CIR v.

CA, 240 SCRA 368

On 22 August 1986, during the period when the President of the Republic still wielded legislative
powers, Executive Order 41 was promulgated declaring a one-time tax amnesty on unpaid income taxes,
later amended to include estate and donor’s taxes and taxes on business, for the taxable years 1981 to
1985.

Availing itself of the amnesty, R.O.H. Auto Products Philippines Inc., filed, in October 1986 and
November 1986, its Tax Amnesty Return and Supplemental Tax Amnesty Return respectively, and paid
the corresponding amnesty taxes due. Prior to this availment, the Commissioner of Internal Revenue, in
a communication received by the company on 13 August 1986, assessed the latter deficiency income
and business taxes for its fiscal years ended 30 September 1981 and 30 September 1982 in an aggregate
amount of P1,410,157.71. The taxpayer wrote back to state that since it had been able to avail itself of
the tax amnesty, the deficiency tax notice should forthwith be cancelled and withdrawn.

The request was denied by the Commissioner, in his letter of 22 November 1988, on the ground that
Revenue Memorandum Order 4-87, dated 09 February 1987, implementing EO 41, had construed the
amnesty coverage to include only assessments issued by the Bureau of Internal Revenue after the
promulgation of the executive order on 22 August 1986 and not to assessments theretofore made.

The company appealed the Commissioner’s denial to the Court of Tax Appeals. Ruling for the taxpayer,
the tax court held that the Commissioner failed to present any case or law which proves than an
assessment can withstand or negate the force of a tax amnesty.

On appeal by the Commissioner to the Court of Appeals, the decision of the tax court was affirmed.
Hence, the present petition.

ISSUE:

Whether or not the the deficiency assessments were extinguished by reason of respondent’s availment
of the tax amnesty.

whether or not the position taken by the Commissioner coincides with the meaning and intent of
executive Order No. 41.

RULING:

Yes, as the scope of the amnesty covers the unpaid income taxes for the years 1981 to 1985. If, as the
Commissioner argues, Executive Order No. 41 had not been intended to include 1981-1985 tax liabilities
already assessed (administratively) prior to August 22, 1986, the law could have simply so provided in its
exclusionary clauses. It did not. The conclusion is unavoidable, and it is that the executive order has
been designed to be in the nature of a general grant of tax amnesty subject only to the
cases specifically excepted by it.

Further, the law provides that, upon full compliance with the conditions of the tax amnesty and the
rules and regulations issued pursuant to this Executive order, the taxpayer shall be relieved of any
income tax liability on any untaxed income from January 1, 1981 to December 31, 1985, including
increments thereto and penalties on account of the non-payment of the said tax. Civil, criminal or
administrative liability arising from the non-payment of the said tax, which are actionable under the
National Internal Revenue Code, as amended, are likewise deemed extinguished.

Lastly, by its very nature, a tax amnesty, being a general pardon or intentional overlooking by the State
of its authority to impose penalties on persons otherwise guilty of evasion or violation of a revenue or
tax law, partakes of an absolute forgiveness or waiver by the Government of its right to collect what
otherwise would be due it, and in this sense, prejudicial thereto, particularly to give tax evaders, who
wish to relent and are willing to reform a chance to do so and thereby become a part of the new society
with a clean slate. (Republic vs. Intermediate Appellate Court. 196 SCRA 335, 340 [1991] citing
Commissioner of Internal Revenue vs. Botelho Shipping Corp., 20 SCRA 487) To follow [the restrictive
application of Revenue Memorandum Order No. 4-87 pressed by petitioner Commissioner would be to
work against the raison d'etre  of E.O. 41, as amended, i.e., to raise government revenues by
encouraging taxpayers to declare their untaxed income and pay the tax due thereon