CTA Case No. 261 (Decision)

KP lULl G Oil' C U.HI' o~ T TI et1t1oner, - v rsua - � T. � � 261 L �- tapon - - -- - -- -- D CI l bts la an a peal eetslon of respon� nt Collector of Int�r e asaesalng and and1 fr petition r ol Lan Transport tion c ency 1nC t ears 194~ to 1 1, luslv , in the g egate nt of 167,07 � s f ct r , including su.r- � , co pr lse pe al y ln erest. et1t1oner bol Land Transportation ( er inafter efer e to as hol C any for ~�- 1 y) is a s c cor rat! enga ed the 1 ainesa wit a1n offices a [ agb � t hol. 19�5 tbru 1 l , petit! r had c t � inc tax returns d paid the c rrespo tax a e thereon as per sal eturns. ver , te.r exa !nation and , r!- fication of the afo~ ntloned returna, respon nt Coll ctor of Internal ev n e ( r nafter referre to �� t ollector for � ort) aaued deficiency <l � 48 6

� 261 - 2- inc ax asse a nt gatnst ohol Co pany, h1eh the latter receiv d on epte r 1, 1953. Theso de- ficiency 1nco � tax asses nt ar detailed as fol- lowas 11 4456 11~ , 27~. I�X � ����iIR re�c. 1947 ���� 1948 . 768. 1l 950 !. 11 , 732. � 20,711. 9 � l ,.712~58..2091 � �� 1951 , 189. (figures �r� exelus ve of ~oaiae penalty � ept eaber 11, 19~3 (E � �A� l� � p. 21, t A ree.) l �o.pany requested the Coll�ctor to fur� n1a fo~r with t~ etalls of the d1screpan- ctes an d!sallo..nces �� stated� n the aforesaid notices or the years 1 ~ 1 1. r l, 9 petitioner receiv ans r, d t epte 13, 1954, 1t..la1n d�talls of the latter�� eftciency �����...nt in question ( � �2", p. 22, CT. rtc.J see ala Exh. �9 � � 148- 15 to ll.21 1 54 (E at for , Cl r c. ) � hol .~ouu.Jany ote a r econ&i~rat1on of th aforeaa~ ������ en � On ov er 22, 19~ ( itted, par. l , nawer), p ti- ceiv d respon � �a er to said request, v~ 16, 1954 ( xh. �1o� , p. 167. IR r c. ), 1Dfo~1ng the for r tha retnv�st!gation .auld conditioned on p tltioner'� compliance of Depart nt er o. 21 of the Depart nt of flnance , dated 487

for t f.on po n t 111 ible ap al ( xh. -7 � ~ v, n te � or r � h 11 ~0 1 t id � � ,_ l ctor � � ...( xh� ol tt -11" . � � 19 ( � t n� ret � r c.) , t! I cto r 2 , 9~ ( X � 48 ---~-"

� T.A. E . � 261 �4� t e Collector urged the Deputy Provincial Tre eurer of hol to ex dite th execution of the warrant of dtstr nt n levy issu d ag in t hol Company an r port t � act on t en in thi re ct !thin 1 d y fro receipt of aaid letter. nee. on ove r 12, 1 5~ (Exh. �A-12.. � p. 70 , Ct ree.), petition r ote th rovi c 1 Tr asurer of ol, c no 1 ing r c pt of pond nt' lett r of to r 2 , 1 ~. nd r qu t n th the execut!o of the nt o 1 tr lnt and le y tay d until the former's tition for r consi- ra ion ct d upon. s for rd d t h Col! ctor ho , n ec r 28 , 19 5 ( � � � �13 � 71, CT rec.) � n1 t fo.r reeon id ration. Thla d nial ce v d hol ! of Ja 1 ~ a d con - ently, ta proper~! s re pl ce n r d tr int nd levy ( � 314, rec.). ub ently. r nt s th D ty ovinc f. 1 T:re sur r of hol to 11 t publ c ct!on t prop rt s of p t t oner th n un e dis ra t (p. 31!>, Ift rec.). n he ant � on erch e. 19~6. th Collect iiSUI to the v r ou anks in an!la warrent of rn s nt a atnst th cash deposit � on y , credit or rights to t n l or int n 1ble ro rt1e of ohol C pany hlch ay in po session or control of se1d ank � a a result of these arr nts of garnia nt t cash '� t189

26 pee its oh 1 C p ny ith Ch t d Bank of Indta. � c � in the 0 t Philippin attonal ank , unt f ~3, 10. 1 � garnf.a d nt, p. lg , I r c.). A pet1tl er 1nst!tut d th el null nd v 1d th ����� enta to 19 � 1ncluaive; (2) .to cl vo d ur~t of 1stra1nt nci levy, ) to d - 11 t h niah ents ff ct d y re po t t 1 $ of o ol C P ny; (4) t l nd nc:o uti nal nt � 213 0 t t of ... ance , at 2. 1 �. y 7, 1 � respo ent 1 alieglng bv y of speelal � ens� �t �t t � e ax ret rn fll � er 0 eu 0 1951, nclu v � � taln � t � - an fir lve fena � t ti 1 tj ction to t ,f t tition 0 r 1 or he reaao ha 11 �� c y nd t ay per! ~ n nt' cl t he re r � 19~. � My � � tit oner il t!on to eel � I' n nt n efa lt, hie enltd thls ourt o t � ~ un tha r n nt' ns r ha� alr ady en led. ..

� �f 1 of v �' 4 91 LJ 99

- � 261 - 7- y �� 11 � t un1 nt di� d a, Aus :r:alia t t c tered ch, lv � t t0 le v!ng s1t. wlt t tl 1 1n nt �� n1 ar inter st of t r � . ar l 5 ��.. ( 1 , CTct to tt 1 tlo f t � J' c.) t tly, Co ina n, a.ry 21, 1 57, lare wit � d ef eet t rt vy 11 n 1 c !r� � 1c 1 e X v� - � f � 1nt at � d! . in (� ). 1 � g sp � t y ev y �- � inc:orr c � s t19 2

� 261 -8- eflcle cy !nc � tax ����� nts with res ct to tbe years 194 to 1 f'JO, tnclua1ve. in vie of its t ory that it uld �aater ally jeopardit th tn- at tereat of petitio ~ thia at� of the proce dings to offer evi � ce 1n ta defe �� w t out ny for al pleading tn a ju 1eial c lo y the ret nt or claim or to 1nst1t te ti for h coll ction of � 1c1ency ax � or y ars l 5 o � 161-163, y S, 1957). ence, et1t1oner 1 itt tta ev enc to the ctione 1n ita 1nc tax return� for 1 1 aff ct1ng foll in laallo d t as ����������� .2 ���� Upon the other ba � it s uld n te t t rea n en � ,in hie anner. all ed y w y of ffir - tlve efense (l) that t r t 1 f11 d y petitioner fo t � years i 4~ to 951. lncl � ve, � taint with fraudJ an (2) t a this o t h no juris lc- tio to ar t 11 c n t e o hat h at nt ppeal was file out of t � the fore otng aete,� oll 1ng are t � atn 1sauea o reaolve a f t er or ~ot thla Court has ju1a lction to eter in t in- stant c���J aecon � whether or not respon nt�a r1 ht to ������ nd/or collect t eftc!ency inc tax for the years 1 45 to 19 1ncl a!ve , �� prescrlb dJ third. ether o not present ct! 1� suff1c1ent to conatt- 493 49t

- cD.Cr.IS � E � 261 - - :) tute J d cial ctton for the coll ction of taxes herein involv J and fourth , ho tUCh , if any, is the defici n y inc tax lia !11 y of ohol �o - ' p ny for th y 1 45 to 1 ;>l , clu ve? ith ap ct t o the fir t 1 � find that the Coll ctor no effort to co. out ith vi� dence in upport of hia cl th t th n tant app al is not eeanon bl � In f ct , r pond nt ms to h v totally aban oo d id {{ n not only f iled t discus th ntion atso r d d f n e in hi u � On th otter han t t tion for ev all g d f eta uf- . ficiel"lt o con er ourt ( � 1-15, juri diction on t 1& t t for v ) ch eta r rc y - tt n n r. Con- ntly, r llin no uff ci nt evi nc to r ut itio r �a lle tion of eta which ar ffic n o conf r this ourt r 0 the op - nion, Juri iction to 1c on it � ll n oc to p pon t cond nt 1u 0 ether or t r:f. ht of t t e Vor collect t fici cy inco t y ara 1 5 0 1 iv , apr cr � con rin t t y r or th n thre yea.rs af the c rr r fil d by petition r. It 1 n 11- t t t t 1e t ver period prov by ct on 1 (d) of h T X 1 it n the 115881 ent nd coll ction of !nco. t X ., 1!) ! t/'16

� 2l -l - ref r rely t th ~o11 t ., � y � ever, t he gove , fter � . lap � of a! peri � ay � 11 c llec 1 c1n ( peala, � � � ar 3~ J oJ.leeto va . l!:no , l v 1- � l ...7; 1 e or v � Zulue , �o. � 1 57} . oll t vs. o. l ov in 0 t p 10 ion w h ch judie! 1 coll ctlo of t xes ay - d $4Ctio � 331 nt :r:n v ue Code. In c e � er urn 1 ed, "int rna e ta - �� � !thin y l1" f :r: h fil� � 1, oce in court t � 11 ue ft r t � expu t1 uch ..>ec 1on X 0 ).. t er no e '"u n 11e or als r IU ulent turn nt to v � t t X ay �r in court for uch y as s en , t any t 1th1n t t f lsity, fr or l ). r x Co � � 0 v :r:, � 1 n e ass nt o y in� it in v nu x the.reo na in f t 0 0 it t!on t ov � � ch t X " y pr e odin court, t ly if un it year a he 5 s nt f h tX 2 (c) , T X ). "'l �� <l95

� 261 - 11 - o ing to the ca at ar , reapondent lleged th t the r turns file by pet! ion r f r the years 1945 to 19~1 were taint d 1th frau 1th inten to ev � the tax. o ver, eon& derlng1 aa !a lerein- aft r diacu d, that � find th evi c in uff!- clont or unsatiaf ctory to ~ o a findin th t peti- tion r filed fal or froudul nt returnG ith intent to eva t tax, are con traine to r j c res- pon ent �s co tention of apply1n the pr cri t ve perio o ten (10) y r pr cr d 1n ct1on 32 (a} ccordingly hold th t the statute of 1 1ta- t1on of fiv (5) y ar prov1 ed by s ct on 3 1 o ld a ply to lti r ' co tax ret rna o t � y r 1 4 o 1 ol. r er no d ' ut th o ol C ny d co al - t ntly en fil1n ts co for th y s 19 o 19 1 nd that th Collector th eorr G on - ing ic cy a aase nta th r� ly n u st 4 a. ctlon 331 o ode, nt at eov r only t 1 c te. turns f r 1 cluai n fo cor- h th r- in9 to t !nco tax � ld fore 1 at th al ty. ����� yo the th � ur for th for n- counting fro the t1oned years re fll � follo t tt C 1- lector ay no long r validly collect eit u- mary r judie 1 proc s, th 11 ged n y co � o nny fo t 496 r 1 to 1 7.

� 261 - 12- are1 t erefore,of t opini n. an 1 � that r a- pondent has le al a thority to collect tbr ju ie "al action only he alle d � ic � cy co 0 t s of - � nc1u iv � p titionor or he y a.ra l to �� � caus the s h d va ly � e � i till the .P riod pre cri d by ecti n 1. ith re pee lo tn thir issue, ohol 0 p ny contend& th sine "th pre nt p t:lt n 1 n or revi rou t no y t 1 yt by th� t. xpayer.," th oll or u t jud - cial action for c 1ectiun f taxe - volve in proceed! P r nt of the . tnat n � 0r cc di: J.� t oner, 0 revl ah ld ot flrta as 1 n to t j dici 1 cti cont .� 2( ) 0 ax ode r t col- ec tax. e f n �this theory not ell te en. I'he J d1ci 1 CtiOI � eo. t 0 ci i l c s u1 tit t ed y t ov r� nt to col- lect th ax t lso t c s 1h r th t xp y r t �� t in1tiat1v to cont t th v lidity of the of \ev nu � The o jeetive in oth c s G th ��t � validity and corr ctn as of e d ter- lnati n and c llect!on of the tax. Thus, a si ple cl 1a fil d by the ollector of I t rn 1 v nu a ain t th state of a d c as d �n a probate cas has co ize s tant unt to t judicial col- l c tio of t xes ( ollector vs. nn!e Laurie H ygo � 6 Phil. 520l. th other hand. in claim for r - 497

� 261 - 13 - 1 f n 1nst1tut d a ainst t e Coll ctor of Intern 1 � nu � t Court const r t t xpayer� � uff cien �ju ic! 1 ct!on or auit for r f nd t c l ct n of t on t rt of the (��� fbll. uga �st1te Dev. o., nc. v � o � btl. 2l6). I � � on the s e �� f � thi t,. C nat furt r th t t vo �r nt d n upon t cell t f � l!�v � it coul not h 0 0- � � 1n the ere tlo of ,is Court t r t Col- 49

1 1 51. c �t lc! .. 499

� 261 .. 15 - ved bo ver. that in ap1te f th 11 e n� ing aug eatt n o the C urt . c nsel f r pttiti ner r~fu � to adduce ev1 en proving the alle e incor- rect eas of esp nd nt ' a as a enta ag inat pet - tio er f tr the taxa le years 9 to 19 � tnclus ve . It i& a 11 � tablia rul tb t X nts � are pre u t!v ly cor ct. b nc 0 8$ 11& thou con tne s h $ t � urd n ~ ty to prove th t t he taid as east nts are rron us. ( u en to r % v � Court o� fax pp ls e o. L� l � ay ~ . 1 57; t r rovinctal uto Co� � I c . vs. Coll ct.or . G�� o. L� 741. ~anu 31, 1 ~6.} or v ou rea ons. t r fora . � shall di c s tb ~1 e s ant ~ p toly p oed tu c on der the def te :l.ney nt co er.ing t y r s 1 4a t o 19~ nc !ve. Con �dcrin th t p i i on r h s f i l d to point o t the error� of rea ondent. - atr 1 d ~o �leav ndistu b d th ction f th .L ttor in di !lowing c rta n n la .d oy the for :r in ta 1nc t X tur ns f r t h ye � 19 and 1� not t h t Co ol C ny app ntl y ct d o d fa h cl a t ln t � d d ct � on nd int � v l ve ~ n n ho spute 0 �� s di ll o d elat Cl n 1 48. 1 49 and 19 � in � c t s. i l or analogous to t oee deductio a c � rcinaf t er discus& d. cons dor for tho y ar 1 51 �~ p... op r d .. ductions in titi ner�a tnc . X urns . or OV � it ay a~n inti f i d f� 11o de- ducttona or 1948. l ob .in y .h~ 500 tl?t:J

1 '< 50t

� 261 � 17 - The Coll t or ai all t unt of 3. on hi f 1n s t'at 1 s t � 1� 1� 1 nc of th r rv for c lla 1� l tt or 19~1 in t - po � t , tre 1 th nt sr r to co r con in t li ility, 1sall t$ n t theory that ounta d p &it in a � � erve to o r co tin nt 11 ilit y ot t1 � ch ltabilitle co c t sup- y t �ollector 0 l r- ~t�' t titio to t f cor f tot 1 cr d!t 1n 1 1 fo 111ty" nd tr for t lly nt for d � it tf 19 1 fo r 502

� 261 - 18 - firs - h l f f t y r 1 :.>1 nd ohol Co pany having ae ually th~n 5 , 33.71 to c o r d s. hospit 1 nd f OS t o 1 gated c find t expl nat on o p tit on fo nd h a ount 0 nd 1ch agr it count in cords su flciently r - is of t t St ltS t � d uction. re � thar ~ io � ore. o t. � ld. t h t o ol c ny for i c t x purpo t uction n o ol c t.x r tur f r l9ol. thot 1 t 0 . 71. xp n s cl uct y 1 r e 1951. t:h Coli . ctor 1 0 h ount of a � � t i- up- 1 n 0 y ht 1 part repl c nts t t � y tr t � 1 t� auld � c liz j hr no �0 nt invol e � titio r con- 11 ca c u ��t� � pr c 0 r. �1 un of t titi er nt 0 'I n incl nt 1r of it 0 lntain 1n rliy - lei nt o � ~� n co ttion. enc � et 1 ar u h t t 503

1� CAS- � 261 -1 - 1 t ate n &s expens and should all d ct 0 - . n bj ct of repl c ents. ove nt rep e �� deduct! n � ttMt stand t rity o c � J'acob � ertens d ot : fG

- - � 2 1 � 505

c.r.ISA.l �n r, � 261 - 21 .. unting to 8 , 174. I w rely t o keep pet1- tioner' s ve ic le 1n eff c ! nt opeaating condition and i s cordingl y t � nature of a m nt en ce charge , a pu � alien to t e xtens!on or pro� longat t on of 1 fe f p t�t�one~ � s v t e l ~" his cone ua re po failure t~ s ow t t t he pose and eff ct t place ta e ot r han a proved y .. l ieve t at o 1 aa a .bU 9 t l u of ex nae r s lot anuf ct r n o. v. C ev. , he o er 1 �e cuedin ha c in u0 ghich nts the .6 1 f el a oil nt th el ctr c pl y tit on r �a n nc ho � Th c th t the ount of 144. 66 con t tut fu 1 d oil con u e in conn ct:lon ith t � lnt n nc of h 1nt n nc nd r p hop of ohol ny, he 1 11 � t.a co $t t t dc x- p n~ s b i09 O?-d1nary and n ces~ r � In r au f nd petit on r ot 1 bl for defie ncy co � t x s for the ye r 19 5, l 46 d 1947 c us t eir a nt nd collection h b en barred y th stat t of 1tat1ons ( ecs. 331 and 32oft T xCod ) , to Sect n 14 of epubl c ct o. 112 , th r 0 c ncy n resp ct of suc h tax � th r f ci cy nco t x sses nt for th y r 1 4 � 1 9 nd 1 50 , no evidene having b en ddue d t o d&stroy t he 506

� 2I -22- eorr r pon n �a et � n d � t in sai y � 0 f c cy tX t r to, or t 1 yr o v r, c th �d ne di close tp not for 1 4S. lfully 0 fr t y not 1 9. ndl � 1n nt r p nt of � 1� � �r ect tl Tax Co � I � it 11 rt 0 12. d� cc X 1�

CI � 261 � r� � CJ - 23 - c � o nd 1 1~ m t) p ct o th c m- r P n lty 0 . 2 .oo. . E. . t deci on app 1 ..r sho ld b � 8$ lt h r b � odlf d , nd th p t;a.t 0 r 1 - er d to pay to th Cellector o In n l v th r. of 46,3~ 6. ~ s defic i ncy nco t for t ye s 1948 , ";4 � n l. r.: � ~it out s c 1 pron ~ to cost. � � � la, J 1 1 p no , pt � � 50