GR 172045; (June, 2009) (Digest)
G.R. No. 172045 June 16, 2009.
COMMISSIONER OF INTERNAL REVENUE, Petitioner, vs. FIRST EXPRESS PAWNSHOP COMPANY, INC., Respondent.
FACTS
On 28 December 2001, the Commissioner of Internal Revenue (CIR) issued assessment notices against First Express Pawnshop Company, Inc. for deficiency income tax, value-added tax (VAT), and documentary stamp tax (DST) on deposit on subscription and on pawn tickets. Respondent received the notices on 3 January 2002 and filed a written protest on 1 February 2002. The CIR did not act on the protest within the 180-day period, prompting respondent to file a petition before the Court of Tax Appeals (CTA). Respondent contended, among other arguments, that its deposit on subscription was not subject to DST. The CTA First Division cancelled the DST assessments. Both parties filed motions for reconsideration and subsequently petitions for review with the CTA En Banc. The CTA En Banc, in its Decision dated 24 March 2006, affirmed respondent’s VAT liability and its liability for DST on pawnshop tickets but found that respondent’s deposit on subscription was not subject to DST. The CIR elevated the case to the Supreme Court, contesting the cancellation of the DST assessment on deposit on subscription.
ISSUE
Whether the Court of Tax Appeals erred on a question of law in disregarding the rule on finality of assessments prescribed under Section 228 of the National Internal Revenue Code, and corollarily, whether respondent is liable to pay DST on its deposit on subscription of capital stock.
RULING
The Supreme Court denied the petition and affirmed the CTA En Banc’s Decision. The Court held that the assessment for deficiency DST on deposit on subscription had not become final and unassailable. It ruled that the submission of supporting documents within the 60-day period from the filing of a protest under Section 228 is directory, not mandatory. The Court found that respondent had sufficiently proven that the amount in question was a deposit on future subscription, which is not subject to DST under Section 175 of the Tax Code, as there was no subscription agreement or issuance of stock certificates for the amount assessed. The CIR’s mere reliance on the presumption of correctness of the assessment was unavailing against respondent’s evidence, including its General Information Sheet and financial statements, which showed no subscription corresponding to the assessed amount. Therefore, respondent was not liable for the deficiency DST on deposit on subscription.