Green Valley Marketing Corp. v. Commissioner of Internal Revenue, C.T.A. Case No. 8988, (November 3, 2017) PDF

SECOND DIVISION
[C.T.A. CASE NO. 8988. November 3, 2017.]
GREEN VALLEY MARKETING CORPORATION , petitioner, vs.

COMMISSIONER OF INTERNAL REVENUE , respondent.
DECISION
CASTAÑEDA, JR. , J : p
STATEMENT OF THE CASE
This is a Petition for Review led by Green Valley Marketing Corporation praying
that Assessment Notices Nos. IT-116-LOA-116-2011-00000109-10-14-809, VT-116-
LOA-116-2011-00000109-10-14-810, MC-116-LOA-116-2011-00000109-10-14-811
and WE-116-LOA-116-2011-00000109-10-14-812 issued by respondent against
petitioner for alleged de ciency income tax, value-added tax (VAT), expanded
withholding tax (EWT), and miscellaneous tax (MC) for calendar year 2010 in the
aggregate amount of P195,931,984.67 be declared void.
STATEMENT OF FACTS
Petitioner is registered with the Bureau of Internal Revenue (BIR) and duly issued
a BIR Certi cate of Registration No. 8RC0000020168 duly certi ed by Teresita M.
Dizon, OIC-HREA Large Taxpayer Service Division. 1
Respondent is the duly appointed Commissioner of Internal Revenue (CIR) who
holds office at the BIR National Office Building, Agham Road, Diliman, Quezon City.
On September 23, 2011, petitioner received Letter of Authority No. LOA-116-
2011-00000109 2 from respondent signed by the OIC-ACIR Alfredo V. Misajon, which
authorized its representatives to conduct an examination of the former's books of
accounts and other accounting records for all internal revenue taxes for the period
January 1, 2010 to December 31, 2010. 3
Sometime in March 2013, petitioner received a Letter Noti cation dated March 5,
2013 from respondent informing it that audit/investigation has been re-assigned
pursuant to MOA No. LOA-116-2013-0433 dated February 25, 2013. 4
On May 6, 2013, petitioner received respondent's First Notice for Presentation of
Books of Accounts and Other Relevant Records. 5
On June 17, 2013, petitioner received BIR's Second Notice for Presentation of
Books of Accounts and Other Relevant Records. 6
On June 21, 2013, petitioner executed a "Waiver of the Defense of Prescription
under the Statute of Limitations of the National Internal Revenue Code" 7 in relation to
the tax audit being conducted. OIC-Assistant Commissioner for the Large Taxpayers
Service, Mr. Alfredo V. Misajon, accepted it on July 17, 2013. The Waiver gave
respondent until December 31, 2013 within which to assess petitioner. 8
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On September 12, 2013, petitioner executed another Waiver 9 giving respondent
until June 30, 2014 within which to assess the former. Mr. Misajon accepted it on
September 17, 2013. 1 0
On June 3, 2014, petitioner received from respondent the Preliminary
Assessment Notice (PAN) together with the Details of Discrepancies. 1 1
On June 25, 2014, petitioner received a Formal Letter of Demand (FLD) 1 2 from
respondent BIR, with Details of Discrepancies and attached Assessment Notices 1 3
Nos. IT-116-LOA-116-2011-00000109-10-14-809, VT-116-LOA-116-2011-00000109-
10-14-810, MC-116-LOA-116-2011-00000109-10-14-811 and WE-116-LOA-116-2011-
00000109-10-14-812. 1 4
On July 25, 2014, petitioner led its administrative protest 15 in the nature of a
request for reconsideration with respondent.
However, respondent failed to act on petitioner's administrative protest. Thus, on
February 20, 2015, petitioner filed the instant Petition for Review.
On May 12, 2015, respondent led his Answer, 16 interposing the following
special and affirmative defenses:
"4. Respondent adopts the abovementioned admissions and denials
as part of her special and affirmative defenses:
THE ASSESSMENT HAS BASES
BOTH IN FACT AND IN LAW
5. Respondent strongly submits that the assessment has bases both
in fact and in law which can be gleaned from the following discussion.
A. PETITIONER IS LIABLE FOR
DEFICIENCY INCOME TAX AND
VALUE-ADDED TAX (VAT)
RESULTING FROM
UNDECLARED INCOME.
6. Petitioner is being assessed for de ciency Income Tax and Value-
Added Tax resulting from alleged unaccounted income amounting to
P158,198,435.66. Petitioner argues that such is without merit and lacks factual
basis since it was only a result of a comparison of different data reported under
the VAT RELIEF System, Tax Reconciliation System (Creditable Withholding Tax
Withheld from petitioner as reported by third parties), Summary Alphalist of
Creditable Withholding Tax) vis-à-vis the declaration made per Summary List of
Sales (SLS).
7. It must be stressed that respondent's audit investigation for
de ciency taxes is not con ned to the examination of the documents provided
or obtained from petitioner. The Commissioner has the power to promulgate
rules to ensure the accuracy and truthfulness of the taxes declared and paid by
taxpayers. Such power of the Commissioner of Internal Revenue to obtain
information from other sources is enshrined in Section 5 of the Tax Code which
specifically provides:
xxx xxx xxx
8. Also, lest petitioner must have forgotten, the RELIEF System which
stands for "Reconciliation of Listing for Enforcement" was purposely to detect
tax leaks by matching the data available under the Bureau's Integrated Tax
System (ITS) with data gathered from third party sources. Through the
consolidation and cross-referencing of third party information,
discrepancy reports on sales and purchases can be generated to
uncover under declared income and over claimed purchases (goods
and services). Timely recognition and accurate reporting of
unregistered taxpayers a non-filer can be made possible .
9. The Tax Reconciliation System (TRS) on the other hand is geared
towards enhancing revenue collection by computerized matching of data
available under the Bureau's Integrated Tax System (ITS). Through the
consolidation and cross-referencing of data from withholding agents
(WAs) and declaration of income recipients, discrepancy reports can
be generated to uncover violations on tax rules and regulations such
under declaration of income, non-declaration of income, under
remittance and/or non-remittance of taxes withheld, over withholding,
under withholding, over declaration of credits to name a few . Timely
recognition and accurate reporting of unregistered taxpayers and non- lers will
also be possible.
B. PETITIONER IS LIABLE FOR
DEFICIENCY INCOME TAX
RESULTING FROM
DISALLOWED EXPENSES DUE
TO NON-WITHHOLDING OF
TAX AND UNACCOUNTED
COST/EXPENSE.
10. Respondent's audit examination revealed that certain income
payments made by petitioner were properly subjected to withholding tax.
11. Thus, the corresponding income tax due thereon is assessed
pursuant to Section 32 in relation to Section 27 of the Tax Code.
12. Section 6 of Revenue Regulations No. 14-2002 explicitly
provides:
xxx xxx xxx
13. Based on the above quoted provision of Revenue Regulations No.
14-2002 and the ndings of respondent that certain payments made by
petitioner were not properly subjected to withholding tax, the disallowed
expenses in the amount of P89,780,690.14 is proper. Thus, the corresponding
income taxes resulting from the disallowed expenses should also be imposed
on petitioner.
14. Further, respondent's audit examination also reveals that
petitioner failed to submit/present su cient proof of support such claim of
deduction. The following deductions are being disallowed:
Salary P84,671.41
Freight/Handling 37,230,901.40
–––––––––––––
Total P37,315,572.81
============
15. Finally, petitioner is being assessed de ciency income tax
because of the audit findings that there exist an unaccounted rental expense per
reconciliation of Expanded Withholding Tax Return with the amount of claimed
rental expenses in petitioner's Financial Statement in the amount of
P232,857.18.
16. Respondent strongly submits the propriety of such assessment.
In Perez vs. Court of Tax Appeals, et al. the Honorable Supreme Court made it
explicit that unre ected sources of funds not accounted for in the
taxpayer's returns leads to the inference that part of his income had
not been reported .
C. PETITIONER IS LIABLE FOR
DEFICIENCY VALUE-ADDED
TAX (VAT) RESULTING FROM
UNACCOUNTED INCOME DUE
TO UNACCOUNTED EXPENSES,
UNACCOUNTED RENTAL
EXPENSE AND DISALLOWED
CREDITABLE INPUT TAXES.
17. As discussed previously, respondent's audit ndings revealed
that there exist an unaccounted income due to unaccounted expenses and
unaccounted rental expense, to wit:
Unaccounted Income P84,671.41
Unaccounted Rental Expense 232,857.18
––––––––––
Total P317,528.59
=========
18. Pursuant to Section 106 of the Tax Code, the corresponding
ndings will not only make petitioner liable for de ciency income tax but also
Value-Added Tax (VAT).
19. Finally, respondent's audit assessment reveals that petitioner
failed to reconcile the unaccounted difference in the sources of input tax per
Summary List of Purchases (SLP) against the declared purchases per VAT
Returns which led to the disallowance of corresponding input tax pursuant to
Section 110(A) of the Tax Code in the amount of P53,738,254.34.
D. PETITIONER IS LIABLE FOR
DEFICIENCY EXPANDED
WITHHOLDING TAX (EWT)
RESULTING FROM INCOME
PAYMENTS NOT PROPERLY
SUBJECTED TO WITHHOLDING
TAXES.
20. Respondent's audit examination reveals that withholding taxes
on certain income payments were not paid pursuant to Section 2.57.2 of
Revenue Regulations No. 2-98, as amended. Thus the assessment de ciency
withholding tax against petitioner, viz.:
Total Income payments per audit P835,453,720.90
Total Income Payments per EWT 745,673,030.76
returns
–––––––––––––
Difference-Income Payments not P89,780,690.14
subjected to withholding tax
–––––––––––––
Basic EWT at various rates P1,311,498.67
============
21. Withholding tax is a system by which taxes are collected at
source. Tax is collected in advance even before it reaches the hands of the
income recipient. It is a means by which the government can collect the
appropiate amount of taxes through payors who are constituted as withholding
tax agents. This ensures that taxes will be paid rst, and will be paid on time as
the government needs the funding to meet its obligations. The system is used to
equal or at least approximate or collect in full the tax due from the payee on
certain income payments.
22. This obligation of petitioner to withhold and remit the correct tax
is its duty as an agent of the government in the collection of taxes and not as a
statutory taxpayer.
23. Thus, the assessment on petitioner for failure on its part to
withhold the proper taxes is proper.
E. PETITIONER IS LIABLE FOR
COMPROMISE PENALTIES.
24. Petitioner contends that is should not be subject of the
compromise penalties since these are only suggested in settlement of criminal
liability, and may not be imposed or exacted on the taxpayer in the event that a
taxpayer refuses to pay the same.
25. Respondent interposes that the compromise penalties are proper
and with bases. Audit examination of petitioner disclosed that it failed to le the
Summary List of Withholding Taxes (SAWT) and Summary List of Sales (SLS)
in violation of Revenue Memorandum Order No. 51-2009. Petitioner is does
subject to compromise penalties per violation as provided for in the Tax Code
and Revenue Memorandum Order No. 19-2007.
THE ASSESSMENTS AGAINST
PETITIONER WERE ISSUED
WITHIN THE PERIOD
PROVIDED FOR BY LAW
26. Petitioner alleged that it executed a third waiver giving
respondent until 31 December 2014 within which to assess the petitioner. As
alleged the third waiver bears no stamp of acceptance from respondent.
27. Respondent interposes that alleged third waiver does not exist in
the BIR Records. Respondent strongly submits that there are only two waivers
involved in the case at hand and with details as follows:
a. The "First Waiver" executed by petitioner on 21 June 2013, extending
the period to assess for taxable year 2010 until 31 December 2013.
The same was accepted for the respondent by Asst. Commissioner
Alfredo V. Misajon on 17 July 2013. The copy of the accepted
waiver was received by petitioner on 22 July 2013; and
b. The "Second Waiver" executed by petitioner on 12 September 2013
extending the period to assess for taxable year 2010 until 30 June
2014. The same was accepted for the respondent by Asst.
Commissioner Alfredo V. Misajon on 17 September 2013. The copy
of the accepted waiver was received by petitioner on 20 September
2013.
28. The Final Assessment Notice (FAN) and the Formal Letter of
Demand was issued and served upon petitioner on 25 June 2014. Thus, the
same ware issued within the period provided for by the Tax Code.

29. Further, respondent submits that the period of prescription
provided for under the Tax Code does not apply to the assessment against
petitioner for de ciency Expanded Withholding Taxes (EWT) in the total amount
of P2,224,383.27.
30. Withholding tax assessments are NOT internal revenue tax as a
statutory taxpayer but rather such assessments were issued for failure of
respondent to withhold correct taxes it is duty bound to collect as agent. Thus
the assessments issued for De ciency Expanded Withholding Tax are
imprescriptible. This obligation of petitioner to withhold and remit the correct
taxes is its duty as an agent of the government in the collection of taxes and not
as a statutory taxpayer.
31. By operation of law, the relationship between the Government
and the withholding agent is one of agency for which reason the withholding
agent only holds the funds withheld by him in trust for the Government. Clearly,
the liability of petitioner as taxpayer is different from its liability as withholding
agent. This is the reason why liabilities arising from withholding taxes were
never covered by tax amnesty programs. Basically, these liabilities arose from a
different source of obligation.
32. The liability of a withholding agent is further established under
Section 251, Title X of the Tax Code, which provides:
xxx xxx xxx
33. In Filipinas Synthetic Fiber Corporation vs. Court of Appeals and
Commissioner of Internal Revenue, the Honorable Supreme Court ratiocinated:
"The law sets no condition for the personal liability of the
withholding agent to attach. The reason is to compel the
withholding agent to withhold the tax under all circumstances. In
effect, the responsibility for the collection of the tax as well as the
payment thereof is concentrated upon the person over whom the
Government has jurisdiction. Thus, the withholding agent is
constituted the agent both the government and the taxpayer. With
respect to the collection and/or withholding of the tax, he is the
Governments agent. In regard to the filing of the necessary income
tax return and the payment of the tax to the Government, he is the
agent of the taxpayer. The withholding agent, therefore, is no
ordinary government agent especially because under Section 53
(c) he is held personally liable for the tax he is duty bound to
withhold; whereas, the Commissioner of Internal Revenue and his
deputies are not made liable to law."
34. The tax Code only makes petitioner, as withholding agent
personally liable for the tax arising from the breach of its legal duty to withhold
as distinguished from its duty to pay tax, since the government's cause of
action against the withholding agent is not for the collection of income tax, but
for the enforcement of the withholding provision of Section 57 of the Tax Code,
compliance with which is imposed on the withholding agent and not upon the
taxpayer.
35. Accordingly, the tax deducted and withheld by withholding
agents under the said provision shall be held as a special fund in trust for the
government until paid to the collecting o cer. It bears emphasis that petitioner
as a withholding agent merely holds in trust the amount of tax it withheld and
as trustee, it is duty bound to remit to the government the proper amount of tax
withheld and this duty is imprescriptible.
THE LETTER OF AUTHORITY
(LOA), NOTICE OF INFORMAL
CONFERENCE (NIC),
PRELIMINARY ASSESSMENT
NOTICE (PAN), FORMAL
LETTER OF DEMAND (FLD)
AND FINAL ASSESSMENT
NOTICE (FAN) WERE ISSUED
IN ACCORDANCE WITH LAW,
RULES AND JURISPRUDENCE
36. As can be deduced from the following narrations of facts, the
procedure prescribed under Revenue Regulations No. 12-99 had been complied
with by respondent, viz.:
36.1 A Letter of Authority (LOA) No. 116-2011-
00000109/SN eLA201100003014 dated 23 September 2011 was
issued authorizing Revenue O cers Zenaida Paz, Myrna Ramirez,
Ma. Salud Maddela, Cletofel Parungao, Allan Maniego, Joel
Aguila/Group Supervisor-Glorializa Samoy of LT Regular Audit
Division 1 to examine books of accounts and other accounting
records for all internal revenue taxes for the period from January
01, 2010 to December 31, 2010 of petitioner. Copy of the Letter of
Authority was issued to petitioner on 26 September 2011.
Accompanying the LOA is the Checklist of Requirements
requesting the presentation of the required records and
documents. The same was served upon petitioner on even date.
36.2 On 06 May 2013 the First Notice was issued
reiterating the request for presentation and submission of the
documents mentioned in the checklist of requirements.
36.3 On 17 June 2013 the Second and Final Notice for
Presentation of Books of Accounts & Other Accounting Records
was issued reiterating the previously issued notice with a warning
that non-compliance within ten (10) days from receipt will warrant
the issuance of a Subpoena Duces Tecum.
36.4 On 21 June 2013, petitioner executed a Waiver
(First Waiver) of the Defense of Prescription under the Statute of
Limitations of the National Internal Revenue Code for taxable year
2010 extending the period to assess until 31 December 2013. The
same was accepted for the respondent by Asst. Commissioner
Alfredo V. Misajon on 17 July 2013. The copy of the accepted
waiver was received by petitioner on 22 July 2013.
36.5 On 12 September 2013, petitioner executed
another Waiver (Second Waiver) of the Defense of Prescription
under the Statute of Limitations of the National Internal Revenue
Code for taxable year 2010 extending the period to assess until 30
June 2014. The same was accepted for the respondent by Asst.
Commissioner Alfredo V. Misajon on 17 September 2013. The
copy of the accepted waiver was received by petitioner on 20
September 2013.
36.6 On 03 June 2014 the Preliminary Assessment
Notice ("PAN") was issued to petitioner on demanding payment of
de ciency Income Tax, Value-Added Tax (VAT), Expanded
Withholding Tax (EWT), surcharge, interest and compromise
penalty for the taxable year 2010. The PAN was received by
petitioner on even date.
36.7 Final Assessment Notice (BIR Form No. 0401) and
Formal Letter of Demand (FLD) dated 25 June 2014 were issued
and received by petitioner on even date. The Formal Letter of
Demand is quoted as follows:
"Please be informed that after investigation here has
been found due from your de ciency Income Tax, Value-
Added Tax, Miscellaneous Tax and Expanded Withholding
Tax for the year ending 31 December 2010, as shown
hereunder:
Tax Type Assessment Amo unt
No .
Income Tax IT-116-LOA-116- P71,613,796.56
Payable 2011-00000109-
10-14-809
Value-Added VT-116-LOA-116- 122,043,804.84
Tax 2011-00000109-
10-14-810
Miscellaneous MC-116-LOA- 50,000.00
Tax 116-2011-
00000109-10-14-
811
Expanded WE-116-LOA- 2,224,383.27
Withholding 116-2011-
Tax 00000109-10-14-
812
To tal P195,931,984.67 "
Amo unt
Payable
36.8 On 25 July 2014, petitioner led its administrative
protest on the Formal Letter of Demand and Final Assessment
Notice.
37. Contrary to petitioner's contention, it was accorded every
opportunity allowed by law and the rules to contest the assessment. Petitioner
therefore cannot just simply claim that it was not accorded due process.
Petitioner in alleging denial of due process randomly quoted the decision of the
Honorable Supreme Court in the case of Castillo, et al. vs. Hon. Juan and
interposed that judgment should be rendered upon lawful hearing and must
clearly explain its factual and legal basis.
38. With all due respect, respondent strongly interposes that the
decision of the Honorable Supreme Court in Vivo vs. Philippine Amusement and
Game Corporation (PAGCOR) is best applied to the case at hand, thus:
The essence of procedural due process is embodied in the basic
requirement of notice and a real opportunity to be heard. In
administrative proceedings, such as in the case at bar,
procedural due process simply means the opportunity to
explain one's side or the opportunity to seek a
reconsideration of the action or ruling complained of. "To
be heard" does not mean only verbal arguments in court;
one may be heard also thru pleadings. Where opportunity
to be heard, either through oral arguments or pleadings, is
accorded, there is no denial of procedural due process .
(Emphasis ours)
39. Petitioner was never denied the opportunity to contest
respondent's ndings. In every stage of the conduct of the audit examination,
petitioner was accorded opportunity to submit supporting documents to refute
the audit findings.
40. Hence, petitioner cannot and should not clamor that it was
denied due process. In Calma, et al. vs. Court of Appeals, et al., the Highest Court
made it clear:
Administrative due process requires notice and an
opportunity to be heard before judgment is rendered. So
long as the parties are given the opportunity to explain
their side, the requirements of due process are
satisfactorily complied with.
41. Based on the foregoing, the nding of de ciency tax liabilities
against petitioner for taxable year 2010 is proper in all respects. It was made
explicit by the Honorable Supreme Court in the case of Commissioner of Internal
Revenue vs. Bank of the Philippine Islands that:
"Tax assessments by tax examiners are presumed correct and
made in good faith. The taxpayer has the duty to prove otherwise.
In the absence of proof of any irregularities in the
performance of duties, an assessment duly made by a
Bureau of Internal Revenue examiner and approved by his
superior o cers will not be disturbed. All presumptions
are in favor of the correctness of tax assessments .""
Thereafter, a Notice of Pre-Trial Conference 1 7 was issued by the Court, setting
the case for pre-trial conference on June 25, 2015. Accordingly, petitioner's Pre-Trial
Brief 1 8 and Respondent's Pre-Trial Brief 1 9 were both led on June 19, 2015. However,
upon petitioner's motion, 2 0 the pre-trial conference was reset on July 23, 2015. 2 1
Pre-trial ensued. The parties submitted their Joint Stipulation of Facts and Issues
22 on August 17, 2015. Thereafter, the Court issued a Pre-Trial Order 2 3 on September
3, 2015.
On September 7, 2015, upon petitioner's motion, 2 4 this Court commissioned Mr.
Rendon P. Gammag, as Independent Certified Public Accountant (ICPA). 2 5
During trial, petitioner presented (1) Ms. Emmie Basmayan-Villamor, 2 6
petitioner's General Manager; and (2) Mr. Rendon P. Gammag, 2 7 the ICPA, as its
witnesses.
The Amended Formal Offer of Evidence for the Petitioner 2 8 was led on March
17, 2016. All exhibits were admitted by this Court, pursuant to the Resolutions 2 9 dated
April 18, 2016 and April 20, 2016.
On the other hand, respondent presented Revenue O cer Carolyn V. Mendoza 30
as his lone witness.
Thereafter, respondent formally offered his exhibits 31 on July 29, 2016, which
were all admitted in the Court's Resolution 3 2 dated August 30, 2016.
This case was deemed submitted for decision on November 24, 2016,
considering respondent's Memorandum 3 3 led on November 4, 2016 and
Memorandum for the Petitioner filed on November 18, 2016. 3 5
3 4
STATEMENT OF ISSUE
The issue and sub-issue stipulated by the parties for this Court's resolution are
as follows: 3 6
Whether petitioner is liable to pay the de ciency IT, VAT, Miscellaneous
Tax and EWT for taxable year 2010 in the amount of P195,931,984.67, inclusive
of interests and compromise.
Whether respondent has su ciently informed the petitioner in writing of
the law and the facts on which the alleged de ciency tax assessments were
made and if those assessments have factual and legal bases.
DISCUSSION/RULING
The Court will determine rst the timeliness of the ling of the instant Petition for
Review.
Section 228 of the National Internal Revenue Code (NIRC) of 1997, as amended,
provides:
SEC. 228. Protesting of Assessment. — When the Commissioner or
his duly authorized representative nds that proper taxes should be assessed,
he shall rst notify the taxpayer of his ndings: Provided, however, That a
preassessment notice shall not be required in the following cases:
xxx xxx xxx
The taxpayers shall be informed in writing of the law and the facts on
which the assessment is made; otherwise, the assessment shall be void.
Within a period to be prescribed by implementing rules and regulations,
the taxpayer shall be required to respond to said notice. If the taxpayer fails to
respond, the Commissioner or his duly authorized representative shall issue an
assessment based on his findings.
Such assessment may be protested administratively by ling a request
for reconsideration or reinvestigation within thirty (30) days from receipt of the
assessment in such form and manner as may be prescribed by implementing
rules and regulations. Within sixty (60) days from ling of the protest, all
relevant supporting documents shall have been submitted; otherwise, the
assessment shall become final.
If the protest is denied in whole or in part, or is not acted upon within one
hundred eighty (180) days from submission of documents, the taxpayer
adversely affected by the decision or inaction may appeal to the Court of Tax
Appeals within thirty (30) days from receipt of the said decision, or from the
lapse of the one hundred eighty (180)-day period; otherwise, the decision shall
become final, executory and demandable.
The FLD with Details of Discrepancies and Assessment Notices were received by
petitioner on June 25, 2014 and petitioner led its administrative protest on July 25,
2014 or within the thirty-day period prescribed under Section 228 of the NIRC of 1997,
as amended.
Moreover, the same section provides that if the protest is not acted upon within
180 days from submission of supporting documents, the taxpayer may appeal the
inaction to this Court within 30 days from the lapse of the 180-day period.
In this case, petitioner did not submit additional supporting documents within
the 60-day period allowed under Section 228 of the NIRC of 1997, as amended. Hence,
counting 180 days from the ling of the administrative protest on July 25, 2014,
respondent had until January 21, 2015 to decide on the protest. There being no action
on the protest, petitioner had thirty (30) days from January 21, 2015 or until February
20, 2015 within which to le an appeal before this Court. Hence, petitioner timely led
the instant Petition for Review with this Court on February 20, 2015.
The Court shall now determine whether petitioner is liable to pay the de ciency
taxes assessed by respondent.
Respondent issued her Formal Letter of Demand 3 7 (FLD) dated June 25, 2014
against petitioner with total de ciency tax liabilities amounting to P195,931,984.67,
detailed as follows:
Tax Type Basic Interest Co mpro mise To tal
Income Tax P42,944,689.00 P28,644,107.56 P25,000.00 P71,613,796.56
VAT 72,760,169.85 49,258,634.99 25,000.00 122,043,804.84
Expanded 1,311,498.67 887,884.60 25,000.00 2,224,383.27
Withholding Tax
Miscellaneous Tax 50,000.00 50,000.00
TOTAL P117,016,357.52 P78,790,627.15 P125,000.00 P195,931,984.67
I. Income Tax (IT) — P71,613,796.56
Respondent assessed petitioner of de ciency IT in the total amount of
P71,613,796.56, computed as follows: 3 8

Taxable Income (Loss) per Return P4,004,253.69
Add: Adjustments per Audit
i. Undeclared Income on
discrepancies per line-by-line P15,819,843.57
reconciliation
ii. Disallowed expenses for non-
89,780,690.14
withholding of tax
iii. Unaccounted income from
37,548,429.63 143,148,963.34
unaccounted expenses
Adjusted Taxable Inco me P147,153,217.03
Tax Due P44,145,965.11

Less: Tax Credits
Prior year's excess credits P461,126.32
Tax payments for the first three
740,186.94
quarters
Creditable Tax Withheld for the first
49,896.46
three quarters
Creditable Tax Withheld per BIR Form
257,379.21
2307 for the 4Q
Tax paid per 1702 152,843.79
Less: Excess MCIT 460,156.61 1,201,276.11
Basic Deficiency Tax 42,944,689.00
Add: Increments
Interest until August 15, 2014 28,644,107.56
Compromise penalty 25,000.00
To tal Amo unt Due P71,613,796.56
As can be seen from the above computation, the assessment arose from the
following items:
i. Undeclared Income on discrepancies per line-by-

P15,819,843.57
line reconciliation
ii. Disallowed expenses for non-withholding of tax 89,780,690.14
iii. Unaccounted income from unaccounted
37,548,429.63
expenses
iv. Disallowed excess MOT 460,156.61
The Court shall determine the propriety of each item.

i. Undeclared Income on
discrepancies per line-
by-line reconciliation —
P15,819,843.57
As stated in the Details of Discrepancies attached to the FLD, this item of
assessment was based on Section 5 (B) of the NIRC of 1997, as amended, which
grants the Commissioner the power to obtain any information, on a regular basis from
any person, any o ce or agency other than the party whose internal revenue tax
liabilities is under audit. This power is further enhanced under the third party
information program of the bureau, wherein the BIR can access the records of the
taxpayer's suppliers/customers to con rm the accuracy of the declaration made in the
tax returns.
The alleged undeclared income on discrepancies per line-by-line reconciliation
was computed as follows: 3 9
A. Unaccounted income resulting from
unaccounted purchases per matching of AITEID P84,819,343.96
data vs. SLP
B. Unaccounted income resulting from
unaccounted purchases per matching of MAP 57,559,248.13
vs. SLP
Total P142,378,592.09
Divided by ratio of cost to sale per ITR 90%
Equivalent Sales P158,198,435.66
Multiply by gross profit rate 10%
Total P15,819,843.57
A. Unaccounted income resulting from unaccounted purchases per
matching of AITEID data vs. SLP — P84,819,343.96
Respondent maintains that petitioner has unrecorded income in the amount of
P84,819,343.96 arising from the reconciliation of purchases per SLP (Summary List of
Purchases) and AITEID (Audit Information, Tax Exemption and Incentives Division) data,
presented as follows: 4 0
Per
SUPPLIE R Per SLP AITE ID AITE ID > SLP
a. Asia Brewery, Incorporated P54,535,600.14
b. Interbrev Philippines, Inc. 24,596,066.55
c. Actuarial Advisers, Inc. 7,500.00
d. Allied Bankers Insurance
Corporation 1,760.00
e. Angeles Electric Corporation 2,556.68
f. Asian Shipping Corporation 104,822.02
g. Charles Ice Plant and Cold
Storage Corp. 312.50
h. Lorenzo Shipping Corporation 1,642,046.12
i. Motormall Davao Corporation 8,482.14
j. Pilipinas Shell Petroleum
Corporation 2,837,954.47
k. PJP Auto Center, Inc. 1,437.50
l. Rapid Movers and Forwarders Co.,
Inc. 378,262.79
m. Ravago Equipment Rentals, Inc. 28,571.12
n. Topkick Movers Corporation 673,971.93
P84,819,343.96
Petitioner contends that respondent's allegation has no factual and legal bases
considering that petitioner has no unaccounted purchases for taxable year 2010.
Petitioner further argues that the schedule above failed to provide the amounts
under columns "Per SLP" and "Per AITEID" to justify that the AITEID data is greater than
those declared by petitioner in its SLP. The details stated by the respondent are not
su cient to afford the petitioner the opportunity to intelligently answer the
assessment, as well as to prepare documentary evidence to support its position.
Needless to say, petitioner cannot properly contest the issues raised by respondent
point-by-point because it was not fully or at least substantially informed of its factual
basis.
We agree with petitioner.
Though respondent provided the legal basis of the assessment, respondent,
however, failed to provide the factual bases of the variances per SLP and per AITEID
data. Respondent failed to indicate the basis of why the AITEID data is greater than the
amounts reported in the petitioner's SLP. Respondent simply did not indicate where the
said amounts came from. To reiterate petitioner's argument, said assessment details
are not su cient to afford petitioner the opportunity to intelligently answer the
assessment, as well as prepare the documentary evidence in support of its protest.
Even the Court-commissioned ICPA himself, Mr. Rendon P. Gammag, in his
Amended Report 4 1 dated December 8, 2015, was not able to reconcile the differences
between SLP and per AITEID data, for lack of details.
In Commissioner of Internal Revenue vs. Enron Subic Power Corporation, 42 the
Supreme Court ruled as follows:
The law requires that the legal and factual bases of the assessment be
stated in the formal letter of demand and assessment notice. Thus, such cannot
be presumed. Otherwise, the express provisions of Article 228 of the NIRC and
RR No. 12-99 would be rendered nugatory. The alleged "factual bases" in the
advice, preliminary letter and "audit working papers" did not su ce. There was
no going around the mandate of the law that the legal and factual bases of the
assessment be stated in writing in the formal letter of demand accompanying
the assessment notice.
We note that the old law merely required that the taxpayer be noti ed of
the assessment made by the CIR. This was changed in 1998 and the taxpayer
must now be informed not only of the law but also of the facts on which the
assessment is made. Such amendment is in keeping with the constitutional
principle that no person shall be deprived of property without due process. In
view of the absence of a fair opportunity for Enron to be informed of the legal
and factual bases of the assessment against it, the assessment in question was
void. x x x
Further, both Section 228 of the NIRC of 1997, as amended, and Section 3.1.4 of
RR No. 12-99 clearly require the written details on the nature, factual and legal bases of
the subject de ciency tax assessments. The reason for the mandatory nature of this
requirement is explained in the case of Commissioner of Internal Revenue vs. Reyes: 4 3
x x x A void assessment bears no valid fruit.
The law imposes a substantive, not merely a formal, requirement. To
proceed heedlessly with tax collection without rst establishing a valid
assessment is evidently violative of the cardinal principle in administrative
investigations: that taxpayers should be able to present their case and adduce
supporting evidence. In the instant case, respondent has not been informed of
the basis of the estate tax liability. Without complying with the
unequivocal mandate of rst informing the taxpayer of the
government's claim, there can be no deprivation of property, because
no effective protest can be made . The haphazard shot at slapping an
assessment, supposedly based on estate taxation's general provisions that are
expected to be known by the taxpayer, is utter chicanery.
Even a cursory review of the preliminary assessment notice, as well as
the demand letter sent, reveals the lack of basis for — not to mention the
insu ciency of — the gross gures and details of the itemized deductions
indicated in the notice and the letter. This Court cannot countenance an
assessment based on estimates that appear to have been arbitrarily or
capriciously arrived at . Although taxes are the lifeblood of the government,
their assessment and collection "should be made in accordance with law as any
arbitrariness will negate the very reason for government itself." (Emphasis
supplied; citations omitted)
Thus, as petitioner cannot be expected to determine and thereafter refute the
ndings of the examiner without the disclosure of the details of the discrepancies and
the factual bases of the assessment made against it, the assessment pertaining
thereto is considered void and shall be cancelled accordingly.
B. Unaccounted income resulting from unaccounted purchases per
matching of MAP vs. SLP — P57,559,248.13
As stated in the Details of Discrepancies, the basis of respondent's assessment
is petitioner's alleged "unaccounted income" amounting to P57,559,248.13 derived by
matching petitioner's SLP and MAP, as follows:
SUPPLIE R'S NAME PE R SLP PE R MAP SLP>MAP
Aboitiz Transport System P5,045,711.74 P5,214,775.28 (P169,063.54)
Corporation
Arce Manpower Services - 8,950.20 (8,950.20)
Asian Shipping Corporation 3,158,977.77 3,263,799.79 (104,822.02)
Buug Hardware & Gen. - 43,526.78 (43,526.78)
Merchandise
Chua Hong/Siu Tian Chua 300,000.00 325,000.00 (25,000.00)
Coren Commercial Co., Inc. - 200,758.93 (200,758.93)
DDIS, Inc. 1,258,928.53 1,607,142.84 (348,214.31)
Dennis Trucking Services 2,002,207.23 2,340,935.22 (338,727.99)
Eagle Force Security and Allied - 881,190.49 (881,190.49)
Services Corp.
Eric Arada - 37,500.00 (37,500.00)
FA Freight Services 960,069.21 1,133,154.38 (173,085.17)
Fastcargo Logistic Corporation 3,961,560.13 4,858,772.29 (897,212.16)
Friends Trucking 1,713,468.21 1,760,372.67 (46,904.46)
Gct and Sons Agricultural Devt. 673,135.71 754,661.32 (81,525.61)
Corp.
George Duran - 165,000.00 (165,000.00)
Gr Real Estate Lessor - 340,507.59 (340,507.59)
Gt Distributor, Inc. 64,707.94 144,274.70 (79,566.76)
Hizon Transport Services and - 3,045.98 (3,045.98)
Trading, Inc.
Interbev Philippines, Inc. 285,353,972.41 331,981,981.89 (46,628,009.48)
Jesus Anthony Tan - 15,789.42 (15,789.42)
Jesus Bajamunde - 292,452.66 (292,452.66)
Landcom Realty Corporation - 72,000.00 (72,000.00)
LFH Venture Merchandising - 89,632.15 (89,632.15)
Corporation
Lorenzo Shipping Corporation 6,042,101.32 7,495,812.74 (1,453,711.42)
Misamis
CD Technologies Asia, Inc.Occidental
© 2019 Electric - 13,822.08 (13,822.08)
cdasiaonline.com
Misamis Occidental Electric - 13,822.08 (13,822.08)
Cooperative, Inc.
Misamis Occidental II Electric - 16,498.66 (16,498.66)
Cooperative, Inc.
Negros Marine Watchman - 194,285.73 (194,285.73)
Services Corporation
Ocean Transport Group of - 2,773,930.80 (2,773,930.80)
Companies, Inc.
Pna Freight Services 673,802.84 719,877.65 (46,074.81)
Rabukawa Trucking - 3,498.30 (3,498.30)
Ravago Equipment Rentals, Inc. 72,282.98 75,019.73 (2,736.75)
Ricardo Tumawak - 130,000.00 (130,000.00)
Romeo Javelosa - 56,000.00 (56,000.00)
Royalmaster Services, Inc. 1,202,984.34 1,490,146.54 (287,162.20)
T Biraogo Trucking Services, 1,211,974.33 1,388,110.17 (176,135.84)
Inc.
Topkick Movers Corporation 4,648,802.13 5,060,502.80 (411,700.67)
Vallecers East Supermart - 107,142.85 (107,142.85)
Value Care Health Systems, Inc. 24,160.62 120,803.09 (96,642.47)
Vila Gil Trucking, Inc. 433,500.00 486,500.00 (53,000.00)
William Uy - 36,842.11 (36,842.11)
Ym Cargo Transport 61,607.14 653,571.43 (591,964.29)
Corporation
Zamboanga Del Norte Electric - 37,467.61 (37,467.61)
Coop, Inc. Dipolog
Zamboanga Del Sur I Electric - 24,423.05 (24,423.05)
Cooperative, Inc.
Zamboanga Del Sur II Electric - 3,722.79 (3,722.79)
Cooperative, Inc.
P318,863,954.58 P376,423,202.71 (P57,559,248.13)
On the other hand, petitioner argues that the amounts per SLP as presented by
respondent is erroneous.
The Court agrees with petitioner.
Upon careful review of petitioner's SLP, 4 4 the Court nds that the total amount
per SLP is equivalent to P353,029,525.22 and not P318,863,954.58 as claimed by
respondent, to wit:
Supplier's Name SLP per GV MC SLP per BIR Discrepancy
Aboitiz Transport System P5,226,025.23 P5,045,711.74 P180,313.49
Corporation
Arce Manpower Services - - -
Asian Shipping Corporation 3,263,799.79 3,158,977.77 104,822.02
Buug Hardware and Gen. 43,660.71 - 43,660.71
Merchandise
Chua Hong/Siu Tian Chua 325,000.00 300,000.00 25,000.00
Coren Commercial Co., Inc. 200,758.93 - 200,758.93
DDIS, Inc. 1,580,357.09 1,258,928.53 321,428.56
Dennis Trucking Services 2,340,935.22 2,002,207.23 338,727.99
Eagle Force Security and 881,190.49 - 881,190.49
Allied Services Corp.
Eric Arada - - -
FA Freight Services 1,133,154.38 960,069.21 173,085.17
FA Freight Services 1,133,154.38 960,069.21 173,085.17
Fastcargo Logistic 4,880,785.92 3,961,560.13 919,225.79
Corporation
Friends Trucking 1,760,372.67 1,713,468.21 46,904.46
Gct and Sons Agricultural 754,661.32 673,135.71 81,525.61
Devt. Corp.
George Duran - - -
Gr Real Estate Lessor - - -
Gt Distributor, Inc. 70,590.48 64,707.94 5,882.54
Hizon Transport Services and 3,045.98 - 3,045.98
Trading, Inc.
Interbev Philippines, Inc. 309,949,038.96 285,353,972.41 24,595,066.55
Jesus Anthony Tan - - -
Jesus Bajamunde - - -
Landcom Realty Corporation - - -
LFH Venture Merchandising 89,632.15 - 89,632.15
Corporation
Lorenzo Shipping 7,495,812.74 6,042,101.32 1,453,711.42
Corporation
Misamis Occidental Electric 7,082.95 - 7,082.95
Cooperative, Inc.
Misamis Occidental II 14,618.48 - 14,618.48
Electric Cooperative, Inc.
Negros Marine Watchman 194,285.73 - 194,285.73
Ocean Transport Group of 2,773,930.80 - 2,773,930.80
Companies, Inc.
Pna Freight Services 719,877.65 673,802.84 46,074.81
Rabukawa Trucking - - -
Ravago Equipment Rentals, 75,019.73 72,282.98 2,736.75
Inc.
Ricardo Tumawak - - -
Romeo Javelosa - - -
Royalmaster Services, Inc. 1,490,146.54 1,202,984.34 287,162.20
T Biraogo Trucking Services, 1,388,110.17 1,211,974.33 176,135.84
Inc.
Topkick Movers Corporation 5,060,502.80 4,648,802.13 411,700.67
Vallecers East Supermart 117,146.04 - 117,146.04
Value Care Health Systems, 24,160.62 24,160.62 -
Inc.
Vila Gil Trucking, Inc. 486,500.00 433,500.00 53,000.00
William Uy - - -
Ym Cargo Transport 653,571.43 61,607.14 591,964.29
Corporation
Zamboanga Del Norte 14,160.51 - 14,160.51
Electric Coop, Inc. Dipolog
Zamboanga Del Sur I Electric 10,489.14 - 10,489.14
Cooperative, Inc.
Zamboanga Del Sur II Electric 1,100.57 - 1,100.57
Cooperative, Inc.
P353,029,525.22 P318,863,954.58 P34,165,570.64
Nowhere in the records of the case can it be found the amount relied upon by
respondent.
Nevertheless, petitioner made a reconciliation to account the discrepancies
between the amounts per SLP and per MAP, summarized as follows:
PE R SLP PE R MAP Discrepancy
No Discrepancy P31,090,308.52 P31,090,308.52 P-
SLP > MAP 10,267,617.90 10,224,217.20 43,400.70
Non-VAT (SLP < MAP) - 1,086,540.28 (1,086,540.28)
Non-VAT portion (SLP < 71,612.27 216,737.28 (145,125.01)
MAP)
EWT based on remittances 309,949,038.96 331,981,981.89 (22,032,942.93)
Wrong computation 1,650,947.57 1,823,417.54 (172,469.97)
To tal P353,029,525.22 P376,423,202.71 P(23,393,677.49)
Taking into account the discrepancies in the above table, petitioner explained the
causes of the discrepancies in this wise: 4 5
a. The suppliers' accounts totaling P31,090,308.52 have no discrepancy, as
shown below:
Supplier's Name Per SLP Per MAP Discrepancy
Asian Shipping Corporation P3,263,799.79 P3,263,799.79 -
Chua Hong/Siu Tian Chua 325,000.00 325,000.00 -
Coren Commercial Co., Inc. 200,758.93 200,758.93 -
Dennis Trucking Services 2,340,935.22 2,340,935.22 -
Eagle Force Security and 881,190.49 881,190.49 -
Allied Services Corp.
F A Freight Services 1,133,154.38 1,133,154.38 -
Friends Trucking 1,760,372.67 1,760,372.67 -
GCT and Sons Agricultural 754,661.32 754,661.32 -
Devt. Corp.
Hizon Transport Services and 3,045.98 3,045.98 -
Trading, Inc.
LFH Venture Merchandising 89,632.15 89,632.15 -
Corporation
Lorenzo Shipping Corporation 7,495,812.74 7,495,812.74 -
Negros Marine Watchman 194,285.73 194,285.73 -
Ocean Transport Group of 2,773,930.80 2,773,930.80 -
Companies, Inc.
P N A Freight Services 719,877.65 719,877.65 -
Ravago Equipment Rentals, 75,019.73 75,019.73 -
Inc.
Royalmaster Services, Inc. 1,490,146.54 1,490,146.54 -
T Biraogo Trucking Services, 1,388,110.17 1,388,110.17 -
Inc.
Topkick Movers Corporation 5,060,502.80 5,060,502.80 -
Villa Gil Trucking, Inc. A 486,500.00 486,500.00 -
YM Cargo Transport 653,571.43 653,571.43 -
Corporation
P31,090,308.52 P31,090,308.52 -
b. Assumed supplier accounts' totaling P10,267,617.90 is not less than the
amounts declared per MAP, in fact the SLP amounts are greater than the MAP amounts
by P43,400.70, as shown below:
Supplier's Name Per SLP Per MAP SLP>MAP
Aboitiz Transport System P5,226,025.23 P5,214,775.28 P11,249.95
Corporation
Buug Hardware and Gen. 43,660.71 43,526.78 133.93
Merchandise
Fastcargo Logistic 4,880,785.92 4,858,772.29 22,013.63
Corporation
Vallecers East Supermart 117,146.04 107,142.85 10,003.19
P10,267,617.90 P10,224,217.20 P43,400.70
c. A total of P1,086,540.28 supplier accounts are Non-VAT entities, therefore
the purchases made by the petitioner were not subjected to VAT, and the reason why
the SLP is less than the MAP, as shown below:
Arce Manpower - P8,950.20 P(8,950.20)
Services
Eric Arada - 37,500.00 (37,500.00)
George Duran - 165,000.00 (165,000.00)
GR Real Estate Lessor - 340,507.59 (340,507.59)
Jesus Anthony Tan - 15,789.42 (15,789.42)
Jesus Bajamunde - 292,452.66 (292,452.66)
Rabukawa Trucking - 3,498.30 (3,498.30)
Ricardo Tumawak - 130,000.00 (130,000.00)
Romeo Javelosa - 56,000.00 (56,000.00)
William Uy - 36,842.11 (36,842.11)
- P1,086,540.28 (P1,086,540.28)
d. A total of P145,125.01 supplier accounts represents the portion of the
purchases that are Non-VAT, again, the purchases made by petitioner are not subject to
VAT and the reason why the SLP is less than the MAP, as shown below:
Misamis Occidental Electric P7,082.95 P13,822.08 (P6,739.13)
Cooperative, Inc.
Misamis Occidental II 14,618.48 16,498.66 (1,880.18)
Value Care Health Systems, 24,160.62 120,803.09 (96,642.47)
Inc.
Zamboanga Del Norte 14,160.51 37,467.61 (23,307.10)
Electric Coop, Inc. Dipolog
Zamboanga Del Sur I 10,489.14 24,423.05 (13,933.91)
Zamboanga Del Sur II 1,100.57 3,722.79 (2,622.22)
P71,612.27 P216,737.28 (P145,125.01)
e. Supplier's account totaling P309,949,038.96 per SLP but reported per
MAP as P331,981,981.89 making the SLP less than the MAP in the amount of
P22,032,942.93, as shown below, actually represents purchases whose EWT is
withheld based on remittances and not in the issuance of invoices:
Interbev Philippines, Inc. P309,949,038.96 P331,981,981.89 P(22,032,942.93)
f. For the remaining P1,650,947.50 per SLP and P1,823,417.54 per MAP with
a discrepancy of P172,464.97 making the SLP less than the MAP is due to a wrong
computation, detailed as follows:
Supplier's Per SLP Per MAP Discrepancy
Name
DDIS, Inc. P1,580,357.09 P1,607,142.84 (P26,785.75)
GT Distributor, 70,590.48 144,274.70 (73,684.22)
Inc.
Landcom Realty - 72,000.00 (72,000.00)
Corporation
P1,650,947.57 P1,823,417.54 (P172,469.97)
Based on the foregoing, petitioner posits that the assessment has no basis
because respondent relied on mere presumptions. As such, petitioner argues that the
alleged ndings of "unaccounted purchases" amounting to P57,559,248.13 should be
cancelled for lack of factual basis.
Assessments are prima facie presumed correct and made in good faith. The
taxpayer has the duty of proving otherwise; and in the absence of proof of any
irregularities in the performance of o cial duties, an assessment will not be disturbed.
46
However, the prima facie correctness of a tax assessment does not apply upon
proof that an 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. 4 7 As
held in the case of Collector of Internal Revenue vs. Benipayo, 4 8 the Court ruled that the
assessment must be based on actual facts.
As such, the nding that petitioner had unaccounted purchases cannot be
enforced against petitioner; otherwise, the Court stands to tax petitioner arbitrarily.
Accordingly, the de ciency income tax assessment on the alleged undeclared income
from unaccounted purchases in the amount of P57,559,248.13 should be cancelled and
withdrawn.
ii. Disallowed expenses for
non-withholding of tax —
P89,780,690.14
Respondent disallowed petitioner's expenses amounting to P89,780,690.14 as
deductions from its gross income for the alleged non-withholding of tax per matching
and reconciliation, determined as follows:
A. Per matching of MAP-SLP P26,526,122.09
B. Per global reconciliation of income payments 63,254,568.05
Total P89,780,690.14
According to respondent, a comparison of petitioner's income payments subject
to withholding tax claimed per nancial statement/income tax return as against the
withholding tax returns led (1601E) disclosed that petitioner did not subject to
withholding tax certain expenses, hence disallowed pursuant to Section 34 (K) of the
NIRC of 1997, as amended, which states that "any amount paid or payable which is
otherwise deductible from, or taken into account in computing the gross income or for
which depreciation or amortization may be allowed under this Section, shall be allowed
as a deduction only if it is shown that the tax required to be deducted and withheld
therefrom has been paid to the Bureau of Internal Revenue in accordance in (sic) this
Section of this Code."
On the other hand, petitioner contends that the allegation has no factual and legal
bases considering that petitioner has properly subjected all its income payments to
withholding tax for the taxable year 2010.
A. Income payments not subject to withholding tax per matching of
MAP vs. SLP — P26,526,122.09
Petitioner alleges that the comparison of the respondent of the income
payments subjected to withholding tax per BIR Form No. 1601E, as against the
petitioner's Audited Financial Statements (AFS) and Income Tax Return (ITR), on one
hand, and the presentation of petitioner's MAP and SLP as its supporting computation,
and the failure to mention the AFS, ITR or the BIR Forms 1601E, on the other hand, are
misleading. That the respondent's confusing manner of presentation deprived
petitioner to ascertain the facts on which respondent based its assessment. Hence,
claiming that the assessment is void.
The Court cannot subscribe to the refutation of petitioner.
It is to be noted that the alleged disallowed expenses arose from the non-
withholding of tax on certain payments made by petitioner to its suppliers. But instead
of directly comparing the amounts of income payments subject to withholding tax
claimed per nancial statement/income tax, as categorically stated in the Details of
Discrepancies, as against the withholding tax returns led (BIR Form 1601 E),
respondent compared petitioner's SLP with its MAP. Nevertheless, petitioner was still
informed of the factual basis of the assessment considering that respondent disclosed
the supporting computation of the assessment in the FLD, i.e., the detailed comparison
of its SLP and MAP, both of which were available to petitioner at hand. The details
indicated therein are su cient to inform petitioner of the factual basis of the
assessment issued.
Based on the supporting schedules presented by respondent, attached as
Annexes A-3 and A-4, the source documents used by respondent to arrive at the alleged
income payments not subjected to withholding tax amounting to P26,526,122.09 are
the MAP and SLP, to wit:
Purchases of Services (Annex A-
3)
Per SLP P15,119,840.39
Per MAP 658,284.44
SLP > MAP P14,461,555.95
Purchases of Goods (Annex A-4)
Per SLP P377,830,331.84
Per MAP 365,765,765.70
SLP > MAP P12,064,566.14
TOTAL P26,526,122.09
The details of the foregoing are as follows:
Purchases of Services (Annex A-3)

Supplier's Name Per SLP Per MAP SLP > MAP
Columbia Computer Center P13,035.71 P- P13,035.71
Davao, Inc.
Herman
CD Technologies Asia, Inc. © Y Hablo Services
2019 309,309.22 296,229.22 13,080.00cdasiaonline.com
Herman Y Hablo Services 309,309.22 296,229.22 13,080.00
Te Petron Service Center 13,693.10 - 13,693.10
Imelda Petron Station 13,708.95 - 13,708.95
Grace Hardware Corporation 13,917.86 - 13,917.86
Sen Guan Hing 14,375.00 - 14,375.00
Carts Pension House 15,357.24 - 15,357.24
Lim Yao Chiong Ventures 18,673.44 - 18,673.44
Corporation
Five Star Motor and Service 19,388.39 - 19,388.39
Center
Pagadian Bay Plaza Hotel 21,590.22 - 21,590.22
Kings Technology Marketing 21,696.43 - 21,696.43
Philippine Airlines 22,016.88 - 22,016.88
Robinsons Abenson Appliances 22,200.89 - 22,200.89
Corp.
Jacinto Canvas Supply 22,321.43 - 22,321.43
Charles Ice Plant & Cold Storage 22,450.92 - 22,450.92
Corporation
ECT Enterprises 22,483.92 - 22,483.92
Chino and Irish Catering Services 23,544.70 - 23,544.70
Royal Garden Hotel 23,878.55 - 23,878.55
Dasoma Distributors 25,000.00 - 25,000.00
Mandaue Foam Industries, Inc. 25,328.57 - 25,328.57
FCT Industrial Fabricators & 27,078.66 - 27,078.66
Services
Lispher Inn 28,928.50 - 28,928.50
JRS Express 30,339.30 - 30,339.30
DH Airconditioning Enterprises 35,352.69 - 35,352.69
Buug Hardware and Gen. 36,294.64 - 36,294.64
Merchandise
Accu Image Productions 37,866.07 - 37,866.07
Street Kings Auto Supply 41,306.23 - 41,306.23
Ventura Marketing & 43,824.55 - 43,824.55
Commercial Development Co.
Highway Tire Supply 44,223.21 - 44,223.21
Steel Art Billboards, Inc. 44,642.86 - 44,642.86
Golden Nugget Trucking 157,022.65 111,754.25 45,268.40
Osaka Auto Supply 46,791.52 - 46,791.52
Hotel Camila 48,423.40 - 48,423.40
CW Cole, Inc. 54,321.18 - 54,321.18
Albacs Motor and Services 59,883.04 - 59,883.04
JMS Jsall Marketing Services 66,071.43 - 66,071.43
Lofer Petron Service Station 76,609.89 - 76,609.89
Jemje Caltex Station and 77,498.24 - 77,498.24
Convenience Store
Davao Light and Power 84,203.06 - 84,203.06
Company
Pacific Motor Parts of Bacolod, 87,774.99 - 87,774.99
Inc.
LFH Venture Merchandising 89,632.15 - 89,632.15
Corporation
Corporation
DBH Caltex Station 91,605.11 - 91,605.11
Tronco Advertising Co., Inc. 100,000.00 - 100,000.00
Western Advertising and 102,232.14 - 102,232.14
Construction, Inc.
Asco Auto Supply 104,727.69 - 104,727.69
Diplahan Petron Station 107,145.34 - 107,145.34
Valiant Electronics Supply 108,234.36 - 108,234.36
Marjac Service Station 109,362.47 - 109,362.47
Tio Tuan Trucking Services, Inc. 119,000.00 - 119,000.00
Aquarius Human Resources Dev. 385,813.25 250,084.91 135,728.34
Corp.
Mae Wess Company, Inc. 147,731.62 - 147,731.62
Liloy Caltex Station 161,534.45 216.06 161,318.39
Ultracraft Advertising Corp. 163,680.00 - 163,680.00
Coren Commercial Co., Inc. 187,500.00 - 187,500.00
Negros Marine Watchman 194,285.73 - 194,285.73
Philippine Long Distance 210,745.72 - 210,745.72
Telephone Company
Seaoil Super Gasoline Station 293,439.62 - 293,439.62
Bacolod Real State Development 327,610.70 - 327,610.70
Corporation
Top Harbor International, Inc. 718,401.06 - 718,401.06
Eagle Force Security and Allied 809,761.92 - 809,761.92
Services Corp.
Ocean Transport Group of 1,648,930.80 - 1,648,930.80
Companies, Inc.
Pilipinas Shell Petroleum 2,531,963.14 - 2,531,963.14
Corporation
Petron Fleet Card 4,594,075.59 - 4,594,075.59
TOTAL P15,119,840.39 P658,284.44 P14,461,555.95
Purchases of Goods (Annex A-4)

Supplier's Name Per SLP Per MAP SLP > MAP
NCCC Supermarket P16,604.64 P- P16,604.64
Han-Joy Marketing 23,750.00 - 23,750.00
Asia Brewery, 377,789,977.20 365,765,765.70 12,024,211.50
Incorporated
TOTAL P377,830,331.84 P365,765,765.70 P12,064,566.14
Upon veri cation, the Court nds that the amount per SLP should be
P396,320,243.95, of which the amount of P370,607,375.02 was subjected to
withholding tax, while the amount of P25,712,868.93 was not, to wit:
Supplier's Name PE R SLP Per MAP SLP > MAP
A. Purchases of Services
Accu Image Productions P37,866.07 P37,866.07
Albacs Motor and Services 59,883.04 59,883.04
Aquarius Human Resources Dev.
698,592.30 P250,084.91 448,507.39
Corp.Asia, Inc. © 2019
CD Technologies cdasiaonline.com
698,592.30 P250,084.91 448,507.39
Corp.
Asco Auto Supply 104,727.69 104,727.69
Bacolod Real State Development
327,619.63 327,619.63
Corporation
Buug Hardware and Gen.
43,660.71 43,526.78 133.93
Merchandise
Carls Pension House 15,892.95 15,892.95
Charles Ice Plant & Cold Storage
22,450.92 22,450.92
Corporation
Chino and Irish Catering Services 23,544.70 23,544.70
Columbia Computer Center
13,035.71 13,035.71
Davao, Inc.
Coren Commercial Co., Inc. 200,758.93 200,758.93 0.00
CW Cole, Inc. 92,008.46 92,008.46
Dasoma Distributors 25,000.00 25,000.00
Davao Light and Power Company 99,990.20 99,990.20
DBH Caltex Station 91,908.68 91,908.68
DH Airconditioning Enterprises 95,504.48 95,504.48
Diplahan Petron Station 107,145.34 107,145.34
Eagle Force Security and Allied
881,190.49 881,190.49 0.00
Services Corp.
ECT Enterprises 22,483.92 22,483.92
FCT Industrial Fabricators &
27,078.66 27,078.66
Services
Five Star Motor and Service
20,000.00 20,000.00
Center
Golden Nugget Trucking 157,022.65 111,754.25 45,268.40
Grace Hardware Corporation 14,498.22 14,498.22
Herman Y Hablo Services 309,309.22 296,229.22 13,080.00
Highway Tire Supply 44,223.21 44,223.21
Hotel Camila 60,708.67 60,708.67
Imelda Petron Station 13,708.95 13,708.95
Jacinto Canvas Supply 22,321.43 22,321.43
Jemje Caltex Station and
79,015.10 79,015.10
Convenience Store
JMS Jsall Marketing Services 66,071.43 66,071.43
JRS Express 30,651.80 30,651.80
Kings Technology Marketing 21,696.43 21,696.43
LFH Venture Merchandising
89,632.15 89,632.15 0.00
Corporation
Liloy Caltex Station 175,027.32 216.06 174,811.26
Lim Yao Chiong Ventures
18,673.44 18,673.44
Corporation
Lispher Inn 28,928.50 28,928.50
Lofer Petron Service Station 95,045.74 95,045.74
Mae Wess Company, Inc. 177,579.62 177,579.62
Mandaue Foam Industries, Inc. 25,328.57 25,328.57
Marjac Service Station 116,862.47 116,862.47
Marjac Service Station 0.00
Negros Marine Watchman
194,285.73 194,285.73 0.00
Ocean Transport Group of
2,773,930.80 2,773,930.80 0.00
Companies, Inc.
Companies, Inc.
Osaka Auto Supply 48,621.52 48,621.52
Osaka Auto Supply 0.00
Pacific Motor Parts of Bacolod,
87,774.99 87,774.99
Inc.
Pagadian Bay Plaza Hotel 22,233.08 22,233.08
Petron Fleet Card 4,594,075.59 4,594,075.59
Philippine Airlines 22,016.88 22,016.88
Philippine Long Distance
479,052.41 479,052.41
Telephone Company
Pilipinas Shell Petroleum
3,966,212.97 3,966,212.97
Corporation
Robinsons Abenson Appliances
22,200.89 22,200.89
Corp.
Royal Garden Hotel 25,655.33 25,655.33
Seaoil Super Gasoline Station 311,227.31 311,227.31
Sen Guan Hing 14,375.00 14,375.00
Steel Art Billboards, Inc. 44,642.86 44,642.86
Street Kings Auto Supply 49,449.10 49,449.10
Te Petron Service Center 14,184.17 14,184.17
Te Petron Service Center 0.00
Tio Tuan Trucking Services, Inc. 119,000.00 119,000.00
Top Harbor International, Inc. 718,401.06 718,401.06
Tronco Advertising Co., Inc. 100,000.00 100,000.00
Ultracraft Advertising Corp. 163,680.00 163,680.00
Valiant Electronics Supply 159.82 159.82
Ventura Marketing & Commercial
49,035.48 49,035.48
Development Co.
Ventura Marketing & Commercial
0.00
Development Co.
Western Advertising and
111,160.71 111,160.71
Construction, Inc.
Sub-total P18,488,023.50 P4,841,609.32 P13,646,414.18
B. Purchases of Goods
Nccc Supermarket 18,493.25 18,493.25
Han-Joy Marketing 23,750.00 23,750.00
Asia Brewery, Incorporated 377,789,977.20 365,765,765.70 12,024,211.50
Sub-total P377,832,220.45 P365,765,765.70 P12,066,454.75
TOTAL P396,320,243.95 P370,607,375.02 P25,712,868.93
In his report, the ICPA explained that part of petitioner's expenses were not
subjected to tax as the same were exempt from withholding tax, as follows:
Amount Exempt
from Withholding
Supplier's Name
Tax
(Annex IC-70)
Accu Image Productions P7,955.36
Albacs Motor and Services 18,651.79
Aquarius Human Resources Dev. Corp. 289,375.60
Asco Auto Supply 104,727.68
Bacolod Real State Development Corporation 327,619.63
Bacolod Real State Development Corporation 327,619.63
Buug Hardware and Gen. Merchandise 133.93
Carls Pension House 15,762.50
Charles Ice Plant & Cold Storage Corporation 19,370.54
Chino and Irish Catering Services 28,981.64
CW Cole, Inc. 48,528.57
Dasoma Distributors 25,000.00
Davao Light and Power Company 122,869.82
DBH Caltex Station 65,160.94
DH Airconditioning Enterprises 95,504.46
Diplahan Petron Station 66,906.30
ECT Enterprises 22,483.93
FCT Industrial Fabricators & Services 30,328.66
Five Star Motor and Service Center 13,262.50
Golden Nugget Trucking 45,268.09
Grace Hardware Corporation 6,785.71
Han-Joy Marketing 13,750.00
Herman Y Hablo Services 13,080.00
Highway Tire Supply 38,357.14
Hotel Camila 33,730.34
Imelda Petron Station 13,708.43
Jacinto Canvas Supply 22,321.43
Jemje Caltex Station and Convenience Store 59,833.37
JMS Jsall Marketing Services 66,071.43
Kings Technology Marketing 21,696.43
Liloy Caltex Station 139,808.92
Lofer Petron Service Station 64,080.55
Mae Wess Company, Inc. 167,225.36
Mandaue Foam Industries, Inc. 31,181.25
Marjac Service Station 116,929.46
Osaka Auto Supply 23,051.19
Pacific Motor Parts of Bacolod, Inc. 86,958.05
Pagadian Bay Plaza Hotel 8,830.36
Petron Fleet Card 3,901,818.81
Philippine Airlines 24,804.88
Philippine Long Distance Telephone Company 193,982.61
Robinsons Abenson Appliances Corp. 22,200.89
Royal Garden Hotel 1,776.79
Seaoil Super Gasoline Station 229,618.41
Steel Art Billboards, Inc. 44,642.86
Street Kings Auto Supply 62,289.11
Te Petron Service Center 1,689.29
Tio Tuan Trucking Services, Inc. 58,000.00
Top Harbor International, Inc. 711,326.60
Tronco Advertising Co., Inc. 80,000.00
Ultracraft Advertising Corp. 68,583.75
Valiant Electronics Supply 159.82
Ventura Marketing & Commercial Development 55,415.03
Co.
CD Technologies Asia, Western
Inc. © 2019 Advertising and Construction, Inc. 97,803.57 cdasiaonline.com
Western Advertising and Construction, Inc. 97,803.57
TOTAL P7,829,403.78
However, the ICPA did not explain nor provide justi cation why the amount of
P7,829,403.78 from the foregoing suppliers was exempted from withholding tax.
Neither did petitioner and the ICPA provide the appropriate supporting documents for
the Court to determine the nature of the transactions purported to be exempt from
withholding taxes. Consequently, the entire amount of P25,712,868.93 shall be
disallowed as deductible expense from petitioner's gross income for its failure to
withhold taxes thereon.
B. Income payments not subject to withholding tax per global
reconciliation — P63,254,568.05
Respondent compared the income payments per petitioner's nancial statement
and income tax return as against the withholding tax returns (BIR Form No. 1601E) led
by petitioner, and found that the amount of P63,254,568.05, as determined below, was
not subjected
Subject to 1% Subject to 2% To tal
Purchases per Cost of Sales P708,757,373.28 P47,384,410.60 P756,141,783.88
Security Services 1,935,654.84 1,935,654.84
Other Outside Services 12,128,798.15 12,128,798.15
Advertising 14,510,036.21 4,423,887.44 18,933,923.65
Repairs and Maintenance 1,870,829.05 1,870,829.05
Research and Development 275,210.29 275,210.29
Office Supplies 434,963.08 434,963.08
Insurance 40,596.42 40,596.42
Representation and
Entertainment 262,222.22 262,222.22
Transportation and Travel 1,804,197.72 1,804,197.72
Fuel and Oil 10,221,912.78 10,221,912.78
Communication, Light and Water 1,291,418.88 1,291,418.88
Miscellaneous 13,284.90 13,284.90
Additions to PPE 157,124.00 157,124.00
Total P734,094,694.25 P71,417,225.61 P805,511,919.86
Amount subject per EWT Return 697,747,747.59 44,509,604.22 742,257,351.81
Difference — Inco me
Payments no t subjected to
withho lding tax — FS>E WT
Return P36,346,946.66 P26,907,621.39 P63,254,568.05
to withholding taxes, hence, disallowed pursuant to Section 34 (K) of the NIRC of
1997, as amended:

Subject to 1% Subject to 2% To tal
Purchases per Cost of Sales P708,757,373.28 P47,384,410.60 P756,141,783.88
Other Outside Services 12,128,798.15 12,128,798.15
Advertising 14,510,036.21 4,423,887.44 18,933,923.65
Repairs and Maintenance 1,870,829.05 1,870,829.05
Research and Development 275,210.29 275,210.29
Office Supplies 434,963.08 434,963.08
Insurance 40,596.42 40,596.42
Representation and
Entertainment 262,222.22 262,222.22
Transportation and Travel 1,804,197.72 1,804,197.72
Fuel and Oil 10,221,912.78 10,221,912.78
Communication, Light and Water 1,291,418.88 1,291,418.88
Miscellaneous 13,284.90 13,284.90
Additions to PPE 157,124.00 157,124.00
Total P734,094,694.25 P71,417,225.61 P805,511,919.86
Amount subject per EWT Return 697,747,747.59 44,509,604.22 742,257,351.81
Difference — Inco me
Payments no t subjected to
withho lding tax — FS>E WT
Return P36,346,946.66 P26,907,621.39 P63,254,568.05
Conversely, petitioner counters that the alleged non-withholding tax based on the
global reconciliation made by the respondent is without merit because not all income
payments are covered by the expanded withholding tax system under Revenue
Regulations No. 02-98.
Further, petitioner noted, upon its review of the global reconciliation of the
respondent, that the discrepancies cited were caused by items that are not subject to
expanded withholding tax, such as, but not limited to the following:
1. Casual Purchases or from a person who is not considered as a Regular
Supplier;
2. Petty Cash Disbursements incurred by Salesmen and Sales O ces such
as, but not limited to meals, representation and entertainment, gasoline,
out-of-town fieldwork expenses and supplies; and/or
3. Expenses that were paid in cash such as, but not limited to prepaid
cellphone loads, registered mails transmitted to customers and the like.
Apart from the foregoing allegations, petitioner did not specify which and how
much of the foregoing expense accounts were not subject to withholding tax. Without
providing the necessary documents to support its claim, the Court cannot ascertain
whether the income payment of P63,254,568.05 is indeed not subject to withholding
tax.
It must be remembered that tax assessments by tax examiners are presumed
correct and made in good faith. All presumptions are in favor of the correctness of tax
assessments. In other words, the taxpayer contesting the validity or correctness of an
assessment must prove not only that the CIR is wrong but the taxpayer is right,
otherwise, the presumption in favor of the correctness of tax assessment stands. 4 9
Mere allegations without adducing evidence are not su cient. Allegation is not
synonymous with proof. 5 0 In the absence of proof, the Court is constrained to uphold
the assessment of respondent against petitioner. Accordingly, the amount of
P63,254,568.05 shall be disallowed as deductible expense from petitioner's gross
income.
In sum, the disallowed expenses for non-withholding of tax are recomputed as
follows:
A. Per matching of MAP-SLP P25,712,868.93
B. Per global reconciliation of income 63,254,568.05
payments
Total P88,967,436.98
iii. Unaccounted income
from unaccounted
expenses —
P37,548,429.63
The alleged unaccounted income from unaccounted expenses of
P37,548,429.63 arose from the following:
Unaccounted income due to unaccounted
expenses P84,671.41
Overstatement of expenses 37,230,901.04
Unaccounted rental expense per reconciliation of
EWT returns vs. FS 232,857.18
Total P37,548,429.63
A. Unaccounted income due to unaccounted expenses — P84,671.41
According to respondent, petitioner's failure to submit/present proof for the
unaccounted cost/expenses claimed led to the disallowance of said costs/deductions
and were made part of the gross income, pursuant to Section 32 of the NIRC of 1997,
as amended.
The alleged unaccounted cost was computed by comparing the salaries and
wages reported per AFS and ITR as against the alphalist of employees, to wit:
Salaries, SSS, HDMF and related accounts P24,674,275.00
Less: SSS, HDMF 1,599,900.01
Salaries per FS/ITR P23,074,374.99
Less: per Alphalist
Non-Taxable Salaries P-
Taxable Salaries 23,159,046.40
Difference P(84,671.41)
Since the amount of salaries per alphalist is higher than the salaries expense
re ected in the ITR/FS, respondent simply inferred that petitioner had undeclared
income.
The Court finds the assessment erroneous.
A close scrutiny of the alphalist for the taxable year 2010 and BIR Form No.
1601-C clearly indicates that the salaries expense amounted to P23,074,374.71, to wit:

Schedule Subject to Tax No t Subject to To tal
Tax
Schedule 7.1 P800,222.00 P61,427.20 P861,649.20
Schedule 7.2 791,202.16 113,654.19 904,856.35
Schedule 7.3 18,766,367.55 2,156,673.26 20,923,040.81
Schedule 7.4 364,724.60 20,103.75 384,828.35
To tal P20,722,516.31 P2,351,858.40 P23,074,374.71
Perio d No t Subject
Co vered Subject to Tax to Tax To tal
January P1,712,504.52 P79,400.53 P1,791,905.05
February 2,061,100.17 82,206.47 2,143,306.64
March 1,635,013.40 76,711.53 1,711,724.93
April 1,858,362.86 83,376.50 1,941,739.36
May 1,719,543.20 77,981.14 1,797,524.34
June 1,896,990.21 81,095.70 1,978,085.91
July 1,659,528.05 77,687.58 1,737,215.63
August 1,578,697.89 75,329.10 1,654,026.99
September 1,613,926.00 76,279.43 1,690,205.43
October 1,667,957.97 78,558.30 1,746,516.27
November 1,721,924.47 78,770.87 1,800,695.34
December 1,596,967.57 1,484,461.25 3,081,428.82
To tal P20,722,516.31 P2,351,858.40 P23,074,374.71
Thus, no discrepancy exists, except for the amount of P0.28 (P23,074,374.99
less P23,074,374.71) which is attributable to rounding off difference.
Even so, it must be emphasized that for income tax purposes, a taxpayer is free
to deduct from its gross income a lesser amount, or not claim any deduction at all.
What is prohibited by the income tax law is to claim a deduction beyond the amount
authorized therein. 5 1 Hence, even granting that there is an unaccounted expense, such
as those pertaining to payments for salaries, wages and other bene ts, the same is not
prohibited by law.
Bearing in mind that an unaccounted expense is not prohibited by law, it goes
without saying that petitioner can exercise its discretion on whether or not it will
declare a lesser amount of deductions or none at all.
Furthermore, it is worthy to note that the imputation of alleged undeclared
income is based on a mere presumption that since there were undeclared expenses,
there were corresponding undeclared income. Even if these alleged unaccounted
expenses are to be treated as unaccounted sources of income, the same will be offset
by recording the equivalent payments as expenses. As such, no taxable income will
result from the said transactions.
While it is axiomatic that all presumptions are in favor of the correctness of tax
assessments, the assessment itself should not be based on presumptions no matter
how logical the presumption might be. In order to stand the test of judicial scrutiny, the
assessment must be based on actual facts. 5 2
For lack of factual basis, the de ciency income tax assessment pertaining to the
alleged undeclared income from unaccounted expenses of P84,671.41 is cancelled.
B. Overstatement of expenses — P37,230,901.04
According to respondent, petitioner's failure to submit/present proof for the
overclaimed expenses led to the disallowance of said costs/deductions and were
made part of the gross income, pursuant to Section 32 of the NIRC of 1997, as
amended.
The alleged unaccounted cost of P37,230,901.04 was computed as follows:
Supplier's Name Amount per SLP
Charles Ice Plant and Cold Storage Co. P22,450.92
JRS Express 30,339.30
Ocean Transport Group of Companies 1,648,930.80
Petron Fleet Card 4,594,075.59
Philippines Airlines 22,016.88
Pilipinas Shell Petroleum Corporation 2,531,963.14
Total P10,153,509.56
Freight and Handling per FS 47,384,410.60
Difference — overstated (P37,230,901.04)
freight/handling
Petitioner contends that no discrepancy exists between the amounts claimed per
FS as against those reported in its SLP as it made a proper accounting of its
transactions.
In his amended report, the ICPA noted that petitioner booked purchases from
suppliers "Petron Fleet Card" and "Pilipinas Shell Petroleum Corporation" under the
account "Fuel and Oil" and not under the "Freight-In" account. Also, purchases from
supplier "Charles Ice Plant and Cold Storage Co." was recorded under "Advertising and
Promotions" account and not under "Freight-In" account, to wit: 5 3
Date V o ucher Supplier Amo unt E xpense
No . Acco unt
12/01/2010 12-10-1007 Pilipinas Shell P278,806.58 Fuel and Oil
Petroleum
Corporation
11/03/2010 11-10-1004 Petron Fleet Card 230,380.93 Fuel and Oil
12/06/2010 12-10-1032 Charles Ice Plant and 600.00 Advertising and
Cold Storage Co. Promotion
Based on further veri cation, the freight-in account per SLP amounts to
P40,503,959.16, as detailed below: 5 4
Registered Name of Supplier Taxable
Amount
2Go Group, Inc. P7,500.00
700 Logistics 21,457.50
Aboitiz Air Transport Corp. 3,566.65
Aboitiz One, Inc. 1,500.00
Aboitiz Transport System Corporation 4,662,359.38
Arce Manpower Services 8,950.20
Asian Shipping Corporation 5,362,442.23
Bacolod Real State Development 327,204.00
Corporation
Cebu Port Authority 22.32
Citiline Enterprises 14,337.14
CW Cole, Inc. 57,385.71
David Trucking Services 118,059.24
Dennis Trucking Services 2,211,212.27
E C Creencia Trading 3,887.05
Elmars Stevedoring Arrastre Trucking & 35.00
Porter
Evergood Trucking 7,857.14
F A Freight Services 1,133,154.37
Fastcargo Logistics Corporation 4,268,519.60
Fastpak International Corp. 2,999.64
Friends Trucking 1,608,616.13
GCT and Sons Agricultural Devt. Corp. 624,705.50
Goldline Commercial 53.57
Good Deal Hauling Services 13,658.04
Guedeon Transport Services 257,206.80
Han-Joy Marketing 13,750.00
Hannie and Joy Trucking Service 3,750.00
Hizon Transport Services and Trading, Inc. 3,945.98
Hyper Speed Service Corporation 7,230.00
Integrated Ports Services of Ozamiz, Inc. 1,338.97
Jomalia Shipping Corporation 803.57
JRS Business Corporation 27,358.35
JSY Transport Services, Inc. 16,805.19
Kheri Lines, Inc. 1,385,579.24
LBC Express Min, Inc. 357.14
LFH Venture Merchandising Corporation 89,632.15
Lorenzo Shipping Corporation 3,893,796.10
M/V Nicole Star Ferry 14,973.21
Mae Wess Company, Inc. 159,100.36
Mail and More Business Services 95.00
Mercantile Corporation of Davao 3,591.32
Montenegro Lines 3,139.29
M-V Nicole Star Ferry 18,053.57
Negros Navigation Co., Inc. 1,364.57
Non VAT Sales Office 143,134.54
Non VAT Supplier 235,463.58
Ocean Transport Group of Companies, Inc. 2,773,930.79
P N A Freight Services 719,877.66
Philippine Airlines 2,768.66
Philippine Ports Authority 15.00
Philippine Salvage Construction and 30.50
Trading C
Prudential Customs Brokerage Service 2,147.40
Rabukawa Trucking 3,498.30
Rapid Movers and Forwarders Co., Inc. 378,262.79

Ravago Equipment Rentals, Inc. 70,797.94
Royalmaster Services, Inc. 1,494,368.61
Selecta Press, Inc. 3,232.14
South Dockhandlers, Inc. 82.68
Starlite Ferry, Inc. 3,553.57
T Biraogo Trucking Services, Inc. 1,388,110.44
Topkick Movers Corporation 4,544,602.70
Villa Gil Trucking, Inc. 486,500.00
Weesam Express 303.57
YM Cargo Transport Corporation 653,571.43
Grand Total P40,503,959.16
Thus, the amount of unsupported freight-in per SLP is P6,880,450.84; derived
from matching the Freight-In per FS in the amount of P47,384,410.00 5 5 against the
verified Freight-In per petitioner's SLP amounting to P40,503,959.16.
Consequently, the assessed amount of overstatement of expenses shall be
reduced to P6,880,450.84.
C. Unaccounted rental expenses per reconciliation of EWT returns
vs. FS — P232,857.18
Based on the comparison of petitioner's rent expense per FS and per EWT return,
respondent's examiner found that petitioner failed to report in its FS the rent expense in
the amount of P232,857.18 and considered the same as unaccounted source of cash,
computed as follows: 5 6
Rent Expense per FS P3,140,321.77
Rent Expense per 1601E 3,373,178.95
Difference — Unaccounted source of (P232,857.18)
cash
Petitioner, on the other hand, argues that the alleged unaccounted rent expense
in the amount of P232,857.18 is reported under the account Advertising-Rental of
Promo Equipment for Special Events in the nancial statements. Further, petitioner
avers that respondent failed to inquire from the petitioner the composition of the
income payments subjected to withholding tax amounting to P3,373,178.95 vis-à-vis
the rent expense reported per AFS amounting to P3,140,321.77. 5 7
According to petitioner, the rental payments reported in the Annual Alphalist of
Payees are as follows: 5 8
TIN SUPPLIER'S NAME PER MAP
103307069 Buug Hardware and Gen. P43,526.78
Merchandise
006408276 DDIS, Inc. 1,607,142.84
180513736 GR Real Estate Lessor 340,507.59
100103314 GT Distributor 11,765.08
004361557 GT Distributor, Inc. 132,509.62
000470445 Landcom Realty Corporation 72,000.00
000470445 Landcom Realty Corporation 72,000.00
102723827 Vallecers East Supermart 71,428.57
102723827 Vallecers East Supermarket 17,857.14
102723827 Vallecers East Supermart 17,857.14
100126392 Chua Hong/Siu Tian Chua 325,000.00
078892004 Eric Arada 37,500.00
121503452 George Duran 165,000.00
911215505 Jesus Anthony Tan 15,789.42
905046820 Jesus Bajamunde 292,452.66
919050715 Ricardo Tumawak 130,000.00
117383187 Romeo Javelosa 56,000.00
102724602 William Uy 36,842.11
Totals P3,373,178.95
Upon veri cation, petitioner withheld and paid the ve percent (5%) withholding
tax on its rental payments on real and personal properties which include, but not limited
to, the following: land transport equipment, water transport equipment, air transport
equipment, industrial equipment, scienti c equipment, agricultural machinery and
equipment, construction/civil engineering machinery and equipment,
telecommunications equipment, o ce furniture/machines/equipment, main frame
computer and all other computer machines/equipment, materials handling equipment
and auxiliary equipment. Also, petitioner paid the expanded withholding tax on a timely
manner as evidence by the BIR Forms 5 9 duly received by the BIR and machine validated
by the bank. Likewise, the aforementioned suppliers were properly reported on the
monthly alphalist of payees (MAP) attached to the withholding tax returns. Moreover,
considering that the foregoing expenses were properly re ected in petitioner's AFS,
lodged under the expense accounts Rental and Advertising, respondent's assessment,
therefore, is without basis. Accordingly, the assessment pertaining thereto shall be
cancelled.
iv. Disallowed excess MCIT —
P460,156.61
Respondent deducted the excess of MCIT over RCIT amounting to P460,156.61
from the total tax credits/payment of P1,661,432.72 6 0 but gave no explanation in the
FLD. The Court can only surmise that the excess MCIT was disallowed in order to
recapture the tax bene t realized by petitioner in carrying the said amount to the
succeeding year.
However, the Court nds it improper for respondent to disallow the said excess
MCIT because any tax bene t derived by petitioner from the carry-over of the said
amount redounds to the succeeding year 2011. Since the tax bene t will be in the
succeeding year, at most, petitioner may only be assessed in the said succeeding year.
In ne, petitioner is liable for basic de ciency income tax in the amount of
P28,294,209.73, as computed below:
Taxable Income (Loss) per Return P4,004,253.69
Add: Adjustments per Audit
Disallowed expenses for non-withholding of tax P88,967,436.98
Unaccounted income from unaccounted expenses 6,880,450.84 95,847,887.82
Adjusted Taxable Income P99,852,141.51
Tax Due P29,955,642.45

Tax Due P29,955,642.45
Less: Tax Credits
Prior year's excess credits P461,126.32
Tax payments for the first three quarters 740,186.94
Creditable Tax Withheld for the first three quarters 49,896.46
Creditable Tax Withheld per BIR Form 2307 for the
257,379.21
Fourth Quarter
Tax paid per BIR Form 1702 152,843.79 1,661,432.72
Basic Deficiency Tax P28,294,209.73
II. Value-Added Tax (VAT) — P122,043,804.84
Respondent found petitioner liable for de ciency VAT in the amount of
P122,043,804.84, computed as follows: 6 1
Taxable Sales per VAT returns P829,380,471.26

Add: Adjustment per Audit
i. Unaccounted income due to unaccounted
P84,671.41
expenses
ii. Unaccounted rental expense 232,857.18
iii. Undeclared Sales on discrepancies per line-
158,198,435.66 158,515,964.25
by-line reconciliation
Gross Receipts per Audit P987,896,435.51
Output tax P118,547,572.26

Less: Creditable Input tax
Input tax carried over from previous period
Add: Input tax claimed for the year P94,240,853.37
Less: iv. Overclaimed input per matching of SLP vs. VAT
53,738,254.34 40,502,599.03
returns
VAT Due 78,044,973.23
Less: VAT paid 5,284,803.38
VAT Still due — Basic 72,760,169.85
Add: Increments
Interest until August 15, 2014 49,258,634.99
Compromise penalty 25,000.00 49,283,634.99
Total Amount Due P122,043,804.84
As shown above, the deficiency VAT arose from the following findings:
i. Unaccounted income due to unaccounted expenses P84,671.41
ii. Unaccounted rental expense 232,857.18
iii. Undeclared Sales on discrepancies per line-by-line
158,198,435.66
reconciliation
iv. Overclaimed input per matching of SLP vs. VAT returns 53,738,254.34
i. Unaccounted income due

to unaccounted expenses
— P84,671.41
This assessment was based on the same ndings under the de ciency income
tax assessment, that since the amount of salaries per alphalist is higher than re ected
in the ITR/FS, respondent simply inferred that petitioner had undeclared income which
is subject to VAT pursuant to Section 106 of the NIRC of 1997, as amended.
The Court finds the assessment devoid of merit.
As discussed earlier [item I (iii) (A)] , no discrepancy exists.
Also, even if these alleged unaccounted expenses are to be treated as
unaccounted sources of income subject to output VAT, the same will be offset by
recording the equivalent payments as expenses for which input tax credits may be
claimed. Hence, no VATable income will result from the said transactions. Accordingly,
the deficiency VAT assessment on this item shall be cancelled.
ii. Unaccounted rental
expense — P232,857.18
This assessment is based on the same nding under the de ciency income tax
assessment that petitioner had an undeclared income from unaccounted rental
expenses based on the comparison of claimed income payments per BIR Form No.
1601-E as against the AFS.
As discussed earlier [item I (iii) (C)] , considering that petitioner properly
accounted its rental expenses per AFS, lodged under the expense accounts Rental and
Advertising, respondent's assessment, therefore, is without basis. Accordingly, the
deficiency VAT assessment pertaining thereto shall be cancelled.
iii. Undeclared Sales on
discrepancies per line-
by-line reconciliation —
P158,198,435.66
As discussed under item I (i) (A) and (B), the assessment has no basis because
respondent relied on mere presumptions, thus, cancelled for lack of basis. That being
the case, the imposition of VAT thereon shall also be cancelled and withdrawn.
iv. Overclaimed input per
matching of SLP vs. VAT
returns — P53,738,254.34
According to respondent, petitioner's failure to reconcile the unaccounted
difference in the sources of input tax per SLP vs. VAT returns led to the disallowance of
corresponding input tax, pursuant to Section 110 (a) of the NIRC of 1997, as amended,
to wit:
Sources of input tax claimed per VAT returns P785,340,444.75
Sources of input tax per SLP 337,521,658.56
Difference — overclaimed source of input P447,818,786.19
tax
Disallowed input tax P53,738,254.34
Petitioner asserts that respondent's claims have no merit as no discrepancy
exists between the input tax claimed per VAT returns and per SLP.
Upon veri cation, the Court nds that indeed no discrepancy exists between the
input tax claimed per VAT returns and per SLP. In fact, contrary to the claim of
respondent, petitioner's purchases actually amount to P784,032,657.01, and not
P785,340,444.75 nor P337,521,658.56, to wit:
Capital
Go o ds
no t Go o ds Other
exceeding than Capital
Purchases Services P1 Millio n Go o ds To tal
January P2,858,114.38 P55,602,765.62 P58,460,880.00
February 4,061,061.34 P959.50 55,226,265.59 59,288,286.43
March 4,109,573.47 1,419.64 72,141,041.46 76,252,034.57
Total — 1st
qtr P11,028,749.19 P2,379.14 P182,970,072.67 P194,001,201.00
April P5,292,443.67 P22,200.89 P56,877,142.97 P62,191,787.53
May 4,472,343.61 7,187.50 60,463,814.33 64,943,345.44
June 1,719,502.17 63,216,236.28 64,935,738.45
Total — 2nd
qtr P11,484,289.45 P29,388.39 P180,557,193.58 P192,070,871.42
July P5,394,427.53 P29,732.14 P43,563,072.50 P48,987,232.17
August 3,034,768.60 2,098.21 50,264,944.90 53,301,811.71
September 6,965,914.95 61,714,751.76 68,680,666.71
Total — 3rd
qtr P15,395,111.08 P31,830.35 P155,542,769.16 P170,969,710.59
October P5,220,974.83 P65,301,154.53 P70,522,129.36
November 4,678,507.82 69,774,055.55 74,452,563.37
December 2,259,745.69 21,116.06 79,735,319.52 82,016,181.27
Total — 4th
qtr P12,159,228.34 P21,116.06 P214,810,529.60 P226,990,874.00
TOTAL P50,067,378.06 P84,713.94 P733,880,565.01 P784,032,657.01
Hence, the disallowance should be cancelled.
In view of the foregoing, the Court nds petitioner's VAT de ciency assessment
devoid of merit. Accordingly, the same should be cancelled.
III. Expanded Withholding Tax (EWT) — P2,224,383.27
Respondent assessed petitioner of deficiency EWT, as shown below: 6 2
Basic Deficiency Tax P1,311,498.67
Add: Increments
Interest until 08/15/2014 P887,884.60
Compromise penalty 25,000.00 912,884.60
To tal Amo unt Due P2,224,383.27
The details of the basic deficiency EWT are as follows:

Su b ject to 1 % Su b ject to 2 % Su b ject to 5 % Su b ject to To ta l
15%
Purchases per Cost
of Sales P708,757,373.28 P47,384,410.60 P756,141,783.88
Rental P3,140,321.77 3,140,321.77
Professional Fees P42,500.00 42,500.00
Other Outside
Services 12,128,798.15 12,128,798.15
Advertising 14,510,036.21 4,423,887.44 18,933,923.65
Repairs and
Maintenance 1,870,829.05 1,870,829.05
Research and
Development 275,210.29 275,210.29
Office Supplies 434,963.08 434,963.08
Insurance 40,596.42 40,596.42
Representation and
Entertainment 262,222.22 262,222.22
Transportation and
Travel 1,804,197.72 1,804,197.72
Fuel and Oil 10,221,912.78 10,221,912.78
Communication,
Light and Water 1,291,418.88 1,291,418.88
Miscellaneous 13,284.90 13,284.90
Additions to PPE 157,124.00 157,124.00
Unaccounted Rental
Expense 232,857.18 232,857.18
To ta l P 7 3 4 ,0 9 4 ,6 9 4 .2 5 P 7 1 ,4 1 7 ,2 2 5 .6 1 P 3 ,3 7 3 ,1 7 8 .9 5 P 4 2 ,5 0 0 .0 0 P 8 0 8 ,9 2 7 ,5 9 8 .8 1
Less: Amount
subjected per
EWT Return 697,747,747.59 44,509,604.22 3,373,178.95 42,500.00 745,673,030.76
To ta l In co m e
P a y m en ts n o t
su b jected to
with h o ld in g ta x
p er g lo b a l
reco n cilia tio n P 3 6 ,3 4 6 ,9 4 6 .6 6 P 2 6 ,9 0 7 ,6 2 1 .3 9 - - P 6 3 ,2 5 4 ,5 6 8 .0 5
Add: Income
payments not
subjected to
withholding per
matching of
MAP-SLP 12,064,566.14 14,461,555.95 26,526,122.09
In co m e P a y m en ts
n o t su b jected to
with h o ld in g ta x P 4 8 ,4 1 1 ,5 1 2 .8 0 P 4 1 ,3 6 9 ,1 7 7 .3 4 - - P 8 9 ,7 8 0 ,6 9 0 .1 4
E W T Du e P 4 8 4 ,1 1 5 .1 3 P 8 2 7 ,3 8 3 .5 5 P 1 ,3 1 1 ,4 9 8 .6 7
Basically, the foregoing arose from (1) the comparison of the income payments
per petitioner's AFS/ITR as against the withholding tax returns (BIR Form No. 1601E),
where respondent found a discrepancy of P63,254,568.05; and (2) the matching of
MAP against SLP, where respondent found a discrepancy of P26,526,122.09.
As already discussed under item I (ii) (A), out of the discrepancy of
P26,526,122.09, the Court nds that only the amount of P25,712,868.93 was not
subjected to withholding tax, while under item I (ii) (B), the amount not subjected to
withholding taxes was P63,254,568.05.
Accordingly, the assessment for de ciency EWT shall be upheld but in the
modified amount of P1,295,214.73, as computed below:

Income Payments not subjected to
withholding tax per global
reconciliation P36,346,946.66 P26,907,621.39 P63,254,568.05
Add: Income payments not
subjected to withholding per
matching of MAP-SLP 12,066,454.75 13,646,414.18 25,712,868.93
Inco me Payments no t
subjected to withho lding tax P48,413,401.41 P40,554,035.57 P88,967,436.98
EWT Rate 1% 2%
E WT Due P484,134.01 P811,080.71 P1,295,214.73
IV. Miscellaneous Tax (MC) — P50,000.00; and Compromise Penalties on
the Deficiency Income Tax, Value-Added Tax, and Expanded Withholding
Tax — P75,000.00
Respondent's veri cation disclosed that petitioner failed to le summary
alphalist of withholding taxes (SAWT) and summary list of sales (SLS), in violation of
Revenue Memorandum Order (RMO) 51-2009, for which a penalty of P25,000.00 for
each failure or in the total amount of P50,000.00 was imposed.
Likewise, respondent imposed compromise penalties on the de ciency income
tax, VAT and EWT, amounting to P25,000.00 for each de ciency or in the total amount
of P75,000.00.
Such imposition cannot be sustained.
Under RMO No. 01-90, compromise penalties are only amounts suggested in
settlement of criminal liability, and may not be imposed or exacted on the taxpayer in
the event that a taxpayer refuses to pay the same. It is well-settled that the Court has
no jurisdiction to compel a taxpayer to pay the compromise penalty because by its very
nature, it implies a mutual agreement between the parties in respect to the thing or
subject matter that is so compromised, and the choice of paying or not paying it
distinctly belongs to the taxpayer. 6 3 Absent a showing that herein petitioner consented
to the compromise penalty, its imposition should be deleted. The imposition of the
same without the conformity of the taxpayer is illegal and unauthorized. 6 4
WHEREFORE , premises considered, the instant Petition for Review is
PARTIALLY GRANTED . The de ciency VAT 6 5 and miscellaneous tax 6 6 assessments,
as well as the compromise penalties, issued by respondent against petitioner for
taxable year 2010 are CANCELLED . On the other hand, the de ciency income tax and
expanded withholding tax assessments are PARTIALLY UPHELD . Accordingly,
petitioner is ordered to pay the amount of P36,986,780.57 , inclusive of the 25%
surcharge imposed under Section 248 (A) (3) of the NIRC of 1997, as amended,
computed as follows:
Tax Type Basic Surcharge To tal

Income Tax P28,294,209.73 P7,073,552.43 P35,367,762.16
Expanded Withholding Tax 1,295,214.73 323,803.68 1,619,018.41
TOTAL P29,589,424.46 P7,397,356.11 P36,986,780.57
In addition, petitioner is ordered to pay:
(a) De ciency interest at the rate of twenty percent (20%) per annum on the
basic de ciency income tax of P28,294,209.73 and expanded withholding tax of
P1,295,214.73 computed from the dates indicated below until full payment thereof
pursuant to Section 249 (B) of the NIRC of 1997, as amended:
Tax Type Deficiency Interest Computed
From
Income Tax 15-Apr-2011
EWT 11-Jan-2011
(b) Delinquency interest at the rate of 20% per annum on the total amount of
P36,986,780.57 and on the 20% de ciency interest which have accrued as aforestated
in (a), computed from August 15, 2014 until full payment thereof pursuant to Section
249 (C) of the NIRC of 1997, as amended.
SO ORDERED.
(SGD.) JUANITO C. CASTAÑEDA, JR.

Associate Justice
Caesar A. Casanova and Catherine T. Manahan, JJ., concur.
Footnotes
1. Par. 3, Admitted Facts, Joint Stipulation of Facts and Issues (JSFI), docket, vol. IV, p. 2405;
Exhibit "P-2", docket vol. III, p. 1346.
2. Exhibit "R-2", BIR Records, Folder 1, p. 2.
3. Par. 4, Admitted Facts, JSFI, docket, vol. IV, p. 2405.


11. Par. 10, Admitted Facts, JSFI, docket, vol. IV, p. 2405; Exhibit "R-9", BIR Records, Folder 1,
pp. 490-501.
12. Exhibits "P-26" and "R-12", BIR Records, Folder 1, pp. 523-529.
13. Exhibits "R-11" to "R-11-c", BIR Records, Folder 1, pp. 519-522.
14. Pars. 11 and 12, Admitted Facts, JSFI, docket, vol. IV, pp. 2405-2406.
15. Exhibit "P-27".
16. Docket, vol. II, pp. 1202-1216.
17. Docket, vol. II, pp. 1218-1219.
18. Docket, vol. II, pp. 1226-1235.

19. Docket, vol. II, pp. 1236-1242.
20. Docket, vol. II, pp. 1258-1260.
21. Docket, vol. II, p. 1262.
22. Docket, vol. IV, pp. 2404-2415.

23. Docket, vol. IV, pp. 2418-2425.
24. Docket, vol. IV, pp. 2368-2371.
25. Minutes of the Hearing dated September 7, 2015, docket, vol. IV, p. 2427.
26. Minutes of the Hearing dated September 7, 2015, docket, vol. IV, p. 2427; offered in
evidence as Exhibit "P-28" (though marked as Exhibit "P-82"), docket, vol. III, pp. 1267-
1280.
27. Minutes of the Hearing dated February 1, 2016, docket, vol. IV, p. 2515; Exhibit "P-81",
docket, vol. IV, pp. 2477-2499.
28. Docket, vol. IV, pp. 2554-2568.
29. Docket, vol. IV, pp. 2575-2576 and p. 2579, respectively.

30. Minutes of the Hearing dated June 22, 2016, docket, vol. IV, p. 2582; Exhibit "R-13", docket,
vol. II, pp. 1249-1257.
31. Respondent's Formal Offer of Evidence, docket, vol. IV, pp. 2588-2596.
32. Docket, vol. IV, pp. 2606-2607.

33. Docket, vol. IV, pp. 2633-2648.
34. Docket, vol. IV, pp. 2654-2674.
35. Docket, vol. IV, p. 2675.
36. JSFI, docket, vol. IV, p. 2406.

37. Exhibits "P-26" and "R-12", BIR Records, Folder 1, pp. 523-529.
38. Ibid.
39. Schedule 1, Details of Discrepancies, Annex "A" of FLD, BIR Records, Folder 1, pp. 523-526.
40. Annex "A-1", Details of Discrepancies, Annex "A" of PAN, BIR Records, Folder 1, pp. 490-
498.
41. Exhibit "P-82".
42. G.R. No. 166387, January 19, 2009.

43. G.R. No. 159694, January 27, 2006.
44. Exhibits "P-24-a" to "P-24-d", docket, vol. III, pp. 2268-2308.
45. Exhibit "P-27".
46. Sy Po v. Honorable Court of Tax Appeals, et al., G.R. No. 81446, August 18, 1988.
47. Commissioner of Internal Revenue v. Hantex Trading Co., Inc. , G.R. No. 136975, March 31,
2005.
48. G.R. No. L-13656, January 31, 1962.
49. Sy Po v. Honorable Court of Tax Appeals, et al., G.R. No. 81446, August 18, 1988.
50. Martin v. Hon. Court of Appeals and Manila Electric Company , G.R. No. 82248, January
30, 1992.
51. Commissioner of Internal Revenue v. Phoenix Assurance Co. Ltd. , G.R. No. L-19727, May
20, 1965.
52. Collector of Internal Revenue v. Benipayo, G.R. No. L-13656, January 31, 1962.
53. Exhibit "P-82" (Amended ICPA Report), p. 22.

54. Annex "IC-67", Amended Annex 63 to 71, pp. 1355-1356.
55. Note 10, Exhibit "P-8-a" (AFS), docket, vol. III, p. 1558.
56. Schedule 5, Details of Discrepancies, Annex "A" of FLD, BIR Records, Folder 1, p. 524.
57. Par. 68, Petition for Review, docket, vol. I, p. 31.
58. Ibid.
59. Exhibits "P-12-a" to "P-12-l", docket, vol. III, pp. 2195-2231.

60. Exhibit "P-8", docket, vol. III, p. 1532.
61. Exhibits "P-26" and "R-12", BIR Records, Folder 1, p. 528.
62. Exhibits "P-26" and "R-12", BIR Records, Folder 1, p. 528.
63. The Philippines International Fair, Inc. v. The Collector of Internal Revenue, et al. , G.R. Nos.
L-12928 and L-12932, March 31, 1962.
64. Commissioner of Internal Revenue v. Lianga Bay Logging Co., Inc., et al. , G.R. No. 35266,
January 21, 1991.
65. Assessment Notice No. VT-116-LOA-116-2011-00000109-10-14-810.
66. Assessment Notice No. MC-116-LOA-116-2011-00000109-10-14-811.

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SECOND DIVISION

[C.T.A. CASE NO. 8988. November 3, 2017.]

GREEN VALLEY MARKETING CORPORATION , petitioner, vs.

STATEMENT OF THE CASE

CD Technologies Asia, Inc. © 2019 cdasiaonline.com

CD Technologies Asia, Inc. © 2019 cdasiaonline.com

Tax Due P44,145,965.11

i. Undeclared Income on discrepancies per line-by-

The Court shall determine the propriety of each item.

Purchases of Services (Annex A-3)

Purchases of Goods (Annex A-4)

CD Technologies Asia, Inc. © 2019 cdasiaonline.com

CD Technologies Asia, Inc. © 2019 cdasiaonline.com

Rapid Movers and Forwarders Co., Inc. 378,262.79

Tax Due P29,955,642.45

Taxable Sales per VAT returns P829,380,471.26

Output tax P118,547,572.26

i. Unaccounted income due

CD Technologies Asia, Inc. © 2019 cdasiaonline.com

CD Technologies Asia, Inc. © 2019 cdasiaonline.com

Tax Type Basic Surcharge To tal

(SGD.) JUANITO C. CASTAÑEDA, JR.

4. Par. 5, Admitted Facts, JSFI, docket, vol. IV, p. 2405.

8. Par. 8, Admitted Facts, JSFI, docket, vol. IV, p. 2405.

18. Docket, vol. II, pp. 1226-1235.

CD Technologies Asia, Inc. © 2019 cdasiaonline.com

22. Docket, vol. IV, pp. 2404-2415.

29. Docket, vol. IV, pp. 2575-2576 and p. 2579, respectively.

32. Docket, vol. IV, pp. 2606-2607.

36. JSFI, docket, vol. IV, p. 2406.

42. G.R. No. 166387, January 19, 2009.

53. Exhibit "P-82" (Amended ICPA Report), p. 22.

59. Exhibits "P-12-a" to "P-12-l", docket, vol. III, pp. 2195-2231.

66. Assessment Notice No. MC-116-LOA-116-2011-00000109-10-14-811.

CD Technologies Asia, Inc. © 2019 cdasiaonline.com

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