Golden Donuts, Inc.
(GDI), the exclusive Philippine Franchisee of the global brand "Dunkin'
Donuts", flagrantly perpetrated fraudulent acts or criminal tax violations
that culminated to deficiency tax assessment amounting to P1.56 billion,
including increments, for year 2007, discovered and documented by Othello
Dalanon in his official capacity as former BIR Examiner.
Dalanon personally
reported GDI's omissions to Commissioner Henares and recommended to her the
criminal prosecution for tax evasion under the much-vaunted "Run After Tax
Evaders" program of the Bureau; but she intentionally did not pursue fraud
case against the company because its secretary - Marixi Prieto who also happens
to be the chairperson of the Philippine Daily Inquirer - is President Aquino's
friend, according to Deputy Commissioner Estela Sales.
Ms. Prieto talked
to Henares and BIR Regional Director (now Assistant Commissioner of Internal
Revenue) Nestor Valeroso, on different occasion, who both gave leniency to GDI.
The aforesaid
deficiency tax assessment obtained finality because GDI failed to file a VALID
PROTEST against the Formal Letter of Demand and Assessment Notice (FAN).
However, Henares
intentionally did not collect it, purportedly because representatives of GDI
complained to her that Dalanon's assessment was faulty. Thus, she ordered two
(2) re-investigations.
There is no LAW
that authorizes the commissioner to order two (2) re-investigations of a FINAL,
EXECUTORY and DEMANDABLE assessment.
Once the deficiency
tax assessment obtained finality, the right of the government to collect the
deficiency tax becomes absolute; thus, precludes the taxpayer from questioning
the correctness of the assessment and from raising any justification or defense
that would pave the way for a re-investigation.
She also claims
that the authority to decide and declare finality of a certain assessment is a
function vested by law upon the Commissioner of Internal Revenue.
Her assertion does
not find basis in LAW.
It is the LAW that
determines finality of a certain assessment as clearly provided under Revenue
Regulations No. 12-99 as amended by Revenue Regulations No. 18-2013 which the
commissioner herself promulgated, in relation to Section 228 of the 1997
National Internal Revenue Code (1997 Tax Code), as amended.
Her claim that
Dalanon's assessment was faulty is WRONG.
In fact, she was
not able to dispute Dalanon's assessment. What is very clear is that, while she
sows fears among taxpayers, bullies private and government workers, marginal
income earners, and insists on probing Supreme Court Justices; she fears,
coddles and lawyers for Dunkin' Donuts' local seller – a big-time tax evader.
Just to reiterate.
The P1.56 billion tax deficit of Dunkin' Donuts' franchisee has become DUE and
DEMANDABLE, thus, it already legally belongs to the FILIPINO people whom
PRESIDENT AQUINO considers as his "bosses", and therefore, Henares is
duty-bound to enforce collection thereof - but she refuses to.
GDI’s OMISSIONS THAT CULMINATED TO DEFICIENCY
TAX ASSESSMENT AMOUNTING TO P1.56 BILLION, INCLUDING INCREMENTS, FOR YEAR 2007
– DOCUMENTED BY OTHELLO DALANON:
1. GDI has two (2)
sets of books of accounts – one was the duly-registered hardbound
computer-generated books of accounts which were the bases of Dalanon’s
assessment; and the other was the unregistered not-permanently-bound
“manually-posted from original books of accounts”, records which GDI claims as
the bases of its Trial Balance for Financial Statements and Income Tax Return
purposes;
2. It supplied
false information on the tax return – the duly-registered books of accounts
reflected a net income amounting to P135.2 million while the tax return showed
a net loss of P44.9 million;
3. It substantially
under-declared sales on the tax return in two (2) instances:
3.1 Sales per
duly-registered books was P1.928 billion while the amount reflected on the tax
return was P1.031 billion – a substantial discrepancy (under-declaration)
amounting to P897 million;
The SUPREME COURT
ruled in the case of Paper Industries Corporation of the Philippines vs. Court
of Appeals, et al., 250 SCRA 434 that “where the books of accounts reflected a
sales or receipts higher than that reflected on the return, the books of
accounts should prevail. This is so, because the books of accounts are kept by
the taxpayer and are prepared under its control and supervision; and they
reflected what may be deemed to be admissions against interest.”
The representations
made by GDI in the CD and duly-registered books submitted and presented by it
to the Bureau for audit and examination amounted to admissions against its own
interest which it cannot disown or change at its convenience of pleasure.
3.2 Other
independent relevant documents, such as, but not limited to: Franchise
Agreement between Dunkin’ Donuts of America, Inc. and GDI, BIR returns, etc.,
further revealed that GDI’s sales topped P2.366 billion but recorded per
duly-registered books was only P1.928 billion – a substantial unrecorded and
consequently undeclared sales amounting to P438 million.
The information
contained in the aforesaid documents were utilized in further determining GDI’s
sales on the basis of the provisions of Section 5(A) of the 1997 Tax Code.
The method of
validation used by Othello Dalanon was already upheld by the COURT OF TAX
APPEALS in the case of Asia Coal Corporation vs. CIR (CTA Case No. 6803,
February 13, 2008), that “the respondent may utilize any kind of document, x x
x to determine the correct sales of the petitioner…”
All the above
enumerations are fraudulent acts or criminal tax violations covered by the RATE
(Run After Tax Evaders) Program of the Bureau; but Henares intentionally did
not pursue tax evasion case against the company.
Henares, in her position paper submitted to the
Office of the Ombudsman in connection with the formal complaint filed against
her by Othello Dalanon, failed to dispute the above-enumerated irregularities
perpetrated by GDI.
THE DEFICIENCY TAX ASSESSMENT AGAINST GDI
OBTAINED FINALITY.
The
deficiency tax assessment against GDI amounting to P1.56 billion, including
increments, for year 2007, obtained finality because GDI’s letter of protest
against the Formal Letter of Demand and Assessment Notice (FAN) was INVALID.
The alleged
letter of protest of GDI merely states “protest against PAN adopted in toto”.
It does not state the facts, the applicable law, rules and regulations, or
jurisprudence on which its protest was based. It is neither a request for
reconsideration nor reinvestigation.
The rules on
protesting an assessment is found in Section 3 subsection 3.1.5 of RR No.
12-99, as amended, that reads:
“Disputed
Assessment. – The taxpayer or his duly authorized representative may protest
administratively against the aforesaid formal letter of demand and assessment
notice within thirty (30) days from date of receipt thereof.
x x x
The taxpayer
shall state the FACTS, the applicable LAW, RULES and REGULATIONS or
JURISPRUDENCE on which his protest is based, otherwise, his protest shall be
considered VOID and WITHOUT FORCE AND EFFECT.
x x x
If the
taxpayer fails to file a VALID PROTEST against the formal letter of demand and
assessment notice within thirty (30) days from date of receipt thereof, the
assessment shall become FINAL, EXECUTORY and DEMANDABLE.”
The said
Regulations must be taken in relation to Section 228 of the 1997 Tax Code, as
amended, which reads:
“Protesting
an assessment. – Such assessment may be protested administratively by filing a
REQUEST FOR RECONSIDERATION or REINVESTIGATION within thirty (30) days from
receipt of the assessment in such form and manner as may be prescribed by
implementing rules and regulations. x x x otherwise, the assessment shall
become FINAL.”
Clearly,
what the law demands is a VALID administrative protest against the formal
letter of demand and assessment notice which required the taxpayer to comply
with the following:
(a) The protest must be through a REQUEST FOR RECONSIDERATION or
REINVESTIGATION;
(b) The protest must be in the form and manner as prescribed under RR
No. 12-99, as amended, which provides that said protest must state the FACTS,
the LAW, RULES and REGULATIONS, or JURISPRUDENCE on which the protest is based;
and
(c) Must be filed within thirty (30) days from receipt of the
assessment.
The COURT OF
TAX APPEALS in the case of Allied Banking Corporation vs. Commissioner of
Internal Revenue (CTA Case No. 4581, March 25, 1992, cited that, “[f]ailure to
comply with any or all of these requirements results in the assessment against
the taxpayer becoming final and unappealable.”
The letter of
protest should not just state “protest against PAN adopted in toto” because the
administrative protest required to be filed as an answer to the formal letter
of demand and assessment notice is distinct and not the same as the protest
filed against the PAN.
The COURT OF
TAX APPEALS emphasized in the case of Security Bank Corporation vs.
Commissioner of Internal Revenue (CTA Case No. 6564, November 8, 2006) and
further accentuated in the case of Bank of the Philippine Islands vs.
Commissioner of Internal Revenue (CTA Case No. 7397, April 9, 2008) that:
“[A] protest
to the preliminary assessment notice is not the same as the protest required to
be filed as an answer to the final assessment notice. In fact, a preliminary
assessment notice may or may not even be protested to by the taxpayer, and the
fact of non-protest shall not in any way make the preliminary assessment notice
final and unappealable. What is clear from Section 319-A of the Tax Code of
1977, as amended, is that failure on the part of the taxpayer to protest or
reply to a preliminary assessment notice paves the way for the issuance of a
final assessment notice. However, evident under said Section (now Section 228
of the 1997 Tax Code) is that failure on the part of the taxpayer to file a
VALID administrative protest through a REQUEST FOR RECONSIDERATION or
REINVESTIGATION on the final assessment notice, shall result in the finality of
the said FAN.”
The SUPREME
COURT in the case of Allied Banking Corporation vs. Commissioner of Internal
Revenue (G.R. no. 175097, February 5, 2010) heightened that:
“It is the
Formal Letter of Demand and Assessment Notice that must be administratively
protested or disputed within 30 days, and not the PAN.”
GDI, in its
INVALID letter of protest against the FAN, likewise claimed that the
assessments are null and void ab initio because it was allegedly issued in
rampant violation of the due process requirements prescribed under Section 228
of the Tax Code as implemented by RR No. 12-99.
GDI’s claim
is not true. Records will show that the due process requirements were promptly
observed. There were at least five (5) notices served to GDI either thru
personal delivery or by mail before the formal letter of demand and assessment
notice (FAN) was issued. In fact, it even contested the PAN as clearly admitted
in GDI’s invalid letter of protest against the FAN.
The COURT OF
TAX APPEALS in the case of Bank of the Philippine Islands vs. Commissioner of
Internal Revenue (CTA Case No. 7397, April 9, 2008), has had the occasion to
say: “[W]hen the petitioner received the final assessment notice and duly
protested the same, petitioner’s right to due process was properly protected
and observed.”
