Basic Taxation Law: The New Court of Tax Appeals

 The New Court of Tax Appeals

• Created under Republic Act No. 1125, the Court of Tax Appeals is a highly specialized  body which reviews tax cases.
• The proceedings therein are judicial in nature although it is not bound by the technical rules of evidence. 

SALIENT FEATURES OF R.A. No. 9282 ["AN ACT EXPANDING THE JURISDICTION OF THE COURT OF TAX APPEALS (CTA), ELEVATING ITS RANK TO THE LEVEL OF A COLLEGIATE COURT WITH SPECIAL JURISDICTION AND ENLARGING ITS MEMBERSHIP, AMENDING FOR THE PURPOSE CERTAIN SECTIONS OF R.A. 1125, AS AMENDED, OTHERWISE KNOWN AS THE LAW CREATING THE COURT OF TAX APPEALS, AND FOR OTHER PURPOSES"]:

Expanded Jurisdiction of the CTA

O: C-T; A: C-T-L-A

1. Exclusive original jurisdiction over criminal cases arising from violations of the NIRC or the Tariff and Customs Code and other laws administered by the BIR and the BOC where the principal amount of taxes and penalties involved is P1 million or more and
• Appellate jurisdiction in lieu of the Court of Appeals over decisions of the Regional Trial Court where the amount is less than P1 million;
2. Exclusive original jurisdiction over tax collection cases where the Principal amount of taxes and penalties involved is P1 million or more and
• The appellate jurisdiction over decisions of the Regional Trial Court where the amount is less than P1 million;
3. Appellate jurisdiction over decisions of the Regional Trial Courts in local tax cases; and 
4. Appellate jurisdiction over decisions of the Central Board of Assessment Appeals over cases involving the assessment of taxation of real property.

Composition

• To complement its expanded jurisdiction, the CTA's membership is increased from one division of three Judges comprised of the Presiding Judge and Associate Judges to three divisions of nine Justices composed of a Presiding Justice and eight Associate Justices. (R.A. No. 9503) 
• The law expanded the organization and, most importantly, its level is raised to that of the Court of Appeals.

Appeals

• Another significant feature of Republic Act No. 9282 is that decisions of the Court of Tax Appeals are no longer appealable to the Court of Appeals. Under the modified appeal procedure, the decision of a division of the CTA may be appealed to the CTA en banc. 
• The decision of the CTA en banc may in turn be directly appealed to the Supreme Court only on a question of law. 
• This is expected to facilitate court proceedings in tax cases since the CTA has the necessary expertise in tax matters. 
• In addition, there will be less divisive rulings on tax matters since the appeal shall be made only to the CTA en banc instead of the Court of Appeals with its many divisions.

Assumption to Office

• Corollary to the reorganization of the CTA is a provision providing for the automatic assumption of the incumbent Presiding Judge and Associate Judges to the positions of Presiding Justice and Associate Justices respectively without the need for new appointments.

CTA Proceedings

• The CTA may sit en banc or in three Divisions, each Division consisting of three Justices.
• Quorum:
• Five (5) Justices shall constitute a  for sessions en banc.
• Two (2) Justices for sessions of a Division. 
• When the required quorum cannot be constituted due to any vacancy, disqualification, inhibition, disability, or any other lawful cause, the Presiding Justice shall designate any Justice of other Divisions of the Court to sit temporarily therein."

• Reversal:
• The affirmative votes of five (5) members of the Court en banc shall be necessary to reverse a decision of a Division.

• Promulgate a Resolution/Decision
• A simple majority of the Justices present necessary to promulgate a resolution or decision in all other cases or two (2) members of a Division, as the case may be, shall be necessary for the rendition of a decision or resolution in the Division Level.

Jurisdiction Over Both Civil and Criminal Aspects

• The vesting of jurisdiction over both the civil and criminal aspects of a tax case in one court will likewise effectively enhance and maximize the development of jurisprudence and judicial precedence on tax matters which is of vital importance to revenue administration. 
• The concentration of tax cases in one court will enhance the disposition of these cases since it will take them out of the jurisdiction of regular courts which, admittedly, do not have expertise in the field of taxation.

CTA shall not be Governed by the Technical Rules of Evidence 

• Strict procedural rules generally frown upon the submission of the Return after the trial. 
• The law creating the Court of Tax Appeals, however, specifically provides that proceedings before it "shall not be governed strictly by the technical rules of evidence." 
• The paramount consideration remains the ascertainment of truth. 
• Verily, the quest for orderly presentation of issues is not an absolute. 
• It should not bar courts from considering undisputed facts to arrive at a just determination of a controversy. 
• Raymundo v. De Joya, 101 SCRA 495:
• In the present case, the Return attached to the Motion for Reconsideration clearly showed that petitioner suffered a net loss in 1990.
• Contrary to the holding of the CA and the CTA, petitioner could not have applied the amount as a tax credit. 
• In failing to consider the said Return, as well as the other  documentary evidence presented during the trial, the appellate court committed a reversible error.
• The findings of fact of the Court of Tax Appeals are entitled to the highest respect. 
• The language used by the Court of Tax Appeals as to the existence of fraud must be given its due weight and force. 
• It found such nefarious intent on the part of the vendor from whom petitioner obtained this vehicle not merely proved by preponderance of evidence but "without any shadow of doubt." 
• Time and again, the Supreme Court had made clear in categorical language that the findings of fact of the Court of Tax Appeals are entitled to the highest respect.

As a Court of Record, CTA Is Bound by the Rules on Documentary Evidence

• Under Section 8 of Republic Act No. 1125, the CTA is described as a court of record. 
• As cases filed before it are litigated de novo, party litigants should prove every minute aspect of their cases. 
• No evidentiary value can be given to the purchase invoices or receipts submitted to the BIR as the rules on documentary evidence require that these documents must be formally offered before the CTA. 
• In the case of CIR v. Manila Mining Corporation, 468 SCRA 571:
• The Supreme Court thus notes with approval the following findings of the CTA: Sale of gold to the Central Bank should not be subject to the 10% VAT-output tax but this does not ipso facto mean that [the seller] is entitled to the amount of refund sought as it is required by law to present evidence showing the input taxes it paid during the year in question. 
• What is being claimed in the instant petition is the refund of the input taxes paid by the herein petitioner on its purchase of goods and services.
• Hence, it is necessary for the Petitioner to show proof that it had indeed paid the said input taxes during the year 1991. 
• In the case at bar, Petitioner failed to discharge this duty. It did not adduce in evidence the sales invoice, receipts or other documents showing the input value added tax on the purchase of goods and services.
• x x x Section 8 of Republic Act No. 1125 (An Act Creating the Court of Tax Appeals) provides categorically that the Court of Tax Appeals shall be a court of record and as such it is required to conduct a formal trial (trial de novo) where the parties must present their evidence accordingly if they desire the Court to take such evidence into consideration.
• While the CTA is not governed strictly by technical rules of evidence, as rules of procedure are not ends in themselves but are primarily intended as tools in the administration of justice, the presentation of the purchase receipts and/or invoices is not mere procedural technicality which may be disregarded considering that it is the only means by which the CTA may ascertain and verify the truth of respondent's claims.

Outline of Jurisdiction

I. Exclusive Appellate Jurisdiction to Review by Appeal

1. Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the NIRC or other laws administered by the BIR
• via a petition for review under Rule 42
2. Inaction by the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the NIRC or other laws administered by the BIR, where the NIRC provides a specific period for action, in which case the inaction shall be deemed a denial 
• via a petition for review under Rule 42
3. Decisions, orders or resolutions of the RTC in local tax cases originally decided or resolved by them in the exercise of their original or appellate jurisdiction
• via a petition for review under Rule 43
4. Decisions of the Commissioner of Customs in cases involving liability of custom duties, fees or other money charges, seizure, detention or release of property affected, fines, forfeitures or other penalties in relation thereto, or other matters arising under the Customs Law or other laws administered by the Bureau of Customs
• via a petition for review under Rule 42
5. Decisions of the Central Board of Assessment Appeals in the exercise of its appellate jurisdiction over cases involving the assessment and taxation of real property originally decided by the provincial or city board of assessment appeals
• via a petition for review under Rule 43
6. Decisions of the Secretary of Finance on customs cases elevated to them automatically for review from decisions of the Commissioner of Customs which are adverse to the government under Section 2315 of the Tariff and Customs Code
• via a petition for review under Rule 42
• Yaokasin v. Commissioner of Customs, 180 SCRA 591 [1989]:
• Purpose and rationale of the automatic review in customs cases.
• The Commissioner of Customs in his Customs Memorandum Order No. 20-87, enjoined all collectors to follow strictly Section 12 of the Integrated Reorganization Plan (P.D. No. 1) which is intended to protect the interest of the Government in the collection of taxes and customs duties in those seizure and protest cases which, without the automatic review provided therein, neither the Commissioner of Customs nor the Secretary of Finance would probably ever know about. 
• Without the automatic review by the Commissioner of Customs and the Secretary of Finance, a collector in any of our country's far-flung ports, would have absolute and unbridled discretion to determine whether goods seized by him are locally produced, hence, not dutiable, or of foreign origin, and therefore subject to payment of customs duties and taxes
• His decision, unless appealed by the aggrieved party (the owner of the goods), would become final with no one the wiser except himself and the owner of the goods.
• The owner of the goods cannot be expected to appeal the collector's decision when it is favorable to him. A decision that is favorable to the taxpayer would correspondingly be unfavorable to the Government, but who will appeal the collector's decision in that case? Certainly not the collector. 
• Evidently, it was to cure this anomalous situation (which may have already defrauded our government of huge amounts of uncollected taxes), that the provision for automatic review by the Commissioner of Customs and the Secretary of Finance of unappealed seizure and protest cases was conceived to protect the government against corrupt and conniving customs collectors.  
7. Decisions of the Secretary of Trade and Industry, in cases of non-agricultural product, com modity or article, and the Secretary of Agriculture in cases of agricultural product, commodity or article involving dumping and countervailing duties under Sections 301 and 302, respectively, of the Tariff and Customs Code, and safeguard measures under Republic Act No. 8808, where either party may appeal the decision to impose or not to impose said duties
• via a petition for review under Rule 42.

II. Criminal and Civil Cases.

• The criminal action and the corresponding civil action for the recovery of civil liability for taxes and penalties shall at all time be simultaneously instituted with and jointly determined in the proceeding before the CTA. 
• The filing of the criminal action being deemed to necessarily carry with it the filing of the civil action, no right to reserve the filing of such civil action separately from the criminal action will be recognized.

1.  Exclusive Original Jurisdiction
1. violations of NIRC, Tariff and Customs Code and other laws administered by the BIR or the Bureau  of Customs, where the principal amount of taxes and fees, exclusive of charges and penalties claimed is P1 million and above.
• xxx
2. Exclusive Appellate Jurisdiction:
1. violations of NIRC, Tariff and Customs Code and other laws administered by the BIR and the Bureau of Customs originally decided by the regular court where the principal amount of taxes and fees is less than P1 million or no specified amount claimed.
2. judgments, resolutions or orders of the RTC in tax cases originally decided by them.
3. judgments, resolutions or orders of the RTC in the exercise of their appellate jurisdiction over tax cases originally decided by the MeTC, MTC and MCTC via a petition for review.
4. tax collection cases:
1. from judgments, resolutions or orders of the RTC originally decided by them, via an appeal;
2. from judgments, resolutions or orders of the RTC in the exercise of its appellate jurisdiction in tax collection cases originally decided by the MeTC, MTC and MCTC, via a petition for review.
   

Who May Appeal?

• Any party adversely affected by a decision, ruling or inaction of the Commissioner of Internal Revenue, the Commissioner of Customs, the Secretary of Finance, the Secretary of Trade and Industry or the Secretary of Agriculture or the Regional Trial Court, may file an appeal with the CTA:
• within 30 days after receipt of such decision or ruling; or
• after the expiration of the period fixed by law for action referred to in Section 7(a)[2] of Republic Act No. 9282, in which case the inaction shall be deemed a denial.

What Is the Mode of Appeal?

1. Appeal may be made by filing a petition for review under a procedure analogous to that provided for under Rule 42 of the 1997 Rules of Civil Procedure, within 30 days from the receipt of the decision or ruling or from the expiration of the period fixed by law for the official concerned to act, in cases of inaction, before the CTA. 
• A Division of the CTA shall hear the appeal.
• All other cases involving rulings, orders or decisions filed with the CTA as provided for in Section 7 of Republic Act No. 9282 shall be raffled to its Divisions. 
• A party adversely affected by a ruling, order or decision of a Division of the CTA may file a motion for reconsideration or new trial before the same Division.
2. Appeals with respect to decisions or rulings of the Central Board of Assessment Appeals and the Regional Trial Court in the exercise of its appellate jurisdiction, may be made by filing a petition for review under a procedure analogous to that provided for under Rule 43 of the 1997 Rules of Civil Procedure, with the CTA, which shall hear the case en banc.
• A party adversely affected by a resolution of a Division of the CTA on a motion for reconsideration or new trial, may file a petition for review with the CTA en banc.
3. Petition for Review on Certiorari may be filed by a party adversely affected by a decision or ruling of the CTA en banc, through a verified petition before the Supreme Court, pursuant to Rule 45 of the 1997 Rules of Civil Procedure.

A Motion for Reconsideration of the Denial of the Administrative Protest does not toll the 30-Day Period to Appeal to the Court of Tax Appeals

• Fishwealth Canning Corporation v. CIR, 610 SCRA 52:
• Petitioner's administrative protest was denied by Final Decision on Disputed Assessment dated August 2, 2005 issued by respondent and which petitioner received on August 4, 2005.
• Under Section 228 of the 1997 Tax Code, petitioner had 30 days to appeal respondent's denial of its protest to the CTA. 
• Since petitioner received the denial of its administrative protest on August 4, 2005, it had until September 3, 2005 to file a petition for review before the CTA Division. It filed one, however, on October 20, 2005, hence, it was filed out of time. 
• For a motion for reconsideration of the denial of the administrative protest does not toll the 30-day period to appeal to the CTA.  
• Metro Manila Shopping Mecca Corp. v. Toledo, 697 SCRA 425:
• Although the Revised Rules of the Court of Tax Appeals (RRCTA) does not explicitly sanction extensions to file a petition for review with the CTA, Section 1, Rule 7 thereof reads that in the absence of any express provision in the RRCTA, Rules 42, 43, 44, and 46 of the Rules of Court may be applied in a suppletory manner. 
• In particular, Section 9 of Republic Act No. 9282 makes reference to the procedure under Rule 42 of the Rules of Court.
• In this light, Section 1 of Rule 42 states that the period for filing a petition for review may be extended upon motion of the concerned party. 
• Thus, in City of Manila v. Coca-Cola Bottlers Philippines, Inc., 595 SCRA 299, the Supreme Court held that the original period for filing the petition for review may be extended for a period of 15 days, which for the most compelling reasons, may be extended for another period not exceeding 15 days. 
• In other words, the reglementary period provided under Section 3, Rule 8 of the RRCTA is extendible and as such, CTA Division's grant of respondents' motion for extension falls squarely within the law. 

When Distraint of Personal Property/Levy on Real Property Shall Issue?

• Upon the issuance of any ruling, order or decision by the CTA favorable to the national government, the CTA shall issue an  order authorizing the BIR, through the Commissioner to seize and distraint any goods, chattels, or effects, and the personal property, including stocks and other securities, debts, credits, bank accounts, and interests in and rights to personal property and/ or levy the real property of such persons in sufficient quantity to satisfy the tax or charge together with any increment thereto incident to delinquency. 
• This remedy shall not be exclusive and shall not preclude the Court from availing of other means under the Rules of Court.

Appeal to the CTA Shall Not Suspend the Payment, Levy, Distraint and Sale of Taxpayer's Property

• No appeal taken to the CTA from the decision of the Commissioner of Internal Revenue or the Commissioner of Customs or the RTC, provincial, city or municipal treasurer or the Secretary of Finance, the Secretary of Trade and Industry or the Secretary of Agriculture, as the case may be, shall suspend the payment, levy, distraint, and/or sale of any property of the taxpayer for the satisfaction of his tax liability as provided by existing law. 
• When in the opinion of the Court, the collection by the aforementioned government agencies may jeopardize the interest of the Government and/or taxpayer, the Court at any stage of the proceeding, may suspend the said collection and require the taxpayer either to deposit the amount claimed or to file a surety bond for not more than double the amount with the court.

The CTA has ample opportunity to dispense with the deposit of the amount claimed or the filing of the required bond

• Pacquiao v. CTA, 789 SCRA 19:
• The CTA has ample opportunity to issue injunctive writs to restrain the collection of tax and to even dispense with the deposit of the amount claimed or the filing of the required bond, whenever the method employed by the CIR in the collection of tax jeopardizes the interests of a taxpayer for being patently in violation of the law. 
• Such authority emanates from the jurisdiction conferred to it not only by Section 11 of Republic Act No. 1125 (now Sec. 9, R.A. No. 9282), but also by Section 7 of the same law.

Administrative Decision on a Disputed Assessment

• The decision of the Commissioner or his duly authorized representative shall:
1. state the facts, the applicable law, rules and regulations, or jurisprudence on which such decision is based, otherwise, the decision shall be void, in which case, the same shall not be considered a decision on a disputed assessment; and
2. that the same is his final decision. 

Final Notice Before Seizure Constitutes as a Decision on a Disputed or Protested Assessment, hence, Appealable to the CTA

• Commissioner of Internal Revenue v. Isabela Cultural Corporation 361 SCRA 71
• The Supreme Court defined the nature of the Final Notice Before Seizure. 
• It held that a final demand letter from the Bureau of Internal Revenue, reiterating to the taxpayer the immediate payment of a tax deficiency assessment previously made, is tantamount to a denial of the taxpayer's request for reconsideration. 
• Such letter amounts to a final decision on a disputed assessment and is thus appealable to the Court of Tax Appeals.
• In so holding, the Court ratiocinated that in the normal course, the revenue district officer sends the taxpayer a notice of delinquent taxes, indicating the period covered, the amount due including interest and the reason for the delinquency. 
• If the taxpayer intends to protest the assessment, it sends a letter to the BIR indicating its protest, stating the reasons therefor, and submitting such proof as may be necessary. 
• This letter is now considered as the taxpayer's request for reconsideration of the delinquent assessment. 
• After the request is filed and received by the BIR, the assessment becomes a disputed assessment on which it must render a decision. 
• That decision is appealable to the Court of Tax Appeals for review. 
• Based on the facts, the Final Notice Before Seizure should be considered as the Commissioner's decision disposing of the request for reconsideration. 
• The very title expressly indicated that it was the final notice prior to the seizure of the property. The letter itself clearly stated that respondent was being given "this LAST OPPORTUNITY" TO PAY; otherwise, its properties would be subjected to distraint and levy. 
• In addition, jurisprudence dictates that a final demand letter for payment of delinquent taxes may be considered a decision on a disputed or protested assessment.
• Commissioner of Internal Revenue v. Ayala Securities Corporation 70 SCRA 204
• The Court ruled that the letter of February 18, 1963 is tantamount to a denial of the reconsideration or respondent corporation's protest of the assessment made by the petitioner since the said letter was in itself a reiteration of the demand by the BIR for the settlement of the assessment already made. 
• This being so, the said letter amounted to a decision on a disputed or protested assessment.
• Surigao Electric Co., Inc. v. Court of Tax Appeals 57 SCRA 523
• The Supreme Court held that the letter of demand constitutes the final action taken by the Commissioner on the petitioner's several requests for reconsideration and recomputation. 
• In this letter, the Commissioner not only demanded that the petitioner pay the delinquent tax but also gave warning that if it failed to pay the Commissioner would be constrained to enforce the collection thereof by means of the remedies provided by law. 
• The tenor of the letter, specifically the statement regarding the resort to legal remedies, indicates the final nature of the determination made by the Commissioner of the petitioner's deficiency franchise tax liability.
• CIR v. Union Shipping 185 SCRA 547 
• The Supreme Court reiterated the dictum that the BIR should always indicate to the taxpayer, in clear and unequivocal language, what constitutes final action on a disputed assessment. 
• The object of this policy, the Court explained, is to avoid repeated requests for  reconsideration by the taxpayer, thereby delaying the finality of the assessment and, consequently, the collection of the taxes due.

A demand letter for tax deficiency assessments issued and signed by the Chief of the BIR Accounts Receivable and Billing Division is deemed final and executory and subject to
an appeal to the Court of Tax Appeals

• Oceanic Wireless Network, Inc. v. CIR, 477 SCRA 205
• The Supreme Court held that the letter of demand dated January 24, 1991, unquestionably constitutes the final action taken by the Bureau of Internal Revenue on petitioner's request for reconsideration when it reiterated the tax deficiency assessments due from petitioner, and requested its payment. 
• Failure to do so would result in the "issuance of a warrant of distraint and levy to enforce its collection without further notice."
• In addition, the letter contained a notation indicating that petitioner's request for reconsideration had been denied for lack of supporting documents.
• Anent the propriety of the subject assessment, the Supreme Court ruled that the act of issuance of the demand letter by the Chief of the Accounts Receivable and Billing Division does not fall under any of the exceptions that have been mentioned in Section 7 of Republic Act No. 8424 as non-delegable.

A formal Letter of Demand with Assessment Notices stating that it is BIR's final decision based on investigation is appealable to the CTA

• Allied Banking Corporation v. CIR, 611 SCRA 692
• Allied Banking Corporation received the Formal Letter of Demand with Assessment Notices, which partly reads:
• It is requested that the above deficiency tax be paid immediately upon receipt hereof, inclusive of penalties incident to delinquency. This is our final decision based on investigation. If you disagree, you may appeal the final decision within thirty (30) days from receipt hereof, otherwise said deficiency tax assessment shall become final, executory and demandable.
• A careful reading of the Formal Letter of Demand with Assessment Notices leads us to agree with Allied Banking Corporation that the instant case is an exception to the rule on exhaustion of administrative remedies, i.e., estoppel on the part of the administrative agency concerned.
• In this case, records show that Allied Banking Corporation disputed the PAN but not the Formal Letter of Demand with Assessment Notices. 
• Nevertheless, we cannot blame petitioner for not filing a protest against the Formal Letter of Demand with Assessment Notices since the language used and the tenor of the demand letter indicate that it is the final decision of the respondent on the matter. 
• The Court has time and again reminded the CIR to indicate, in a clear and unequivocal language, whether his action on a disputed assessment constitutes his final determination thereon in order for the taxpayer concerned to determine when his or her right to appeal to the tax court accrues. 
• Viewed in the light of the foregoing, respondent is now estopped from claiming that he did not intend the Formal Letter of Demand with Assessment Notices to be a final decision. 

The jurisdiction of the Court of Tax Appeals has been expanded to include not only decisions or rulings but inaction as well of the Commissioner of Internal Revenue

• Rizal Commercial Banking Corporation v. CIR, 522 SCRA 144
• The Supreme Court emphasized that it is clear that the jurisdiction of the Court of Tax Appeals has been expanded to include not only decisions or rulings but inaction as well of the Commissioner of 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 failed to act on the disputed assessment within the 180-day period from date of submission of documents, a taxpayer can either:
1. file a petition for review with the Court of Tax Appeals within 30 days after the expiration of the 180-day period; or 
2. await the final decision of the Commissioner on the disputed assessments and appeal such final decision to the Court of Tax Appeals within 30 days after receipt of a copy of such decision. 
• However, these options are mutually exclusive, and resort to one bars the application of the other.
• This jurisprudential precept has been echoed in the recent case of Lascona Land Co., Inc. v. CIR, 667 SCRA 455. 
• It bears emphasis that such doctrinal precedent finds a procedural hook in Rule 4, Section 3(a)(2) of the RRCTA which states that should the taxpayer opt to await the final decision of the Commissioner of Internal Revenue on the disputed assessments beyond the 180-day period, the taxpayer may appeal such final decision to the CTA under Section 3(a), Rule 8 of these Rules.

The CTA has jurisdiction over dispute between PNB and BIR relative to deficiency withholding tax assessment

• Philippine National Oil Company v. Court o f Appeals, 457 SCRA 32:
• PNB sought the suspension of the proceedings in CTA Case No. 4249, after it contested the deficiency withholding tax assessment against it and the demand for payment thereof before the DOJ, pursuant to Presidential Decree No. 242. 
• The CTA, however, correctly sustained its jurisdiction and continued the proceedings in CTA Case No. 4249; and, in effect, rejected DOJ's daim of jurisdiction to administratively settle or adjudicate BIR's
• assessment against PNB.
• The CTA assumed jurisdiction over the Petition for Review
• filed by private respondent Savellano based on the following
• provision of Republic Act No. 1125, the Act Creating the Court
• of Tax Appeals:

Section 7.Jurisdiction. - The Court of Tax Appeals shall

exercise exclusive appellate jurisdiction to review by appeal,

as herein provided -

(1) Decisions of the Collector of Internal Revenue in

cases involving disputed assessments, refunds of internal

revenue taxes, fees or other charges, penalties imposed in

relation thereto, or other matters arising under the National

Internal Revenue Code or other law or part of law administered

by the Bureau of Internal Revenue; ... (Italics ours.)

In his Petition before the CTA, private respondent Savellano

requested a review of the decisions of then BIR Commissioner

Tan to enter into a compromise agreement with PNOC and to

reject his claim for additional informer's reward. He submitted

before the CTA questions of law involving the interpretation

and application of (1) E.O. No. 44, and its implementing rules

and regulations, which authorized the BIR Commissioner to

wumpromise delinquent accounts and disputed assessments

pending as of December 31, 1985; and (2) Section 316(1) of the

National Internal Revenue Code of 1977 (NIRC of 1977), as

amended, which granted to the informer a reward equivalent

to 15% of the actual amount recovered or collected by the BIR.

These should undoubtedly be considered as matters arising from

the NIRC and other laws being administered by the BIR, thus,

appealable to the CTA under Section 7(1) of Republic Act No.

1125.

PNB, however, insists on the jurisdiction of the DOJ over its

appeal of the deficiency withholding tax assessment by virtue of

Presidential Decree No. 242.

The PNB and DOJ are of the same position that Presidential

Decree No. 242, the more recent law, repealed Section 7(1) of

Republic Act No. 1125, based on the pronouncement of the

Supreme Court in Development Bank of the Philippines v. Court of

Appeals, 180 SCRA 609.

In the said case, it was expressly declared that Presidential

Decree No. 242 repealed Section 7(2) of Republic Act No. 1125, which provides for the exclusive appellate jurisdiction of the CTA

over decisions of the Commissioner of Customs. PNB contends

that Presidential Decree No. 242 should be deemed to have

likewise repealed Section 7(1) of Republic Act No. 1125, which

provides for the exclusive appellate jurisdiction of the CTA over

decisions of the BIR Commissioner.

After re-examining the provisions on jurisdiction of Republic

Act No. 1125 and Presidential Decree No. 242, the Supreme

Court finds itself in disagreement with the pronouncement made

in Development Bank of the Philippines v. Court of Appeals, et al.,

and refers to the earlier case of Lichauco & Company, Inc. v. Apostol,

et al., 44 Phil. 138, for the guidelines in determining the relation

between the two statutes in questions.

Sustained herein is the contention of private respondent

Savellano that Presidential Decree No. 242 is a general law that

deals with administrative settlement or adjudication of disputes,

claims and controversies between or among government offices,

agencies and instrumentalities, including government-owned

or controlled corporations. Its coverage is broad and sweeping,

encompassing all disputes, claims and controversies. It has been

incorporated as Chapter 14, Book IV of E.O. No. 292, otherwise

known as the Revised Administrative Code of the Philippines.

On the other hand, Republic Act No. 1125 is a special law

dealing with a specific subject matter - the creation of the CTA,

which shall exercise exclusive appellate jurisdiction over the tax

disputes and controversies enumerated therein.

Following the rule on statutory construction involving a

general and a special law previously discussed, then Presidential

Decree No. 242 should not affect Republic Act No. 1125. Republic

Act No. 1125, specifically Section 7 thereof on the jurisdiction of

the CTA, constitutes an exception to Presidential Decree No. 242.

Disputes, claims and controversies, falling under Section 7 of

Republic Act No. 1125, even though solely among government

offices, agencies, and instrumentalities, including government-

owned and controlled corporations, remain in the exclusive

appellate jurisdiction of the CTA. Such a construction resolves

the alleged inconsistency or conflict between the two statutes,

and the fact that Presidential Decree No. 242 is the more reœnt

law is no longer significant. (Philippine National Oil Company u

Court of Appeals, 457 SCRA 32)

CTA has jurisdiction to review rulings of the Commissioner of

Internal Revenue set forth in RMO

The jurisdiction to review the rulings of the Commissioner

of Internal Revenue pertains to the Court of Tax Appeals, not to

the RTC.

The questioned RMO No. 15-91 and RMC No. 43-91 are

actually rulings or opinions of the Commissioner implementing

the Tax Code on the taxability of pawnshops. This is clear from

petitioner's RMO No. 15-91, pertinent portion of which reads:

"A restudy of P.D. 114 (the Pawnshop Regulation Act)

shows that the principal activity of pawnshops is lending

money at interest and incidentally accepting a 'pawn' of

personal property delivered by the pawner to the pawnee

as security for the loan (Sec. 3, ibid.). Clearly, this makes

pawnshop business akin to lending investor's business

activity which is broad enough to encompass the business

of lending money at interest by any person whether natural

or juridical. Such being the case, pawnshops shall be subject

to the 5% lending investor's tax based on their gross income

pursuant to Section 116 of the Tax Code, as amended."

Suchrevenueorders were issued pursuantto Commissioner's

powers under Section 245 of the Tax Code, which states:

SEC.245. Authority of the Secretary of Finance to promul gate

rules and regulations. - The Secretary of Finance, upon

recommendation of the Commissioner, shall promulgate all

need ful rules and regulations for the effective enforcement

of the provisions of this Code.

"The authority of the Secretary of Finance to determine

articles similar or analogous to those subject to a rate of

sales tax under certain category enumerated in Sections 163

and 165 of this Code shall be without prejudice to the power

of the Commissioner of Internal Revenue to make rulings

or opinions in connection with the implementation of the

provisions of internal revenue laws, including ruling on

the classification of articles of sales and similar purposes."

(Emphasis added)

Under Republic Act No. 1125 (An Act Creating the Court of

Tax Appeals [CTA for brevity]), as amended, such rulings of the

Commissioner of Internal Revenue are appealable to the CTA.

(CIR u. Leal, 392 SCRA 9)

The validity of Administrative issuances fall within the

exclusive appellate jurisdiction of the Court of Tax Appeals

Administrative issuances (revenue orders, revenue memo-

randum circulars, or rulings) are issued by the Commissioner

under its power to make rulings or opinions in connection with

the implementation of the provisions of internal revenue laws.

Tax rulings, on the other hand, are official positions of the Bureau

on inquiries of taxpayers who request clarification on certain

provisions of the National Internal Revenue Code, other tax laws,

or their implementing regulations. Hence, the determination of

the validity of these issuances clearly falls within the exclusive

appellate jurisdiction of the Court of Tax Appeals under Section

7(1) of Republic Act No. 1125, as amended, subject to prior review

by the Secretary of Finance, as required under Republic Act No.

8424. (Banco De Oro, et al. v. Secretary of Finance, 800 SCRA 392)

A motion for reconsideration or new trial is mandatory

before a petition for review of a decision or resolution of the

CTA in Division may be filed before the CTA en banc

Any aggrieved party of the decision or resolution of the

CTA in Division must file a motion for reconsideration or new

trial with the Division as a condition precedent to a petition for

revew with the CTA en banc. Rule 8, Section 1 of the Revised

Rules of the Court of Tax Appeals cannot be any clearer-

SECTION 1. Review of cases in the Court en banc. - In

cases falling under the exclusive appellate jurisdiction of

the Court en banc, the petition for review of a decision or

resolution of the Court in Division must be preceded by the

filing of a timely motion for reconsideration or new trial

with the Division.

The word "must" clearly indicates the mandatory - not

merely directory - nature of a requirement. (Commissioner of

Customs v. Marina Sales, Inc., 635 SCRA 606)

The CTA by constitutional mandate is vested with

jurisdiction to issue writs of certiorari in cases falling within

its exclusive appellate jurisdiction

Section 5(1), Article VIII of the 1987 Constitution grants

power to the Supreme Court, in the exercise of its original

jurisdiction, toissue writs of certiorari, prohibition and mandamus.

With respect to the Court of Appeals, Section 9(1) of Batas

Pambansa Blg. 129 gives the appellate court, also in the exercise

of its original jurisdiction, the power to issue, among others, a

writ of certiorari, whether or not in aid of its appellate jurisdiction.

As to Regional Trial Courts, the power to issue a writ of crtiorari,

in the exercise of their original jurisdiction, is provided under

Section 21 of Batas Pambansa Blg. 129.

The foregoing notwithstanding, while there is no express

grant of such power, with respect to the CTA, Section 1, Article

VIII of the 1987 Constitution provides, nonetheless, that judicial

power shall be vested in one Supreme Court and in such

lower courts as may be established by law and that judicial

power includes the duty of the courts of justice to settle actual

controversies involving rights which are legally demandable

and enforceable, and to determine whether or not there has

been a grave abuse of discretion amounting to lack or excess

of jurisdiction on the part of any branch or instrumentality of

the Government.

It can be fairly interpreted that the power of the CTA includes

that of determining whether or not there has been grave abuse

of discretion amounting to lack or excess of jurisdiction on the

part of the RTC in issuing an interlocutory order in cases falling

within the exclusive appellate jurisdiction of the tax court. It,

thus, follows that the CTA, by constitutional mandate, is vested

with jurisdiction to issue writs of certiorari in these cases.

Indeed, in order for any appellate court to effectively

exercise its appellate jurisdiction, it must have the authority to

issue, among others, a writ of certiorari. In transferring exclusive

jurisdiction over appealed tax cases to the CTA, it can reasonably

be assumed that the law intended to transfer also such power as

is deemed necessary, if not indispensable, in aid of such appellate

jurisdiction. There is no perceivable reason why the transfer

should only be considered as partial, not total.

It is more in consonance with logic and legal soundness to

conclude that the grant of appellate jurisdiction to the CTA over

tax cases filed in and decided by the RTC carries with it the power

to issue a writ of certiorari when necessary in aid of such appellate

jurisdiction. The supervisory power or jurisdiction of the CTA to

issue a writ of certiorari in aid of its appellate jurisdiction should

co-exist with, and be a complement to, its appellate jurisdiction

to review, by appeal, the final orders and decisions of the RTC,

in order to have complete supervision over the acts of the latter.

(City of Manila v. Grecia-Cuerdo, 715 SCRA 182)

The CTA En Banchas no certiorari jurisdiction over interlocutory

orders issued by its Division

In the recent case of Pacquiao v. CTA, 789 SCRA 19, the Sup-

reme Court took cognizance of the Resolutions dated April 22,

2014 and July 11, 2014 issued by the Division of the CTA requiring

the spouses Pacquiao to deposit the amount of P3,298,514,894.35

or post a bond in the amount of P4,947,772,341.53 as a condition

for its order enjoining the CIR from collecting the taxes from

them.

Indeed, the CTA en banc is devoid of certiorari jurisdiction

over its division's interlocutory orders. R.A. No. 9282 conferred

no such jurisdiction. Settled is the rule that jurisdiction is

conferred by law.

The CTA En Banc has no jurisdiction over petition for

annulment of judgment of its Division

The Revised Rules of the CTA provide for no instance of an

annulment of judgment. The CTA en banc may not reverse, annul

or void a final decision of a division. Instead, what remained as a

remedy for the aggrieved party was to file a petition for certiorari

under Rule 65, which could have been filed as an original action

before the Supreme Court and not before the CTA en banc. (CIR v.

Kepco Ilijan Corporation, 794 SCRA 193)

The Secretary of Justice has jurisdiction over the dispute

between PSALM (Power Sector Assets and Liabilities

Management Corporation) and NPC and BIR over the

Imposition of VAT on the Sale of Two Power Plants

A dispute between PSALM and NPC, which are both wholly

government-owned and -controlled corporations, and the BIR, a

govemment office, over the imposition of VAT on the sale of the

two power plants is vested in the Secretary of Justice. There is

no question that original jurisdiction is with the CIR, who issues

the preliminary and the final tax assessments. However, if the

government entity disputes the tax assessment, the dispute is

already between the BIR (represented by the CIR) and another

government entity, in this case, the petitioner PSALM. Under

Presidential Decree No. 242, all disputes and claims solely bet-

ween government agencies and offices, including government-

owned and controlled corporations, shall be administratively

settled or adjudicated by the Secretary of Justice, the Solicitor

General, or the Government Corporate Counsel, depending on

the issues and government agencies involved. (PSALM v. CIR,

835 SCRA 235)