A.M. No. 02-8-188-MTCC - Report on the Judicial Audit Conducted in the MTCC-Brs. 1, 2, and 3, Mandaue City

On April 3, 1980, petitioner purchased two parcels of land from Estrella Benedicto Tan, covered by Transfer Certificate of Title No. T-55917.
The deed of sale described:

Lot 308 of the Cadastral Survey of Cebu, approximately 49 square meters, with improvements.
Lot 309 of the Cadastral Survey of Cebu, approximately 48 square meters, with improvements.

The conveyance explicitly included a “residential house of strong materials” constructed on the lots.
For tax purposes, petitioner declared the real property as a residential house of strong materials having a floor area of 60 square meters.
The property was assessed for the year 1980 under Tax Declaration No. 02-20454 with a market value of P60,000.00 and an assessed value of P36,900.00.

In February 1989, during a tax-mapping operation, field inspectors of the Cebu City Assessor discovered discrepancies.
It was found that the declared “residential house” was in fact a residential building consisting of four storeys plus a fifth storey utilized as a roof deck, totaling 500.20 square meters (with 100.04 square meters per floor).
The building was determined to be constructed using Type II-A materials.
On October 17, 1990, an ocular inspection by the Board of Commissioners confirmed these findings.
Consequently, the City Assessor issued Tax Declaration No. GR-06-045-00162 (effective 1989) canceling the previous declaration and reassessing the building at a net market value of P499,860.00 and an assessed value of P374,900.00 based on the 1981-1984 Schedule of Market Values.

Petitioner protested the new assessment, arguing it was “excessive and unconscionable” due to a more than 1,000% increase relative to the original market (P60,000.00) and assessed (P36,900.00) values.
He contended that he acquired the property for only P100,000.00, asserting that this should be the basis for market valuation.
The Local Board of Assessment Appeals of Cebu City dismissed petitioner’s appeal on January 11, 1990.
Pursuant to the dismissal, petitioner elevated his case to the Central Board of Assessment Appeals (CBAA).

A tax declaration effective 1981 (covering back taxes from 1981 to June 30, 1987) based on the minimum rate for Type II-A buildings using applicable schedules, and
Subsequent tax declarations effective from July 1, 1987 to 1989, again based on prescribed rates and schedules.

Petitioner filed a motion for reconsideration wherein both parties submitted a joint manifestation:

Manifestation No. 1 proposed a revised valuation classifying the property as Type II-B with an assessed value of P78,330.00 at P1,110 per square meter.
Manifestation No. 2 referred to Section 23 of PD 464, arguing that the assessor had not yet completed the certification required for a general revision of property assessments.

The CBAA, while accepting Manifestation No. 1, rejected Manifestation No. 2 on the ground that Section 25—not Section 23—was applicable in this case.

Petitioner questioned the propriety of assessing back taxes for periods not previously raised or litigated in the Local or Central Board proceedings.
He accused the CBAA of misapplying or misinterpreting Section 25 of PD 464 regarding “property declared for the first time,” contending that the property had already been declared in 1980 and should not attract back taxes in 1989.
Additional issues included the proper basis for computing the assessed value (i.e., using the market value defined in paragraph n, Section 3 of PD 464 versus acquisition cost) and whether the refusal to apply Section 23 of PD 464 was erroneous.
Petitioner also argued that the new assessment was discriminatory, unjust, confiscatory, and unconstitutional, and further referenced the jurisprudence in Reyes vs. Almanzor to support his claim that an income approach should have been used in valuation.

Whether the Central Board of Assessment Appeals (CBAA) erred in considering the issue of back taxes—which was not raised before either the Local Board of Assessment Appeals or earlier proceedings—thus violating principles of due process and fair play.
Whether the application and interpretation of Section 25 of PD 464 are correct in assessing back taxes on the property, specifically addressing the phrase “declared for the first time” when the property had been previously declared.
Whether the assessed value should have been computed strictly on the basis of the “market value” as defined by paragraph n, Section 3 of PD 464 rather than using the acquisition cost or other valuation approaches.
Whether the CBAA erred in refusing to apply Section 23 of PD 464, which petitioner contends should preclude the imposition of back taxes pending the certification of a general revision of property assessments.
Sub-Issues:

Whether the assessment is unconstitutional by being punitive or ex post facto in nature, in violation of Section 22, Article III of the 1987 Constitution.
Whether PD 20 and the income approach—as established in Reyes vs. Almanzor—should have been applied instead of the comparable sales approach adopted by the assessor.