REPUB LIC OF THE PHILIP PINES

COURT OF TAX APPEA LS

QUEZO N CITY

ENBAN C

COMMI SSIONE R OF INTERN AL CTA EB NO. 2646

REVENU E , (CTA Case N o. 9341)
P etitioner,

Present:
D el R osario, P.J.,
-versus- Ringpis-Lib an,
M an ah an,
Bacorro-Villen a,
M od esto-San P edro,
Reyes-Fa jardo,
Cui-D avid,
F errer-Flo res, and
Angeles, ]].

P romulgat ed :

DECIS ION

RINGPIS -LIBAN, J.:

Before the Court En Bam· is a Petition for Review filed by petitioner '
Commissioner of Internal Revenue (CIR) to seek nullification of the D ecision~
dated March 18, 2022 (assailed D ecisio n), the dispositive portion thereof reads:

"WHE REF ORE , premises considered, the present

Petition for Review is GRANTE D . 1\ ccordingly, the subject
assessmen t issued against petitioner s for deficiency income tax,
inclusive of incremen ts, in the aggregate amount of P305,735,
910.71, for taxable years 2004 to 2009, as embodied in the FDDA
dated April4, 2016, is CANCE LLE D and SET ASIDE /

1 Respondent in CT.\ Case No. 934 1.

2
Rollo, CT.\ EB Case l\'o. 26..J6, pp. 24-..J4.
Page 2 of 10
DECISION
CTA EB NO. 2646 (CTA CASE NO. 9341)

SO ORDERED."

and the Resolutio n3 dated June 9, 2022 (assailed Resolution) of the same Second
Division of the Court (Court in Division) dismissing the CIR's Motion for
Reconsideration, the dispositive portion thereof reads:

"WHEREFORE, premises considere d, the motion IS

DISMISSED for lack of jurisdiction.

SO ORDERED."

THE PARTIES

Petitioner is the duly appointed Commiss ioner of the Bureau of Internal

Revenue (BIR) who has the power to decide disputed assessments, refunds of
internal revenue taxes, fees or other charges, penalties imposed in relation thereto
or other matters arising under the National Internal Revenue Code (NIRC) or
other laws or portions thereof administered by the BIR. He holds office at the
BIR National Office Building, Agham Road, Dillman, Quezon City.

Responde nts Juan Miguel M. Arroyo (Mr. Arroyo) is a registered taxpayer

of Revenue District No. 39, South Quezon City with TIN 914-841-267-000. He
was the Vice-Gov ernor of the Province of Pampanga for two (2) consecutive
terms, or from 2004-2010. Petitioner Ma. Angela M. Arroyo (Mrs. Arroyo) on
the other hand, is registered as a One-Time Transacti on ("ONETT ") taxpayer
of Revenue District No. 50, South Makati with TIN 185-405-985-000.'

THE FACTS

The facts as stated in the assailed Decision5 are as follows:

"On AprilS, 2011, petitioner Juan Miguel M. Arroyo and his

wife, Ma. Angela Arroyo, received two (2) Letters of Authority
(LOA Nos. 211~2011-00000083 and 211-2011-00000084), both
dated April 4, 2011, issued by responden t Commiss ioner of
Internal Revenue, to examine their books of accounts and other
accountin g records for all internal revenue taxes for the period
January 1, 2002 to Decembe r 31, 2009~

-1Rollo, pp. 46-48.

-4Decision, p. 2.
5 Citations omitted.
Page 3 of 10
DECISION
CTA EB NO. 2646 (CTA CASE NO. 9341)

On April 7, 2011, the BIR filed a Complaint Affidavit with

the Department of Justice (DOJ) for violation of Sections 254 and
255 of the National Internal Revenue Code of 1997 (NIRC).

Thereafter, a Preliminary Assessment Notice ("PAN") dated

September 20, 2011 with Details of Discrepancies was issued
against petitioners, against which a Protest was flled by Petitioners
on November 25, 2011.

On January 10,2012, a Formal Letter of Demand ("FLO")

with Details of Discrepancies and Final Assessment Notices
("FAN") were issued demanding the payment of the alleged
deficiency income taxes for 'l'axablc Years 2004-2009.

A protest to the FAN was filed on March 9, 2012.

At the same time, the following cases against the Petitioners

were filed:

1. Criminal Case Nos. 0-247 to 0-249, entitled "People v.

Juan Miguel M. Arroyo," with the Court of Tax Appeals,
for Failure to Supply Correct and Accurate Information
in his Income Tax Return for taxable years 2004, 2006
and 2007.

2. Criminal Case Nos. Q-11-172641 to Q-11-172647,

entitled "People v. Ma. Angela l\f. Arroyo", with the
Regional Trial Court of Quezon City, for failure to file
Income Tax Return for 2003, 2004, 2005 2006, 2007
2008, 2009.

3. Criminal Case Nos. Q-11-172638 to Q-11-172640,

entitled, "People v. Juan Miguel M. Arroyo", with the
Regional Trial Court of Quezon City, for failure to file
Income Tax Return for 2005, 2008, 2009.

On April 5, 2016, the spouses received a Final Decision on

Disputed Assessment ("FDDA") dated April4, 2016, signed by the
Commissioner, denying the Protest against the alleged deficiency
tax assessments for taxable years 2004 to 2009. The FDDi\ finds
Petitioner Spouses liable for alleged deficiency income taxes for the
taxable years 2004-2009 in the aggregate amount of
P305,735,91 0. 71/
Page 4 of 10
DECISION
CTA EB NO. 2646 (CTA CASE NO. 9341)

Meanwhile on August 14, 2017, the Regional Trial Court of

Quezon City, issued an Order dismissing Criminal Case Nos. Q-
11-172641-47.

Subsequentl y on March 21, 2018, this Court promulgated its

Decision in CTA Criminal Case Nos. 0-247 to 0-249 acquitting
Juan Miguel M. Arroyo for failure of the prosecution to prove his
guilt beyond reasonable doubt. " 6

On May 4, 2016, respondents ftled a Petition for Review7 before the Court
in Division, docketed as CTA Case No. 9341, entitled 'Juan MiguelAm!JO & Ma.
Angela Am!JO (GOMECO Metal Cop.) vs. Commissioner of Internal Revenue. "

On September 19, 2016, the petitioner CIR ftled his Answer, 8 interposing
the following defenses, to wit: that the Net Worth Method was properly applied;
that the total unreported income of respondents was established by using the
Net Worth Method, an authorized method under Revenue Memorandu m Order
(RMO) No. 15-95, as amended by Riv10 31-95, where a comparison was made
between an increase in net worth and the reported taxable income over time in
order to determine the legitimacy of the taxpayer's reported income; that the use
of Net Worth Method in investigating the tax case of the respondents is
embodied in Sections 6(B) and 43 of the NIRC of 1997, as amended; that the
instant case is not barred by prescription; that Mr. Arroyo ftled false or fraudulent
returns for taxable years 2004, 2005 & 2006, and did not file his ITRs for taxable
years 2007, 2008 and 2009, while Mrs. Arroyo failed to ftle her ITRs for taxable
year 2003 to 2009; that the applicable period to assess is ten (1 0) years and not
three (3) years; that the imposition of fifty percent (50%) surcharge as fraud
penalty is consistent wit the provisions of the law and therefore justified; that the
burden of proof is on the taxpayer contesting the validity of the assessment to
prove not only that the CIR is wrong but the taxpayer is right; and all
presumption s are in favor of the correctness of tax assessments.

The sole issue stated in the Pre-Trial Order dated June 4, 2018 is "Whether
petitioners are liable to pay the aggregate amount of P305,735,910.71 as
deficiency Income Tax for taxable years 2004 up to 2009 as well as 50%
surcharge and 20% deficiency and delinquency interest for late payment until
fully paid pursuant to Sections 248 and 249 of the National Internal Revenue
Code (NIRC), of 1997."9

On March 18, 2022, the Court in Division rendered the assailed Decision.
On June 9, 2022, the Court in Division rendered the assailed Resolutio n/

"Docket, CL\ Case :-.Jo. 9341, pp. 1147-1149.

7 Ibid , pp.
10-30.
X Ibid., pp. 172-182.
9 Page
2, Pre-Trial Order.
Page 5 of 10
DECISION
CTA EB NO. 2646 (CTA CASE NO. 9341)

Aggrieved, the CIR filed before the Court En Bane this Petition for
Review 10 on July 1, 2022.

On August 4, 2022, the Court En Bane issued a Resolutio n ordering

responden ts to file their Commen t/Opposit ion to the Petition for Review,
within ten (1 0) days from notice. 11

On August 19, 2022, responden ts filed their "Oppositi on." 12

On Septembe r 27, 2022, the Court En Bane issued a Resolutio n noting

responden ts' "Opposit ion" and referring the instant case to the Philippine
Mediation Center-Co urt of Tax Appeals (PMC-CTA) for initial appearanc e on
Novembe r 8, 2022 at 1:30 p.m. 13

On Novembe r 10,2022, the Court En Bane received PMC-CTA Form 6-

No Agreemen t to Mediate, stating that the parties decided not to have their case
mediated by the PMC-CTA . 14

In the Resolutio n dated Decembe r 15, 2022,15 the Court notes

responden ts' "Opposit ion" and the PMC-CTA Form 6- No Agreemen t to
Mediate. In view thereof, the instant case was deemed submitted for decision.

THE ISSUE

The main issue for the Court En Ban(s considera tion is "Whether or not
the Court En Bane has jurisdiction to review the Court in Division's Decision and
Resolutio n."

THE ARGUMENTS

The CIR contends that technical rules of procedure are liberally construed
to promote substantia l justice; that the Court in Division denied petitioner 's
motion for reconside ration for lack of jurisdiction because the motion was filed
out of time; that the motion was flied only one day late; that as representa tive of
the governme nt in the collection and enforcem ent of taxes, petitioner should not
be bound by the errors of its agents; that in the interest of substantial justice and
pursuant to the settled rule that litigants should, as much as possible be decided
on their merits and not on technicalities; that the net worth method of assessing
a taxpayer was properly applied in the instant case; that responden ts w e /

1
" Rollo, CT"\ EB Case No. 2646, pp. 1-15, with .\nnexes.
II Ibid. pp. 50-51.
12 Ibid., pp. 52-84.
n Ibid., pp. 267-268.
II Ibid., p. 269.
"Ibid pp. 271-272.
Page 6 of 10
DECISION
CTA EB NO. 2646 (CTA CASE NO. 9341)

accorded due process; and that the issuance and service of the Notice oflnformal
Conference (NIC) to respondents was never denied by respondents, hence, it is
unnecessary for petitioner to offer evidence to prove the contrary.

On the other hand, respondent counter-argues that the Court in Division

correctly denied petitioner's motion for reconsideration for lack of merit; that
judgments or orders become final and executory by operation of law, and not by
judicial declaration; that petitioner admitted that his office received the Decision
dated March 18, 2022 on March 21, 2022; that the motion for reconsideration
was therefore due on April 5, 2022; that the postmark on the attached Affidavit
of Service, as well as the Affidavit itself, indicates that the Motion was mailed on
April 6, 2022; that petitioner did not attempt to explain why his motion was late;
that the relaxation of rules in the interest of justice was never intended to be a
license for erring litigants to violate the rules with impunity; that the motion for
reconsideration, even if allowed, should still be denied because it is not impressed
with merit; and that the Court in Division correctly cancelled and set aside the
assessment because the Net Worth Method cannot be applied.

THE RULING OF THE COURT EN BANC

After consideration, the Court En Bam· finds that the CIR's opportunity
to appeal has already lapsed since the assailed Decision has become final and
executory for failure of the CIR to file a motion for reconsideration in
accordance with the rules.

The CIR's right to appeal is a statutory privilege that must be exercised in

the manner provided by law.

Sections 1 and 3, Rule 8 of the Revised Rules of the Court of Tax Appeals
(RRCTA) provide:

SECTION 1. Review of cases in the Court en bam: - In cases

falling under the exclusive appellate jurisdiction of the Court en
bane, the petition for review of decision or resolution of the Court
in Division must be preceded by the filing of a timely motion for
reconsideration or new trial with the Division.

XXX XXX XXX

SECTION 3. Who may appeal,· period to file petition.- (a) xxx

XXX XXX/
Page 7 of 10
DECISION
CTA EB NO. 2646 (CTA CASE NO. 9341)

(b) A party adversely affected by a decision or resolution of

a Division of the Court on a motion for reconsiderat ion or a 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 of
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.

The records of this case show that the CIR received a copy of the Decision
on March 21, 2022. 16

Based on the above-ment ioned provisions, the CIR had fifteen (15) days
from March 22, 2022 or until April 5, 2022 within which to flle his motion for
reconsiderat ion. April 5, 2022 is a Tuesday.

On April 6, 2022, the CIR filed before the Court in Division a "Motion
for Reconsidera tion [re: Decision dated March 18, 2022]" dated April4, 2022. 17
Hence, the CIR's right to appeal has already lapsed.

A party who fails to question an adverse decision by not filing a motion

for reconsiderat ion within the period prescribed by the rules loses its right to do
so, since the decision as to him, becomes final and binding. In Nippon Express
(Philippines) Corp. vs. Commissioner of Internal Revenue, 18 the Supreme Court ruled
that:

"It must be emphasized that jurisdiction over the subject

matter or nature of an action is fundamental for a court to act on a
given controversy , and is conferred only by law and not by the
consent or waiver upon a court which, otherwise, would have no
jurisdiction over the subject matter or nature of an action. Lack of
jurisdiction of the court over an action or the subject matter of an
action cannot be cured by the silence, acquiescence, or even by
express consent of the parties. If the court has no jurisdiction over
the nature of an action, its only jurisdiction is to dismiss the case.
The court could not decide the case on the merits.

The CTA, even if vested with special jurisdiction, is, as

courts of general jurisdiction can only take cognizance of such
matters as are clearly within its statutory authority. Relative thereto,
when it appears from the pleadings or evidence on record that the

16
~
Ibid. p. 1144.
17 Docket, pp. 1167-1173.

"G.R. No. 185666, February 04,2015.

Page 8 of 10
DECISION
CTA EB NO. 2646 (CTA CASE NO. 9341)

court has no jurisdiction over the subject matter, the court shall
dismiss the claim."

In the case of Bureau of Internal Revenue vs. TICO Insurance CompaY!J, Im:,
Glowide Enterprises, Im:, and Pacific Mills, Inc., 19 the Supreme Court extensively
discussed the effect of failure to ftle on time a motion for reconside ration, viz:

It is setded that the perfection of an appeal in the manner

and within the period prescribed by law is not only mandator y but
jurisdictional. This means that the failure to interpose a timely
appeal deprives the appellate body of any jurisdiction to alter the
final judgment , more so to entertain the appeal. Once a decision
attains finality, it becomes the law of the case irrespectiv e of
whether the decision is erroneous or not, and no court- not even
the Supreme Court - has the power to revise, review, change or
alter the same. The right to appeal is not a part of due process of
law, but is a mere statutory privilege to be exercised only in the
manner, and in accordanc e with, the provision s of the law. After a
decision is declared final and executory, vested rights are acquired
by the winning party.

In the same vein, "a motion for reconside ration must

necessarily be ftled within the period to appeal. When filed beyond
such period, the motion for reconside ration ipso jatto forecloses the
right to appeal." "Under Section 1, Rule 52 of the Rules of Court,
a motion for reconside ration of a judgment or final resolution
should be filed within 15 days from notice. If no appeal or motion
for reconside ration is ftled within this period, the judgment or final
resolution shall forthwith be entered by the clerk in the book of
entries of judgment, as provided under Section 10 of Rule 51. The
15-day reglement ary period for filing a motion for reconside ration
is non-exten dible."

Provision s of the Rules of Court prescribin g the time within

which certain acts must be done, or certain proceedin gs taken, are
absolutely indispensa ble to the preventio n of needless delays, and
to the orderly and speedy discharge of judicial business. While this
Court has previously allowed the liberal applicatio n of procedura l
rules, these are exception s that are sufficiendy justified by
meritoriou s and exception al circumsta nces attendant therein,
which are notably not present in the instant petition. Not every plea
for relaxation of rules of procedure shall be granted by the Court
for it will render such rules inutile/

I'J G.R. No. 204226, .-\pril18, 2022, citations omitted.

Page 9 of 10
DECISION
CTA EB NO. 2646 (CTA CASE NO. 9341)

Significantly, the BIR failed to adduce any cogent or

exceptional reason that would warrant the liberal application of the
rules. It merely invoked the inadvertence of its counsel's Document
Managemen t Division in failing to Hie its motion for
reconsiderat ion on time. However, a counsel's tardiness in
complying with reglementary periods for filing pleadings that are
attributed to the negligence of said counsel's secretary or clerk is
not a valid reason. "It is the counsel's duty to adopt and to strictly
maintain a system that ensures that all pleadings should be filed and
duly served within the period; and if he fails to do so, the negligence
of his secretary or clerk to file such pleading is imputable to the said
counsel."

That the motion for reconsiderat ion was flied only one day
late is immaterial; the Court has similarly refused to admit motions
for reconsiderat ion which were filed late without sufficient
justification. Indeed, "[j]ust as a losing party has the right to appeal
within the prescribed period, the winning party has the correlative
right to enjoy the finality of the case."

In fine, the BIR's failure to seasonably file its motion for

reconsiderat ion rendered the December 16, 2011 Decision of the
CA final and executory, and beyond the courts' power to amend or
revoke."

Since the assailed Decision of the Court in Division has become final and
executory, the Court En Bane cannot exercise appellate jurisdiction to review the
decision. Accordingly, the Court En Bane must deny the instant petition.

WHEREFORE, premises considered, the instant Petition for Review is

DENIED for lack of jurisdiction.

SO ORDERED .

~. ~ """"' '--
MA. BELEN M. RINGPIS-LIBAN
Associate Justice

WE CONCUR:

Presiding Justice
Page 10 of 10
DECISION
CTA EB NO. 2646 (CTA CASE NO. 9341)

·~~
CA~MA
/ A • ./.

AllAN ....._
Associate Justice

PEDRO

~~ r. ~-rf4~
MARIAN IvfJF. REYiS-FA JARDO
Associate Justice

Mtmt4 1t£
LANEE s. CUI-DAVID
Associate Justice

~"#.~
CO~NG. -- -
Associate Justice

(Ibok No Part)
HENRY S. ANGELES
Associate Justice

CERTIFI CATION

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

certified that the conclusions in the above Decision have been reached in
consultation with the members of the Court En Bane before the case was assigned
to the writer of the opinion of the Court.

Presiding Justice