G.R. No. 106611 July 21, 1994COMMISSIONER OF INTERNAL REVENUE,
COURT OF APPEALS, CITYTRUST BANKING CORPORATION and COURT OF TAX APPEALS,
respondents.Citytrust filed a claim for refund with BIR in the amount of P19,971,745.00 representing the allegedoverpayment of income tax as computed in its final income tax return for the calendar year endingDecember 31, 1985. To interrupt the prescriptive period, Citytrust filed a petition with the Court of TaxAppeals, claiming the refund of its income tax overpayments for the years 1983, 1984 and 1985. TheOSG in their answer contended that the claim of Citytrust from 1983 was not properly documented andthat even if they are entitled for such claim the right to claim the same has prescribed with respect toincome tax payments prior to August 28, 1984, pursuant to Sections 292 and 295 of the National InternalRevenue Code of 1977, as amended, since the petition was filed only on August 28, 1986. The case wassubmitted for decision based solely on the pleadings and evidence submitted by herein privaterespondent Citytrust because the petitioner failed to present evidence due to the failure of TaxCredit/Refund Division of the BIR to transmit the records of the case, as well as the investigation reportthereon, to the Solicitor General. The petitioner filed a motion to suspend the proceedings but the samewas denied. The case was decided and the Tax court ruled in ordering BIR to refund the overpaid tax forthe year 1984 and 1985 only. Petitioner filed a motion for reconsideration contending that Citytrust hasan outstanding tax liability amounting to P56M in 1984. Both parties filed a motion for reconsiderationwhich was denied by the CA and the court affirmed the decision of CTA. Hence this petition.
Whether or not the state is bound to the mistakes committed by its agents
It is a long and firmly settled rule of law that the Government is not bound by the errorscommitted by its agents.
In the performance of its governmental functions, the State cannot be estoppedby the neglect of its agent and officers. Although the Government may generally be estopped through theaffirmative acts of public officers acting within their authority, their neglect or omission of public duties asexemplified in this case will not and should not produce that effect.Nowhere is the aforestated rule more true than in the field of taxation. It is axiomatic that the Governmentcannot and must not be estopped particularly in matters involving taxes.
Taxes are the lifeblood of thenation through which the government agencies continue to operate and with which the Stateeffects its functions for the welfare of its constituents.
The errors of certain administrative officersshould never be allowed to jeopardize the Government's financial position, especially in the case at barwhere the amount involves millions of pesos the collection whereof, if justified, stands to be prejudiced just because of bureaucratic lethargy. Wherefore the Judgment of CA is hereby set aside and the case isremanded to CTA