G.R. No. 147188 - COMMISSIONER OF INTERNAL REVENUE, VS. THE ESTATE OF BENIGNO P. TODA, JR., REPRESENTED BY SPECIAL CO-ADMINISTRATORS LORNA KAPUNAN AND MARIO LUZA BAUTISTA.D E C I S I O N - Supreme Court E-Library

Ruling

accordingly, cancelled and set aside the assessment issued by the Commissioner on 9 January 1995. In its motion for reconsideration, [19] the Commissioner insisted that the sale of the property owned by CIC was the result of the connivance between Toda and Altonaga. She further alleged that the latter was a representative, dummy, and a close business associate of the former, having held his office in a property owned by CIC and derived his salary from a foreign corporation (Aerobin, Inc.) duly owned by Toda for representation services rendered. The CTA denied [20] the motion for reconsideration, prompting the Commissioner to file a petition for review [21] with the Court of Appeals. In its challenged Decision of 31 January 2001, the Court of Appeals affirmed the decision of the CTA, reasoning that the CTA, being more advantageously situated and having the necessary expertise in matters of taxation, is better situated to determine the correctness, propriety, and legality of the income tax assessments assailed by the Toda Estate. [22] Unsatisfied with the decision of the Court of Appeals, the Commissioner filed the present petition invoking the following grounds: THE COURT OF APPEALS ERRED IN HOLDING THAT RESPONDENT COMMITTED NO FRAUD WITH INTENT TO EVADE THE TAX ON THE SALE OF THE PROPERTIES OF CIBELES INSURANCE CORPORATION. THE COURT OF APPEALS ERRED IN NOT DISREGARDING THE SEPARATE CORPORATE PERSONALITY OF CIBELES INSURANCE CORPORATION. THE COURT OF APPEALS ERRED IN HOLDING THAT THE RIGHT OF PETITIONER TO ASSESS RESPONDENT FOR DEFICIENCY INCOME TAX FOR THE YEAR 1989 HAD PRESCRIBED. The Commissioner reiterates her arguments in her previous pleadings and insists that the sale by CIC of the Cibeles property was in connivance with its dummy Rafael Altonaga, who was financially incapable of purchasing it. She further points out that the documents themselves prove the fact of fraud in that (1) the two sales were done simultaneously on the same date, 30 August 1989; (2) the Deed of Absolute Sale between Altonaga and RMI was notarized ahead of the alleged sale between CIC and Altonaga, with the former registered in the Notarial Register of Jocelyn H. Arreza Pabelana as Doc. 91 , Page 20, Book I, Series of 1989; and the latter, as Doc. No. 92 , Page 20, Book I, Series of 1989, of the same Notary Public; (3) as early as 4 May 1989, CIC received P 40 million from RMI, and not from Altonaga. The said amount was debited by RMI in its trial balance as of 30 June 1989 as investment in Cibeles Building. The substantial portion of P 40 million was withdrawn by Toda through the declaration of cash dividends to all its stockholders. For its part, respondent Estate asserts that the Commissioner failed to present the income tax return of Altonaga to prove that the latter is financially incapable of purchasing the Cibeles property. To resolve the grounds raised by the Commissioner, the following questions are pertinent: Is this a case of tax evasion or tax avoidanc