Tax court grants Estrada’ plea, junks BIR’s P2.9B tax valuation

THE Court of Tax Appeals has dismissed the P2.9-billion 2001 tax assessment against former president and now Manila Mayor Joseph Estrada and his wife, former senator Eloisa Ejercito.

In a 41-page decision, the Tax Court’s second division through Associate Justice Juanito Castaneda, Jr. said the tax assessment made by then Bureau of Internal Revenue Commissioner Lilia Hefti cannot be sustained.

“(W)hile it appears that the assessment contains factual and legal bases, the Court is not precluded from evaluating the propriety of the facts and the law on which it is based,” the Tax Court said.

The BIR used as basis in its tax assessment the Jose Velarde account allegedly owned by Estrada.

Estrada filed a petition for review with the Tax Court questioning the tax assessment and denying ownership of the account and presented several witnesses including the vice-president of Equitable PCI Bank.

It thus held that the judgment in the plunder case cannot apply for purposes of taxation as “there is no identity of parties between Criminal Case No. 26658 [the case for plunder] and the present case. There is no privity of interest, or even community of interest, between the People of the Philippines and the Bureau of Internal Revenue or Lilia Hefti,” the Tax Court said.
The court further noted that “the prima facie, correctness of a tax assessment does not apply upon proof that as assessment is utterly without foundation, meaning it is arbitrary and capricious. Where the BIR has come out with a ‘naked assessment,’ i.e. without any foundation character, the determination of the tax due is without rational basis.”

The court also agreed with Estrada that the BIR violated his right to due process, holding that “the documents alleged to have been obtained in support of the assessment were never presented before this Court,” thus “the mere presumption of the correctness of an assessment, being a mere presumption, cannot be made to rest on another presumption.”

The decision is concurred in by Associate Justices Caesar Casanova and Amelia Cotangco-Manalastas.