GR 141212; (June, 2006) (Digest)
G.R. No. 141212 ; June 22, 2006
BENGUET CORPORATION, Petitioner, vs. COMMISSIONER OF INTERNAL REVENUE, Respondent.
FACTS
Petitioner Benguet Corporation received a demand from the Commissioner of Internal Revenue for unremitted withholding taxes on executive compensation for 1988-1991, totaling P6,188,672.50, alleging the payment orders (POs) and confirmation receipts (CRs) in its annual return were fake. Petitioner protested, asserting timely remittance through its agent, L.C. Diaz and Company, via 25 manager’s checks, evidenced by official BIR-issued POs and CRs. The BIR, without resolving the protest, enforced collection via warrants of distraint and levy. Petitioner secured a surety bond and filed a petition with the Court of Tax Appeals (CTA) to restrain collection.
The CTA dismissed the petition, a ruling affirmed by the Court of Appeals. While the POs and CRs were genuine, the courts found the checks themselves were the best evidence of payment. Examination revealed handwritten annotations on the checks’ dorsal sides indicating they were used by various other taxpayers to purchase documentary stamps, corroborated by BIR Special Projects Team reports. The courts concluded the checks were not applied to petitioner’s withholding tax liabilities.
ISSUE
Were there valid remittances of the withholding taxes, and what constitutes the best evidence of such payment?
RULING
The Supreme Court denied the petition, affirming the CA and CTA decisions. The legal logic rests on the principle that while POs and CRs are prima facie evidence of payment, they are not conclusive and can be rebutted by superior evidence. Here, the best evidence was the physical checks, which are the very instruments of payment. The handwritten notations on the checks, supported by official BIR investigation reports, concretely demonstrated that the funds were diverted to pay for documentary stamps for other parties, not for Benguet’s withholding taxes. This substantive evidence overcame the prima facie case established by the POs and CRs. Furthermore, petitioner’s delegation of the remittance function to its agent, L.C. Diaz and Company, did not absolve it of responsibility. The negligence of the agent in ensuring the proper application of the tax payments is imputable to the principal, the taxpayer. Consequently, no valid payment was made, making the assessment for deficiency taxes, including penalties, final and executory.