Facts: CTA ordered CIR to grant a refund to Citytrust its overpaid income taxes for 1984 and 1985, but denied its claim for the alleged refundable amount reflected in its 1983 income tax return on the ground of prescription. CA affirmed.
Private respondent corporation filed a claim for refund with the BIR the alleged aggregate of the excess of its carried-over total quarterly payments over the actual income tax due, plus carried-over withholding tax payments on government securities and rental income. In order to interrupt the running of the prescriptive period, Citytrust filed a petition with the CTA.
Petitioner filed with the tax court a manifestation and motion praying for the suspension of the proceedings in the said case on the ground that the claim of Citytrust for tax refund was already being processed by the Tax Credit/Refund Division of the BIR, and that said bureau was only awaiting the submission by Citytrust of the required confirmation receipts which would show whether or not the Citytrust filed an opposition thereto, contending that since the CTA already acquired jurisdiction over the case.
The tax court denied the motion to suspend proceedings on the ground that the case had already been submitted for decision. The court ruled that petitioner is entitled to a refund but only for the overpaid taxes incurred in 1984 and 1985.
The order for refund was based on the following findings of the CTA: (1) the fact of withholding has been established by the statements and certificates of withholding taxes accomplished by herein private respondent’s withholding agents, the authenticity of which were neither disputed nor controverted by herein petitioner; (2) no evidence was presented which could effectively dispute the correctness of the income tax return filed by herein respondent corporation and other material facts stated therein; (3) no deficiency assessment was issued by herein petitioner; and (4) there was an audit report submitted by the BIR Assessment Branch, recommending the refund of overpaid taxes for the years concerned, which enjoys the presumption of regularity in the performance of official duty.
SolGen and filed a motion for reconsideration but it was denied. CA affirmed CTA’s decision.
Issue: Whether or not respondent court erred in affirming the grant of the claim for refund of Citytrust, considering that, firstly, said private respondent failed to prove and substantiate its claim for such refund; and, secondly, the bureau’s findings of deficiency income and business tax liabilities against private respondent for the year 1984 bars such payment.
Held: Despite the filing of the aforementioned initiatory petition with the CTA, the Tax Refund Division of the BIR still continued to act administratively on the claim for refund previously filed therein, instead of forwarding the records of the case to the CTA as ordered.
It is a long and firmly settled rule of law that the Government is not bound by the errors committed by its agents. In the performance of its governmental functions, the State cannot be estopped by the neglect of its agent and officers. Although the Government may generally be estopped through the affirmative acts of public officers acting within their authority, their neglect or omission of public duties as exemplified in this case will not and should not produce that effect.
CTA erred in denying petitioner’s supplemental motion for reconsideration alleging and bringing to said court’s attention the existence of the deficiency income and business tax assessment against Citytrust. The fact of such deficiency assessment is intimately related to and inextricably intertwined with the right of respondent bank to claim for a tax refund for the same year. To award such refund despite the existence of that deficiency assessment is an absurdity and a polarity in conceptual effects. Herein private respondent cannot be entitled to refund and at the same time be liable for a tax deficiency assessment for the same year.
The grant of a refund is founded on the assumption that the tax return is valid, that is, the facts stated therein are true and correct. The deficiency assessment, although not yet final, created a doubt as to and constitutes a challenge against the truth and accuracy of the facts stated in said return which, by itself and without unquestionable evidence, cannot be the basis for the grant of the refund.
SC remanded the case at bar to the CTA for further proceedings and appropriate action.
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