Court of Tax Appeals: en Bang

REPUBLIC OF THE PHILIPPINES
Court of Tax Appeals

QUEZON CITY
EN BANG
ALFREDO V. MISAJON, in his CTA EB No. 1361

capacity as Assistant (CTA Case No. 8564)
Commissioner of the Bureau of
Internal Revenue, Present:
Petitioner,
Del Rosario , P.J. ,
Castaneda , Jr.,
Bautista ,
-versus- Uy,
Casanova ,
Fabon-Victorino ,
Mindaro-Grulla ,
SOCIAL SECURITY SYSTEM, Ringpis-Liban , and
represented by its President Manahan , JJ.
and CEO EMILIO S. DE
QUIROS, JR., Promulgated :
Respondent. ~ -' fCJ ~- h..
MAY 2 4 2017
X------------------------------------------~ ---X
DECISION
DEL ROSARIO, P.J.:
This is a Petition for Review filed pursuant to Section 3(b) , Rule

8 of the Revised Rules of the Court of Tax Appeals 2 seeking for the
1
nullification of the Decision 3 dated June 24 , 2015 of the Court of Tax
1 Rule 8- Procedure in Civil Cases xxx

Sec. 3. Who may appeal ; period to file petition . - xxx
(b) A party adversely affected by a decision or resolution of a Division of the Court
on a motion for reconsideration or new trial may appeal to the Court by filing before
it a petition for review within fifteen days from receipt of a copy of the questioned
decision or resolution. Upon proper motion and the payment of the full amount of
the docket and other lawful fees and deposit for costs before the expiration of the
reglementary period herein fixed , the Court may grant an additional period not
exceeding fifteen days from the expiration of the original period within which to file
the petition for review.
2 A.M . No. 05-11-07-CTA
3 Penned by Associate Justice Amelia R. Cotangco-Manalastas and concurred by
Associate Justice Juanita C . Castaneda , Jr. and Associate Justice Caesar A.

Casanova .
Decision
Alfredo V. Misajon, in his capacity as Assistant Commissioner of the Bureau of
Internal Revenue v. Social Security System, represented by its President and
CEO Emilio S. De Quiros, Jr.
CTA EB No. 1361 (CTA Case No. 8564)
Page 2 of23
Appeals' (CTA) Second Division (Court in Division) which upheld with

modification the disputed deficiency Withholding Tax on
Compensation (WTC), deficiency Expanded Withholding Tax (EWT),
and deficiency Withholding VAT and other percentage tax for taxable
year 2004, as well as the subsequent Resolution dated September 4,
2015 of the Court in Division denying therein petitioner's Motion for
Partial Reconsideration for lack of merit.
PARTIES
Petitioner Alfredo V. Misajon, the respondent before the Court in

Division, is the Assistant Commissioner of the Bureau of Internal
Revenue (BIR) Large Taxpayers Service, with office address at BIR
National Office Building, BIR Road, Diliman, Quezon City. 4
Respondent Social Security System (SSS for brevity), the

petitioner before the Court in Division, is a government-owned and
controlled corporation (GOCC) created by virtue of Republic Act (RA)
No. 1161, as amended by RA No. 8282, with principal office address
at SSS Building, East Avenue, Diliman, Quezon City. 5
FACTS
The facts of the case are undisputed.
The deficiency tax assessments arose as a result of the BIR's

issuance of Letter of Authority No. 000096205 dated April 6, 2006 for
the examination of the books of accounts and other accounting records
of SSS for all internal revenue taxes for taxable year 2004. 6
The BIR issued a Preliminary Assessment Notice (PAN) with

Details of Discrepancies dated December 18, 2007, which was
received by SSS on the same date, assessing the latter deficiency
WTC of P38,291 ,668.24, deficiency EWT of P35,411 ,849.85, and
4
Decision in CTA Case No. 8564, Rollo, p. 22; Par. 1, Joint
Stipulations/Admission of Facts and Issues (JSAFI), CTA Case No. 8564 Docket,
p. 244.
5 Decision in CTA Case No. 8564, Rollo, pp. 21-22; Par. 2, JSAFI, CTA Case No.
8564 Docket, p. 244.

6
Decision in CTA Case No. 8564, Rollo, 22; Exhibit 1, BIR Records, p. 573; par.
4, JSAFI, CTA Case No. 8564 Docket, p. 245.
Decision
Page 3 of 23
deficiency withholding tax on government payment of P84,653, 797.91,

inclusive of interest. 7
SSS protested the said PAN through its letter dated January 2,
2008, which the BIR received on even date. 8
SSS received on January 10, 2008 the Audit ResuiUAssessment

Notices WC-04-000106, EWT-04-000196, and VT-04-000247, all
dated January 9, 2008, and the Formal Letter of Demand (FLO) with
Details of Discrepancies dated January 10, 2008. 9 The BIR found due
from SSS a deficiency WTC of P38,699,726.58, deficiency EWT of
P35, 789,219.16, and deficiency withholding VAT and other percentage
taxes withheld of P85,555,918.14, inclusive of interest. 10
SSS filed its Protest Letter dated January 30, 2008 against the
FAN and the FLO, with attached Preliminary Assessment
Reconciliation Analysis and Explanatory Notes, which petitioner
received on January 31, 2008. 11
On September 27, 2012, SSS received the BIR's Final Decision

on Disputed Assessment (FDDA) upholding the assessments. The
BIR found SSS liable for deficiency WTC of P61, 103,445.85,
deficiency EWT of P54,386,601.73, and deficiency withholding VAT
and other percentage taxes withheld of P135,085,228.57, or in the
aggregate amount of P250,575,276.15 for taxable year 2004, inclusive
of interest. 12
On October 29, 2012, SSS filed a Petition for Review 13 before

the Court in Division and the case was docketed as CTA Case No.
8564.
7
Rollo, p. 23; par. 10, JSAFI, CTA Case No. 8564 Docket, p. 245; Exhibit "7",
BIR Records, pp. 1356-1359.
8 Rollo, p. 23.
9 Rollo, p. 23; Exhibits "9-a", "9-b", "9-c", "9", BIR Records, pp. 1389, 1387, 1386,
1413 to 1416.
10 Exhibit "9", BIR Records, pp. 1415-1416.
11 Rollo, p. 23.
12 Rollo, p. 24; Exhibit "12", BIR Records, pp. 1424-1425.
13 Rollo, p. 24; CTA Case No. 8564 Docket, pp. 6-45.
Decision
Page 4 of23
After trial, the Court in Division rendered the assailed Decision 14

on June 24, 2015 partially granting the Petition for Review, the
dispositive part of which reads:
"WHEREFORE, premises considered, the instant Petition for

Review is hereby PARTIALLY GRANTED. Accordingly, the assessed
basic deficiency withholding tax on compensation, deficiency expanded
withholding tax, and deficiency withholding VAT and other percentage
tax for taxable year 2004 are upheld but in the modified amount of
P67,314,515.98, computed as follows:
Tax Type Basic Deficiency Taxes

Withholding Tax on Compensation P23,998, 188.36
Expanded Withholding Tax 13,518,496.99
VAT and Other Percentage Tax Withheld 29,797,830.63
Total P67,314,515.98
Furthermore, petitioner shall not be held liable for the interest and
penalty, in addition to the basic tax due, pursuant to Sections 247(b)
and 251 of the NIRC of 1997, as amended.
SO ORDERED." 15
The Court in Division declared that it has jurisdiction over the

Petition for Review filed on October 29, 2012 since SSS has thirty (30)
days from receipt of the FDDA on September 27, 2012, or until October
27, 2012, within which to appeal the same before the CTA pursuant to
Section 228 of the National Internal Revenue Code (N/RC) of 1997, as
amended, and since October 27, 2012 fell on a Saturday, SSS filed the
Petition for Review on the next working day which was on October 29,
2012. 16
Anent the issue of imposition of 20% interest under Section 249

and the penalty under Section 251 of the NIRC of 1997, the Court in
Division held that it is the employee responsible for the withholding and
remittance of the tax who is personally liable for the accrued interest,
deficiency interest and/or delinquency interest on the deficiency tax
pursuant to Section 24 7 of the NIRC of 1997. The Court in Division
further ruled that conviction is necessary in order for a person to be
held liable for the penalty prescribed under Section 251 of the NIRC,
14 Rollo, pp. 21-56.

15
Rollo, p. 55.
16 Rollo, pp. 31-32.
i\
Decision
Page 5 of23
and without proof of conviction, the head, chief accountants and other
person holding similar position cannot be held liable for the penalty. 17
As regards the disputed deficiency WTC, the Court in Division

held that SSS is liable for underwithholding of the correct tax due on
compensation of its employees in the amount of P277, 148.36. It
likewise upheld the deficiency tax on other benefits amounting to
P23,721 ,040.00 which is based on the following benefits, namely: gift
cheques, loyalty awards and incentive awards. It ruled that gift
cheques given to employees and loyalty awards cannot be considered
as de minimis benefits considering that SSS did not provide detailed
schedules showing the breakdown of the supposed de minimis
benefits to determine which portion of benefits are exempt for each
employee as there is a limit in the amount of each de minimis benefit
pursuant to Section 2 of Revenue Regulations (RR) No. 08-00; that the
Retirement Incentive Award shall not be excluded from the taxable
income of the retiring employees and consequently subject to
withholding tax on compensation for failure of SSS to provide the
following: (i) detailed schedules showing the breakdown of the
Incentive Awards; (ii) SSS Manual on Personnel Policies, Rules and
Regulations; and (iii) proof that the concerned employees retired from
the service in accordance with the rules laid down in the manual that
entitles the employees to the payment of the Retirement Incentive
Award. 18
Concerning the deficiency EWT, the Court in Division adjudged

SSS as liable thereto in the amount of P13,518,496.99 out of the
P54,386,601.73 assessed by the BIR. 19 The Court in Division made
the following findings:
1. Out of P11 0,926,351.20 Supplies and Materials

Inventory assessment, the amount of P1 05,948,120.95 is
subject to 1°/o EWT and the amount of P4,978,230.25 is not
subject to withholding tax as it pertains to payments to
government which are supported with corresponding
Disbursement Vouchers. 20
2. The total Furniture and Equipment expense of

P5,319,394.96 is subject to 1°/o EWT. Accordingly, accruals
17
Rollo, pp. 32-35.
1s Rollo, pp. 35-42.
19 Rollo, pp. 42-53.
20 Rollo, pp. 45-46.
Decision
Page 6 of23
are subject to withholding tax pursuant to Section 2.57.4 of

RR No. 2-98 while the claimed reimbursements are also
subject to withholding since SSS did not provide evidence to
support the same. 21
3. The Additions to Property and Equipment pertaining to

Computer Equipment in the amount of P1,072,672,424.42 is
subject to 1°/o EWT. The said amount consists of an
unaccounted difference of P40,443,079.42, Purchases of
P78,192,781,63, Restoration of Accruals of P1,777,186.47,
Reclassification from Intangible Assets of P935,583,031.96,
Year-end accruals of P15,145,769.00, and Other adjustments
of P1,530,575.94. 22
4. Freight charges of P9,883, 186.50 is subject to 2°/o

EWT. Accordingly, the accruals are subject to withholding,
and SSS did not submit supporting documents for the alleged
reimbursements and failed to establish as well the basis of its
exclusion from withholding. 23
5. Light and Water expense of P1 07,670,335.58 is

subject to 2°/o EWT. Out of the P107,974,557.10 assessment,
only P304,221.52 is not subject to withholding tax as it
pertains to payments to tax-exempt electric cooperatives
supported by Disbursement Vouchers, Billings, Receipts and
Certificates. Electric cooperatives registered with the National
Electrification Administration (NEA) and/or Cooperative
Development Authority (CDA) are exempt from income tax
pursuant to Sections A(3) and 8(1 )(b) of Revenue
Memorandum Circular No. 72-2003, and consequently not
subject to 2°/o EWT. 24
6. The M/R expense accounts (i.e., MIR- Transportation

Equipment of P15, 843,930.31, MIR-Furniture & Equipment of
P249,493, 797.25 and MIR-Building of P158,206, 748.07),
which was attributed by SSS to accruals in 2005, are subject
to 2°/o EWT. Accruals should have been subjected to
withholding tax in 2004 pursuant to Section 2.57.4 of RR No.
21 Rollo, p. 46.
22 Rollo, pp. 46-48.
23 Rollo, p. 48.
24 Rollo, pp. 48-51.
Decision
Page 7 of23
2-98, and SSS failed to show that proper withholding and

remittance were made in 2005. 25
7. The discrepancy of P2,052,901.43 between the Office

Space Rental of P88,822,264.04 (net of adjustment of
P1, 743, 948.46 pertaining to payments to government agency
and foreign payees duly supported by Disbursement
Vouchers), and the amount per Alpha list of P86,769,362.61
is subject to 5°/o EWT. 26
With respect to deficiency withholding VAT and other percentage

tax assessment, which pertained to Additions to Property and
Equipment and Supplies and Materials Inventory, the Court in Division
observed that the justification provided by SSS on these two income
payments are the same with the discussion in the deficiency EWT; and
that no additional supporting documents were provided by SSS to
prove that the same are not subject to withholding VAT; hence, the
basic deficiency withholding VAT and other percentage tax
assessment to the extent of P29,797,830.63 was sustained. 27
On July 10, 2015, petitioner filed his Motion for Partial

Reconsideration Re: Decision dated June 24, 2015, but the same was
denied in the Court in Division's Resolution dated September 4,
2015, 28 the dispositive portion of which reads:
"WHEREFORE, premises considered, the instant Motion for

Partial Reconsideration is hereby DENIED for lack of merit.
SO ORDERED." 29
On September 24, 2015, petitioner filed a Motion for Extension

of Time to File Petition for Review, which was granted on September
30, 2015, thereby allowing petitioner to file a Petition for Review until
October 10, 2015. 30
On October 12, 2015, petitioner filed through registered mail his

Petition for Review and the same was received by the Court En Bane
25 Rollo, p. 51.
26 Rollo, pp. 51-52.
27 Rollo, pp. 53-55.
28
Rollo, pp. 57-58.
29 Rollo, p. 58.
30 Rollo, p. 6.
J',
Decision
Page 8 of23
on October 15, 2015. 31 The Petition for Review was timely filed since
the due date for filing on October 10, 2015 fell on a Saturday; hence,
petitioner had until October 12, 2015, the next working day, to file the
Petition for Review pursuant to Sec. 1, Rule 22 of the Rules of Court. 32
In the Resolution dated October 28, 2015, SSS was directed to

file its comment, not a motion to dismiss, within ten (10) days from
notice, to the Petition for Review. 33
Within the extended period allowed per Minute Resolution dated

December 7, 2015, 34 SSS filed on December 15, 2015 its Comment
(To the Petition for Review dated 9 October 2015). 35
In the Resolution dated January 29, 2016, the Petition for Review
was given due course and the parties were required to submit their
respective memoranda within thirty (30) days from receipt thereof. 36
On March 14, 2016, petitioner filed his Manifestation that he is

adopting the arguments raised in his Petition for Review filed on
October 12, 2015 as his Memorandum. 37 SSS, on the other hand, filed
through registered mail its Memorandum 38 on March 18, 2016. SSS
also filed its Manifestation 39 on May 5, 2016 submitting additional
copies of its Memorandum in compliance with the Resolution dated
April 5, 2016. 40
The case was submitted for decision on June 17, 2016. 41
31 Rollo, pp. 8-62

32
Section 1. How to compute time. - In computing any period of time prescribed
or allowed by these Rules, or by order of the court, or by any applicable statute,
the day of the act or event from which the designated period of time begins to run
is to be excluded and the date of performance included. If the last day of the period,
as thus computed, falls on a Saturday, a Sunday, or a legal holiday in the place
where the court sits, the time shall not run until the next working day.
33 Rollo, pp. 67-68.
34 Rollo, p. 71.
35 Rollo, pp. 72-76.

36 Rollo, pp. 77-78.
37 Rollo, pp. 79-80.

38 Rollo, pp. 84-98.
39 Rollo, p. 100.
40 Rollo, p. 99.
41
Rollo, pp. 104-105.
Decision
Page 9 of23
ISSUE
Whether the assailed Decision of the Court in Division dated

June 24, 2015 which upheld with modification the disputed deficiency
assessments and declared SSS as not liable for interest and penalty
pursuant to Sections 247(b) and 251 of the NIRC is correct.
PARTIES' ARGUMENTS
Petitioner argues that Section 251 of the NIRC is inapplicable in

the present case. It is his claim that the amount sought to be collected
from the offender under Section 251 is a penalty which is equivalent to
the amount of tax not withheld, or not accounted for and remitted, and
this penalty is far from the civil liability for interest and surcharge.
Petitioner points out further that Section 247(b) applies without any
relation to Section 251; hence, conviction is not necessary to hold the
officer or employee liable for interest and surcharge. 42
Petitioner further contends that respondent is liable for expanded

withholding taxes in the amount of P54,386,601. 73 in accordance with
Section 57 of the NIRC and RR Nos. 6-2001 and 17-2003; that
respondent failed to rebut the result of the investigation made by the
investigating examiners; that there was a discrepancy on respondent's
income payments shown in the Financial Statements against those
already subjected to expanded withholding tax and the same resulted
to under withholding-- thus, the assessment for EWT is proper; 43 that
respondent's various purchase of goods amounting to P1 ,770,2899.33
(sic) were not subjected to the 3% withholding VAT on Government
Money Payments as prescribed by the provisions of RR 2-98 and
Section 114(C) of the NIRC, resulting to deficiency VAT and other
percentage tax of P135,085,228.57; 44 and, that the burden of proof is
on the taxpayer contesting the validity of an assessment and that the
presumption in favor of the correctness of tax assessment stands
where evidence to the contrary is wanting. 45
SSS counter-argues that Section 251 is under Chapter 1 of Title

X of the NIRC while the criminal provisions are in Chapter II of Title X,
where Section 255 can be found; that conviction is necessary whether
42 Petition for Review, Rollo, p. 11-12.

43 Petition for Review, Rollo, pp. 12-14.
Decision
Page 10 of 23
the omission or failure was inadvertent or deliberate as the law states

that the agent shall be liable upon conviction to a penalty equal to the
total amount of the tax not withheld, or not accounted for and remitted;
46 that while Section 247 is the general provision identifying the person
who could be held liable where the withholding agent is the

government or any of its agencies and government controlled
corporation, Section 251 states when the withholding agent could be
held liable for failure to collect and remit the tax due - - that is, when
there is conviction; that a withholding agent would not benefit from his
failure to withhold and remit the taxes due, hence, such acts of the
withholding agent must be shown to be deliberate for him/her to be
held liable; and that holding him/her liable without a conviction would
amount to denial of due process of law. 47
SSS further avers that the application of Section 251 is made

clearer from Revenue Memorandum Order No. 23-2014. It insists that
the liability of the government officials and employees responsible for
the withholding of the tax attaches only when there is a conviction. It
further discusses that even if the penalties for deficiency in withholding
taxes is imposable, the same should be waived in favor of its officials
and employees relying on BIR Ruling No. 042-2001 dated September
20, 2001 and the ruling in Republic of the Philippines vs. The Philippine
Bank of Commerce (G.R. No. L-20951, July 31, 1970). 48
Anent the assessment and its presumption of regularity, SSS

asserts that the same may be rebutted by evidence, which it did,
though only partial, resulting to the partial grant of its petition by the
Court in Division. It states that presumptions are not facts and therefore
disputable. 49
According to SSS, the assailed Decision dated 24 June 2015 of

the Court Second Division is correct. 50 The questioned decision was
rendered in accordance with the mandate of the Constitution as it
shows the factual bases as well as the law relied upon in support of its
conclusion, holding it liable to pay the basic deficiency taxes of
P67,314,515.98. 51
46 Comment (To the Petition for Review dated 9 October 2015), Rollo, p. 72.
47 Comment (To the Petition for Review dated 9 October 2015), Rollo, pp. 72-73.
48
Respondent's Memorandum, Rollo, pp. 93-95.
49
Comment (To the Petition for Review dated 9 October 2015), Rollo, p. 73.
50
Respondent's Memorandum, Rollo, p. 88.
51
Respondent's Memorandum, Rollo, p. 89.
Decision
Page 11 of23
SSS posits that the denial of the Motion for Reconsideration as

contained in the Resolution dated 4 September 2015 of the Court in
Division is correct as the grounds raised therein were a mere rehash
of the arguments which have been fully discussed and ruled upon. 5 2
SSS finally concludes that the present Petition has not shown
any reversible error in the assailed Decision and Resolution issued by
the Court in Division. 53
COURT EN BANG'S RULING
It is observed that petitioner did not question the Court in

Division's findings and conclusion about the liability of SSS for
deficiency WTC in the amount of P23,998, 188.36 as stated in the
assailed Decision. As far as this assessment is concerned, the same
has attained finality. Settled is the rule in this jurisdiction that issues
not raised in the pleadings, as opposed to ordinary appeal of criminal
cases where the whole case is opened for review, are deemed waived
or abandoned. 54
With respect to petitioner's contentions regarding respondent's

liability for EWT of P54,386,601.73, and withholding VAT and other
percentage tax of P135,085,28.57, the same are found to be mere
reiteration or amplification of his arguments presented in his
Memorandum 55 and in his Motion for Partial Reconsideration 56 filed
before the Court in Division, which had been squarely passed upon
and settled in the assailed Decision.
The Court in Division had scrutinized the various items involved

in the disputed deficiency EWT, and withholding VAT and other
percentage tax assessments and came out with detailed findings in
pages 22 to 34 of the assailed Decision, 57 which sufficiently support its
conclusion that SSS is liable only to basic deficiency EWT of
P13,518,496.99, and withholding VAT and Other Percentage Tax of
52 Respondent's Memorandum, Rollo, p. 96

53 Respondent's Memorandum, Rollo, p. 96.
54
Bedes vs. Court of Appeals, G.R. No. 174373, October 15, 2007.
55 CTA Case No. 8564 Docket, pp. 517-529, 520-522.
56 CTA Case No. 8564 Docket, pp. 577-583.
57 CTA Case No. 8564 Docket, pp. 562-574; Rollo, pp. 42-54.
Decision
Page 12 of 23
P29,797,830.63. 58 Since the findings and conclusion of the Court in

Division are supported with evidence, and considering that petitioner
has utterly failed to point out which particular findings in the assailed
Decision are erroneous, or contrary to law, the Court En Bane sees no
cogent reason to deviate from the findings and conclusion reached in
the assailed Decision.
Anent the imposition of surcharge and deficiency and

delinquency interests against SSS pursuant to Sections 248 and 249
of the NIRC, petitioner insists that conviction is not necessary to hold
the responsible officer or employee liable for such interest and
surcharge.
Civil penalties at the rate of 25% or 50%, deficiency interest of

20%, and delinquency interest of 20% are additions to tax authorized
under Sections 247, 248 and 249 of Title X, Chapter 1 of the NIRC,
which provide:
"TITLE X-STATUTORY OFFENSES AND PENALTIES

Chapter !-Additions to the Tax
SEC. 247. General Provisions.-
(a) The additions to the tax or deficiency tax

prescribed in this Chapter shall apply to all taxes, fees and
charges imposed in this Code. The amount so added to the tax
shall be collected at the same time, in the same manner and as part
of the tax.
(b) If the withholding agent is the Government or any

of its agencies, political subdivisions or instrumentalities, or a
government-owned or controlled corporation, the employee
thereof responsible for the withholding and remittance of the
tax shall be personally liable for the additions to the tax
prescribed herein. xxx
XXX XXX XXX
SEC. 248. Civil Penalties. -
(A) There shall be imposed, in addition to the tax required

to be paid, a penalty equivalent to twenty-five percent (25%) of
the amount due, in the following cases:
58 CTA Case No. 8564 Docket, p. 575.

Decision
Page 13 of 23
(1) Failure to file any return and pay the tax due
thereon as required under the provisions of this
Code or rules and regulations on the date
prescribed; or
(2) Unless otherwise authorized by the Commissioner,

filing a return with an internal revenue officer other
than those with whom the return is required to be
filed; or
(3) Failure to pay the deficiency tax within the time

prescribed for its payment in the notice of
assessment; or
(4) Failure to pay the full or part of the amount of tax

shown on any return required to be filed under the
provisions of this Code or rules and regulations, or
the full amount of tax due for which no return is
required to be filed, on or before the date prescribed
for its payment.
(B) In case of willful neglect to file the return within the

period prescribed by this Code or by rules and regulations, or in
case a false or fraudulent return is willfully made, the penalty to be
imposed shall be fifty percent (50%) of the tax or of the deficiency
tax, in case any payment has been made on the basis of such return
before the discovery of the falsity or fraud: Provided, That a
substantial underdeclaration of taxable sales, receipts or income,
or a substantial overstatement of deductions, as determined by the
Commissioner pursuant to the rules and regulations to be
promulgated by the Secretary of Finance, shall constitute prima
facie evidence of a false or fraudulent return: Provided, further, That
failure to report sales, receipts or income in an amount exceeding
thirty percent (30%) of that declared per return, and a claim of
deductions in an amount exceeding thirty percent (30%) of actual
deductions, shall render the taxpayer liable for substantial
underdeclaration of sales, receipts or income or for overstatement
of deductions, as mentioned herein.
XXX XXX XXX
SEC. 249. Interest. -
(A) In General. - There shall be assessed and collected

on any unpaid amount of tax, interest at the rate of twenty percent
(20%) per annum, or such higher rate as may be prescribed by
rules and regulations, from the date prescribed for payment until the
amount is fully paid.
(B) Deficiency Interest. -Any deficiency in the tax due,

as the term is defined in this Code, shall be subject to the interest
Decision
Page 14 of 23
prescribed in Subsection (A) hereof, which interest shall be

assessed and collected from the date prescribed for its payment
until the full payment thereof.
(C) Delinquency Interest.- In case of failure to pay:
(1) The amount of the tax due on any return

to be filed, or
(2) The amount of the tax due for which no
return is required, or
(3) A deficiency tax, or any surcharge or
interest thereon on the due date appearing in the
notice and demand of the Commissioner, there shall
be assessed and collected on the unpaid amount,
interest at the rate prescribed in Subsection (A)
hereof until the amount is fully paid, which interest
shall form part of the tax.
(D) Interest on Extended Payment. - If any person

required to pay the tax is qualified and elects to pay the tax on
installment under the provisions of this Code, but fails to pay the tax
or any installment hereof, or any part of such amount or installment
on or before the date prescribed for its payment, or where the
Commissioner has authorized an extension of time within which to
pay a tax or a deficiency tax or any part thereof, there shall be
assessed and collected interest at the rate hereinabove prescribed
on the tax or deficiency tax or any part thereof unpaid from the date
of notice and demand until it is paid." (Boldfacing supplied)
Section 247(b) of the NIRC is plain and unequivocal in declaring

that if the withholding agent involving the assessed tax is the
Government or any of its agencies, political subdivisions or
instrumentalities, or a government-owned or controlled corporation,
the employee thereof responsible for the withholding and
remittance of the tax shall be personally liable for the additions to
the tax. In other words, the additions to the tax may not be imposed
on the Government or any of its agencies, political subdivisions or
like herein respondent SSS, as it is the personal liability of the
employee who is responsible for the withholding and remittance of the
assessed tax.
True, Section 247(a) of the NIRC is a general provision which

states that the "additions to the tax or deficiency tax shall apply to
all taxes". Section 247(a), however, must not be read in isolation but
in relation to the other provisions of Section 247 as well as the other
Decision
Page 15 of 23
Sections found in Chapter I, Title X of the NIRC so as to render all of

them effective.
While Section 247(a) made no distinction as to whether the

taxpayer being assessed and made liable for the "additions to the tax
or deficiency tax" is an individual or a private or public corporation, it
must be read and construed together with Section 247(b). Section
247(b) is clear and categorical that "if the withholding agent is the
Government or any of its agencies, political subdivisions or
the employee thereof responsible for the withholding and remittance of
the tax shall be personally liable for the additions to the tax." To say
that the liability to the "additions to the tax" attaches to the
taxpayer, irrespective of whether the taxpayer is a private or
public corporation, would render senseless or nugatory Section
247(b) which unequivocally imposes the liability to the "additions
to the tax" to the employee of the Government or any of its
agencies, political subdivisions or instrumentalities, or a
government-owned or controlled corporation responsible for the
withholding and remittance of the tax.
It is a fundamental rule in statutory construction that the clauses,

phrases, sections and provisions of a law be read as a whole; never
as disjointed or truncated parts, 59 for a law is enacted as a single entity
and not by installment of paragraphs here and subsections there.
Moreover, a law should not be so construed as to produce an absurd
result. 60 Statutes should receive a sensible construction, such as will
give effect to the legislative intention and so as to avoid an unjust or
an absurd conclusion. 61
When the law is clear and free from any doubt or ambiguity, there
is no room for construction or interpretation. There is only room for
application. As the statute is clear, plain, and free from ambiguity, it
must be given its literal meaning and applied without attempted
interpretation. This is what is known as the plain-meaning rule or verba
legis. It is expressed in the maxim, index animi sermo, or speech is the
59Samar II Electric Cooperative, Inc. vs. Estrella Quijano, G.R. No. 144474, April
27, 2007, citing Civil Service Commission v. Joson, Jr., G.R. No. 154674, May
27, 2004, 429 SCRA 773, 786.
60AngGiokChipvs. Springfield, G.R. No. L-33637, December31, 1931.
61 Condrado Cosico, Jr. vs. National Labor Relations Commission, G.R. No.
118432 May 23, 1997, citing Commissioner of Internal Revenue v. TMX Sales,
Inc., G.R. No. 83736 January 15, 1992.
Decision
Page 16 of 23
index of intention. Furthermore, there is the maxim verba legis non est
recedendum, or from the words of a statute there should be no
departure. 62
Applying the foregoing basic and fundamental rules on statutory

construction, the inevitable conclusion is that, in a situation where the
withholding agent is the Government or any of its agencies, political
subdivisions or instrumentalities, or a government-owned or controlled
corporation, the framers of the NIRC intended to impose the "additions
to tax" specified in Chapter I, Title X, upon the employee responsible
for the withholding and remittance of the tax; otherwise, Section 247(b)
would not have been incorporated therein. For in the absence of
Section 24 7(b ), the liability for the additions to the tax shall be imposed
on the income payor, without distinction as to whether the income
payor is a private or public person.
Truth to tell, in Revenue Memorandum Order (RMO) No. 8-2003,

the Commissioner of Internal Revenue (CIR) has identified the
government officials designated as withholding agents who are
responsible for the correct withholding of tax and its timely remittance.
Pertinent parts of RMO No. 8 -2003 are quoted hereunder:
"SUBJECT: Compliance of Local Government Units (LGUs),

National Government Agencies (NGAs) and other government
offices to withholding tax laws, rules and regulations and to clarify
and identify the officials responsible for withholding of tax and its
remittance
TO: All Regional Directors, Revenue District Officers, Officials

of Government Offices and others concerned
I. OBJECTIVES
This Order is issued to:
1. Ensure the efficient compliance of government withholding

agents to existing withholding tax laws, rules and regulations and
other related issuances.
2. Identify government officials designated as

withholding agents personally responsible for the correct
withholding of tax and its timely remittance.
62 Bolos vs. Bolos, G.R. No. 186400, October 20, 2010.

Decision
Page 17 of 23
3. Reiterate Item 11(1) of Revenue Memorandum Order

No. 14-98 and amend Revenue Memorandum Order No. 70-98 and
implement the provisions of R.A. 1051, E. 0. 651 and RR 1-87.
4. To effect and monitor collection of delinquent

accounts/final assessments from LGUs.
II. RESPONSIBILITY OF GOVERNMENT OFFICIALS
1. The following government officials are personally

charged with the duty to correctly withhold taxes on
compensation, expanded and final withholding tax as well as
government money payments to persons registered as Non-
VAT (percentage, franchise, etc.) and VAT taxpayers and the
timely remittance of taxes withheld:
a. XXX XXX XXX
b. XXX XXX XXX
c. Government Owned or Controlled Corporations

(GOCC) - Heads of Offices (officials holding the highest
position) and Chief Accountants or other persons holding
similar positions officially designated as such by the head of
office.
XXX XXX XXX.
2. The aforesaid officials shall be equally liable to the

penalties prescribed in Title X of the National Internal Revenue
Code, as amended." (Boldfacing and underscoring supplied)
Furthermore, RR No. 1-87 is also explicit in declaring that the

designated officers or employee of the government or any of its
agencies and instrumentalities, its political subdivisions as well as
government-owned or controlled corporations shall be personally
liable for the additions to the tax prescribed in Chapter I, Title XI (now
Title X) of the NIRC, viz.:
"SECTION 3. Liability of Designated Officers. -
(a) Additional to the Tax. - The Treasurers and Chief

Accountants designated with the duty to withhold and remit taxes
withheld in their respective offices, under these regulations shall be
personally liable for the additions to the tax prescribed in
Chapter I, Title XI of the NIRC as amended.
(b) Penalties. - Every officer or employee of the

government of the Republic of the Philippines or any of its agencies
Decision
Page 18 of 23
and instrumentalities, its political subdivisions as well as

government-owned or controlled corporations including the Central
Bank who, under the provisions of the Tax Code or regulations
promulgated thereunder, is charged with the duty to deduct and
withhold any internal revenue tax and to remit the same in
accordance with the provisions of the Tax Code and other laws, shall
be fined in a sum of not less than five thousand pesos but not more
than fifty thousand pesos of imprisoned for a period of less than six
months and one day but not more than two years, or both, if
convicted and found guilty of any of the offenses hereinafter
specified:
"1. Those who fail or cause the failure to deduct and

withhold any internal revenue tax under any of the withholding tax
laws and implementing regulations;
2. Those who fail or cause the failure to remit taxes

deducted and withheld within the time prescribed by law and
implementing regulations; and
3. Those who fail or cause the failure to file return or

statement within the time prescribed, or render or furnish a false or
fraudulent return or statement required under the withholding tax
laws and regulations." (Boldfacing and underscoring supplied)
To insist on imposing or collecting the "additions to the tax" from

SSS would run counter to the clear mandate of Section 247(b) of the
NIRC. While the Court is not unmindful of the rationale behind the
adoption of the withholding tax system in collecting taxes, the Court
cannot go beyond the tenets of the law it seeks to interpret. Section
247(b) undoubtedly prevents the imposition of the "additions to
tax" to 555 as the same is, by its explicit provision, imposable
only to its employee who is responsible for the withholding and
remittance thereof. Worth re-echoing the principle that tax statutes
are strictly construed against the taxing authority and that tax laws may
not be extended by implication beyond the clear import of their
language, nor their operation enlarged so as to embrace matters not
specifically provided. 63
Relatedly, Republic Act (RA) No. 1051 bestows upon the

responsible official or employee of a government-owned or controlled
corporation the duty to ensure that taxes are withheld prior to making
any payment. Section 4 of RA 1051 states:
63Philippine Health Care Providers, Inc. vs. Commissioner of Internal Revenue,

G.R. No. 167330, September 18, 2009.
Decision
Page 19 of 23
"Section 4. It shall be unlawful for any public officer or

employee, or official or employee of a government owned or
controlled corporation to authorize any of the payments
mentioned in section one hereofwithoutwithholding, or without
requiring the previous payment of, the tax liability mentioned in
section two hereof. It shall be equally unlawful for any person or
persons to induce or connive with any public officer or employee, or
official or employee of a government owned or controlled corporation
to commit the unlawful act herein defined or to receive any payment
in violation of this Act." (Boldfacing supplied)
While SSS, as a government-owned and controlled corporation,

may be held liable to pay the basic deficiency tax assessments, the
"additions to the tax," as afore-discussed, cannot be collected from it.
Stated differently, since SSS was acting through its official or employee
to whom the task of withholding pertains, SSS cannot be made to
assume the liability of the official or employee as a consequence of the
latter's failure to perform his/her duty.
More importantly, under Section 247(a) of the NIRC, the "amount

so added to the tax shall be collected at the same time, in the same
manner and as part of the tax". It follows therefore that in collecting the
"additions to the tax" from SSS' responsible official or employee, the
same must be done at the same time and in the same manner as
the collection of the basic deficiency taxes assessed against SSS.
Thus, it behooves the BIR to observe the procedure outlined in Section
228 of the NIRC and RR No. 12-99, failing which the inherent right to
due process of the responsible official or employee against whom the
"additions to tax" are sought to be collected would be violated.
In the present case, while the BIR is fully aware that the liability
for the "additions to the tax," if any, may only be imposed on SSS'
responsible official or employee. Yet, it failed to observe the procedural
requirements under Section 228 of the NIRC and RR No. 12-99 with
regard to said official or employee. To be specific, the BIR must have
shown at the very least that it had issued a Letter of Authority, sent
notice of informal conference, issued a Preliminary Assessment
Notice, and issued the Final Assessment Notice as well as Formal
Letter of Demand against the official or employee of SSS responsible
for the withholding and remittance of tax within the period prescribed.
Decision
Page 20 of23
The pronouncement in C/R vs. Metro Star Superama, Inc. 64 on

the importance of observing due process in the assessment and
collection of tax is instructive:
"It is an elementary rule enshrined in the 1987 Constitution that

no person shall be deprived of property without due process of law.
In balancing the scales between the power of the State to tax and its
inherent right to prosecute perceived transgressors of the law on one
side, and the constitutional rights of a citizen to due process of law
and the equal protection of the laws on the other, the scales must tilt
in favor of the individual, for a citizens right is amply protected by the
Bill of Rights under the Constitution. Thus, while taxes are the
lifeblood of the government, the power to tax has its limits, in spite of
all its plenitude. Hence in Commissioner of Internal Revenue v.
Algue, Inc., it was said
Taxes are the lifeblood of the government and so

should be collected without unnecessary hindrance. On
the other hand, such collection should be made in
accordance with law as any arbitrariness will negate the
very reason for government itself. It is therefore necessary
to reconcile the apparently conflicting interests of the
authorities and the taxpayers so that the real purpose of
taxation, which is the promotion of the common good, may
be achieved.
XXX XXX XXX
It is said that taxes are what we pay for civilized

society. Without taxes, the government would be
paralyzed for the lack of the motive power to activate and
operate it. Hence, despite the natural reluctance to
surrender part of one's hard-earned income to taxing
authorities, every person who is able to must contribute
his share in the running of the government. The
government for its part is expected to respond in the form
of tangible and intangible benefits intended to improve the
lives of the people and enhance their moral and material
values. This symbiotic relationship is the rationale of
taxation and should dispel the erroneous notion that it is
an arbitrary method of exaction by those in the seat of
power.
But even as we concede the inevitability and

indispensability of taxation, it is a requirement in all
democratic regimes that it be exercised reasonably
and in accordance with the prescribed procedure. If it
is not, then the taxpayer has a right to complain and the
64 G.R. No. 185371, December 8, 2010.

Decision
Page 21 of 23
courts will then come to his succor. For all the awesome
power of the tax collector, he may still be stopped in his
tracks if the taxpayer can demonstrate x x x that the law
has not been observed."
Considering that SSS, as a government-owned and controlled

corporation, may not be held liable for the "additions to tax", and absent
any showing that the BIR observed the procedural requirements in
assessing and collecting the "additions to tax" from SSS' responsible
official or employee, petitioner's prayer for the imposition of surcharge
and interest against SSS, and even against its responsible official or
employee, is devoid of merit.
Finally, while the procedural requirements laid down in Section

228 of the NIRC and RR No. 12-99 must be observed prior to
assessing and collecting the "additions to tax" from SSS' responsible
official or employee pursuant to Section 247(b), a criminal conviction
is not necessary to hold them personally liable therefor. Criminal
conviction is indispensable only in situations where the penalties under
the following relevant provisions of the NIRC are sought to be imposed,
viz.: (i) Section 251 - Failure of a Withholding Agent to Collect and
Remit Tax where, in addition to the other penalties provided in Chapter
I, Title X, the penalty shall be equal to the amount of the tax not
withheld, or not accounted for and remitted; (ii) Section 255 - Failure
to File Return, Supply Correct and Accurate Information, Pay Tax,
Withhold and Remit Tax and Refund Excess Taxes Withheld on
Compensation; and, Section 272 - Violation of Withholding Tax
Provision.
In fine, the Court En Bane finds SSS liable for the basic
deficiency WTC, EWT, and deficiency withholding VAT and other
percentage tax in the modified amounts of P23,998, 188.36,
P13,518,496.99, and P29, 797,830.63, respectively, for taxable year
2004, without interest and penalty.
WHEREFORE, premises considered, the Petition for Review is

DENIED for lack of merit. Accordingly, the June 24, 2015 Decision of
the Court in Division holding the Social Security System liable for the
assessed basic deficiency withholding tax on compensation,
deficiency expanded withholding tax, and deficiency withholding VAT
and other percentage tax in the modified amounts of P23,998, 188.36,
P13,518,496.99, and P29, 797,830.63, respectively, for taxable year
2004 is AFFIRMED.
Decision
Page 22 of23
The Court En Bane declares that no interest and penalty shall be

imposed upon Social Security System pursuant to Section 247(b) of
the National Internal Revenue Code of 1997, as amended.
SO ORDERED.
Presiding Justice
WE CONCUR:
~~C-~Q (With Concurringr'!nd Dissenting Opinion)

JU~Nfrcf c. CASTANEDAfJR. LOVEL~a~. BAUTISTA
Associate Justice Associate Justice
E~P.UY
Assoc1ate Justice
CAESAR~SANOVA
Associate Justice
~N~M~~-6~
(Joined the Concurring
and Dissenting Opinion of
Associate Justice Lovell R. Bautista)
ABON-VICTORINO CIELITO N. MINDARO-GRULLA
Associate Justice
OM.~~-~ ~~~;.~
(Joined the Concurring (Joined the Concurring
and Dissenting Opinion of and Dissenting Opinion of
Associate Justice Lovell R. Bautista) Associate Justice Lovell R. Bautista)
MA. BELEN M. RINGPIS-LIBAN CATHERINE T. MANAHAN
Associate Justice Associate Justice
Decision
Page 23 of23
CERTIFICATION
Pursuant to Article VIII, Section 13 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.
Presiding Justice
REPUBLIC O F THE PHILIPPINES
Court of Tax Appeals
QUEZON CITY
En Bane
ALFREDO V. MISAJON in his capacity as CTA EB NO. 1361

Assistant Commissioner of the Bureau of (CTA Case No. 8564)
Internal Revenue,
Petitioner, Members:
D EL RO SARIO, P.L
CASTANEDA,
BAUTISTA,
UY,
-versus- CASANOVA,
FABON-VICTORIN O,
MINDARO-GRULLA,
RINGPIS-LIBAN, and
MANAHAN,JL
SOCIAL SECURITY SYSTEM,
represented by its President and CEO Promulgated:
EMILIO S. DE QUIROS, JR.,
Respondent. MAY 2 4 2017 +""·
X-------------------------------------------------------------------------------- ~
CONCURRING AND DISSENTING

OPINION
BAUTI STA, ] :
The present case involves the following deficiency tax

assessments against respondent Social Security System ("SSS"), a
government owned and controlled corporation ("GOCC"), for
calendar year ("CY") 2004: withholding tax on compensation
("WTC"), expanded withholding tax ("EWT"), and withholding value-
added tax ("VAT") and other percentage tax.
I concur with the conclusion reached by the ponencia as to the

finality of the deficiency WTC assessment in view of the parties' failure
to raise the same as an issue before the Court En Bane. I likewise concur
with the findings of the Court in Division anent the computation of the
I
CONCURRING AND DISSENTING OPINION
CTA EB NO. 1361 (CTA Case No. 8564)
Page 2 of 8
deficiency EWT and the deficiency withholding VAT and other

percentage tax due from SSS, which was upheld by the majority. I
further agree with the ponencia's conclusion that the additions to the
II
tax" specified under Chapter 1, Title X of the 1997 National Internal

Revenue Code, as amended (the "1997 NIRC")l should be imposed on the
employee responsible for the withholding and remittance of the tax in
case the withholding agent is a GOCC. Finally, I agree with the
majority's finding that criminal conviction is not necessary to hold the
responsible official or employee of SSS personally liable to the
additions to the tax" unless the same refers to penalties for failure of
II
a withholding agent to collect and remit tax under Section 251 of the
1997 NIRC.
I do not agree, however, with the majority in holding that

petitioner's prayer for the imposition of surcharge, deficiency interest,
and delinquency interest is devoid of merit because SSS cannot be
made to assume the liability of its official or employee who is tasked
with the withholding of taxes on behalf of respondent, but who failed
to perform his or her duty. According to the ponencia, Section 247(b) of
the 1997 NIRC prevents the imposition of the" additions to the tax" on
SSS as the same is, by explicit provision, only imposable on the
employee of SSS responsible for the withholding and remittance
thereof.
I beg to differ. A review of the applicable provisions is in order.
Section 249 of the 1997 NIRC provides that twenty percent (20%)
interest per annum shall be imposed on any deficiency in the tax due.
Specifically, Section 249(A) provides in general that the twenty percent
(20%) interest per annum shall be imposed on any unpaid amount or
tax from the date prescribed for its payment until the full payment
thereof; while Sections 249(B) and (C)(3) provide that the deficiency
interest shall be imposed from the date prescribed for its payment until
the full payment thereof, and that the delinquency interest shall be
imposed from the due date appearing in the notice and demand of the
Commissioner of Internal Revenue (" CIR") until full payment thereof.
The relevant provisions state:
Sec. 249. Interest. -
(A) In general. - There shall be assessed and collected

(V
1 Republic Act No. 8424, as amended (1997).
CTA EB NO. 1361 (CTA Case No. 8564}
Page 3 of 8
on any unpaid amount or tax, interest at the rate of twenty

percent (20%) per annum, or such higher rate as may be
prescribed by rules and regulations, from the date prescribed
for payment until the amount is fully paid.
(B) Deficiency Interest. - Any deficiency in the tax due,

as the term is defined in this Code, shall be subject to the
interest prescribed in Subsection (A) hereof, which interest
shall be assessed and collected from the date prescribed for its
payment until the full payment thereof.
(C) Delinquency Interest.- In case of failure to pay:
XXX XXX XXX
(3) A deficiency tax, or any surcharge or interest

thereon on the due date appearing in the notice and
demand of the Commissioner, there shall be assessed
and collected on the unpaid amount, interest at the rate
prescribed in Subsection (A) hereof until the amount is
fully paid, which interest shall form part of the tax.
Meanwhile, Section 251 of the 1997 NIRC 2 states that the

withholding agent's failure to collect and remit tax shall make such
withholding agent - upon conviction - liable for penalty equal to the
total amount of the tax not withheld, or not accounted for and
remitted, which penalty shall be in addition to other penalties
provided under Chapter I, Title X of the 1997 NIRC on Additions to the
Tax.
Finally, Section 247(b) of the 1997 NIRC3 provides that the

employee of a GOCC responsible for the withholding and remittance
of the tax shall be personally liable for the additions to the tax
{\/
2 The relevant provision states:
Sec. 251. Failure of a Withholding Agent to Collect and Remit Tax. - Any
person required to withhold, account for, and remit any tax imposed by this Code
or who willfully fails to withhold such tax, or account for and remit such tax, or
aids or abets in any manner to evade any such tax or the payment thereof, shall, in
addition to other penalties provided for under this Chapter, be liable upon
conviction to a penalty equal to the total amount of the tax not withheld, or not
accounted for and remitted.
3 The relevant provision states:
Sec. 247. General Provisions. -
DX XU DX
(b) If the withholding agent is the Government or any of its agencies,
political subdivisions or instrumentalities, or a government-owned or -controlled
corporation, the employee thereof responsible for the withholding and remittance
of the tax shall be personally liable for the additions to the tax prescribed herein.
Page4 of 8
prescribed.
In determining respondent's liability for interest and penalty

under Sections 249 and 251 of the 1997 NIRC, respectively, a discussion
on the person liable therefor is necessary. A reading of Section 247(b) of
the 1997 NIRC would show that in the case of GOCCs, such as SSS,
additions to the tax prescribed shall be the personal liability of the
employee of the GOCC responsible for the withholding and remittance
of the tax. Such "additions to the tax" may be in the form of civil
penalties under Section 248, interest under Section 249, penalty for
failure to file certain information returns under Section 250, or penalties
for failure of a withholding agent to collect and remit tax under Section
251. Thus, in the event wherein respondent is found to be liable for the
additions to the tax enumerated in Chapter I, Title X of the 1997 NIRC,
its employee responsible for the withholding and remittance of the tax
shall be personally liable therefor.
The majority takes the position that Section 247(b) of the 1997
NIRC makes a distinction between withholding agents who belong to
the Government and those who are not, i.e., between public entities
and private entities. According to the majority, Section 247(b) of the 1997
NIRC basically exempts GOCCs, such as SSS, from the imposition of
the additions to the tax because such additions to the tax" is the
II
personal liability of the responsible employee of the GOCC.
I respectfully dissent. In my opinion, a plain reading of Section

247(b) of the 1997 NIRC should be applied to mean that in the event
wherein the Government and its attached agencies are found to be
liable for the additions to the tax enumerated in Chapter I, Title X of the
1997 NIRC, such government employee responsible for the
withholding and remittance of the tax shall be personally liable
therefor. Nowhere in Chapter I, Title X of the 1997 NIRC does it say that
the additions to the tax cannot be imposed on the Government and its
attached agencies. In fact, Section 247(a) of the 1997 NIRC even makes a
categorical declaration that the additions to the tax or deficiency
II
tax ... shall apply to all taxes, fees and charges imposed in this Code,"
which should be interpreted as applying to all persons who are subject
to the taxes, fees, and charges imposed in the 1997 NIRC.
As applied to assessment cases in general, it is my opinion that

the additions to the tax enumerated in Chapter I, Title X of the 1997 NIRC
are made to apply to all taxpayers regardless if such taxpayers are
I
Page 5 of 8
public entities or private entities because the 1997 NIRC does not
distinguish. Ubi lex non distinguit, nee nos distinguere debemos. 4
I humbly submit that what Section 247(b) of the 1997 NIRC only
seeks to clarify is who shall be liable for the additions to the tax in case
the taxpayer found to be deficient is the government- the government
employee responsible for the withholding and remittance of the tax.
The CIR may still impose the additions to the tax on the government
agency found to have deficiency taxes; however, the liability for the
payment of the same rests on such responsible employee of said
government agency.
Having established that SSS can be subject to the additions to the

tax (except that payment for the same remains the liability of the
responsible employee of SSS), I will now discuss which additions to
the tax may be imposed on the deficiency EWT and withholding VAT
and other percentage tax of SSS.
As regards the imposition of the deficiency interest and the

delinquency interest under Section 249 of the 1997 NIRC, it is my
opinion that it was proper for petitioner to impose the same on
respondent's deficiency EWT and deficiency withholding VAT and
other percentage tax. Insofar as deficiency interest is concerned, Section
249(B) clearly provides that the twenty percent (20%) interest per
annum shall be imposed on any deficiency in the tax due from the date
prescribed for its payment until full payment thereof. On the other
hand, insofar as delinquency interest is concerned, Section 249(C)
expressly states that the twenty percent (20%) interest per annum shall
be imposed on the unpaid amount of the deficiency tax from the due
date appearing in the notice and demand of the CIR until the amount
is fully paid. Accordingly, it is my view that respondent shall be liable
for both deficiency interest and delinquency interest on respondent's
deficiency EWT and deficiency withholding VAT and other
percentage tax for CY 2004. Specifically, respondent's employee
responsible for the withholding and remittance of the aforementioned
taxes shall be personally liable for the said deficiency interest and
delinquency interest.
rJ
4 CIR v. Reyes, G.R. Nos. 159694 & 163581, January 27, 2006, 480 SCRA 382; Secretan; of Finance v.
Ilarde, G.R. No. 121782, May 9, 2005, 458 SCRA 218; Philippine National Oil Company v. Court of
Appeals, G.R. Nos. 109976 & 112800, April26, 2005, 457 SCRA 32.
Page 6 of 8
In addition, I respectfully submit that the imposition of the

twenty-five percent (25%) surcharge under Section 248(A)(3) of the 1997
NIRCS is proper. It is worthy to note that the imposition of the
surcharge is, similar to the imposition of deficiency interest and
delinquency interest, mandatory. Again, respondent's employee
responsible for the withholding and remittance of the aforementioned
taxes shall be personally liable for the twenty-five percent (25%)
surcharge.
The imposition of deficiency interest, delinquency interest, and

surcharge is but proper in light of the Supreme Court's
pronouncements in Philippine Refining Company v. Court of Appeals6
wherein it held that collection of penalty and interest is mandatory in
cases of delinquency, thus:
Our attention has also been called to two of our previous

rulings and these we set out here for the benefit of petitioner
and whosoever may be minded to take the same stance it has
adopted in this case. Tax laws imposing penalties for
delinquencies, so we have long held, are intended to hasten tax
payments by punishing evasions or neglect of duty in respect
thereof. If penalties could be condoned for flimsy reasons, the
law imposing penalties for delinquencies would be rendered
nugatory, and the maintenance of the Government and its
multifarious activities will be adversely affected.
We have likewise explained that it is mandatory to

collect penalty and interest at the stated rate in case of
delinquency. The intention of the law is to discourage delay in
the payment of taxes due the Government, and in this sense,
the penalty and interest are not penal but compensatory for the
concomitant use of the funds by the taxpayer beyond the date
when he is supposed to have paid them to the Government.
Unquestionably, petitioner chose to turn a deaf ear to these
injunctions.? (
s The relevant provision states:

Sec.248. Civil Penalties. -
(A) There shall be imposed, in addition to the tax required to be paid,
a penalty equivalent to twenty-five percent (25%) of the amount due, in the
following cases:
XXX XXX XXX
(3) Failure to pay the deficiency tax within the time prescribed for
its payment in the notice of assessment; or
6 G.R. No. 118794, May 8, 1996, 256 SCRA 667.
7 Underscoring ours.
Page 7 of8
In view of the foregoing discussion, I humbly submit that

respondent should be liable for the twenty-five percent (25%)
surcharge, twenty percent (20%) deficiency interest per annum, and
twenty percent (20%) delinquency interest per annum, on its deficiency
EWT and deficiency withholding VAT and other percentage tax for CY
2004, the payment of which additions to the tax shall be the personal
liability of respondent's employee responsible for the withholding and
remittance of the same.
Accordingly, I vote to partially grant the instant Petition for

Review. The Decision promulgated on June 24, 2015 and the
Resolution promulgated on September 4, 2015 by the Second Division
should be affirmed with modifications. Respondent should be ordered
to pay the amount of Php78,143,597.89, inclusive of twenty-five
percent (25%) surcharge amounting to Php10,829,081.91 imposed
under Section 248(A)(3) of the 1997 NIRC for the deficiency EWT, and
VAT and Other Percentage Tax Withheld, computed as follows:
TAX TYPE BASIC 25'Y., SURCHARGE TOTAL
Withholding Tax on Compensation Php 23,998,188.36 Php - Php 23,998,188.36

Expanded Withholding Tax 13,518,496.99 3,379,624.25 16,898,121.24
VAT and Other Percentage Tax Withheld 29,797,830.63 7,449,457.66 37,247,288.29
TOTAL PHP 67,314,515.98 PHP 10,829,081.91 PHP 78,143,597.89
In addition, respondent should be ordered to pay:
1. Deficiency interest at the rate of twenty percent (20%) per

annum on the basic deficiency EWT, and VAT and Other Percentage
Taxes Withheld computed from the following dates until full payment
thereof pursuant to Section 249(B) of the 1997 NIRC:
20'Yt, DEFICIENCY INTEREST

TAX TYPE BASIC
COMPUTED FROM
Expanded Withholding Tax Php 13,518,496.99 January 15,2005
VAT and Other Percentage Tax Withheld 29,797,830.63 January 10, 2005
2. Delinquency interest at the rate of twenty percent (20%) per

annum on the total amount of Php54,145,409.53 and on the twenty
percent (20%) per annum deficiency interest which have accrued as
aforestated in (1), computed from September 27, 2012 until full
payment thereof pursuant to Section 249(C) of the 1997 NIRC, computed
as follows: ~
Page 8 of 8
TAX TYPE BASIC 25''l\, SURCHARGE TOTAL

Expanded Withholding Tax Php 13,518,496.99 Php 3,379,624.25 Php 16,898,121.24
VAT and Other Percentage Tax Withheld ---==---=2"::'9,'--:-79--'7::'-'-,8:..::3-=0.-=:-63:..___.==----'::7:....:,44:..::.9':!._,4.::.::5,.:-7.:..::..6-=-6-----,-~-_::3-=:-7!::::.,2-=:-47...:.:.,2=8:..=.8.=29::_
TOTAL PHP 43,316,327.62 PHP 10,829,081.91 PHP 54,145,409.53
LOVELL €!BAUTISTA
Associate Justice

Court of Tax Appeals: en Bang

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REPUBLIC OF THE PHILIPPINES

Court of Tax Appeals

ALFREDO V. MISAJON, in his CTA EB No. 1361

DEL ROSARIO, P.J.:

This is a Petition for Review filed pursuant to Section 3(b) , Rule

nullification of the Decision 3 dated June 24 , 2015 of the Court of Tax

1 Rule 8- Procedure in Civil Cases xxx

Associate Justice Juanita C . Castaneda , Jr. and Associate Justice Caesar A.

Appeals' (CTA) Second Division (Court in Division) which upheld with

Petitioner Alfredo V. Misajon, the respondent before the Court in

Respondent Social Security System (SSS for brevity), the

The facts of the case are undisputed.

The deficiency tax assessments arose as a result of the BIR's

The BIR issued a Preliminary Assessment Notice (PAN) with

8564 Docket, p. 244.

deficiency withholding tax on government payment of P84,653, 797.91,

SSS received on January 10, 2008 the Audit ResuiUAssessment

On September 27, 2012, SSS received the BIR's Final Decision

On October 29, 2012, SSS filed a Petition for Review 13 before

After trial, the Court in Division rendered the assailed Decision 14

"WHEREFORE, premises considered, the instant Petition for

Tax Type Basic Deficiency Taxes

The Court in Division declared that it has jurisdiction over the

Anent the issue of imposition of 20% interest under Section 249

14 Rollo, pp. 21-56.

As regards the disputed deficiency WTC, the Court in Division

Concerning the deficiency EWT, the Court in Division adjudged

1. Out of P11 0,926,351.20 Supplies and Materials

2. The total Furniture and Equipment expense of

are subject to withholding tax pursuant to Section 2.57.4 of

3. The Additions to Property and Equipment pertaining to

4. Freight charges of P9,883, 186.50 is subject to 2°/o

5. Light and Water expense of P1 07,670,335.58 is

6. The M/R expense accounts (i.e., MIR- Transportation

2-98, and SSS failed to show that proper withholding and

7. The discrepancy of P2,052,901.43 between the Office

With respect to deficiency withholding VAT and other percentage

On July 10, 2015, petitioner filed his Motion for Partial

"WHEREFORE, premises considered, the instant Motion for

On September 24, 2015, petitioner filed a Motion for Extension

On October 12, 2015, petitioner filed through registered mail his

In the Resolution dated October 28, 2015, SSS was directed to

Within the extended period allowed per Minute Resolution dated

On March 14, 2016, petitioner filed his Manifestation that he is

The case was submitted for decision on June 17, 2016. 41

31 Rollo, pp. 8-62

35 Rollo, pp. 72-76.

37 Rollo, pp. 79-80.

Whether the assailed Decision of the Court in Division dated

Petitioner argues that Section 251 of the NIRC is inapplicable in

Petitioner further contends that respondent is liable for expanded

SSS counter-argues that Section 251 is under Chapter 1 of Title

42 Petition for Review, Rollo, p. 11-12.

the omission or failure was inadvertent or deliberate as the law states

who could be held liable where the withholding agent is the

SSS further avers that the application of Section 251 is made

Anent the assessment and its presumption of regularity, SSS

According to SSS, the assailed Decision dated 24 June 2015 of