.67 plus 3,961,713.93) consistent with that declared in the un-amended ITR; and, that the modification of the Union Bank income from Php3,961,713.93 in the un-amended ITR to Php2,623,706.89 in Note 6 of the amended ITR is erroneous. Further, the prosecution, in the case before the Division, did not prove any other income of the accused in addition to the incomes received from the Social Security System (SSS), UBP, Philex Mining Corporation (Philex), Commission on Higher

Education

(CHED), and

Philippine

Health

Insurance

Corporation (Philhealth).

Based on the foregoing, the Court En Bane finds that petitioner sufficiently explained the discrepancy in Note 6 and Line 29 of his amended ITR. The proven income items of the petitioner amount to Php14,095,952.4532 while that declared in Line 29 of the amended ITR is greater at Php14, 117,945.36. This warrants the reversal of the Court in Division's finding of civil liability against the accused for taxable year 2009.

WHEREFORE, the instant Petition for Review is GRANTED.

Accordingly, the imposition of civil liability amounting to Php474,381.63 for taxable year 2009 in the Decision dated August 30, 2017 and Resolution dated 30 Docket, Vol. 3, Exhibit "P-15", p. 1296. 31 Docket, Vol. 3, Exhibit "Q-4", p. 1300. 32 Php290,625.00 + Php9,333, 196.80 + Php4,472, 130.65 (consisting of Philhealth, Philex, and UBP incomes).,_,...--

CTA EB CRIM. No. 046 (C.T.A. Crim. Case Nos. 0-251 & 0-252)

December 6, 2017, of the Court in Division in CTA Crim. Case Nos. 0-251 and 0-252, is hereby REVERSED.

WE CONCUR:

/.'~' 7~ CATHERINE T. MANAHAN

Associate Justice

Presiding Justice

J~l c'1~i~6l.·JR.

Associate Justice

ERL~P.UY

Associate Justice

~N.M~~-6'~ CIELITO N. MINDARO-GRULLA

Associate Justice

~. ~ .4--- MA. BELEN M. RINGPIS-LIBAN

Associate Justice

JEANMA

BACORRO-VILLENA

CTA EB CRIM. No. 046 (C.T.A. Crim. Case Nos. 0-251 & 0-252)

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 before the case was assigned to the writer of the opinion of the Court.

Presiding Justice