G.R. No. 200658 - Lamadrid vs. Cathay Pacific Airways Limited

On October 23, 2007, pursuant to Revenue Delegation Authority Order (RDAO) No. 2-2007 issued by Commissioner Jose Mario C. Bunag of the BIR, Regional Director Alfredo V. Misajon of BIR Manila filed a criminal complaint before the Office of the City Prosecutor (OCP) of Manila.
The complaint was directed against Benedicta Mallari, President, and Chi Wei-Neng, General Manager of Topsun Int’l., Inc. (Topsun) for alleged violations of Section 255 in relation to Sections 253 and 256 of the 1997 National Internal Revenue Code (NIRC), stemming from Topsun’s failure to pay its outstanding Value Added-Tax (VAT) deficiency amounting to P3,827,564.64 for January to June 2000 and a further compromise penalty of P25,000.00.
In her counter-affidavit, Mallari denied the existence of any outstanding tax liability, presenting a Certificate of No Tax Liability dated October 15, 2003, issued by Revenue District Office No. 32.

A Resolution dated August 7, 2009, by ACP Gideon C. Mendoza (Assistant City Prosecutor) determined that probable cause existed to indict the accused, thereby recommending the filing of an Information before the CTA for the alleged tax violations.
An Information was subsequently filed, covering the period from July 9, 2003, to the present, charging the accused with willfully failing to pay the deficiency tax and penalty due from Topsun for the taxable year 2000.
The Information was found to contain several discrepancies, notably:

A misstatement of the nature of the deficiency (stating “deficiency income tax” instead of “deficiency VAT” as evidenced by DOJ’s August 7, 2009 Resolution).
Lack of the required written approval by the Commissioner of Internal Revenue (CIR) as mandated under Sections 220 and 221 of the NIRC and Section 2, Rule 9 of the Revised Rules of the CTA.
Missing attachments, namely the “Motion to Adopt Allegations contained in the Counter-Affidavit of Mallari” and the “Reply to the Counter-Affidavit” along with its annexes.

On October 7, 2009, the CTA First Division issued a Resolution directing ACP Mendoza to:

Correct the Information to reflect the proper tax classification.
Submit the recommended approval or referral letter from the CIR, or its equivalent via written authority, to authorize criminal prosecution under the NIRC.
Attach the missing documents (i.e., the motions concerning the counter-affidavit).

The First Division reiterated its orders in additional Resolutions on November 10 and November 26, 2009, warning that non-compliance would result in dismissal of the case for failure to obey a lawful court order.
In response, ACP Mendoza eventually submitted:

The Amended Information;
A certified true copy of RDAO No. 2-2007 (in lieu of the actual authorization from the CIR);
The “Motion to Adopt Allegations” from Mallari’s counter-affidavit; and
The “Reply to Counter-Affidavit” with its annexes.

Nonetheless, the omission of the CIR’s written approval was noted, leading to the CTA First Division’s Resolution on December 14, 2009, which dismissed the criminal complaint for failure of ACP Mendoza to obey the court’s order.

The BIR’s special counsels/prosecutors later filed an Entry of Appearance accompanied by a Motion for Reconsideration on January 18, 2010, arguing that:

The RDAO No. 2-2007 authorized Regional Director Misajon to act on behalf of the CIR by signing the necessary approval and referral letters.
The March 27, 2007 Memorandum from the CIR granted authority to specific BIR legal officers to prosecute criminal proceedings.

The CTA Special First Division, however, in its Resolution dated March 17, 2010, denied the Motion for Reconsideration on the ground of late filing.

It was determined that the notice of the December 14, 2009 Resolution was received on December 17 and December 21, 2009, setting strict 15-day reglementary periods that expired on January 4 and 5, 2010, respectively.
Filing on January 18, 2010, was found to be 14 days beyond the prescribed period.

Consequently, the prosecution’s subsequent Petition for Review before the CTA En Banc, filed based on alleged lack of proper notice and misinterpretation of RDAO No. 2-2007, was rendered moot.

Whether the December 14, 2009 Resolution of the CTA First Division had already achieved finality, given that the required Motion for Reconsideration was filed beyond the 15-day reglementary period.

Whether a Regional Director, by virtue of RDAO No. 2-2007, has the power to sign approval and referral letters authorizing the institution of criminal prosecution in the absence of the specific written approval from the Commissioner of Internal Revenue (CIR) as mandated by the NIRC and the Revised Rules of the CTA.