The Supreme Court has admonished the Bureau of Internal Revenue for violating its rules on waiver of the prescriptive period to assess and collect taxes that almost cost the government more than P313 million in a tax collection case involving mobile telephone system operator Next Mobile Inc.
The Court’s Third Division through Associate Justice Presbitero Velasco Jr. made the admonition, but nonetheless granted the petition filed by the BIR seeking the reversal of the Court of Appeals decision that nullified its P313.33-million tax assessment I against Next Mobile for having been issued beyond the three-year prescriptive period provided under the law.
The tax assessment represents deficiency income tax, final withholding tax, expanded withholding tax, increments for late remittance of taxes withheld, and compromise penalty for failure to file returns/late filing/late remittance of taxes withheld for the taxable year ending December 31, 2001.
Although it granted BIR’s petition, the Court chided the tax collection agency for gross negligence amounting to “malice and bad faith” in honoring Next Mobile’s waiver of the statute of limitations, despite its failure to comply with the provisions of Revenue Memorandum Order No. 20-90 on the proper execution of the waiver of statute of limitations under the National Internal Revenue Code and Revenue Delegation Authority Order No. 05-01.
“Finally, the Court cannot tolerate the highly suspicious situation. In this case, the taxpayer, on the one hand, after voluntarily executing waivers, insisted on their invalidity by raising the very same defects it caused,” the SC stressed.
“On the other hand, the BIR miserably failed to exact from respondent compliance with its rules . . . Moreover, the BIR was so lax such that it seemed that it consented to the mistakes in the waivers,” the high court lamented.
The tribunal said that such situation is dangerous and open to abuse by unscrupulous taxpayers who intend to escape their responsibility to pay taxes by hiding behind technicalities.
Because of this, the SC recommended to the BIR leadership to address this kind of negligence of the agency by imposing administrative liabilities against those officers responsible for the errors.
In the case of Next Mobile, the SC noted that it executed waivers five times from March to October of 2005 in order to extend the prescriptive period of assessment for its taxes due.
The BIR, for its part, honored the waivers despite not being valid as they were executed without a notarized board authority; the dates of acceptance by the BIR were not indicated therein; and the fact of receipt by respondent of its copy of the second waiver was not indicated on the face of the original second waiver, the tribunal said.
The high court pointed out that the BIR violated its own rules considering that under RDAO 05-01, it is the duty of the authorized revenue official to ensure that the waiver is duly accomplished and signed by the taxpayer or his authorized representative before affixing his signature to signify acceptance of the same.
The rules also instructs that in case the authority is delegated by the taxpayer to a representative, the concerned revenue official shall see to it that such delegation is in writing and duly notarized.
Furthermore, RDAO 05-01 mandates that the waiver should not be accepted by the concerned BIR office and official unless duly notarized.
However, despite the defects, both parties continued dealing with each other on the strength of the waivers without bothering to rectify the said infirmities, the tribunal stressed.
The tribunal noted that the stringent requirements in RMO 20-90 and RDAO 05-01 are in place because there were formulated by the BIR.
However, instead of strictly enforcing its provisions, the BIR violated the mandates of its very own issuances.