CIR v CTA (1994)

CIR v CTA
GR No 106611, July 21, 1994

FACTS:
Citytrust filed a petition with the Court of Tax Appeals claiming the refund of its income tax overpayments for the
years 1983, 1984 and 1985 in the total amount of P19,971,745. The CIR could not present any evidence due to the
repeated failure of the tax credit/refund division of the BIR to transmit the records of the case and the investigation
report to the Solicitor General. The case was decided in favor of City Trust. Upon motion of reconsideration,
petitioner alleged that through an inter-office memorandum of the Tax Credit/Refund Division, dated August 8, 1991,
he came to know only that Citytrust had outstanding tax liabilities for 1984 in the amount of P56,588,740.91
representing deficiency income and business taxes.

ISSUES:
1. Whether the BIR was denied its day in court
2. Whether the CTA erred in denying petitioner’s supplemental motion for reconsideration alleging bringing to said
court’s attention the existence of deficiency income and business taxes

RULING:
1. Yes, the BIR is denied its day in court. When it was petitioner’s turn to present evident evidence, several
postponements were sought by its counsel, the Solicitor General, due to the unavailability of the necessary records
which were not transmitted by the Refund Audit Division of the BIR to said counsel. It was under such predicament
and in deference to the tax court that the counsel was constrained to submit the case for decision without presenting
any evidence. It is a long and firmly settled rule of law that the Government is not bound by the errors committed by
its agents.
2. Yes. The fact of such deficiency assessment is intimately related and inextricably intertwined with the right of the
bank. The private respondent cannot be entitled to refund and at the same time be liable for a deficiency tax
assessment for the same year. 
Posted by Victor Morvis 
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