REPUBLIC OF THE PHILIPPINES

caun al Tax APpeals

QUEZON CITY
ENBANC
COMMISSIONER OF INTERNAL CT A EB No. 720
REVENUE, (CTA Case Nos. 6921 and 7172)
Petitioner,
Present:

ACOSTA, P.J.
- versus - CASTANEDA, JR. ,
BAUTISTA,
UY,
CASANOVA,
IMPSA CONSTRUCTION PALANCA-ENRIQUEZ,
CORPORATION, FASON-VICTORINO,
Respondent. MINDARO-GRULLA, and
COT ANGCO-MANALAST AS, JJ.

Promulgated:
twlf~~~
IAN 0 2 2012 /,G"'p 1'- ~ .
X-------------------------------------------------------------------------------------------------------------------------X

DECISION
UY, d_.:

In this Petition for Review filed on February 10, 2011 , the Commissioner of

Internal Revenue prays for the reversal and setting aside of the Amended

Decision dated September 3, 2010 and the Resolution dated January 11 , 2011 ,1

both rendered by the Special First Division of this Court in CTA Case Nos. 6921

and 7172, entitled "lmpsa Construction Corporation, petitioner, vs. Commissioner t

1
Ponencia of Associate Justice Love ll R. Bautista, and concurred by Chairperson and Presiding Justice
Ernesto D. Acosta and Associate Justice Caesar A. Casanova of the Special First Division of this Court,
Docket, pp. 21 to 38.
DEC ISIO N
CT A EB No. 720
Page 2 of 18

of Internal Revenue, respondent", the dispositive portions of which respectively

read :

Amended Decision dated September 3, 2010:

"WHEREFORE, petitioner's Motion for Reconsideration is

hereby PARTIALLY GRANTED and the assailed Decision
promulgated on January 5, 2010 is hereby MODIFIED. Accordingly,
respondent is hereby ORDERED TO REFUND to petitioner the
amount of FIFTY-FOUR MILLION TWO HUNDRED SIXTY
THOUSAND FOUR HUNDRED EIGHTY-TWO PESOS AND
78/100 PESOS (P54,260,482.78) , representing its excess tax
credits for taxable year 2003 .

SO ORDERED ."

Resolution dated January 11, 2011:

"WHEREFORE , premises considered , respondent's Motion for

Partial Reconsideration is hereby DENIED for lack of merit.

SO ORDERED ."

THE FACTS

Petitioner, Commissioner of Internal Revenue (hereinafter referred to as

the Commissioner) , is a public officer duly appointed by the President of the

Philippines as head of the Bureau of Internal Revenue (BIR) , the government

agency officially responsible for the assessment and collection of all national and

internal revenue taxes . She is vested with the power and authority to refund any

internal revenue tax erroneously or illegally assessed or collected , any penalty

collected without authority, or any sum excessively or in any manner wrongfully

collected ; including excess income tax payments and creditable withholding

taxes .

On the other hand , respondent , IMPSA Construction Corporation

(hereinafter referred to as IMPSA) is a domestic corporation duly organized an ~

DEC ISION
CT A EB No. 720
Page 3 of 18

existing under the laws of the Republic of the Philippines , with principal office at

the NPC Compound , San Juan , Kalayaan , Laguna 4015 . It is a duly registered

taxpayer engaged in the construction business and other allied business ,

including the design , supply, assembly, erection , commissioning , constructing ,

enlarging , repairing , removing , developing and other related activities , but limited

to projects either primarily foreign-funded or registered under the build-

rehab ilitate-operate-transfer arrangements, pursuant to Republic Act No. 6957 ,

as amended .

On August 18, 2000 , IMPSA entered into a Turnkey Contract with CBK

Power Company Limited (hereinafter referred to as "CBK") for the construction of

power plants located at Caliraya , Botocan , and Kalayaan , Laguna Province . For

services rendered to CBK, IMPSA received income payments which were

allegedly subjected to creditable withholding tax.

On April 10, 2002 , IMPSA filed with the BIR its Annual Income Tax Return

for taxable year 2001 , reflecting no income tax liability as it declared a net loss in

the amount of ~ 16,264 ,545 .00 . Consequently, IMPSA was unable to utilize the

reported income tax payment for the first three quarters amounting to

~ 3,286 ,262 .00 and creditable taxes withheld during the year amounting to

~ 90 ,055 ,266 .00, totaling ~ 93 ,341 ,528.00 , as shown below:

~ 5,467,939 ,353 .00

Sales/Revenues/Receipts/Fees
Less : I Cost of Sales/Services 5,467 ,597 ,240 .00
Gross Income from Operation ~ 342 ,113.00
Add : I Non-operating & Other Income 3,974 ,816 .00
Total Gross Income ~ 4,316 ,929 .00
Less : I Deductions 20 ,581,474.00
Taxable Income Ji (16,264,545.00)

Income Tax Due ~ -

DEC ISIO N
CT A EB No. 720
Page 4 of 18

Less : Tax Credits/Payments

Tax Payments for the First Three Quarters 3,286 ,262 .00
Creditable Tax Withheld for the First Three
Quarters 33 ,535 ,733 .00
Creditable Tax Withheld for the Fourth Quarter 56 ,519 ,533 .00
Total Tax Credits/Payments 93 ,341 ,528 .00
Tax Overpayment Iii (93,341 ,528.00)

IMP SA opted to carry-over its income tax overpayment of~ 93 ,341 ,528 .00

as tax credit to the succeeding year/quarter by putting an "x" mark on the

corresponding box in the return .

In its Annual Income Tax Return for taxable year 2002 filed with the BIR

on March 20 , 2003 , IMP SA's total tax credits amounted to ~ 200 ,621 ,201 .00 ,

representing the sum of the prior year's excess credits (2001) in the amount of

~ 93 ,341 ,528 .00 and creditable taxes withheld during the year 2002 in the

amount of ~ 107,279 ,673 .00 . Likewise, it reflected an income tax due of

~ 2, 146,686 .00 , which was offset against total tax credits of ~ 200 ,621 ,201 .00 ,

leaving an overpayment of~ 198,474 ,515.00 ; computed as follows :

Sa les/Reven ues/Receipts/F ees ~ 6,094 ,078 ,251 .00

Less: Cost of Sales/Services 6,070 ,834 ,209 .00
Gross Income from Operation ~ 23,244 ,042 .00
Add : Non-operating & Other Income 32 ,918 ,128.00
Total Gross Income ~ 56 ,162,170.00
Less : Deductions 49,453 ,775 .00
Taxable Income Iii 6, 708,395.00

Income Tax Due ~ 2,146,686 .00

Less: Tax Credits/Payments
Prior Year's Excess Credits 93 ,341 ,528 .00
Creditable Tax Withheld for the First Three
Quarters 79 ,337 ,653 .00
Creditable Tax Withheld for the Fourth Quarter 27 ,942 ,020 .00
Total Tax Credits/Payments 200 ,621 ,201 .00
Tax Overpayment Iii (198,474,515.00)
DECISIO N
CTA EB No. 720
Page 5 of 18

As indicated in the return , IMPSA elected to carry-over the income tax

overpayment of 12 198,474,515 .00 to the succeeding year/quarter .

On May 20 , 2003 , IMPSA filed Amended Annual Income Tax Returns for

taxable years 2001 and 2002 , revising its chosen option from "To be carried over

as tax credit next year/quarter" to "To be refunded". Notwithstanding the marking

of the option " To be refunded' in its Amended Annual Income Tax Return for

taxable year 2001 , the 2001 excess tax credits/payment of 12 93 ,341 ,528.00

was reflected as "Prior Year's Excess Credits" in its Amended Annual Income

Tax Return for taxable year 2002 .

On August 11 , 2003, IMPSA filed its second Amended Annual Income Tax

Return for taxable year 2002 , this time indicating no amount of "Prior Year's

Excess Credits" and declaring a lower refundable amount of 12 105,132,987 .00 ,

as shown below:

Sa les/Reven ues/Receipts/F ees 12 6,094,078 ,251 .00

Less: Cost of Sales/Services 6,070 ,834 ,209 .00
Gross Income from Operation 12 23,244 ,042 .00
Add : Non-operating & Other Income 32 ,918 ,128.00
Total Gross Income 12 56 ,162,170.00
Less : Deductions 49,453 ,775 .00
Taxable Income fi 6,708,395.00

Income Tax Due 12 2,146 ,686.00

Less : Tax Credits/Payments
Prior Year's Excess Credits
Creditable Tax Withheld for the First Three
Quarters 79 ,337 ,653 .00
Creditable Tax Withheld for the Fourth Quarter 27 ,942 ,020.00
Total Tax Credits/Payments 107,279 ,673 .00
Tax Overpayment fi (1 05,132,987 .00)

On April 2, 2004 , IMPSA filed its Annual Income Tax Return for taxable

year 2003 , declaring no income tax liability and unutilized creditable taxes
DECISION
CTA EB No. 720
Page 6 of 18

withheld during the year 2003 in the amount of 12 56 ,250 ,759 .75 , which

respondent opted "To be refunded", detailed as follows :

Sales/Revenues/Receipts/Fees 12 1,654,294 ,127.00

Less : Cost of Sales/Services 2,093 ,082 ,271 .00
Gross Income from Operation 12 (438 ,788 ,144.00)
Add : Non-operating & Other Income 24 ,331 ,706.00
Total Gross Income 12 (414,456,438 .00)
Less : Deductions 2,216 ,650 .00
Taxable Income Iii (416,673,088.00)

Income Tax Due 12 -

Less : Tax Credits
Creditable Tax Withheld for the First Three
Quarters 46 ,150,415.47
Creditable Tax Withheld for the Fourth Quarter 10,100,344 .28
Total Tax Credits/Payments 56 ,250 ,759.75
Tax Overpayment Iii (56,250,759.75)

On April 5, 2004 and July 15, 2004 , IMPSA filed with the BIR its claim for

refund of its excess income taxes paid/withheld for taxable year 2001 in the

amount of 12 93 ,341 ,528 .00 and for taxable years 2002 and 2003 in the amount

of 12 161 ,383 ,746 .24 .

Due to the Commissioner's inaction on both claims and in order to toll the

running of the two-year prescriptive period , IMPSA filed two (2) separate

Petitions for Review in CTA Case Nos. 6921 and 7172 , details of which are as

follows :

CTA Case Petition for Taxable year

No. Review filed on covered Amount of claim
6921 April 6, 2004 2001 12 93 ,341 ,528.00
7172 March 18, 2005 2002 12 105,132,987.00
2003 56 ,250,759.75 161 ,383 ,7 46.75
Total Iii 254,725,27 4. 75

On May 19, 2004 and May 25 , 2005 , the Commissioner filed her Answers

in CTA Case Nos. 6921 and 7172 raising therein , Special and Affirmative
;
DECISION
CTA EB No. 720
Page 7 of 18

Defenses. On June 3, 2005 , IMPSA filed a motion for the consolidation of CTA

Case No. 7172 with CTA Case No. 6921 on the ground that said cases involve

common questions of law and of facts , albeit for different years. Said motion was

granted in the Resolution dated June 15, 2005 .

During trial , IMPSA Construction Corporation proffered testimonial and

documentary evidence in said cases. On the other hand , the Commissioner,

through counsel , waived her right to present evidence therein , as no report was

furnished by Revenue District Office No. 55 . Thus , the cases were submitted for

decision on January 9, 2009 , after the parties filed their respective memorandum .

On January 5, 2010 , the Former First Division of this Court promulgated

its Decision , denying respondent's claim for refund for lack of merit. The Court

held that for taxable years 2001 and 2002 , considering that IMPSA originally

elected to have the respective excess tax credits/payments to be carried over the

succeeding year, such election is irrevocable , pursuant to Section 76 of the

National Internal Revenue Code (NIRC) of 1997. Anent the taxable year 2003 ,

while IMPSA opted to refund the excess/unutilized creditable withholding taxes, it

failed to present the Quarterly Income Tax Returns (ITRs) for 2004 .

The Court a quo ruled that the presentation of said Returns is very

important as it will settle the question of whether respondent carried over said

excess tax credits/payments for taxable year 2003 .

On January 22 , 2010 , IMP SA filed its Motion for Reconsideration of the

said Decision arguing that: (1) it has not carried-over nor utilized its 2003 excess

creditable withholding taxes as evidenced by its Quarterly ITRs for the first ,

second , and third quarters of 2004 and its 2004 Annual Income Tax Return ; an ~
DEC ISIO N
CTA EB No. 720
Page 8 of 18

(2) it is entitled to a refund of its 2001 and 2002 excess income tax payments and

creditable withholding taxes . Thus , it prayed that the Court (1) admit into

evidence and consider for purposes of resolving the Motion and the case , the

Supplemental Judicial Affidavit of its witness, Noralyn Sy, and the exhibits

attached thereto (consisting of photocopies of its Quarterly ITRs for the first ,

second , and third quarters of 2004) ; and (2) reconsider and set aside the said

Decision , and grant its claim for refund in the amounts of ~ 93 ,341 ,528.00 ,

~ 105,132,986 .55 , and~ 56 ,250 ,759 .75 , or a total amount of~ 254 ,725 ,274 .30 ,

representing excess income tax payments and creditable income taxes withheld

for taxable years 2001 , 2002 , and 2003 , respectively .

In the Order dated January 23 , 2010 ,2 the Court a quo directed the

Commissioner to file her Comment to said Motion for Reconsideration of IMPSA.

Before the former was able to file said Comment, the latter filed on February 2,

201 0, a Motion To Set Case for Hearing (To Identify the Supplemental Affidavit of

Noralyn R. Sy) .

Thereafter, the Commissioner filed the required Comment/Opposition to

IMPSA's Motion for Reconsideration and Motion to Set Case for Hearing on

February 4, 2010 , arguing that: (1) IMP SA failed to formally offer its supplemental

documentary and testimonial evidence ; and (2) IMPSA's Motion for

Reconsideration is not in accordance with law and jurisprudence. Accordingly,

the Commissioner prayed for the dismissal and denial of both Motions.

2
Order dated January 23, 20 I 0, CTA Case Nos. 692 1 and 7 172 Docket ,Vol. ll , p. 1206.
DEC ISION
CT A EB No. 720
Page 9 of 18

As the Motion for Reconsideration had not yet been resolved , the Court a

quo denied the Motion to Set Case for Hearing .3 On February 23 , 2010 , IMPSA

filed a Motion To Admit Reply, attaching therewith its Reply to the Comment/

Opposition filed by the Commissioner.

In the Resolution dated March 8, 2010 ,4 the Special First Division allowed

IMPSA to present the documents attached to its Motion for Reconsideration as

Annexes "A" to "D" for consideration and evaluation , subject to the Court's final

evaluation and/or appreciation of their purposes , materiality, relevance , and

probative value to the issues involved. After marking the exhibits during the

hearing held on April 20 , 2010 ,5 IMP SA filed its Formal Offer of Documentary

Evidence (Re : Motion for Reconsideration dated January 21 , 201 0) 6 on April 22 ,

2010 .

Subsequently, on April 29 , 2010 , IMP SA filed its Memorandum (Re:

Motion for Reconsideration dated January 21 , 201 of.

On April 30 , 2010 , the Commissioner filed her Comment 8 to respondent's

Formal Offer and on May 11 , 2010 , a Manifestation 9 alleging her intention to

adopt the relevant facts , proceeding , issue, and discussion specifically declared

in her Comment/Opposition to IMPSA's Motion for Reconsideration . In the

Resolution dated May 25 , 2010 ,10 evidence proffered by IMP SA were admitted

3
Order dated February I 0, 20 I 0, Divis ion Docket-Vol. II , p. 1226.
4
Division Docket-Yo!. II , pp. 1242 to 1244.
5
Minutes of hearing held on April 20, 20 10, Division Docket, p. 1245.
6
Division Docket-Yo!. II , pp . 1246 to 1271.
7
Division Docket-Yo!. II , pp. 1272 to 1288 .
8
Divi sion Docket-Yo!. II , pp. 1289 to 1293 .
9
Division Docket-Yo!. II, pp. 1295 to 1298 .
10
Division Docket-Yo !. II , pp. 130 1 to 1302 .
DECISION
CTA EB No. 720
Page 10 of 18

by the Court a quo and it also considered IMPSA's Motion for Reconsideration

submitted for resolution .

In the assailed Amended Decision dated September 3, 2010, the Special

First Division partially granted IMPSA's Motion for Reconsideration , and

correspondingly modified the Decision dated January 5, 2010 . The

Commissioner was ordered to refund respondent the amount of Iii 54 ,260 ,482 .78 ,

representing the latter's excess tax cred its for taxable year 2003 .

On September 22 , 2010 , the Commissioner filed a Motion for Partial

Reconsideration 11 , praying for the partial reversal and setting aside of the said

Amended Decision . The Commissioner argues that IMPSA's presentation of its

final adjustment return for taxable year 2004 was not enough to conclude that it

did not apply the said unutilized creditable withholding taxes aga inst the income

tax due for the first three quarters of 2004 ; and that IMPSA should have

presented its 2004 Quarterly ITRs.

In its Opposition 12 to said Motion for Partial Reconsideration , IMP SA

submits that said Motion is pro forma , and does not cite new arguments or

compelling reasons to warrant reconsideration and reversal of the Amended

Decision ; and that contrary to the Commissioner's contention , it presented and

offered in evidence its Quarterly ITRs for 2004 to prove that it did not carry over

and apply its excess creditable withholding tax for taxable year 2003 against its

income tax liabilities for the succeeding quarters of 2004 .

The Special First Division of this Court denied the Commissioner's Motion

for Partial Reconsideration for lack of merit in the Resolution dated January 10,

11
12
Division Docket-Yo!. II , pp. 13 19 to 1325.
Division Docket-Yo!. II , pp. 1527 to 1533.
t
DEC IS ION
CT A EB No. 720
Page II of 18

2011 .

Hence, the Commissioner filed the instant Petition for Review 13 praying for

the reversal of the assailed Amended Decision dated September 3, 2010 and

Resolution dated January 11 , 2011.

In the Resolution dated March 1, 2011 ,14 the Court En Bane directed

IMP SA to file a Comment to the instant Petition within ten (1 0) days from receipt

thereof. On March 30 , 2011 , IMP SA filed the required Comment 15 within the

extension period of ten (1 0) days, or from March 21 , 2011 or until March 31 ,

2011 . Thereafter, the Court En Bane gave due course to the instant Petition for

Review 16 and the parties were required to submit their respective Memorandum ,

within a non-extendible period of thirty (30) days from receipt of said

Resolution .17

IMPSA filed its Memorandum on July 4, 2011 18 while the Commissioner

failed to do so . On September 6, 2011 , this case was deemed submitted for

decision in the Resolution dated September 6, 2011 .19

Hence, this Decision .

THE ISSUE

A sole issue is raised for the resolution of the Court En Bane, as follows :

13
For its part, respondent filed a Petition for Re view before the Court En Bane on October 6, 20 I 0,
questioning the Decision dated January 5, 20 I 0 and Amended Decision dated September 3, 20 I 0,

f
respectively rendered by the First Division and the Spec ial First Divi s ion, both of thi s Court. The case was
docketed as CTA EB No . 685 .
14
Docket, pp. 43 to 44.
15
Docket, pp. 50-62
16
Resolution dated May 23 , 20 II , Docket, pp. 69-70
17
Docket, pp. 69 to 70.
18
Docket, pp. 7 1 to 93.
19
Docket, pp. 97 to 98 .
DECISIO N
CTA EB No. 720
Page 12 of 18

"THE HONORABLE COURT'S FIRST DIVISION ERRED IN

PARTIALLY GRANTING RESPONDENT'S PETITION FOR REVIEW
BY MODIFYING ITS EARLIER DECISION AND ORDERING
PETITIONER TO REFUND TO RESPONDENT THE AMOUNT OF
P54 ,260 ,482 .78 , REPRESENTING ITS EXCESS TAX CREDITS FOR
TAXABLE YEAR 2003 ."

Petitioner's Arguments

The Commissioner argues that during the presentation of its evidence-in-

chief, IMPSA failed to formally offer its supplemental documentary and

testimonial evidence consisting of the supplemental Judicial Affidavit of its

witness , Noralyn Sy and its 2004 Quarterly Income Tax Returns to establish that

it had not carried-over its claimed creditable withholding taxes of 12 54 ,250 ,759 .75

for the taxable year 2003 to the succeeding first, second , and third quarters of

2004 . Allegedly, it is well-settled that the Court shall consider as evidence only

those that were formally offered . Conversely, evidence not formally offered

cannot be considered by the Court in deciding the case at hand .

Furthermore , the Commissioner submits that IMPSA's Motion for

Reconsideration praying that the First Division allow it to submit its belated

supplemental documentary and testimonial evidence to establish the legal and

factual basis of its claim for a tax credit or refund , is not in accordance with law

and jurisprudence. According to the Commissioner, IMPSA is guilty of

inexcusable negligence in the prosecution of its case because it exercised lack of

ordinary diligence to ensure that all proofs under the rules are duly presented as

it was in possession of those documents at the time of the trial , had all the

opportunity to present and to offer those documents and affidavits of its witness

in order to comply with the law, but it did not. r

DECIS IO N
CTA EB No. 720
Page 13 of 18

Respondent's Counter-Arguments

On the other hand , IMPSA counter-argues that the First Division correctly

acted in allowing it to formally offer in evidence its 2004 Quarterly ITRs and the

Supplemental Judicial Affidavit of Ms. Sy, in connection with its Motion for

Reconsideration based on the prevailing circumstances therein . Allegedly, these

circumstances include, (i) its reliance in good faith on cases decided by this Court

prior to the 2009 Millenium case 20 , which did not require the presentation of

Quarterly ITRs, and in fact explicitly stated that their presentation was not

necessary, and (ii) the question of whether the subm ission of Quarterly ITRs is

required , appears to be a question which even this Court has found difficult to

resolve , as evidenced by the fact that even after the said 2009 Mil/enium case,

th is Court has rendered decisions which appear to rule that their submission is

not necessary.

IMPSA also stresses that the cases cited by the Commissioner in the

instant Petition for Review are not applicable to this case.

Finally, it is submitted by IMPSA that the admission of respondent's 2004

Quarterly ITRs is consistent with jurisprudence.

THE COURT EN BANC'S RULING

Existing jurisprudence is to the effect

that the court may still consider
IMP SA's 2004 Quarterly ITRs
evidence even if the same was
presented only after trial.

20
Millenium Business Services, Inc. vs. Commissioner of Internal Revenue, CT A Case No . 744 1, February
I I, 2009.
DEC IS ION
CTA EB No. 720
Page 14 of 18

21
In Commissioner of Internal Revenue vs. Perf Realty Corporation , the

Supreme Court said :

"The CIR takes the view that the CA erred in considering the 1998 ITR
of PERF . It was not formally offered in evidence . Section 34 , Rule 132 of
the Revised Rules of Court states that the court shall consider no
evidence which has not been formally offered .

The reasoning is specious .

PERF attached its 1998 ITR to its motion for reconsideration . The
1998 ITR is a part of the records of the case and clearly showed that
income taxes in the amount of P1 ,280 ,504 .00 were not claimed as tax
credit in 1998.

In Filinvest Development Corporation v. Commissioner of Internal

Revenue,22 the Court held that the 1997 ITR attached to the motion for
reconsideration is part of the records of that case and cannot be simply
ignored by the CTA. Moreover. technicalities should not be used to defeat
substantive rights . especially those that have been held as a matter of
right. We quote:

In the proceedings before the CTA, petitioner presented in

evidence its letter of claim for refund before the BIR to show that it
was made within the two-year reglementary period ; its Income Tax
Returns for the years 1995 and 1996 to prove its total creditable
withholding tax and the fact that the amounts were declared as part
of its gross income; and several certificates of income tax withheld
at source corresponding to the period of claim to prove the total
amount of the taxes erroneously withheld . More importantly,
petitioner attached its 1997 Income Tax Return to its Motion for
Reconsideration , making the same part of the records of the case.
The CTA cannot simply ignore this document.

Thus, we hold that petitioner has complied with all the

requirements to prove its claim for tax refund . The CA, therefore,
erred in denying the petition for review of the CTA's denial of
petitioner's claim for tax refund on the ground that it failed to
present its 1997 Income Tax Return .

The CA's reliance on Rule 132, Section 34 26 of the

Rules on Evidence is misplaced. This provision must be taken
in the light of Republic Act No. 1125, as amended, the law
creating the CTA, which provides that proceedings therein

21
G.R. No. 163345, July 4, 2008.
22
G.R. No. 146941 , August 9, 2007.
DECISIO N
CTA EB No. 720
Page 15 of 18

shall not be governed strictly by technical rules of evidence.

Moreover, this Court has held time and again that technicalities
should not be used to defeat substantive rights, especially
those that have been established as a matter of fact.

xxxx

We must also point out that, simply by exercising the CIR's

power to exam ine and verify petitioner's claim for tax exemption as
granted by law, respondent CIR could have easily verified
petitioner's claim by presenting the latter's 1997 Income Tax
Return , the original of which it has in its files . However, records
show that in the proceedings before the CTA, respondent CIR fa iled
to comment on petitioner's formal offer of evidence, waived its right
to present its own evidence , and failed to file its memorandum .
Neither did it file an opposition to petitioner's motion to reconsider
the CTA decision to which the 1997 Income Tax Return was
appended .

That no one shall unjustly enrich oneself at the expense of

another is a long-standing principle prevailing in our legal system .
This applies not only to individuals but to the State as well. In the
field of taxation where the State exacts strict compliance upon its
citizens , the State must likewise deal with taxpayers with fairness
and honesty. The harsh power of taxation must be tempered with
evenhandedness . Hence, under the principle of solutio indebiti, the
Government has to restore to petitioner the sums representing
erroneous payments of taxes .

Further, We sustain the CA that there is no need to rule on the issue of

the admissibility of the 1998 ITR since the CTA ruled that PERF already
complied with the requisites of applying for a tax refund . The verification
process is not incumbent on PERF ; it is the duty of the CIR to verify
whether or not PERF had carried over the 1997 excess income taxes."
(Underscoring supplied)

Also, in BPI-Family Savings Bank, Inc. vs. Court of Appeals, et a/. ,23 the

High Court declared :

"True , strict procedural rules generally frown upon the submission of the
Return after the trial. The law creating the Court of Tax Appea ls, however,
specifically provides that proceedings before it 'shall not be governed
strictly by the technical rules of evidence .' The paramount
consideration remains the ascertainment of truth. Verily, the quest
for orderly presentation of issues is not an absolute. It should not

23
G.R. No . 122480, Apri l 12,2000.
DEC ISIO N
CT A EB No. 720
Page 16of l 8

bar courts from considering undisputed facts to arrive at a just

determination of a controversy.

XXX XXX XXX

It should be stressed that the rationale of the rules of procedure is to

secure a just determination of every action. They are tools designed to
facilitate the attainment of justice. But there can be no just
determination of the present action if we ignore, on grounds of strict
technicality, the Return submitted before the CTA and even before this
Court. To repeat, the undisputed fact is that petitioner suffered a net loss
in 1990; accordingly, it incurred no tax liability to which the tax credit could
be applied . Consequently, there is no reason for the BIR and this Court to
withhold the tax refund which rightfully belongs to the petitioner."
(Emphases supplied)

Thus , contrary to the assertion of the Commissioner, the submission and

presentation of IMPSA's supplemental documentary and testimonial evidence ,

even after trial , may be justified under the foregoing jurisprudence, which clearly

considered and have given effect to a document merely attached to a motion for

reconsideration . Moreover, it must be emphasized that the Court a quo has

already made a finding , in the assailed Amended Decision , that, for taxable year

2003 , IMPSA has complied with the requisites of applying for a tax refund , albeit

in the reduced amount ofF' 54 ,260 ,482 .78-a fact which was never disproved in

the instant Petition for Review, nor in the Court below. Such being the case , and

pursuant to the above-quoted rulings , there is no legal obstacle for the grant of

the said reduced refundable amount.

The cases relied upon by the

Commissioner is not applicable to
the instant case.

The Commissioner relies on the following cases in support of the instant

24
Petition, viz: Dizon vs. Court of Tax Appeals, et a/. ; Atlas Consolidated Mining ;

24
G.R. No. 140944, Apri130 , 2008.
DECISION
CT A EB No. 720
Page 17 of 18

and Development Corporation vs. Commissioner of Internal Revenue ;25 and M.E.

Holding Corporation vs. Court of Appeals, et a/.26

The foregoing cases , however, fail to convince Us that they are squarely

applicable to the instant case . Unlike the earlier quoted cases of Commissioner

of Internal Revenue vs. Perf Realty Corporation and BPI-Family Savings Bank,

Inc. vs. Court of Appeals, et a/., the cases relied upon by the Commissioner do

not involve: (1) the fact that the taxpayer has complied with the requisites of

applying for a tax refund , and (2) the issue of whether or not to consider the

subsequent tax return presented after trial to establish that the excess income

tax paid was carried over in the succeeding period .

WHEREFORE , premises considered , the instant Petition for Review is

hereby DENIED . The assailed Amended Decision promulgated on September 3,

2010 and Resolution dated January 11 , 2011 rendered by the Special First

Division of this Court, are hereby AFFIRMED .

SO ORDERED.

"

E~.UY
As:~ustice
WE CONCUR:
l\ --
L..-../\- ~ .
~
ERNESTO D. ACOSTA
Presiding Justice

~)(C.~.Q,.
JuANITO c. CASTANEO.(JR.
Associate Justice

25
G.R. No. 159490, February 18, 2008.
26
G.R. No. 160 193, March 3, 2008.
DEC IS ION
CT A EB No. 720
Page 18 of 18

CAESA~OVA
Associate Justice
~RIQUEZ
Associate Justice

f£~1.'-b. N.M&...:~ . 6'~

CfEiiro N. MINDARO-GRULLA
Associate Justice

AMEt.YcT~G~~SAssociate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution , it is hereby certified

that the conclusions in the above decision were reached in consultation before the
case was assigned to the writer of the opinion of the Court En Bane.

~._.:- w . 0 .....A--
ERNESTO D. ACOSTA
Presiding Justice