The Bureau of Internal Revenue has failed to collect P1.3 billion from businessman Macario Lim Gaw in undeclared income, value-added taxes and interest and surcharges for taxable year 2007 after the Supreme Court sustained the decision of the Court of Tax Appeals dismissing the tax evasion case on technicality.
In a three-page resolution, SC’s First Division resolved to affirmed the September 20, 2018 decision and July 3, 2019 resolution of the Court of Tax Appeals En Banc that set aside the tax assessment issued by the BIR on technicality.
The September 20, 2018 decision of the CTA En Banc ruled that the BIR‘s failure to comply with the rules on verification and certification of non-forum shopping warrants the nullification of its appeal seeking the reversal of the CTA’s First Division’s September 2, 2016 decision granting Gaw’s petition disputing the tax assessment.
“After a judicious study of the case, the Court resolves to deny the instant petition and affirm the September 20, 2018 decision and July 3, 2019 resolution of the Court of Tax Appeals En Banc for failure of petitioner Commissioner of Internal Revenue to sufficiently show that the CTA EB committed any reversible error in dismissing its petition for lack of proper verification and certification of non-forum shopping as required by the Rules of Court (Rules),” states the SC resolution.
“While the existence of compelling reasons or special circumstances has been recognized as valid reasons for the relaxation of the Rules, such does not obtain in this case, considering that the CIR failed to rectify the procedural error despite having ample opportunity to do so, and no timely attempt at substantial compliance was made,” the SC added.
The high court also did not give weight to the concern raised by the BIR that the dismissal of its petition would endanger the entirety of its deficiency tax assessment against Gaw in the amount of P7.01 billion for taxable years 2007 and 2008.
Based on its review of the decision issued by the CTA First Division, the SC stressed that the issues raised by Gaw pertained solely to the inclusion of taxable year 2007, as falling within the term “unverified prior years,” in the Letter of Authority (LOA) and resulting assessment issued by the BIR.
“It is settled that when a LOA authorizes an examination for a taxable year and ‘unverified prior years,’ in contravention of Revenue Memorandum Order No. 43-90, it is not void in its entirety and shall be valid as to the declared taxable year,” the SC ruled.
“It is for this reason that the CT A First Division correctly limited its disposition to the cancellation of the deficiency income tax assessment for taxable year 2007 amounting to Pl,295,855,151.89,” it said.
The BIR has accused Gaw of misdeclaring his real estate acquisitions as sales of “capital assets,” instead of ordinary assets, thus, allowing him to pay only a 6 percent capital gains tax, instead of a 32 percent income tax and a 12 percent VAT.