G.R. No. L-36181 and L-36748, October 23, 1982
MERALCO SECURITIES CORPORATION (now FIRST PHILIPPINE HOLDINGS CORPORATION) and COMMISSIONER OF INTERNAL REVENUE, petitioners, vs. HON. VICTORINO SAVELLANO and ASUNCION BARON VDA. DE MANIAGO, et al., as heirs of the late Juan G. Maniago, respondents.

FACTS

The late Juan G. Maniago submitted a confidential denunciation to the Commissioner of Internal Revenue (CIR) against Meralco Securities Corporation (MSC) for alleged tax evasion. Maniago claimed MSC paid income tax on only 25% of dividends received from Manila Electric Co. for 1962-1966, shortchanging the government. The CIR investigated and ruled that no deficiency tax was due, citing Section 24(a) of the National Internal Revenue Code, which required only 25% of such dividends to be returnable for tax purposes when received from a domestic corporation liable to tax. The CIR thus denied Maniago’s claim for an informer’s reward.
Unsatisfied, Maniago filed a petition for mandamus in the Court of First Instance of Manila to compel the CIR to impose a deficiency assessment on MSC and to award him the corresponding informer’s reward under R.A. 2338. The CIR and MSC moved to dismiss, arguing that the issuance of assessments is a discretionary power not subject to mandamus and that jurisdiction lies with the Court of Tax Appeals. Respondent Judge Victorino Savellano granted the writ, ordering the CIR to assess and collect over P51 million from MSC and to pay 25% to Maniago as a reward.

ISSUE

Whether the respondent judge had jurisdiction to issue a writ of mandamus compelling the CIR to assess and collect alleged deficiency taxes and to grant an informer’s reward.

RULING

The Supreme Court granted the petitions, reversing the respondent judge’s decision. The Court held that the respondent judge lacked jurisdiction over the subject matter. Under Section 7 of Republic Act No. 1125 , the Court of Tax Appeals has exclusive appellate jurisdiction to review decisions of the CIR on matters arising under the National Internal Revenue Code, including disputed assessments. The question of whether to impose a deficiency assessment is a matter exclusively within the CIR’s discretionary authority and is reviewable only by the Court of Tax Appeals on appeal from a formal decision of the CIR. Mandamus does not lie to control or reverse the exercise of such discretion.
Furthermore, an informer’s reward is contingent upon the actual assessment and collection of unpaid taxes. Since the CIR validly exercised his discretion in finding no deficiency tax due, no assessment or collection could be made. Consequently, no informer’s reward was due to Maniago’s heirs. The writ of mandamus issued by the respondent judge was therefore without legal basis.