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    Joshua Erik Madria
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    1) Citytrust Banking Corporation filed a claim for refund of excess income tax payments from 1983 to 1985 totaling 19.7 million pesos. 2) The Court of Tax Appeals granted the refund for 1984 and 1985 but denied it for 1983 due to prescription. 3) On appeal, the Commissioner of Internal Revenue argued Citytrust owed deficiency taxes for 1984, but this was denied as it was not raised earlier. 4) The Supreme Court remanded the case, finding the BIR was denied its day in court due to bureaucratic mistakes, and the deficiency claim related to the refund request so both issues should be resolved together.

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    CIR vs CA Digest

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    1) Citytrust Banking Corporation filed a claim for refund of excess income tax payments from 1983 to 1985 totaling 19.7 million pesos. 2) The Court of Tax Appeals granted the refund for 1984 and 1985 but denied it for 1983 due to prescription. 3) On appeal, the Commissioner of Internal Revenue argued Citytrust owed deficiency taxes for 1984, but this was denied as it was not raised earlier. 4) The Supreme Court remanded the case, finding the BIR was denied its day in court due to bureaucratic mistakes, and the deficiency claim related to the refund request so both issues should be resolved together.

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    758 views2 pages

    CIR Vs CA Digest

    Uploaded by

    Joshua Erik Madria
    1) Citytrust Banking Corporation filed a claim for refund of excess income tax payments from 1983 to 1985 totaling 19.7 million pesos. 2) The Court of Tax Appeals granted the refund for 1984 and 1985 but denied it for 1983 due to prescription. 3) On appeal, the Commissioner of Internal Revenue argued Citytrust owed deficiency taxes for 1984, but this was denied as it was not raised earlier. 4) The Supreme Court remanded the case, finding the BIR was denied its day in court due to bureaucratic mistakes, and the deficiency claim related to the refund request so both issues should be resolved together.

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    of 2

    G.R. No. 106611. July 21, 1994.

    *
    COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. COURT OF APPEALS,
    CITYTRUST BANKING CORPORATION and COURT OF TAX APPEALS, respondents.

    FACTS:
    - Herein private respondent corporation filed a claim for refund with the Bureau of Internal
    Revenue (BIR) in the amount of P19,971,745,00 representing the excess income tax
    overpayments for the years 1983, 1984 and 1985;
    - In order to interrupt the running of the prescriptive period, Citytrust filed a petition with
    the Court of Tax Appeals;
    - The Solicitor General, for and in behalf of therein respondent commissioner asserts that
    the mere averment that Citytrust incurred a net loss in 1985 does not ipso facto merit a
    refund. Moreover, the right to claim the same has prescribed with respect to income tax
    payments prior to August 28, 1984 since the petition was filed only on August 28, 1986;
    - On February 20, 1991, the case was submitted for decision since herein petitioner could not
    present any evidence by reason of the repeated failure of the Tax Credit/ Refund Division of
    the BIR to transmit the records of the case, as well as the investigation report thereon, to
    the Solicitor General.

    RULING OF THE COURT OF TAX APPEALS:


    - Petitioner is entitled to a refund but only for the overpaid taxes incurred in 1984 and 1985
    in the amount of P13,314,506.14. The refundable amount as shown in its 1983 income tax
    return is hereby denied on the ground of prescription;
    - The order for refund was based on the following findings of the Court of Tax Appeals:
    o the fact of withholding has been established by the statements and certificates of
    withholding taxes accomplished by herein private respondent’s;
    o no evidence was presented which could effectively dispute the correctness of the
    income tax return;
    o no deficiency assessment was issued by herein petitioner;
    o there was an audit report submitted by the BIR Assessment Branch, recommending
    the refund of overpaid taxes.
    - Motion for reconsideration was thereafter filed, wherein it was contended for the first time
    that herein private respondent had outstanding unpaid deficiency income taxes for 1984 in
    the amount of P56,588,740.91;
    - CTA denied the motions since that matter was not raised in the pleadings, the same cannot
    be considered, invoking therefor the salutary purpose of the omnibus motion rule which is
    to obviate multiplicity of motions and to discourage dilatory pleadings;
    - Hence a petition for review was filed with CA

    RULING OF CA:
    - CA affirmed the judgment of CTA
    - Petitioner elevated the case to SC

    ISSUE:
    - WON respondents should be entitled for a tax refund despite of deficiency tax.

    HELD:
    - After a careful review of the records, we find that it would be better subserved by the remand
    of this case to the Court of Tax Appeals for further proceedings;
    - The BIR, represented herein by petitioner Commissioner of Internal Revenue, was denied
    its day in court by reason of the mistakes and/or negligence of its officials and employees;
    - When it was herein petitioner’s turn to present evidence, several postponements were
    sought by its counsel, the Solicitor General, due to the unavailability of the necessary
    records;
    - It is a long and firmly settled rule of law that the Government is not bound by the errors
    committed by its agents. In the performance of its governmental functions, the State cannot
    be estopped by the neglect of its agent and officers
    - Nowhere is the aforestated rule is more true than in the field of taxation. It is axiomatic
    that the Government cannot and must not be estopped particularly in matters involving
    taxes. Taxes are the lifeblood of the nation through which the government agencies continue
    to operate and with which the State effects its functions for the welfare of its constituents.
    The errors of certain administrative officers should never be allowed to jeopardize the
    Government’s financial position, especially in the case at bar where the amount involves
    millions of pesos the collection whereof, if justified, stands to be prejudiced just because of
    bureaucratic lethargy;
    - It is also worth noting that the Court of Tax Appeals erred in denying petitioner’s motion
    for reconsideration alleging and bringing to said court’s attention the existence of the
    deficiency income since respondent cannot be entitled to refund and at the same time be
    liable for a tax deficiency assessment for the same year;
    - The deficiency assessment, although not yet final, created a doubt as to and constitutes a
    challenge against the truth and accuracy of the facts stated in said return which, by itself
    and without unquestionable evidence, cannot be the basis for the grant of the refund;
    - Section 82, Chapter IX of the National Internal Revenue Code of 1977, which was the
    applicable law when the claim of Citytrust was filed, provides that “(when an assessment is
    made in case of any list, statement, or return, which in the opinion of the Commissioner of
    Internal Revenue was false or fraudulent, no tax collected under such assessment shall be
    recovered by any suits unless it is proved that the said list, statement, or return was not
    false nor fraudulent;
    - Moreover, to grant the refund without determination of the proper assessment and the tax
    due would inevitably result in multiplicity of proceedings or suits;
    - Thus, to avoid multiplicity of suits and unnecessary difficulties or expenses, it is both
    logically necessary and legally appropriate that the issue of the deficiency tax assessment
    against Citytrust be resolved jointly with its claim for tax refund, to determine once and for
    all in a single proceeding the true and correct amount of tax due or refundable.
    - WHEREFORE, the judgment of respondent Court of Appeals in CA-G.R. SP No. 26839 is
    hereby SET ASIDE and the case at bar is REMANDED to the Court of Tax Appeals for
    further proceedings and appropriate action

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