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THIRD DIVISION
[ G.R. Nos. 251306-07, June 16, 2021 ]
COMMISSIONER OF INTERNAL REVENUE, PETITIONER, VS. NORKIS TRADING COMPANY, INC., RESPONDENT.
D E C I S I O N
INTING, J.:
This resolves the Petition for Certiorari[1] filed by the Commissioner of Internal Revenue (CIR) assailing the Court of Tax Appeals (CTA) En Banc Resolutions dated May 29, 2019[2] and January 16, 2020[3] which dismissed the CIR's petitions for review docketed as CTA En Banc Nos. 1766 and 1845,[4] respectively.
The Antecedents
The present case stemmed from an assessment[5] issued by the CIR against Norkis Trading Company, Inc. (Norkis) involving alleged deficiency income taxes amounting to P285,927,070.68, inclusive of interest and penalties, for the taxable year ending June 30, 2007.[6]
Norkis filed a judicial protest before the CTA which was docketed as CTA Case No. 8862.
Ruling of the CTA Division
On August 16, 2017, the CTA Second Division (CTA Division) rendered a Decision (Main Decision)[7] canceling the aforementioned assessment for two reasons. First, the CIR failed to prove that Norkis entered into an Indemnity Agreement with, or that it received an indemnity fee from Yamaha Motors Co. Ltd. (Yamaha) amounting to $6 Million.[8] Consequently, it failed to establish a substantial underdeclaration of gross sales on the part of Norkis which would have allowed the application of the 10-year prescriptive period in issuing an assessment. Second, the tax authorities only had three years to assess Norkis, or until October 14, 2010. However, Norkis received the assessment only on April 11, 2014. Therefore, the assessment is void for having been issued beyond the three-year prescriptive period.[9]
Aggrieved, the CIR filed a Motion for Reconsideration[10] dated August 31, 2017, insisting that it sufficiently established the fact of Norkis' underdeclaration of sales, and thus, the 10-year prescriptive period applies to the assessment.[11]
Subsequently, the CIR also filed a Supplemental Motion for Reconsideration[12] dated October 2, 2017 requesting the CTA Division to consider and admit copies of the following documents: (a) agreement between Norkis and Yamaha and (b) letter from the National Tax Agency of Japan. According to the CIR, the documents are prima facie evidence of an Indemnity Agreement between the parties[13] from which Norkis received, but did not declare a fee as part of their gross sales. Alternatively, the CIR sought to reopen the proceedings for purposes of identifying the aforementioned documents, if necessary.[14]
However, in a Resolution dated December 12, 2017, the CTA Division denied both motions for lack of merit.[15]
Undaunted, the CIR filed another Motion for Reconsideration[16] dated January 19, 2018 of the Resolution dated December 12, 2017, specifically the denial of its request to admit additional documents and the alternative prayer to reopen the proceedings.
Pending the CTA Division's resolution on the most recent motion, the CIR filed a Petition for Review Ad Cautelam,[17] dated February 7, 2018 before the CTA En Banc docketed as CTA EB No. 1766 assailing the Main Decision and the Resolution dated December 12, 2017, viz.:
The denial prompted the CIR to file another Petition for Review[20] dated May 11, 2018 before the CTA En Banc docketed as CTA EB Case No. 1845 seeking to reverse the Main Decision and the Resolutions dated August 16, 2017 and April 4, 2018, viz.:
The court a quo later resolved[22] to consolidate CTA EB Nos. 1766 and 1845 in view of the factual relation between the two proceedings.[23]
Despite consolidation, Norkis sought the CTA En Banc's permission to file a separate comment on the petition in CTA EB No. 1845.
Ruling of the CTA En Banc
In its assailed resolution, the CTA En Banc dismissed the CIR's petitions in CTA EB No. 1766 and 1845 on the ground of litis pendentia. It explained that "x x x both petitions assail the [CTA] Division's Decision promulgated on August 16, 2017 and its Resolution promulgated on December 12, 2017."[24] Inasmuch as the two cases involved the same parties, rights, reliefs, as well as factual foundation, "the resolution in one petition would amount to res judicata in the other."[25] Thus, the CIR's simultaneous petitions amounted to forum shopping.[26]
As a result, the CTA En Banc also denied Norkis's request because the petitions' dismissal would render the filing of a comment unnecessary.[27]
The CIR moved to reconsider. However, the court a quo denied[28] the motion.
Hence, the CIR filed the present petition.
Issue
The lone issue for the Court's resolution is whether the CTA En Banc erred in dismissing both petitions in CTA EB No. 1766 and 1845 for violating the rule against forum shopping.
The Court's Ruling
The petition is meritorious.
The Court agrees with the court a quo in that the CIR's petitions amounted to forum shopping. However, only the petition in CTA EB No. 1845 should have been dismissed, not both.
When the CIR filed the petitions in CTA En Banc Nos. 1766 and 1845, it invoked the CTA En Banc's exclusive appellate jurisdiction to review by appeal "[d]ecisions or resolutions on motions for reconsideration or new trial of the Court in Divisions in the exercise of its exclusive appellate jurisdiction over x x x [c]ases arising from the x x x Bureau of Internal Revenue."[29]
A careful review of the subject petitions reveals that the CIR prayed for one and the same relief: that the CTA En Banc reverse and set aside the CTA Division's ruling consisting of its Main Decision and the subsequent resolutions denying the CIR's motion for reconsideration, as well as its supplement, which cancelled the subject assessment and disallowed the CIR to submit additional documents, or reopen trial. Stated differently, the CIR's main thrust in both appeals is that it be given the opportunity to reestablish the timeliness of its assessment.
To be sure, the petitions both stemmed from one assessment. That the focal point in petition in CTA En Banc No. 1845 was the CIR's request to admit additional documents and/or reopen the proceedings, as it argues, did not create another matter that may be litigated independently of the assessment case.
Thus, the petitions have identical causes of action and subject matter inasmuch as both were appeals from the CTA Division's cancellation of the CIR's assessment against Norkis. Due to the two petitions' same identity in the parties, relief sought, cause of action, and subject matter, a favorable judgment in either CTA En Banc case would have remanded the proceedings to the CTA Division (i.e., for the admission of documents or reopening of trial) and, effectively, resulted in res judicata in the other case.
The foregoing are the requisites of litis pendentia.[30] Thus, as correctly ruled by the court a quo, the CIR's filing of the petition in CTA En Banc No. 1845 despite the pendency of the proceedings in CTA En Banc No. 1766 amounted to forum shopping.[31]
Certainly, the CIR's two separate appeals before the CTA En Banc rendered the court a quo vulnerable to the possibility of rendering conflicting decisions upon the same issues-precisely the vexatious situation that the rule against forum shopping seeks to avoid.[32]
The Court takes litis pendentia literally to mean "a pending suit." It may be invoked to dismiss[33] another pending action between the same parties involving the same cause of action because "the second action becomes unnecessary and vexatious."[34] The dismissal of any one of the two pending actions would logically lead to the cessation of litis pendentia. When the parties finally confine themselves to one suit in litigating similar issues between them, the former evil caused by a multiplicity of suits ceases to exist.
To reiterate, the CIR is guilty of forum shopping. However, the dismissal of both of its appeals is a harsh penalty. It may be prohibited to lodge multiple appeals, but the law certainly affords him an opportunity to seek redress from an unfavorable judgment. Thus, upon the dismissal of the petition in CTA En Banc No. 1845, the CIR must still be allowed to pursue and maintain the petition in CTA En Banc No. 1766.
WHEREFORE, the Court GRANTS the instant petition and SETS ASIDE the Resolutions dated May 29, 2019 and January 16, 2020 of the Court of Tax Appeals En Banc in CTA En Banc Nos. 1766 and 1845. The Court DIRECTS the Court of Tax Appeals En Banc to reinstate the petition in CTA En Banc No. 1766 and proceed with the case. On the other hand, the Court AFFIRMS the dismissal of the petition in CTA En Banc No. 1845.
SO ORDERED.
Leonen, (Chairperson), Delos Santos, and J. Lopez, JJ., concur.
Hernando, J., on official leave.
[1] Rollo, pp. 13-28.
[2] Id. at 39-44; penned by Associate Justice Cielito N. Mindaro-Grulla with Presiding Justice Roman G. Del Rosario and Associate Justices Juanito C. Castañeda, Jr, Erlinda P. Uy, Esperanza R. Fabon-Victorino, and Catherine T. Manahan, concurring; Associate Justice Ma. Belen M. Ringpis-Liban, on leave.
[3] Id. at 46-49; penned by Associate Justice Cielito N. Mindaro-Grulla with Presiding Justice Roman G. Del Rosario and Associate Justices Juanito C. Castañeda, Jr., Erlinda P. Uy, Esperanza R. Fabon-Victorino, Catherine T. Manahan. Jean Marie A. Bacorro-Villena, and Maria Rowena Modesto-San Pedro, concurring; Associate Justice Ma. Belen M. Ringpis-Liban, inhibited.
[4] Formerly CTA Case No. 8862.
[5] Through a Formal Letter of Demand and Final Assessment Notice dated April 10, 2014 (FLD/FAN). Subsequently, the CIR issued a Final Decision on Disputed Assessment (FDDA) dated July 9, 2014 denying Norkis's protest.
[6] Rollo, p. 52.
[7] Id. at 51-63; penned by Associate Justice Juanito C. Castañeda, Jr. with Associate Justices Caesar A. Casanova and Catherire T. Manahan, concurring.
[8] Id. at 61-62.
[9] Id. at 62.
[10] Id. at 64-73.
[11] Id. at 65-78.
[12] Id. at 79-85.
[13] Id. at 82.
[14] Id.
[15] Id. at 16.
[16] Id. at 93-108.
[17] Id. at 93-107.
[18] Id. at 106.
[19] Id. at 17.
[20] Id. at 111-121.
[21] Id. at 119.
[22] In a Resolution dated May 21, 2018, id. at 39.
[23] Id. at 40.
[24] Id. at 43.
[25] Id.
[26] Id. at 41.
[27] Id.
[28] In a Resolution dated January 16, 2020 of the CTA En Banc, p. 48.
[29] Revised Rules of the Court of Tax Appeals, A.M. No. 05-11-07-CTA, November 22, 2005.
[30] See Lajave Agricultural Management and Development Enterprises, Inc. v. Spouses Javellana, G.R. No. 223785, November 7, 2018; Zamora v. Quinan, et al., 821 Phil. 1009 (2017).
[31] In Commissioner of Customs, et al. v. Pilipinas Shell Petroleum Corporation (PSPC), et al., 785 Phil. 537 (2016), the Court cited the "filing multiple cases based on the same cause of action and with the same prayer, the previous case not having been resolved yet" or the concurrence of the conditions for litis pendentia, as one of the ways by which forum shopping may be committed.
[32] Grace Park International Corporation, et al. v. Eastwest Banking Corporation, et al., 791 Phil. 570 (2016).
[33] Section 1(e), Rule 16, Rules of Court provides:
The present case stemmed from an assessment[5] issued by the CIR against Norkis Trading Company, Inc. (Norkis) involving alleged deficiency income taxes amounting to P285,927,070.68, inclusive of interest and penalties, for the taxable year ending June 30, 2007.[6]
Norkis filed a judicial protest before the CTA which was docketed as CTA Case No. 8862.
On August 16, 2017, the CTA Second Division (CTA Division) rendered a Decision (Main Decision)[7] canceling the aforementioned assessment for two reasons. First, the CIR failed to prove that Norkis entered into an Indemnity Agreement with, or that it received an indemnity fee from Yamaha Motors Co. Ltd. (Yamaha) amounting to $6 Million.[8] Consequently, it failed to establish a substantial underdeclaration of gross sales on the part of Norkis which would have allowed the application of the 10-year prescriptive period in issuing an assessment. Second, the tax authorities only had three years to assess Norkis, or until October 14, 2010. However, Norkis received the assessment only on April 11, 2014. Therefore, the assessment is void for having been issued beyond the three-year prescriptive period.[9]
Aggrieved, the CIR filed a Motion for Reconsideration[10] dated August 31, 2017, insisting that it sufficiently established the fact of Norkis' underdeclaration of sales, and thus, the 10-year prescriptive period applies to the assessment.[11]
Subsequently, the CIR also filed a Supplemental Motion for Reconsideration[12] dated October 2, 2017 requesting the CTA Division to consider and admit copies of the following documents: (a) agreement between Norkis and Yamaha and (b) letter from the National Tax Agency of Japan. According to the CIR, the documents are prima facie evidence of an Indemnity Agreement between the parties[13] from which Norkis received, but did not declare a fee as part of their gross sales. Alternatively, the CIR sought to reopen the proceedings for purposes of identifying the aforementioned documents, if necessary.[14]
However, in a Resolution dated December 12, 2017, the CTA Division denied both motions for lack of merit.[15]
Undaunted, the CIR filed another Motion for Reconsideration[16] dated January 19, 2018 of the Resolution dated December 12, 2017, specifically the denial of its request to admit additional documents and the alternative prayer to reopen the proceedings.
Pending the CTA Division's resolution on the most recent motion, the CIR filed a Petition for Review Ad Cautelam,[17] dated February 7, 2018 before the CTA En Banc docketed as CTA EB No. 1766 assailing the Main Decision and the Resolution dated December 12, 2017, viz.:
WHEREFORE, premises considered, it is most respectfully prayed of the Honorable Court that the assailed Decision promulgated on 16 August 2017 and Resolution dated 12 December 2017 denying petitioner's Molon for Reconsideration be REVERSED and SET ASIDE, and judgment be rendered ordering the respondent to pay the deficiency income taxes in the amount to P285,927,070.68, inclusive of interest and penalties, for its fiscal year ending June 30, 2007, as well as the corresponding penalty and deficiency and delinquency interest, pursuant to Sections 248 and 249 of the [National Internal Revenue Code (NIRC)] of 1997.Eventually, in a Resolution dated April 4, 2018, the CTA Division denied the CIR's Motion for Reconsideration filed on January 19, 2018 for being a second motion for reconsideration, and thus, prohibited under the rules.[19]
Any other relief just and equitable under the premises are likewise prayed for.[18] (Underscoring supplied.)
The denial prompted the CIR to file another Petition for Review[20] dated May 11, 2018 before the CTA En Banc docketed as CTA EB Case No. 1845 seeking to reverse the Main Decision and the Resolutions dated August 16, 2017 and April 4, 2018, viz.:
WHEREFORE, premises considered, it is most respectfully prayed of the Honorable Court that the assailed Decision dated 16 August 2017, Resolution dated 12 December 2017, and Resolution dated 4 April 2018 be REVERSED and SET ASIDE, and that judgment be rendered holding that the Agreement (between Yamaha and Norkis) and the Letter from the National Tax Agency of Japan are CONSIDERED and ADMITTED as evidence for petitioner, and/or that the Honorable Court REOPEN and REMAND the case to the Honorable CTA. Second Division to allow petitioner to present a witness who will identify the Agreement (between Yamaha and Norkis) and the Letter from the National Tax Agency of Japan.Norkis filed its comment on the CIR's petition in CTA EB No. 1766 on April 27, 2018.
Any other relief just and equitable under the premises are likewise prayed for.[21] (Underscoring supplied.)
The court a quo later resolved[22] to consolidate CTA EB Nos. 1766 and 1845 in view of the factual relation between the two proceedings.[23]
Despite consolidation, Norkis sought the CTA En Banc's permission to file a separate comment on the petition in CTA EB No. 1845.
In its assailed resolution, the CTA En Banc dismissed the CIR's petitions in CTA EB No. 1766 and 1845 on the ground of litis pendentia. It explained that "x x x both petitions assail the [CTA] Division's Decision promulgated on August 16, 2017 and its Resolution promulgated on December 12, 2017."[24] Inasmuch as the two cases involved the same parties, rights, reliefs, as well as factual foundation, "the resolution in one petition would amount to res judicata in the other."[25] Thus, the CIR's simultaneous petitions amounted to forum shopping.[26]
As a result, the CTA En Banc also denied Norkis's request because the petitions' dismissal would render the filing of a comment unnecessary.[27]
The CIR moved to reconsider. However, the court a quo denied[28] the motion.
Hence, the CIR filed the present petition.
The lone issue for the Court's resolution is whether the CTA En Banc erred in dismissing both petitions in CTA EB No. 1766 and 1845 for violating the rule against forum shopping.
The petition is meritorious.
The Court agrees with the court a quo in that the CIR's petitions amounted to forum shopping. However, only the petition in CTA EB No. 1845 should have been dismissed, not both.
The CIR is guilty of forum shopping. |
When the CIR filed the petitions in CTA En Banc Nos. 1766 and 1845, it invoked the CTA En Banc's exclusive appellate jurisdiction to review by appeal "[d]ecisions or resolutions on motions for reconsideration or new trial of the Court in Divisions in the exercise of its exclusive appellate jurisdiction over x x x [c]ases arising from the x x x Bureau of Internal Revenue."[29]
A careful review of the subject petitions reveals that the CIR prayed for one and the same relief: that the CTA En Banc reverse and set aside the CTA Division's ruling consisting of its Main Decision and the subsequent resolutions denying the CIR's motion for reconsideration, as well as its supplement, which cancelled the subject assessment and disallowed the CIR to submit additional documents, or reopen trial. Stated differently, the CIR's main thrust in both appeals is that it be given the opportunity to reestablish the timeliness of its assessment.
To be sure, the petitions both stemmed from one assessment. That the focal point in petition in CTA En Banc No. 1845 was the CIR's request to admit additional documents and/or reopen the proceedings, as it argues, did not create another matter that may be litigated independently of the assessment case.
Thus, the petitions have identical causes of action and subject matter inasmuch as both were appeals from the CTA Division's cancellation of the CIR's assessment against Norkis. Due to the two petitions' same identity in the parties, relief sought, cause of action, and subject matter, a favorable judgment in either CTA En Banc case would have remanded the proceedings to the CTA Division (i.e., for the admission of documents or reopening of trial) and, effectively, resulted in res judicata in the other case.
The foregoing are the requisites of litis pendentia.[30] Thus, as correctly ruled by the court a quo, the CIR's filing of the petition in CTA En Banc No. 1845 despite the pendency of the proceedings in CTA En Banc No. 1766 amounted to forum shopping.[31]
Certainly, the CIR's two separate appeals before the CTA En Banc rendered the court a quo vulnerable to the possibility of rendering conflicting decisions upon the same issues-precisely the vexatious situation that the rule against forum shopping seeks to avoid.[32]
Only the petition in CTA En Banc No. 1845 should have been dismissed. |
The Court takes litis pendentia literally to mean "a pending suit." It may be invoked to dismiss[33] another pending action between the same parties involving the same cause of action because "the second action becomes unnecessary and vexatious."[34] The dismissal of any one of the two pending actions would logically lead to the cessation of litis pendentia. When the parties finally confine themselves to one suit in litigating similar issues between them, the former evil caused by a multiplicity of suits ceases to exist.
To reiterate, the CIR is guilty of forum shopping. However, the dismissal of both of its appeals is a harsh penalty. It may be prohibited to lodge multiple appeals, but the law certainly affords him an opportunity to seek redress from an unfavorable judgment. Thus, upon the dismissal of the petition in CTA En Banc No. 1845, the CIR must still be allowed to pursue and maintain the petition in CTA En Banc No. 1766.
WHEREFORE, the Court GRANTS the instant petition and SETS ASIDE the Resolutions dated May 29, 2019 and January 16, 2020 of the Court of Tax Appeals En Banc in CTA En Banc Nos. 1766 and 1845. The Court DIRECTS the Court of Tax Appeals En Banc to reinstate the petition in CTA En Banc No. 1766 and proceed with the case. On the other hand, the Court AFFIRMS the dismissal of the petition in CTA En Banc No. 1845.
SO ORDERED.
Leonen, (Chairperson), Delos Santos, and J. Lopez, JJ., concur.
Hernando, J., on official leave.
[1] Rollo, pp. 13-28.
[2] Id. at 39-44; penned by Associate Justice Cielito N. Mindaro-Grulla with Presiding Justice Roman G. Del Rosario and Associate Justices Juanito C. Castañeda, Jr, Erlinda P. Uy, Esperanza R. Fabon-Victorino, and Catherine T. Manahan, concurring; Associate Justice Ma. Belen M. Ringpis-Liban, on leave.
[3] Id. at 46-49; penned by Associate Justice Cielito N. Mindaro-Grulla with Presiding Justice Roman G. Del Rosario and Associate Justices Juanito C. Castañeda, Jr., Erlinda P. Uy, Esperanza R. Fabon-Victorino, Catherine T. Manahan. Jean Marie A. Bacorro-Villena, and Maria Rowena Modesto-San Pedro, concurring; Associate Justice Ma. Belen M. Ringpis-Liban, inhibited.
[4] Formerly CTA Case No. 8862.
[5] Through a Formal Letter of Demand and Final Assessment Notice dated April 10, 2014 (FLD/FAN). Subsequently, the CIR issued a Final Decision on Disputed Assessment (FDDA) dated July 9, 2014 denying Norkis's protest.
[6] Rollo, p. 52.
[7] Id. at 51-63; penned by Associate Justice Juanito C. Castañeda, Jr. with Associate Justices Caesar A. Casanova and Catherire T. Manahan, concurring.
[8] Id. at 61-62.
[9] Id. at 62.
[10] Id. at 64-73.
[11] Id. at 65-78.
[12] Id. at 79-85.
[13] Id. at 82.
[14] Id.
[15] Id. at 16.
[16] Id. at 93-108.
[17] Id. at 93-107.
[18] Id. at 106.
[19] Id. at 17.
[20] Id. at 111-121.
[21] Id. at 119.
[22] In a Resolution dated May 21, 2018, id. at 39.
[23] Id. at 40.
[24] Id. at 43.
[25] Id.
[26] Id. at 41.
[27] Id.
[28] In a Resolution dated January 16, 2020 of the CTA En Banc, p. 48.
[29] Revised Rules of the Court of Tax Appeals, A.M. No. 05-11-07-CTA, November 22, 2005.
[30] See Lajave Agricultural Management and Development Enterprises, Inc. v. Spouses Javellana, G.R. No. 223785, November 7, 2018; Zamora v. Quinan, et al., 821 Phil. 1009 (2017).
[31] In Commissioner of Customs, et al. v. Pilipinas Shell Petroleum Corporation (PSPC), et al., 785 Phil. 537 (2016), the Court cited the "filing multiple cases based on the same cause of action and with the same prayer, the previous case not having been resolved yet" or the concurrence of the conditions for litis pendentia, as one of the ways by which forum shopping may be committed.
[32] Grace Park International Corporation, et al. v. Eastwest Banking Corporation, et al., 791 Phil. 570 (2016).
[33] Section 1(e), Rule 16, Rules of Court provides:
SECTION 1. Grounds. - Within the time for but before filing the answer to the complaint or pleading asserting a claim, a motion to dismiss may be made on any of the following grounds:[34] Proton Pilipinas Corp. v. Republic, 535 Phil. 521 (2006).
x x x
(e) That there is another action pending between the same parties for the same cause;
x x x