A businessman has been acquitted by the Court of Tax Appeals (CTA) of criminal charges in a tax case but was ordered to pay more than P1.7 million in tax deficiencies.

In 33-page decision promulgated last Feb. 28, the CTA Special First Division acquitted Dexter M. Magtaan, owner of the retail business Dex-Than Trading, of willful failure to pay income tax, willful failure to pay percentage tax, and willful failure to pay value added tax (VAT) under Section 255 of the 1997 National Internal Revenue Code (NIRC).

The CTA said that "plaintiff-appellee (Bureau of Internal Revenue) failed to present sufficient evidence to prove beyond reasonable doubt that the accused-appellant willfully failed to pay the deficiency income tax, VAT, percentage tax, and miscellaneous taxes for TY (taxable year) 2016.” 

“Such being the case, accused-appellant must perforce be acquitted,” it ruled. 

However, the tax court ordered him to pay “the aggregate amount of P1,718,861.77, representing basic deficiency income tax, VAT and percentage taxes, plus 50 percent surcharge imposed under Section 248(B) of the 1997 NIRC, as amended, the 20 percent deficiency interest, and the 20 percent delinquency interest imposed under Section 249(A) and (C) of the same Code….”

Magtaan was also ordered to pay “delinquency interest at the rate of twelve percent (12 percent) on the unpaid deficiency taxes due as of March 25, 2020 in the amount of P1 ,718,861.77 for TY (taxable year) 2016, or equivalent to P565.1190 per day, computed from March 26, 2020 until full payment thereof pursuant to Section 249(C) of the 1997 NIRC, as amended, by RA No. 10963, also known as Tax Reform for Acceleration and Inclusion (TRAIN), as implemented by RR No. 21-2018.”

The CTA decision partially granted the petition of Magtaan to reverse the 2022 rulings of the Regional Trial Court (RTC) Branch 69 of Lingayen, Pangasinan that found him guilty of three counts of violating Section 255 of the NIRC and sentenced him to suffer for each count imprisonment ranging from two years to six years as well as ordered to pay the fines P1,682,061.32 relative to the income tax; P10,000 relative to the percentage tax; and P1,325,223.48 relative to VAT.

The RTC also ordered Magtaan to pay “P1,505,168.25 consisting of the deficiency income, value added and percentage taxes, plus the additions thereto, with the 12 percent interest; respectively imposed thereon continuing to run from March 26, 2020 until full payment.” 

In its decision, the CTA found that “accused-appellant attempted to settle the subject deficiency taxes through possible compromise agreement, and to pay the supposed compromise amount by installment.”

“But he was prevented from doing so due to his financial incapacity, as he was still required by RO Rejano (Revenue Officer Imelda Rejano) to pay the full amount of the assessed deficiency taxes, on the ground that they were bound by the prescriptive period given to them to act on the case docket,” the CTA said. 

“Failure on their part to do so shall, accordingly, make them administratively liable for inaction thereon,” it added. 

Because of this fact, the CTA explained “this creates a reasonable doubt as to the indicia of willfulness on the part of the accused -appellant not to pay his tax liabilities, since it is evident that accused-appellant merely failed to pay the subject tax assessments due to his financial incapacity.”  

However, the tax court found that “accused-appellant failed to protest the subject assessment within thirty (30) days from receipt of the FLD /FANs (Formal Letter of Demand and Assessment Notices) on February 28, 2020.

It pointed out that “the subject assessments had become final, executory and demandable on March 29, 2020.”

“Thus, despite of the acquittal herein decreed, accused-appellant is still civilly liable for the subject deficiency taxes, as stated in the aforementioned FLD /FANs, plus any surcharge and interests that have accrued thereon,” it explained.