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RIZAL COMMERCIAL BANKING CORPORATION (petitioner) v CIR (respondent) April 24 2007 | Ynares-Santiago, J. | Leigh Remedies SUPERFACTS!

CTA denied RCBCs petition for review, and RCBC did not file a MR or an appeal. RCBC then filed a petition for relief from judgment on the ground of excusable negligence but this was denied by the CTA. The SC said that first, RCBC was not denied due process when its petition for relief was denied because it was given ample opportunity to be heard, and the negligence it alleged was not excusable. Second, even if the petition for relief was granted, the action for the cancellation of its assessments had already prescribed. According to the law, If the protest (against the tax) is denied in whole or in part, or is not acted upon within 180 days from submission of documents, the taxpayer may appeal to the CTA within 30 days from receipt of the said decision, or from the lapse of the 180-day period; otherwise the decision shall become final, executory and demandable.

The assignment is the MR. The first part of this digest will be the original case decided on June 16 2006. July 5 2001: RCBC received a Formal Letter of Demand dated May 25 2001 from CIR for its tax liabilities for Gross Onshore Tax in the amount of P53,998,428.29 and Documentary Stamp Tax for its Special Savings Placements in the amount of P46,717,952.76, for the taxable year 1997. July 20: RCBC filed a protest letter/request for reconsideration/reinvestigation pursuant to Section 228 of the NIRC. As the protest was not acted upon by the CIR, RCBC filed on April 30, 2002 a petition for review with the CTA for the cancellation of the assessments. July 15 2003: CIR filed a motion to resolve the issue of CTAs jurisdiction, which was granted by the CTA in a resolution dated September 10 2003. The petition for review was dismissed because it was filed beyond the 30-day period following the lapse of 180 days from RCBCS submission of documents in support of its protest, as provided under Sec. 228 of the NIRC and Section 11 of RA 1125 (Law Creating the Court of Tax Appeals) RCBC did not file a MR or an appeal to the CTA En Banc from the dismissal of its petition for review. Thus, the September 10 2003 Resolution became final and executory on October 1 2003 and Entry of Judgment was made on December 1 2003. CIR sent a Demand Letter to RCBC for the payment of the deficiency tax assessments. February 20 2004: RCBC filed a Petition for Relief from Judgment on the ground of excusable negligence of its counsels secretary who allegedly misfiled and lost the September 10 2003 Resolution. The CTA Second Division set the case for hearing on April 2 2004, but on May 3 the CTA Second Division rendered a Resolution denying RCBCs Petition for Relief from Judgment. RCBCs MR was denied in a Resolution dated November 5, 2004, hence it filed a petition for review with the CTA En Banc, which affirmed the CTA. RCBCs contention: it was denied due process when it was not given the opportunity to be heard to prove that its failure to file a MR or appeal from the dismissal of its petition for review was due to the failure of its employee to forward the copy of the September 10, 2003 Resolution, which constitutes excusable negligence. ISSUE: Should RCBCs petition for relief have been denied, even if based on a technicality? YES Considering that the subject assessment, insofar as it involves alleged deficiency DST on special savings accounts, is an issue affecting all members of the banking industry, should RCBC have been afforded an equal opportunity to fully litigate the issue and have the case determined on its merits rather than on a mere technicality? RULING: CTA decision AFFIRMED. ON DUE PROCESS Relief from judgment under Rule 38 of the Rules of Court is a legal remedy that is allowed only in exceptional cases whereby a party seeks to set aside a judgment rendered against him by a court whenever he was unjustly deprived of a hearing, or was prevented from taking an appeal, because of fraud, accident, mistake or

excusable neglect. As long as a party is given the opportunity to defend his interests in due course, he would have no reason to complain, for it is this opportunity to be heard that makes up the essence of due process. The essence of due process is a hearing before conviction and before an impartial and disinterested tribunal, but due process does not always require a trial-type proceeding. The essence of due process is to be found in the reasonable opportunity to be heard and submit any evidence one may have in support of ones defense. "To be heard" does not only mean verbal arguments in court; one may be heard also through pleadings. Where opportunity to be heard, either through oral arguments or pleadings, is accorded, there is no denial of procedural due process. (Batongbakal v Zafra) The CTA set the case for hearing on April 2 2004 after the filing by RCBC of its petition for relief from judgment. RCBCs counsel was present on the scheduled hearing and in fact orally argued its petition. Moreover, after the CTA dismissed the petition for relief from judgment, RCBC filed a MR and the court further required both parties to file their respective memorandum. Indeed, RCBC was not denied its day in court considering the opportunities given to argue its claim. Relief cannot be granted on the flimsy excuse that the failure to appeal was due to the neglect of RCBCs counsel. Otherwise, all that a losing party would do to salvage his case would be to invoke neglect or mistake of his counsel as a ground for reversing or setting aside the adverse judgment, thereby putting no end to litigation. Negligence to be "excusable" must be one which ordinary diligence and prudence could not have guarded against and by reason of which the rights of an aggrieved party have probably been impaired. RCBCs former counsels omission could hardly be characterized as excusable, much less unavoidable. RCBCs counsel failed to check periodically, as an act of prudence and diligence, the status of the pending case. The fact that counsel allegedly had not renewed the employment of his secretary, thereby making the latter no longer attentive or focused on her work, did not relieve him of his responsibilities to his client. It is a problem personal to him which should not in any manner interfere with his professional commitments. In exceptional cases, when the mistake of counsel is so palpable that it amounts to gross negligence, this Court affords a party a second opportunity to vindicate his right. But this opportunity is unavailing in the case at bar, especially since petitioner had squandered the various opportunities available to it at the different stages of this case. ON PRESCRIPTION Assuming ex gratia argumenti that the negligence of RCBCs counsel is excusable, still the petition must fail. Even if the petition for relief from judgment would be granted, RCBC will not fare any better if the case were to be returned to the CTA since its action for the cancellation of its assessments had already prescribed. RCBC protested the assessments pursuant to Section 228 of the NIRC, which provides:
SEC. 228. Protesting of Assessment.- xxx xxxx Within a period to be prescribed by implementing rules and regulations, the taxpayer shall be required to respond to said notice. If the taxpayer fails to respond, the Commissioner or his duly authorized representative shall issue an assessment based on his findings. Such assessment may be protested administratively by filing a request for reconsideration or reinvestigation within 30 days from receipt of the assessment in such form and manner as may be prescribed by implementing rules and regulations. Within 60 days from filing of the protest, all relevant supporting documents shall have been submitted; otherwise, the assessment shall become final. If the protest is denied in whole or in part, or is not acted upon within 180 days from submission of documents, the taxpayer adversely affected by the decision or inaction may appeal to the Court of Tax Appeals within 30 days from receipt of the said decision, or from the lapse of the 180-day period; otherwise the decision shall become final, executory and demandable. (Emphasis supplied)

Following the periods provided, from July 20 2001 (date of RCBCs filing of protest) it had until September 18 2001 to submit relevant documents and from September 18 2001, the Commissioner had until March 17 2002 to issue his decision. As admitted by RCBC, the protest remained unacted by the CIR. Therefore, it had until April 16 2002 within which to elevate the case to this court. Thus, when RCBC filed its Petition for Review on April 30, 2002, the same is outside the 30-day period. As provided in Section 228, the failure of a taxpayer to appeal from an assessment on time rendered the assessment final, executory and demandable. Consequently, RCBC is precluded from disputing the correctness of the assessment. While the right to appeal a decision to the CTA is merely a statutory remedy, the requirement that it must be brought within 30 days is jurisdictional. If a statutory remedy provides as a condition precedent that the action to must be commenced within a prescribed time, such requirement is jurisdictional and failure to comply therewith may be raised in a motion to dismiss (Ker & Company, Ltd. v CTA). Failure to comply with the 30-day statutory period would bar the appeal and deprive the Court of Tax Appeals of its jurisdiction to entertain and determine the correctness of the assessment. MOTION FOR RECONSIDERATION DENIED! RCBC argument #1: its counsels neglect in not filing the petition for review within the reglementary period was excusable, as the counsels secretary misplaced the Resolution, hence the counsel was not aware of its issuance and that it had become final and executory. SC: (same as original decision) Relief cannot be granted on the flimsy excuse that the failure to appeal was due to the neglect of petitioners counsel. Negligence to be "excusable" must be one which ordinary diligence and prudence could not have guarded against and by reason of which the rights of an aggrieved party have probably been impaired. Petitioners former counsels omission could hardly be characterized as e xcusable RCBC argument #2: the case should have been re-opened considering that it was allegedly not accorded its day in court when the CTA dismissed its petition for review for late filing. The rules of procedure are intended to help secure, not override, substantial justice. SC: If indeed there was negligence, it would be on the part of RCBCs counsel, and his negligence cannot support RCBCs claim for relief from judgment. Besides, tax assessments by tax examiners are presumed correct and made in good faith, and all presumptions are in favor of the correctness of a tax assessment unless proven otherwise. ALSO, RCBCs failure to file a petition for review with the CTA within the statutory period rendered the assessment final, executory and demandable, thereby precluding it from interposing the defenses of legality or validity of the assessment and prescription of the Governments right to assess. The CTA is a court of special jurisdiction and can only take cognizance of such matters as are clearly within its jurisdiction. Section 7 of RA 9282, amending RA 1125, otherwise known as the Law Creating the Court of Tax Appeals, provides:
Sec. 7. Jurisdiction. The CTA shall exercise: (a) Exclusive appellate jurisdiction to review by appeal, as herein provided: (1) Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the National Internal Revenue or other laws administered by the Bureau of Internal Revenue; (2) Inaction by the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the National Internal Revenue Code or other laws administered by the Bureau of Internal Revenue, where the National Internal Revenue Code provides a specific period of action, in which case the inaction shall be deemed a denial;

The Court also cited Rules 4 (Jurisdiction of the Court) and 8 (Procedure in Civil Cases) (sorry copy pastin g)
Rule 4, Sec. 3. Cases Within the Jurisdiction of the Court in Divisions. The Court in Divisions shall exercise: (a) Exclusive original or appellate jurisdiction to review by appeal the following:

(1) Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the National Internal Revenue Code or other laws administered by the Bureau of Internal Revenue; (2) Inaction by the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the National Internal Revenue Code or other laws administered by the Bureau of Internal Revenue, where the National Internal Revenue Code or other applicable law provides a specific period for action: Provided, that in case of disputed assessments, the inaction of the Commissioner of Internal Revenue within the one hundred eighty day-period under Section 228 of the National Internal Revenue Code shall be deemed a denial for purposes of allowing the taxpayer to appeal his case to the Court and does not necessarily constitute a formal decision of the Commissioner of Internal Revenue on the tax case; Provided, further, that should the taxpayer opt to await the final decision of the Commissioner of Internal Revenue on the disputed assessments beyond the one hundred eighty day-period abovementioned, the taxpayer may appeal such final decision to the Court under Section 3(a), Rule 8 of these Rules; and Provided, still further, that in the case of claims for refund of taxes erroneously or illegally collected, the taxpayer must file a petition for review with the Court prior to the expiration of the two-year period under Section 229 of the National Internal Revenue Code; Rule 8, Sec. 3. Who May Appeal; Period to File Petition. (a) A party adversely affected by a decision, ruling or the inaction of the Commissioner of Internal Revenue on disputed assessments or claims for refund of internal revenue taxes, or by a decision or ruling of the Commissioner of Customs, the Secretary of Finance, the Secretary of Trade and Industry, the Secretary of Agriculture, or a Regional Trial Court in the exercise of its original jurisdiction may appeal to the Court by petition for review filed within thirty days after receipt of a copy of such decision or ruling, or expiration of the period fixed by law for the Commissioner of Internal Revenue to act on the disputed assessments. In case of inaction of the Commissioner of Internal Revenue on claims for refund of internal revenue taxes erroneously or illegally collected, the taxpayer must file a petition for review within the two-year period prescribed by law from payment or collection of the taxes. (n)

It is clear that the jurisdiction of the CTA has been expanded to include not only decisions or rulings but also inaction of the CIR. The decisions, rulings or inaction of the CIR are necessary in order to vest the CTA with jurisdiction to entertain the appeal, provided it is filed within 30 days after the receipt of such decision or ruling, or within 30 days after the expiration of the 180-day period fixed by law for the CIR to act on the disputed assessments. This 30-day period within which to file an appeal is jurisdictional and failure to comply therewith would bar the appeal and deprive the CTA of its jurisdiction to entertain and determine the correctness of the assessments. In case the CIR failed to act on the disputed assessment within the 180-day period from date of submission of documents, a taxpayer can either: 1) file a petition for review with the CTA within 30 days after the expiration of the 180-day period; or 2) await the final decision of the CIR on the disputed assessments and appeal such final decision to the CTA within 30 days after receipt of a copy of such decision. However, these options are mutually exclusive, and resort to one bars the application of the other. In the instant case, the CIR failed to act on the disputed assessment within 180 days from date of submission of documents. Thus, RCBC opted to file a petition for review before the CTA. Unfortunately, the petition for review was filed out of time, i.e., it was filed more than 30 days after the lapse of the 180-day period. Consequently, it was dismissed by the CTA for late filing. RCBC did not file a MR or make an appeal; hence, the disputed assessment became final, demandable and executory. RCBC cannot now claim that the assessment is not yet final as it remained unacted upon by the CIR. After availing the first option, i.e., filing a petition for review which was however filed out of time, RCBC cannot successfully resort to the second option, i.e., awaiting the final decision of the CIR and appealing the same to the CTA. Lastly, RCBC is raising the issue of prescription for the first time in the instant MR. Although the same was raised in the petition for review, it was dismissed for late filing. No MR was filed. Thereafter, RCBC filed a petition for relief from judgment, but failed to raise the issue of prescription therein. After its petition was denied, RCBC filed a petition for review before this Court without raising the issue of prescription. Issues and arguments not adequately brought to the attention of the lower court need not be considered by the reviewing court as they cannot be raised for the first time on appeal, much more in a MR as in this case.