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ENBANC
Present:
COMMISSIONER OF INTERNAL
REVENUE,
Respondent. Promulgated:
DECISION
Before the CTA En Bane is the petition for review of petitioner R.A.
Oben Holdings, Inc. ("petitioner") filed on May 3, 2016 assailing the
Decision 1 and the Resolution2 promulgated on January 6, 2016 and on April
7, 2016, respectively, by the CTA Third Division in the case entitled "R.A.
Oben Holdings, Inc. v. Commissioner of Internal Revenue, " docketed as
CTA Case No. 8723. Jv'
1
Rollo, pp. 40-60; Penned by Associate Justice Esperanza R. Fabon-V ictori no, concurred in by Associate Justice
Lovell R. Bautista and Assoc iate Justi ce Ma. Belen M. Ringpis-Li ban .
2
Rollo, pp. 6 1-68.
DECISION
CTA EB No. 1454 (CTA Case No. 8723)
Page 2 of20
SO ORDERED."
SO ORDERED." p
DECISION
CTA EB No. 1454 (CTA Case No. 8723)
Page 3 of20
THE FACTS
The facts of the case as found by the CTA Third Division, as stated in
the January 6, 2016 Decision are: 3
3
Rollo, pp. 40-48.
DECISION
CTA EB No. 1454 (CTA Case No. 8723)
Page 4 of20
On July 26, 2016, this Court ordered the parties to file their respective
Memoranda. Both parties filed their respective Memoranda, thus, this case
was submitted for decision on September 28, 2016.
ISSUES
In its Petition for Review, petitioner states the following grounds for
the allowance of the petition: 6
4
Rollo, p. l.
5 /d., p. 208.
6 /d., pp. 9-10.
DECISION
CTA EB No. 1454 (CTA Case No. 8723)
Page 10 of20
7 A prima facie evidence is one which that will establish a fact or sustain a judgment unless contradictory evidence is
produced. (Commissioner ofinternal Revenue v. Asalus Corporation, GR No. 221590, February 22, 2017).
8 GR No. 221590, February 22, 2017.
DECISION
CTA EB No. 1454 (CTA Case No. 8723)
Page 11 of20
Applying the Asalus case in the instant case, it is therefore the duty of
petitioner to refute the presumption of the falsity of the return and to prove
that it had filed accurate returns.
Petitioner alleges that its VAT returns for the four quarters of taxable
year 2008 are not false returns and thus the VAT assessment is already
barred by prescription. Petitioner points out that the falsity of the
petitioner's quarterly VAT returns for taxable year 2008 is not even an issue
raised in the present petition and that the issue that was raised by respondent
is the falsity of the Annual Income Tax Return filed on April 2009, which
was made part ofthe Pre-Trial Order.
Considering the finding of falsity in the VAT returns, the general rule
that internal revenue taxes shall be assessed within three years after the last
day prescribed by law for the filing of the return or from the day the return
was filed, whichever is later 12 does not apply in this case. Section 114(A) of
the NIRC 13 requires the filing of the quarterly return of the amount of the
gross sales or receipts within twenty-five (25) days following the close of
each taxable quarter, provided that payment of the VAT shall be on a
monthly basis. ft-
10
Rollo, p. 59.
11 Assailed Decision, p.l7; Rollo, p. 56.
12 Section 203 of the National Internal Revenue Code of 1997, as amended, states:
"SEC. 203. Period of Limitation Upon Assessment and Collection.- Except as provided in Section 222,
internal revenue taxes shall be assessed within three (3) years after the last day prescribed by law for the filing of the
return, and no proceeding in court without assessment for the collection of such taxes shall be begun after the
expiration of such period: Provided, That in a case where a return is filed beyond the period prescribed by law, the
three (3)-year period shall be counted from the day the return was filed. For purposes of this Section, a return filed
before the last day prescribed by law for the filing thereof shall be considered as filed on such last day."
13 SEC. 114. Return and Payment of Value-Added Tax.-
(A) In General. - Every person liable to pay the value-added tax imposed under this Title shall file a
quarterly return of the amount of his gross sales or receipts within twenty-five (25) days following the close of each
taxable quarter prescribed for each taxpayer: Provided, however, That VAT-registered persons shall pay the value-
added tax on a monthly basis.
DECISION
CTA EB No. 1454 (CTA Case No. 8723)
Page 13 of20
Clearly, this case falls under Section 222( a) of the NIRC of 1997, as
amended, which states:
taxable year 2008 was amended and filed on April 15, 2010. The LOA was
already served on July 29, 2009, thus, the amended ITR filed on a later date
cannot be considered as proof of the alleged correct gross rental income
subject to VAT. The law does not allow the amendment of the return after
LOA has been served on the taxpayer.
Petitioner avers that the VAT assessment against the petitioner is not
based on actual facts, but merely on presumption.
Any return, statement or declaration filed in any office authorized to receive the same shall not be
withdrawn:Provided, That within three (3) years from the date of such filing, the same may be modified, changed, or
amended: Provided, further, That no notice for audit or investigation of such return, statement or declaration has, in the
meantime, been actually served upon the taxpayer .
19
Assailed Decision, p. 12; Rollo, p. 51.
°
2 CA-G.R. SP No. 78828, September 9, 2004.
DECISION
CTA EB No. 1454 (CTA Case No. 8723)
Page 16 of20
This Court agrees with the CTA that the ten-year period
of limitation should apply. The falsity of the VAT return
filed by HIPI is established by the fact that in its 1995
Annual Income Tax Return, HIPI's declared gross income
from sale of services representing management fees was
higher than the taxable sales reported in its VAT returns by
P269,967.02. This was not denied by HIPI albeit it claimed
good faith in not declaring the said amount. That
notwithstanding, this Court is not inclined to sustain HIPI's
defense of good faith, otherwise, any taxpayer filing a false
return can easily escape liability. While there may be truth to
HIPI's claim that it had no malicious intent to evade payment of
the tax, this does not preclude a finding of a false return. This is
because while a fraudulent return implies a malicious and
deliberate intent to evade the payment of the tax, a false return
merely implies a deviation from the correct amount of the tax.
That the 50% surcharge was not imposed does not mean that
the return filed by HIPI was correct. In fact, the 30% threshold
on substantial underdeclaration under Section 248(B) of the
Tax Code is but a mere prima facie presumption of the filing of
a false or fraudulent return. Thus, the fact that HIPI
underdeclared 5% only of its total sales does not mean that it
did not file a false return. To sustain HIPI's interpretation would
certainly be absurd." (Emphases Supplied.)
Applying the Holiday Inns case in the instant case, We agree that
there is falsity in this case which warrants the application of the ten-year
prescriptive period.
"Annex A
Details of Discrepancies
Deficiency value added tax was assessed pursuant to Sec. 106 and
222 of the 1997 NIRC at the rate of twelve percent of taxable receipts per
investigation not subjected to VAT in the amounts ofP7,885,848.37 or by
49.49% below of that declared per return, to wit:
Percentage Amount
Rental Income per Original ITR 100% P15,949,631.00
Rental Income per VAT Returns:
1st Q 2,012,299.86
2ndQ 1,905,426.83
3rdQ 2,003,744.90
4thQ 50.55% 2,142,311.04 8,063, 782.63
Difference (Sch.l) 49.45% P7.885.848.37
Petitioner is mistaken.
22
Supra, Note 9.
23
Mercado, et al. vs. Spouses Espina, G.R. No. 173987, February 25, 2013.
24
Bank ofthe Philippine Islands vs. Shembergh Biotech Corporation and Benson Dakay, G.R. No. 162291, August 11,
20/0, 628 SCRA 70, 76; National Association of Electricity Consumers for Reforms, Inc. (NASECORE) vs. Energy
Regulatory Commission (ERC), G.R. No. 190795, July 6, 2011,653 SCRA 642,651, citing Rasdas vs. Estenor, G.R.
No. 157605, December 13, 2005, 477 SCRA 538, 551.
DECISION
CTA EB No. 1454 (CTA Case No. 8723)
Page 19 of20
Based on the foregoing discussions, the CTA En Bane agrees with the
findings and conclusions rendered by the CTA Third Division in this case.
SO ORDERED.
a~-~ c_ Gt-o..-Uota Q. .
.1UANITO c. CASTANED~, JR.
Associate Justice
WE CONCUR:
...
CAESA~ANOVA
Associate Justice
25
Commissioner of Internal Revenue v. Gonzalez, G.R. No. 177279, October 13, 20 I 0, citing Rizal Commercial
Banking Corporation v. Commissioner of Internal Revenue, G.R. No. 168498, April 24, 2007, 522 SCRA 144, 149-
150, citing Commissioner of Internal Revenue v. Hantex Trading Co., Inc., G.R. No. 136975, March 31, 2005, 454
SCRA 301, 329.
DECISION
CTA EB No. 1454 (CTA Case No. 8723)
Page 20 of20
~~ ~ ,4~
~N.M-:~~ &~ I
(With due respect, I join PJ's Dissenting Opinion.) (See Concurring Opinion)
CIELITO N. MINDARO-GRULLA MA. BELEN M. RINGPIS-LIBAN
Associate Justice Associate Justice
~·y-.~tL-.
(See Dissenting Opinion)
CATHERINE T. MANAHAN
Associate Justice
CERTIFICATION
Presiding Justice
REPUBLIC OF THE PHILIPPINES
Court of Tax Appeals
QUEZON CITY
ENBANC
Present:
DISSENTING OPINION
1
Exhibit R-2, BIR Records, p. 27.
2 Exhibit R-5, BIR Records, p. 92.
3 CTA Division Docket, p. 407; CTA EB Rollo, p. 41.
4 CTA Division Docket, pp. 82-88.
5 CTA Division Docket, pp. 101-108.
6 CTA Division Docket, pp. 83 & 102.
7 G.R. No. 100152, March 31, 2000.
~
U'
Dissenting Opinion
R.A. Oben Holdings, Inc. vs. CIR
CTA EB No. 1454 (CTA Case No. 8723)
Page 3 of 12
In other words, although the parties did not specifically put into
issue the authority of RO Cayago to continue the investigation that
ultimately led to the issuance of the present disputed tax
assessment, I submit that the Court has the authority to rule upon
matters wich are vital in the disposition of the case; otherwise, the
Court would abdicate its primary objective which is the just resolution
of disputes brought before it. 9
9 Ramona T. Logronio vs. Roberto Taleseo, G.R. No. 134602, August 6, 1999.
10 G.R. No. 222743, April 5, 2017.
Dissenting Opinion
R.A. Oben Holdings, Inc. vs. CIR
CTA EB No. 1454 (CTA Case No. 8723)
Page 5 of 12
12
G.R. No. 178697, November 17, 2010.
13
Exhibit R-32; CTA Division Docket, pp. 321-327.
Dissenting Opinion
R.A. Oben Holdings, Inc. vs. CIR
CTA EB No. 1454 (CTA Case No. 8723)
Page 9 of12
A. Yes, Sir.
14
CTA Division Docket, p. 330.
15 CTA Division Docket, p. 322.
Dissenting Opinion
R.A. Oben Holdings, Inc. vs. CIR
CTA EB No. 1454 (CTA Case No. 8723)
Page 10 of 12
Not only that. The Revalidation Notice may not be given any
probative value as it was not offered in evidence. The declaration in
Pilipinas Shell Petroleum Corporation vs. Commissioner of
Customs, 17 is edifying, viz.:
18Development Bank of the Philippines v. NLRC, March 1, 1995, 242 SCRA 59;
Albert v. Court of First Instance of Manila (Branch VI), L-26364, May 29, 1968,
23 SCRA 948 cited in the Concurring Opinion of Sandovai-Gutierrez, J., Raul L.
Lambino v. The Commission on Elections, G.R. No. 174153, October 25, 2006.
Dissenting Opinion
R.A. Oben Holdings, Inc. vs. CIR
CTA EB No. 1454 (CTA Case No. 8723)
Page 12 of 12
All told, I VOTE to: (i) GRANT the Petition for Review filed by
R.A. Oben Holdings, Inc.; (ii) REVERSE and SET ASIDE the Court
in Division's Decision dated January 6, 2016 and Resolution dated
April 7, 2016; and, (iii) CANCEL and SET ASIDE the deficiency
value-added tax assessment issued against petitioner for the
taxable year 2008 for being VOID.
Presiding Justice
ENBANC
CONCURRING OPINION
RINGPIS-LIBAN, L:
I concur in the ponencia in denying the instant Petition for Review flied by
R.A. Oben Holdings, Inc. ("Petitioner") for lack of merit.
Records reveal that Revenue Officer Ma. Dolores M. Ferry ("RO Ferry")
and Group Supervisor Arceli N . Puno ("GS Puno") were originally authorized
to conduct the audit of Petitioner's books for taxable year 2008. The Letter of
Authority1 ("LOA") reads as follows: ~
LOA 2007-00037795
JUL 24 2009
LEITER OF AUTHORITY
XXX
2
Memorandum, BIR Records, page 92.
3
Revalidation Notice, BIR Records, page 98.
Concurring Opinion
erA EB No. 1454 (CfA Case No. 8723)
Page 3 of 9
REVALIDATION NOTICE
Sir/ Madam:
( ) XXX
( ) XXX
( ) XXX
(x) Your failure to present the required
records/ documents for examination
XXX
XXX
Section 7 of the 1997 NIRC likewise sets limits on which powers of the
CIR may be delegated by him and which powers are to be exercised exclusively
by him. The issuance of an LOA is not one of the non-delegable powers of the
CIR, vii;·
(c) The power to compromise or abate, under Sec. 204 (A) and (B)
of this Code, any tax liability: Provided, however, That assessments
issued by the regional offices involving basic deficiency taxes of
Five hundred thousand pesos (PSOO,OOO) or less, and minor
criminal violations, as may be determined by rules and regulations
to be promulgated by the Secretary of finance, upon
recommendation of the Commissioner, discovered by regional and
district officials, may be compromised by a regional evaluation
board which shall be composed of the Regional Director as
Chairman, the Assistant Regional Director, the heads of the Legal,
Assessment and Collection Divisions and the Revenue District
Officer having jurisdiction over the taxpayer, as members; and
On the contrary, issuing LOAs is a delegable power which the CIR may
devolve to Revenue Regional Directors, as expounded on in Section 10 of the
1997 NIRC:
XXX
XXX
An LOA is, in essence, a contract of agency. Article 1868 of the Civil Code
defines agency as a contract where "a person binds himself to render some
service or to do something in representation or on behalf of another, with the
consent or authority of the latter."
Now, may the RRD, the CIR's agent, appoint a sub-agent, in this case, the
RO / s named in the LOA? Article 1892 of the Civil Code says that he can. The
said provision states:
8
Emphasis supplied.
9
Emphasis supplied.
Concurring Opinion
CTA EB No. 1454 (CTA Case No. 8723)
Page 7 of 9
XXX
Note that under the provisions on agency, acceptance by the agent may
be express or implied from his acts which carry out the agency. 13 Moreover,
considering that, given the facts of the case, RO Cayago did not exceed the
authority given to her and the audit was limited to examining books of account
/Y"'
10
SEC. 13. Authority of a Revenue Officers. - subject to the rules and regulations to be prescribed
by the Secretary of Finance, upon recommendation of the Commissioner, a Revenue Officer
assigned to perform assessment functions in any district may, pursuant to a Letter of
Authority issued by the Revenue Regional Director, examine taxpayers within the
jurisdiction of the district in order to collect the correct amount of tax, or to recommend the
assessment of any deficiency tax due in the same manner that the said acts could have been
performed by the Revenue Regional Director himself." (Emphasis supplied).
11
Civil Code of the Philippines, Article 1869.
12
Judicial Affidavit of Revenue Officer Minda A. Cayago, Docket, pp. 321-322.
13
Civil Code of the Philippines, Article 1870.
Concurring Opinion
CfA EB No. 1454 (CfA Case No. 8723)
Page 8 of 9
or accounting records within the period indicated in the LOA in coming up with
the assessment, all the elements for a contract of agency are present.
Last!J, is the glaring fact that the principal, the CIR, has acknowledged, if
not ratified, the agency granted to RO Cayago to conduct the audit through the
act of championing this very case.
I therefore vote for the DENIAL of the Petition for Review filed by the
Petitioner.
~- ~ _/t._.
MA. BELEN M. RINGPIS-LIBAN
Associate Justice
19
Fort Bonifacio Development Corporation v. Commissioner of Internal Revenue, G.R. Nos.
175707, 180035 & 181092, November 19, 2014.
REPUBLIC OF THE PHILIPPINES
COURT OF TAX APPEALS
QUEZON CITY
ENBANC
Present:
MANAHAN, J.:
10, 2002.
DISSENTING OPINION
CTA EB No. 1454 (C.T.A. Case No. 8723)
Page 3 of4
6 Supra, Note 2.
DISSENTING OPINION
CTA EB No. 1454 (C.T.A. Case No. 8723)
Page 4 of4
~~ '"-;~
CATHERINE rf. MANAHAN
Associate Justice