SECOND DIVISION

[C.T.A. CASE NO. 8604. August 16, 2016.]

G & W ARCHITECTS, ENGINEERS AND PROJECT CONSULTANTS CO. ,

petitioner, vs. COMMISSIONER OF INTERNAL REVENUE , respondent.

DECISION

CASTAÑEDA, JR. , J : p

STATEMENT OF THE CASE

Before this Court is the Petition for Review led by G & W Architects, Engineers
and Project Consultants Co. on January 25, 2013, seeking the cancellation of the
assessment issued against it for alleged de ciency income tax and value-added tax
(VAT) in the amounts of P518,268,999.15 and P181,317,267.09, respectively, for
taxable year 2007.
STATEMENT OF FACTS
Petitioner G & W Architects, Engineers and Project Consultants Co. is a
partnership whose purpose is to engage in the general practice of Architecture and
Construction and to purchase, own, hold, manage, lease, and operate any and all kinds
of properties. 1
On the other hand, respondent is the Commissioner of the Bureau of Internal
Revenue (BIR), vested by law with authority to decide, approve, and reverse
assessments of internal revenue taxes. She holds o ce at the BIR National O ce
Building, Agham Road, Diliman, Quezon City.
Letter Notice (LN) No. 030-RLF-07-00017 dated July 16, 2009 was issued to
petitioner by the Letter Notice Task Force (LNTF) of the BIR due to alleged
discrepancies as disclosed by the computerized matching conducted by the BIR on
information or data provided by third-party sources against petitioner's declarations
per VAT Returns for taxable year ended December 31, 2007. 2
Subsequently, Letter of Authority (LOA) No. 00017191 dated May 11, 2010 was
issued authorizing the conduct of an investigation or examination of petitioner's books
of accounts and other accounting records and the corresponding pre-processed data
under Tax Reconciliation System (TRS) for the period covering January 1, 2007 to
December 31, 2007. 3 CAIHTE

Thereafter, a Preliminary Assessment Notice (PAN) dated December 26, 2011

was issued against petitioner. 4
Respondent then issued the assailed Formal Assessment Notice (FAN) dated
February 15, 2012, 5 nding petitioner liable to pay de ciency income tax and
de ciency VAT due to the discrepancy that resulted from the Reconciliation of Listing
for Enforcement (RELIEF) and Third-Party Matching-BOC Data Program as declared in
the tax returns.
Petitioner led its protest 6 against the FAN on May 2, 2012 and submitted its
supporting documents on June 29, 2012. 7
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 Due to respondent's inaction on the protest, petitioner led the instant Petition
for Review before this Court on January 25, 2013. 8
Respondent led her Answer 9 to the Petition for Review and interposed the
following Special and Affirmative defenses:
"5. Respondent hereby reiterates and re-pleads the preceding
paragraphs of this Answer as part of her Special and Affirmative Defenses
ARGUMENTS AND DISCUSSIONS
ACTS WHICH CIRCUMVENT OR NEGATE THE PAYMENT OF JUST
TAXES ARE CONSIDERED INIMICAL TO NATIONAL INTEREST
WHICH SHOULD NEVER BE COUNTENANCED BY THIS
HONORABLE COURT.
6. Preliminarily, it is an undisputed fact that petitioner engages in a
Build-To-Own (BTO) concept of pooling of owners' funds for the construction of
condominium units on behalf of the fund owners.
7. The strength of petitioner's arguments are based solely on alleged
favorable BIR Rulings as enumerated in its petition for review. However, it bears
emphasizing that said BIR Rulings were issued with a specific collatilla, to wit:
'This ruling is being issued on the basis of the foregoing
facts as represented. However, if upon investigation, it will be
disclosed that the facts are different, then this ruling shall be
considered null and void.'
8. Subsequently, RMC 55-2010 was issued upon investigation that
the facts are not as represented by herein petitioner in their request for ruling. It
was found that the transactions entered into by petitioner relative to its Build-to-
Own concept should be treated as pre-selling/selling and therefore subject to
Expanded Withholding Tax (EWT) and Documentary Stamp Tax (DST).
9. The aforesaid Revenue Memorandum Circular stated verbatim:
xxx xxx xxx
10. Verily, the abandonment of the BIR rulings were succinctly
discussed in RMC 55-2010. Any action to circumvent the mandate of the law, by
allowing the scheme implemented by petitioner, is tantamount to giving undue
bene ts to a party to the prejudice of the government. To rule otherwise would
provide an opportunity for circumventing the law.
11. In sum, petitioner has come up with an innovative way to
circumvent the imposition of applicable taxes and obtain an exemption. While
tax avoidance schemes and arrangements are not prohibited, tax laws cannot
be circumvented in order to evade the payment of just taxes. Acts which
circumvent or negate any of the provisions of the law pertinent to the collection
of taxes shall be considered inimical to the national interest.
12. Petitioner further declares that it was not informed of the
implementation of RMC 55-2010. However, it bears stressing that Revenue
Memorandum Circulars are issued simply to restate and then clarify the
prevailing position and ruling of the BIR. The subject-RMC in particular merely
interpreted an existing law which had already been in effect and which was not
set to be amended. Hence, notice is not a pre-requisite before said RMC takes
effect.
PETITIONER CONTROVERTED ITS STATUS AS A GENERAL
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 PROFESSIONAL PARTNERSHIP (GPP) BY EXCEEDING THE
EXERCISE AND PRACTICE OF ITS PROFESSION, HENCE IS LIABLE
FOR THE ASSESSED DEFICIENCY INCOME TAX.
13. Furthermore, petitioner contends that it is a General Professional
Partnership, hence, is exempt from Income Tax.
14. However, as above-discussed, petitioner was engaged in a Build-
To-Own concept. It undertakes the responsibility to build/construct/develop a
condominium project, and as such it can reasonably be expected that petitioner,
while registered as a general professional partnership of architects, is really
doing business as a real estate developer.
15. Besides, there is no such profession as a project manager, in
contrast to other professions such as lawyers, doctors, accountants, engineers,
architects, teachers and the like which are registered professions as authorized
by an appropriate regulatory body.
16. Petitioner obtained BIR Ruling DA-(C-014) 070-10 as a group of
architects in a general professional partnership. Exercise or practice of a
profession beyond or in excess of its professional competence does not exempt
a general professional partnership, like petitioner in this case, from payment of
just taxes.
17. Hence, petitioner is liable for the assessed income tax liability
from the transactions it entered into while building condominium units. DETACa

ANY DIMINUTION OF POWER TO TAX STRICTLY CONSTRUED

AGAINST THE TAXPAYER AND IN FAVOR OF THE TAXING
AUTHORITY.
18. The Honorable Supreme Court has laid down the rule that 'as the
power of taxation is a high prerogative of sovereignty, the relinquishment is
never presumed and any reduction or diminution thereof with respect to its
mode or its rate, must be strictly construed, and the same must be coached in
clear and unmistakable terms in order that it may be applied.' (84 C.J.S., pp.
659-800). More speci cally stated, the general rule is that any claim for
exemption from the tax statute should be strictly construed against the taxpayer
(Acting Commissioner of Customs v. Manila Electric Co., et al. , 69 SCRA 469
[1977] and Commissioner of Internal Revenue v. P.J. Kiener Co. Ltd., et al. , 65
SCRA 142 [1975]).
19. Thus, any doubt whether the exemption exists is strictly
construed against the taxpayer and in favor of the taxing authority.
It is a governing principle in taxation that tax exemptions
must be construed in strictissimi juris against the taxpayer and
liberally in favor of the taxing authority; and he who claims an
exemption must be able to justify his claim by the clearest grant
of organic or statute law. An exemption from the common burden
cannot be permitted to exist upon vague implications.
20. Petitioner's contention that it was not subject to creditable
withholding tax or capital gains tax, value-added tax (VAT) and Documentary
Stamp Tax (DST), except the P15.00 DST on contractual agreements, amounts
to a claim of tax exemption. The cardinal rule in taxation is exemptions are
highly disfavored and whoever claims an exemption must justify his right by the
clearest grant of organic or statute law. Petitioner must point to a speci c
provision of law granting the tax exemption. The tax exemption cannot arise by
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 mere implication and any doubt about whether the exemption exists is strictly
construed against the taxpayer and in favor of the taxing authority.
GUIDELINES IN DETERMINING THE FACTUAL AND LEGAL BASES
RELATIVE TO AN ASSESSMENT BY LETTER NOTICE WHERE
FAITHFULLY OBSERVED.
21. As provided for under the existing Revenue Memorandum Order
(RMO) on RELIEF/SLSP System . . . and RMO on TPM-BOC Data Program, . . .
taxpayers with discrepancy on their sales and/or purchases (domestic or
imported) shall be noti ed of such ndings through the issuance of a Letter
Notice.
22. The de ciency income and value added taxes shall be computed
using the formulas prescribed in the attached Computation Sheets for
Discrepancy on Sales and/or purchases [Local and/or Imported] (Annexes 'C', 'C-
1', or 'C-2') and the corresponding payment shall be made using BIR Form No.
0611-A. This is in compliance with the 'no-contact-audit approach' policy laid
down under RMO No. 42-2003, as amended by RMO No. 46-2004, where the
Revenue O cer has no opportunity to examine the records of the taxpayer for
purposes of determining his true tax liabilities, but his de ciency tax liabilities
are determined using information from third party sources.
23. T h e 'no-contact-audit approach' includes the process of
computerized matching of sales and purchases data contained in the Schedule
of Sales and Domestic Purchases, and Schedule of Importation submitted by
VAT taxpayers under the RELIEF System pursuant to RR No. 7-95, as amended
by RR Nos. 13-97, 7-99 and 8-2002. This may also include the matching of data
from other information or returns led by the taxpayers with the BIR such as
Alphalist of Payees subject to Final or Creditable Withholding Taxes.
24. Even without conducting a detailed examination of taxpayer's
books and records, the computerized/manual matching of sales and purchases
will reveal discrepancies which shall be communicated to the concerned
taxpayer through the issuance of Letter Notice (LN) by the Commissioner.
25. The foregoing paragraphs of various RMO's issued as guidelines
in implementing a Letter Notice glaringly offers an immediate understanding of
the assessment process. The Revenue O cer concerned need not inspect
petitioner's nancial records as alleged in the instant petition for review. The
investigation begins by matching data pursuant to the 'no-contact-approach'
policy, and the de ciency taxes are computed using the prescribed forms
similar to those used in assessing petitioner.
26. Verily, the data collected from RELIEF and TPM-BOC reveals the
transactions entered into by petitioner and served as basis for the computation
for its assessed deficiency taxes.
27. Even petitioner acknowledged that they were land sales of FBDC
to G & W because FBDC declared output VAT from its sale of land in the name
of G & W, a result of the aforesaid matching of sales and purchases of
taxpayers subject to a Letter Notice.
28. The above-mentioned under-declaration of local purchases is
hereunder shown, thus:
A. LOCAL PURCHASES (VAT & IT)
Per Summary List of Sales P356,045,481.18
submitted by petitioner's Suppliers
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 Adjustment per evaluation P23,083,765.33
––––––––––––––
Under-declaration of Local Purchases P332,961,715.85
============
29. Hence, petitioner was assessed income tax and value added tax
in accordance with Sections 31, 106 and 108 of the Tax Code, as amended, and
RMO No. 32-2007. These provisions of the Tax Code su ce given the fact that
Letter Notices assess only Income and Value-Added Tax deficiencies. aDSIHc

30. The amounts as re ected in the Assessment Notices were

derived by working-back the above-underdeclaration of Local Purchases.
Further, ratios used were based on petitioner's financial statements.
31. Therefore, the assertion that the assessment made was bereft of
factual and legal bases deserves scant consideration considering that the
procedure pursuant to assessments by Letter Notice were followed. The gures
were never presumed and/or estimated because they were collected from
matching data inquiries and computed using the form prescribed by RMO 32-
2007.
32. Besides, even granting, without conceding, that the foregoing
gures in the assessment were mere estimates, the case of Marcos II vs. Court
of Appeals decided by the Supreme Court is instructive on the issue, viz.:
In the absence of proof of any irregularities in the
performance of o cial duties, an assessment will not be
disturbed. Even an assessment based on estimates is prima
facie valid and lawful where it does not appear to have
been arrived at arbitrarily or capriciously. The burden of
proof is upon the complaining party to show clearly that the
assessment is erroneous. Failure to present proof of error in
the assessment will justify the judicial a rmance of said
assessment. In this instance, petitioner has not pointed out one
single provision in the Memorandum of the Special Audit Team
which gave rise to the questioned assessment, which bears a trace
of falsity. Indeed the petitioner's attack on the assessment bears
mainly on the alleged improbable and unconscionable amount of
taxes charged. But mere rhetoric cannot supply the basis for the
charge of impropriety of the assessment made.
33. Henceforth, the assailed-assessment should be upheld as the
rules, procedure or guidelines in determining the de ciency taxes of petitioner
were complied with. Thus, negating any factor of an arbitrary and capricious
manner of assessment. The burden of proof is upon the complaining party to
show clearly that the assessment is erroneous. Failure to present proof of error
in the assessment will justify the judicial affirmance of said assessment.
THE ASSESSMENT WAS MADE WITHIN THE PRESCRIPTIVE
PERIOD UNDER SECTION 222 OF THE TAX CODE ON
FRAUDULENT ASSESSMENTS
34. Petitioner argued that the period within which to assess it of its
de ciency tax liabilities has already prescribed based on Section 203 of the Tax
Code:
xxx xxx xxx
35. Based on the above-cited provision particularly on the emphasis
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 supplied thereon, it can be obviously perceived that petitioner glossed on the
fact the same provision provided for an exemption detailed in Section 222 of
the Tax Code, thus:
xxx xxx xxx
36. In the instant case, the falsity, fraud or omission was discovered
only after conducting an investigation pursuant to a Letter Notice (LN) No. 030-
RLF-07-00017 dated 28 July 2009. It can be safely expected that discovery be
reckoned on the date of the LN since an LN is borne by discrepancies from
matching data inquiries used by the BIR.
37. As such it is well within the ten (10)-year period within which to
assess cases of false or fraudulent return. Veri cation disclosed a discrepancy
in petitioner's local purchases resulting in the Reconciliation of Listing for
Enforcement (RELIEF) and Third Party Matching-Bureau of Customs (TPM-BOC)
Data Program as declared in petitioner's income tax returns.
38. Likewise, Section 248 (B) of the National Internal Revenue Code
of 1997 (the Tax Code), as amended, provides:
xxx xxx xxx
39. The above-discussed scheme carried-out by petitioner readily
exposed it from undeniable under-declarations tantamount to fraudulent ling
of its tax returns for the year 2007.
40. Thusly, the above-stated under-declaration re ects sales, receipts
or income in an amount exceeding thirty percent (30%) of that declared per
return. Such substantial under-declaration rendered petitioner's tax return led
for calendar year 2007 as a false or fraudulent return prescribed by Section
248(B) of the National Internal Revenue Code of 1997, as amended, thus
creating prima facie evidence of a false [or] fraudulent return.
THE PRESUMPTION UNDER THE LAW IS IN FAVOR OF
CORRECTNESS OF THE ASSESSMENT.
41. Well-settled is the rule that tax assessments are entitled to the
presumption of correctness 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 (Sy Po vs.
Court of Tax Appeals, 164 SCRA 524) . Dereliction on the part of petitioner to
satisfactorily overcome the presumption of regularity and correctness of the
assessment will justify the judicial upholding of said assessment notices. ETHIDa

42. Worth of note, are the words of the Supreme Court in the case of
Commissioner of Internal Revenue vs. Bank of the Philippine Islands:
'Tax assessment 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.'"
On May 20, 2013, the Court issued the Notice of Pre-Trial Conference and set the
pre-trial conference on June 20, 2013. 10 Accordingly, petitioner's Pre-Trial Brief and
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 respondent's Pre-Trial Brief were both filed on July 26, 2013. 11
The parties later led their Joint Stipulation of Facts and Issues 12 on October 3,
2013.
Upon the termination of the pre-trial, the Court issued the Pre-Trial Order 13 on
October 9, 2013 and set the initial presentation of petitioner's evidence.
During the hearing held on November 4, 2013, 14 petitioner presented its witness,
Arch. Gilbert C. Yu, who testi ed on direct examination by way of his Amended Judicial
Affidavit 15 dated September 12, 2013.
After the marking, identi cation, and formal offer of petitioner's exhibits, 16 the
Court admitted Exhibits "P-1" to "P-23" as petitioner's evidence pursuant to the Court's
Resolution 17 dated January 15, 2014.
On the other hand, during the hearing held on February 10, 2014, respondent's
rst witness, Atty. Christina C. Barroga, completed her testimony by way of Judicial
A davit led on August 28, 2013. 18 Respondent also presented as witness, Mr.
Ellsworth W. Chiu, who testi ed on direct examination by way of a Judicial A davit and
Supplemental Judicial A davit led on August 28, 2013 and April 3, 2014, respectively.
19

As to respondent's documentary evidence, the Court admitted the exhibits

marked, identi ed, and formally offered as Exhibits "R-1" to "R-13-a", "R-15", and "R-17"
to "R-19-a", as per Resolution 20 dated October 13, 2014. The Court later admitted
Exhibit "R-16" as per Resolution 21 dated December 15, 2014; while Exhibit "R-14" was
admitted via Resolution 22 dated July 29, 2015.
Thereafter, the Court declared the instant case submitted for decision on
September 18, 2015, considering the ling of the Memorandum for the Petitioner 23 on
January 20, 2015 and the Report of the Court's Judicial Records Division dated
September 11, 2015 that respondent failed to file her Memorandum. 24
STATEMENT OF ISSUES
The parties submitted the following issues 25 for the Court's resolution:
1. Whether or not the tax de ciency assessment is null and void because the
FAN was issued beyond the mandatory 3-year period and for failure to
provide factual and legal bases of the assessment in violation of Sec. 228
of the Tax Code; and
2. Whether or not the petitioner is liable for P181,317,267.09 and
P518,268,999.15 representing the de ciency income tax and value added
tax, respectively, for taxable year 2007.
DISCUSSION/RULING
The assessment complied with
Section 228 of the NIRC of 1997, as
amended, which requires that the
assessment must state the facts and
the law upon which it is based.
Petitioner directs the Court's attention to the FAN and claims that it does not
provide any facts or legal basis that may remotely link petitioner to the taxes for which
it is being assessed.
Petitioner maintains that despite the statement that the discrepancy in the taxes
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 due resulted from the "Reconciliation Listing for Enforcement (RELIEF) and Third Party
Matching-BOC Data Program", respondent failed to comply with the mandatory due
process requirement of the BIR's data-matching process pursuant to Revenue
Memorandum Order (RMO) No. 46-2004.
According to petitioner, respondent's witness con rmed that there was a total
failure to comply with the mandatory requirement of obtaining sworn statements from
third-party informants attesting to the veracity of the data provided.
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 pre-
assessment 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. cSEDTC

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." (Emphasis supplied)
The law requires that the taxpayers should be informed of the legal and factual
bases of the assessment. However, the assessment notices need not be a full narration
of the facts and laws on which the assessment is based. As long as the parties are
noti ed and given the opportunity to explain their side, the requirements of due process
are satisfactorily complied with. 26
The Details of Discrepancy attached to the assessment stated that the
assessment was the result of the Reconciliation of Listing for Enforcement (RELIEF)
and Third-Party Matching-BOC Data Program as declared in petitioner's tax returns. The
Details of Discrepancy also provided the computation as to how the alleged under-
declaration on purchases was derived by respondent, i.e., from the difference between
the amount of purchases per summary list of sales submitted by petitioner's suppliers
and the amount of purchases per returns filed by petitioner.
In view thereof, it is clear that petitioner was informed of the factual and legal
bases of the assessment and was given the opportunity to contest same. Thus, there is
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 no reason for this Court to sustain petitioner's allegation that the assessment notice
was void for failure to state the assessment's factual basis inasmuch as it was based
on the examination by respondent of petitioner's tax returns and the summary list of
sales submitted by petitioner's suppliers as stated in the subject tax assessment.
However, as to whether respondent can rely solely on the information resulting
from the Reconciliation of Listing for Enforcement (RELIEF) and Third-Party Matching-
BOC Data Program shall be addressed in the succeeding discussion.
Respondent based the
assessed amount on
unverified information.
Revenue O cer (RO) Ellsworth W. Chiu, the Revenue Examiner assigned by the
Letter Notice Task Force (LNTF) of the BIR to conduct the investigation of petitioner's
books of accounts and accounting records, testi ed that a Letter Notice 27 was issued
to petitioner by the LNTF of the BIR due to a generated discrepancy in the amount of
P699,586,266.24 based on the under-declaration of local purchases and additional
gross income covering three (3) parcels of land from Fort Bonifacio Development
Corporation (FBDC) in the year 2007. 28
According to RO Chiu, the discrepancies as disclosed by computerized matching
conducted by the BIR on information/data provided by third-party sources against
petitioner's declarations per VAT Returns for taxable year 2007 were presented to
petitioner. The LOA 29 was served to petitioner on June 11, 2010 for the conduct of an
investigation/examination of petitioner's book of accounts and other accounting
records and corresponding pre-processed data under the Tax Reconciliation System
(TRS) for the period January 1, 2007 to December 31, 2007.
Thereafter, petitioner received a Notice of Informal Conference. 30
RO Chiu likewise stated that he conducted further investigation on the
discrepancies pertaining to petitioner's local purchases and found that the parcels of
land where condominiums were built were bought in the name of the condominium
corporations which at the time of purchase were not yet in existence, as evidenced by
the Certificate of Incorporation of Grand Hamptons Towers I and II.
RO Chiu also noticed that the members of the Board of Directors of these
condominium corporations 31 (Grand Hamptons Towers I and II) were identical and
surprisingly include one of petitioner's partners, 32 Mr. Gilbert C. Yu. This development
led the investigation to the conclusion that the Build-To-Own concept was a scheme to
avoid proper declaration of taxes.
He then recommended the issuance of the PAN and, later, the FAN.
The FAN details the de ciency income tax and VAT assessments for taxable year
2007 as follows:
DEFICIENCY VALUE-ADDED TAX
Discrepancy per Letter Notice (Purchases)
Local Purchases P332,961,715.85
Importations -
––––––––––––––
Total 332,961,715.85
Divide by Cost of Sales Ratio 32.85%
Additional Taxable Sales 1,013,582,087.82
Multiply by Gross Profit Rate 67.15%
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 Additional Gross Income 680,620,371.97
Multiply by VAT Rate 12%
Deficiency VAT 81,674,444.64
Add: 50% Surcharge 40,837,222.32
20% interest p.a. Up to (8/31/2011) 58,805,600.14
––––––––––––––
TOTAL AMOUNT DUE P181,317,267.09
=============

DEFICIENCY INCOME TAX

Net Taxable Income P380,496.14
Add: Additional Gross Income 680,620,371.97
––––––––––––––
Total Taxable Income 681,000,868.11
Multiply by Normal Income Tax Rate 35%
Adjusted Income Tax Due 238,350,303.84
Less: Income Tax Due per ITR 133,174.00
Deficiency Income Tax 238,217,129.84
Add: 50% Surcharge 119,108,564.92
20% interest p.a. Up to (8/31/2011) 160,943,304.39
––––––––––––––
TOTAL AMOUNT DUE P518,268,999.15
=============
In the Details of Discrepancies attached to the FAN, there is a nding of under-
declaration of petitioner's purchases which resulted from the Reconciliation of Listing
for Enforcement (RELIEF) and Third-Party Matching-BOC Data Program as declared in
its tax returns. The assessment was made pursuant to Sections 31, 106, and 108 of the
NIRC of 1997, as amended, and RMO No. 32-2007. SDAaTC

Based on the records, respondent discovered that the purchases of petitioner as

per the Details of Taxpayer's Suppliers Records for 2007 show a total of
P356,045,481.18 as compared to the total amount of purchases as per the schedule of
purchases in respondent's computer database, to wit:
A. LOCAL PURCHASES (VAT and IT)
Per Summary List of Sales submitted by
P356,045,481.18
Suppliers
Adjustments per evaluation 23,083,765.33
––––––––––––––
Under-declaration of Local Purchases P332,961,715.85
============
From the foregoing, the basis for the income tax assessment and the VAT
assessment issued by respondent is the nding that petitioner under-declared its
purchases and that petitioner is engaged in the sale of condominium units considering
that one of the members of the Board of Directors and one of petitioner's partners are
the same.
Petitioner opposes the assessment issued by respondent, alleging that it did not
engage in any selling activity which may be subject to VAT and income tax. Contrary to
respondent's allegation that petitioner acknowledged that the alleged undeclared
purchases pertain to land sales of FBDC, petitioner claims that it did not acquire the
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 land or the condominium units constructed thereon. According to petitioner, the alleged
undeclared purchase of the land from the FBDC were undertaken by the individual unit
owners of the condominium projects and petitioner only assisted in the acquisition of
the land pursuant to contracts to manage and execute the construction of the Grand
Hamptons Place Condominium.
Petitioner presented the said Contracts to Manage executed with its clients 33
and the corresponding Depository and Disbursing Agreement between the said clients
and Banco De Oro Universal Bank. 34
In the Contract to Manage, the clients engage the services of petitioner as
project manager and as trustee of the subject land. The clients further irrevocably
name, appoint and constitute petitioner as their true and lawful attorney-in-fact to
prepare or cause the preparation of all the necessary documents for the purchase of
the subject land and the subsequent registration thereof in its name for the bene t of
the clients and to apply for the issuance of individual Condominium Certi cates of Title
in its name, with the proper Registry of Deeds.
The fund for the project contributed by the client is called the construction
funding, which shall be payable to an Account, to be delivered by the client to petitioner
together with the signed copies of the Depository and Disbursing Agreement which
Account shall be held and managed by the Banco de Oro Universal Bank Trust Banking
Group for the clients' benefit.
In relation thereto, Depository and Disbursing Agreements were executed
between Banco de Oro Universal Bank Trust Banking Group and the clients, which
provide as to how the funds in the Account shall be distributed.
The stipulations in the said agreements state that the fund in the said Account
shall be used for the necessary payments in connection with the construction and
development of the project and the purchase of the land where the condominium
building will be situated. Petitioner shall provide photocopies of source documents to
the bank for each disbursement instruction. The source documents shall include but
not be limited to bills, invoices, certi cations of indebtedness issued by petitioner and
other evidence of indebtedness in relation to services rendered or materials procured
for the project.
Considering the foregoing, petitioner claims that it is not the one who bought the
land and that it is not engaged in the selling of condominium units.
Petitioner also points out that it relied on the validity of BIR Rulings that ruled that
the implementation of the projects was not subject to VAT and income tax.
To counter this allegation, respondent presented the testimony of Assistant
Revenue District O cer (RDO) Christina C. Barroga, stating that she was the one who
conducted the investigation regarding petitioner's Build-To-Own scheme. According to
Assistant RDO Barroga, the said BIR Ruling was nulli ed by Revenue Memorandum
Circular (RMC) No. 55-2010. acEHCD

Perusal of the records shows that the assessment issued by respondent against
petitioner anchored mainly on the finding of undeclared purchases of petitioner.
However, as pointed out by petitioner and as admitted by respondent's witness,
the said undeclared purchases which allegedly resulted from third-party information
matching were all unverified.
In the cross-examination of respondent's witness, RO Chiu, during the hearing
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 held on April 7, 2014, RO Chiu made the following statements: 35
"JUSTICE MANALASTAS:
Q: Mr. Witness, the question is, do you also verify the information given by the
supplier because you are saying that you are matching the information by
the taxpayer and the supplier, and if there are discrepancies, you'll have the
taxpayer to explain, and the question is, do you also verify the information
given by the supplier?
WITNESS:
A: Your Honor, we also wrote letters to the suppliers, like the Fort Bonifacio to
present to us all the possible receipts but they failed to . . . (interrupted)
Q: Before you wrote to the taxpayers you verify first to the supplier?
A: Yes, your Honors.
JUSTICE CASTAÑEDA:
Q: What was the reply of the supplier?
WITNESS:
A: The reply, your Honors, is that, that they are not in the position to give us
some informations regarding those receipts.
JUSTICE MANALASTAS:
Q: So no informations were given?
WITNESS:
No, your Honors.
xxx xxx xxx
ATTY. LUGTU:
xxx xxx xxx
Q: Mr. witness, moving into your Supplemental Judicial A davit , so again,
one of the fact that you've taken in consideration was the unverified
Computer Generated Data ?
A: Yes, ma'am." (Emphasis supplied)
Petitioner further contends that respondent likewise failed to comply with the
guidelines as to the veri cation of the ndings in the Letter Notice due to third-party
information discrepancies.
The pertinent portions of Revenue Memorandum Order Nos. 32-07 and 46-04
state:
"SUBJECT: Prescribing Guidelines and Procedures in Handling 2006 Letter
Notices Generated Thru Reconciliation of Listing for Enforcement System
(RELIEF) and Third Party Matching-Bureau of Customs (TPM-BOC) Data
Program
xxx xxx xxx
IV. GUIDELINES AND PROCEDURES
xxx xxx xxx
19. Follow, wherever applicable, the procedures prescribed under RMO Nos.
30-2003, 42-2003, 24-2004 and 34-2004, as amended by RMO Nos. 46-2004, 32-
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 2005 and 21-2006, insofar as the veri cation of the actions on LN discrepancy
are concerned.
xxx xxx xxx"
"REVENUE MEMORANDUM ORDER NO. 46-04
SUBJECT: Additional Supplement and Guidelines in Handling Letter Notices
with Discrepancies Arising from Data Matching Processes as de ned in
Revenue Memorandum Order (RMO) Nos 34-2004 and 30-2003, as amended by
RMO Nos. 42-2003 and 24-2004, which remain Unserved, have been Served but
are Without Response, or are Under Protest by Taxpayers
xxx xxx xxx
III. PROCEDURES
xxx xxx xxx
Action on Protested LNs due to TPI discrepancy
The Revenue Officer assigned to handle the Letter Notice shall:
1. Evaluate the merits of the taxpayer's Protest by:
1.1 Requiring the taxpayer to submit the necessary
schedules and supporting documents to substantiate his claims.
1.2 Reconciling the Schedule of Sales/Local Purchases
submitted by the taxpayer against the Details of Taxpayer's
Customers/Suppliers' Records (DTCS) culled from the Quarterly
Summary List of Sales/Purchases submitted by taxpayer's
suppliers and customers, respectively.
1.3 Reconciling the Schedule of Importation submitted
by the taxpayer against the Details of Importation with Return
Information Matching (DIRIM) culled from data provided by the
Bureau of Customs (BOC). SDHTEC

1.4 Checking for the propriety of the transactions

re ected in the schedules submitted by the taxpayer by validating
against source documents (e.g., sales invoices, o cial receipts,
import entry declarations, etc.).
2. Require the taxpayer to execute a Sworn Statement (Annex A)
attesting to the veracity of the schedules and authenticity of the documents
presented/submitted.
3. Obtain Sworn Statements from TPI sources (Annexes 'B' and 'C')
attesting to the veracity of the data provided."
While there is no showing from the above guidelines that the sworn statements
from the third-party information sources are indispensable and mandatory, the fact
remains that the amounts of undeclared purchases found by respondent were
admittedly unveri ed. Thus, the same casts doubts as to the reliability and correctness
of the findings of deficiency taxes assessed by respondent.
The presumption of correctness of
the assessment against petitioner
cannot be made to rest on another
presumption, which is the
presumption that the undeclared
purchases translated into
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 undeclared income or additional
taxable sale.
The basis of the assessment issued by respondent is the Details of Taxpayer's
Suppliers Records for 2007, showing that petitioner has a total of P356,045,481.18
purchases as compared to the total amount of purchases as per the schedule of
purchases in respondent's computer database.
To prove the factual basis of the assessment, respondent presented the
Schedule of petitioner's suppliers for 2007 36 and the schedule of petitioner's
purchases for 2007. 37 Respondent also presented the Article of Incorporation and
2008 Financial Statements (FS) of Grand Hamptons I Condominium Corporation, Grand
Hamptons II Condominium Corporation, 38 and petitioner's FS. 39 From the foregoing,
respondent found out that one of the members of the Board of Directors of the
corporation is also one of petitioner's partners. Petitioner likewise presented the
testimony of Assistant RDO Barroga who testi ed that petitioner is engaged in the
selling of condominium units.
Based on the above information, respondent assessed petitioner of de ciency
income tax and de ciency VAT, citing as its legal basis Sections 31, 106, and 108 of the
NIRC of 1997, as amended; the pertinent portions of which state:
"SEC. 31. Taxable Income De ned. — The term 'taxable income' means
the pertinent items of gross income speci ed in this Code, less the deductions
and/or personal and additional exemptions, if any, authorized for such types of
income by this Code or other special laws.
xxx xxx xxx
SEC. 106. Value-Added Tax on Sale of Goods or Properties. —
(A) Rate and Base of Tax. — There shall be levied, assessed and
collected on every sale, barter or exchange of goods or properties, a value-added
tax equivalent to ten percent (10%) of the gross selling price or gross value in
money of the goods or properties sold, bartered or exchanged, such tax to be
paid by the seller or transferor: Provided, That the President, upon the
recommendation of the Secretary of Finance, shall, effective January 1, 2006,
raise the rate of value-added tax to twelve percent (12%) after any of the
following conditions has been satisfied:
xxx xxx xxx
SEC. 108. Value-added Tax on Sale of Services and Use or Lease of
Properties. —
(A) Rate and Base of Tax. — There shall be levied, assessed and
collected, a value-added tax equivalent to ten percent (10%) of gross receipts
derived from the sale or exchange or services, including the use or lease of
properties: Provided, That the President, upon recommendation of the Secretary
of Finance, shall, effective January 1, 2006, raise the rate of value-added tax to
twelve percent (12%), after any of the following conditions has been satisfied:
xxx xxx xxx"
Aside from the fact that the information in the above schedules presented by
respondent was unveri ed, it can be inferred that respondent presumed that the said
unverified undeclared purchases are part of petitioner's cost which eventually
translated into sales/income and that these sales/income pertain to the alleged sale of
condominium units in Grand Hamptons Towers I and II.
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 As to petitioner's de ciency income tax, let it be noted that the three elements in
the imposition of income tax are: (1) there must be gain or pro t, (2) that the gain or
pro t is realized or received, actually or constructively, and (3) it is not exempted by law
or treaty from income tax. 40 Income tax is assessed on income received from any
property, activity or service. 41 Such being the case, in the imposition or assessment of
income tax, it must be clear that there was an income, and such income was received
by the taxpayer, not when there is an under-declaration of purchases. 42
In this case, the assessment made by respondent and the testimony of her
witness would show that respondent merely presumed that the alleged undeclared
purchases are part of petitioner's cost which translated into pro t or income. Thus,
respondent's assessment was not based on undeclared income actually received
by petitioner . AScHCD

Now, as regards respondent's assessment for de ciency VAT, it must be pointed

out that under Section 106 (A) of the NIRC of 1997, as amended, VAT is assessed on
the "gross selling price or gross value in money of the goods or properties sold,
bartered or exchanged, such tax to be paid by the seller or transferor".
Also, under Section 108 of the NIRC of 1997, as amended, VAT is assessed on
the "gross receipts derived from the sale or exchange of services". Signi cantly, the law
defines "gross receipts" as:
". . . the total amount of money or its equivalent representing the contract
price, compensation, service fee, rental or royalty, including the amount charged
for materials supplied with the services and deposits and advanced payments
actually or constructively received during the taxable quarter for the services
performed or to be performed for another person, excluding value-added tax."
Clearly, VAT can be imposed only when it is shown that the taxpayer received an
amount of money or its equivalent from its sale, barter or exchange of goods or
properties, or from sale or exchange of services, and not when there are under-declared
purchases.
At this juncture, it must be pointed out that in order to stand the test of judicial
scrutiny, the assessment must be based on actual facts. The presumption of
correctness of assessment being a mere presumption cannot be made to rest on
another presumption. Hence, assessments should not be based on mere presumptions
no matter how reasonable or logical said presumptions may be. 43
While there is a presumption of correctness of assessment issued by
respondent, being a mere presumption, the same cannot be made to rest on another
presumption, which is respondent's presumption that the under-declared purchases
translated and would automatically result in pro t, undeclared income or additional
taxable sales which would in turn increase petitioner's income tax and VAT liability.
Therefore, the Court nds that respondent's assessment lacks factual or legal
basis.
Respondent should have fully
utilized the powers granted by
the law in obtaining the best
evidence or other information
to sufficiently support the
assessment issued against
petitioner.
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 Respondent should always be reminded of the broad powers granted by law to
be exercised for the determination of the proper amount of taxes to be imposed, as
provided under Section 5 (A) to (D) of the NIRC of 1997, as amended:
"SEC. 5. Power of the Commissioner to Obtain Information, and to
Summon, Examine, and Take Testimony of Persons. — . . .
(A) To examine any book, paper, record or other data which may be
relevant or material to such inquiry;
(B) To obtain on a regular basis from any person other than the
person whose internal revenue tax liability is subject to audit or investigation, or
from any o ce or o cer of the national and local governments, government
agencies and instrumentalities, including the Bangko Sentral ng Pilipinas and
government-owned or -controlled corporations, any information such as, but not
limited to, costs and volume of production, receipts or sales and gross income
of taxpayers, and the names, addresses, and nancial statements of
corporations, mutual fund companies, insurance companies, regional operating
headquarters of multinational companies, joint accounts, associations, joint
ventures or consortia and registered partnerships, and their members;
(C) To summon the person liable for tax or required to le a return, or
any o cer or employee of such person, or any person having possession,
custody, or care of the books of accounts and other accounting records
containing entries relating to the business of the person liable for tax, or any
other person, to appear before the Commissioner or his duly authorized
representative at a time and place speci ed in the summons and to produce
such books, papers, records, or other data, and to give testimony;
(D) To take such testimony of the person concerned, under oath, as
may be relevant or material to such inquiry; . . ."
Moreover, in the case of Commissioner of Internal Revenue vs. Hantex Trading
Co., Inc., 44 the Supreme Court ruled as follows:
"The law allows the BIR access to all relevant or material records and
data in the person of the taxpayer. It places no limit or condition on the type or
form of the medium by which the record subject to the order of the BIR is kept.
The purpose of the law is to enable the BIR to get at the taxpayer's records in
whatever form they may be kept. Such records include computer tapes of the
said records prepared by the taxpayer in the course of business. In this era of
developing information-storage technology, there is no valid reason to
immunize companies with computer-based, record-keeping capabilities from
BIR scrutiny. The standard is not the form of the record but where it might shed
light on the accuracy of the taxpayers return.
In Campbell, Jr. v. Guetersloh , the United States (U.S.) Court of Appeals
(5th Circuit) declared that it is the duty of the Commissioner of Internal Revenue
t o investigate any circumstance which led him to believe that the
taxpayer had taxable income larger than reported . Necessarily, this
inquiry would have to be outside of the books because they supported the return
as led. He may take the sworn testimony of the taxpayer; he may take the
testimony of third parties; he may examine and subpoena, if
necessary, traders' and brokers' accounts and books and the
taxpayer's book accounts. The Commissioner is not bound to follow
any set of patterns . The existence of unreported income may be shown by
any practicable proof that is available in the circumstances of the particular
situation. Citing its ruling in Kenney v. Commissioner , the U.S. appellate court
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 declared that where the records of the taxpayer are manifestly inaccurate and
incomplete, the Commissioner may look to other sources of information
to establish income made by the taxpayer during the years in
question ." AcICHD

xxx xxx xxx

The rule is that in the absence of the accounting records of a taxpayer,
his tax liability may be determined by estimation. The petitioner is not required
to compute such tax liabilities with mathematical exactness. Approximation in
the calculation of the taxes due is justi ed. To hold otherwise would be
tantamount to holding that skillful concealment is an invincible barrier to proof.
However, the rule does not apply where the estimation is arrived at
arbitrarily and capriciously ." (Emphasis supplied)
In this case, respondent should have exerted her best effort in gathering
information from other sources to verify the alleged undeclared purchases, to establish
that the said undeclared purchases translated into sales, and to establish that the
transaction between petitioner and the unit owners is a sale of condominium units.
Instead, respondent chose to resort to presumptions and heavily relied on the results
of the unverified third-party matching and RELIEF program.
Also, while respondent has the power to assess petitioner on the best evidence
obtainable and may resort to the exercise of its powers under Section 5 of the NIRC of
1997, as amended, and to approximation in the calculation of the taxes due, the same
should not be arrived at arbitrarily and capriciously.
Considering the above discussions, the Court nds that the assessment has no
factual and legal bases and should therefore be cancelled.
Since the falsity of petitioner's
tax returns for 2007 was not
clearly established, the three-
year period prescribed under
Section 203 in relation to
Section 222 of the NIRC of
1997, as amended, shall be the
prescriptive period applicable
in this case.
Petitioner alleges that the de ciency tax assessment is null and void because the
assessment was issued beyond the 3-year prescriptive period provided under Section
203 of the NIRC of 1997, as amended. Petitioner further claims that there is no
fraudulent return led because it only relied on the validity of BIR Rulings saying that the
implementation of the projects was not subject to VAT and income tax.
Petitioner asserts that even assuming that the BIR Rulings were validly revoked,
the revocation cannot be retroactively applied if it is prejudicial to the taxpayer.
Respondent counter-argues that the falsity, fraud or omission was discovered
only after conducting an investigation pursuant to Letter Notice No. 030-RLF-07-00017
dated July 16, 2009. Consequently, the period of ten (10) years as provided under
Section 222 of the NIRC of 1997, as amended, shall be applicable, to be reckoned from
the date of discovery of the discrepancy, which is the date of the Letter Notice.
Respondent likewise points out that the under-declaration re ects sales, receipts
or income in an amount exceeding thirty percent (30%) of that declared per return. Such
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 substantial under-declaration rendered petitioner's tax return led for calendar year
2007 as a false or fraudulent return pursuant to Section 248 (B) of the NIRC of 1997, as
amended, thus creating prima facie evidence of a false or fraudulent return.
Considering the Court's nding that the falsity of petitioner's income tax and VAT
returns for taxable year 2007 was not clearly established, the period within which to
assess internal revenue taxes shall be governed by Section 203 of the NIRC of 1997, as
amended, to wit:
"SEC. 203. Period of Limitation upon Assessment and Collection. —
Except as provided in Section 222, internal revenue taxes shall be assessed
within three (3) years after the last day prescribed by law for the ling of the
return, and no proceeding in court without assessment for the collection of such
taxes shall be begun after the expiration of such period: Provided, That in a case
where a return is led beyond the period prescribed by law, the three (3)-year
period shall be counted from the day the return was led. For purposes of this
Section, a return led before the last day prescribed by law for the ling thereof
shall be considered as filed on such last day."
It is clear from the foregoing that the three-year period to assess internal revenue
taxes commences from the date of actual ling of the return; or from the last day
prescribed by law for the ling of such return, whichever comes later. Accordingly, if the
return was led earlier than the last day allowed by law, the period to assess shall still
be counted from the last day prescribed for ling of the return. However, if the return
was led beyond the period prescribed by law, the three-year period shall be counted
from the day the return was filed. TAIaHE

The instant Petition for Review involves the assessment issued by respondent
against petitioner for alleged de ciency income tax and de ciency VAT for taxable year
2007.
As regards petitioner's income tax, the return is required to be led and the
payment is to be made on or before the fteenth (15th) day of April. 45 The Annual
Income Tax Return for taxable year 2007 was filed on April 11, 2008. 46 Hence, counting
from the last day required by law to le the return, respondent had until April 15, 2011
within which to assess petitioner for de ciency income tax for taxable year 2007.
Clearly, the de ciency income tax assessment issued by respondent in 2012 was
issued beyond the 3-year period provided by law.
On the other hand, the law requires that the VAT Return must be led quarterly
within twenty- ve (25) days following the close of each taxable quarter prescribed for
each taxpayer. 47
Records reveal that petitioner led its Quarterly VAT Returns covering the four
quarters of taxable year 2007 on April 24, 2007, 48 on July 23, 2007, 49 on October 25,
2007, 50 and on January 22, 2008, 51 respectively. Hence, respondent had until April 25,
2010, July 25, 2010, October 25, 2010, and January 25, 2011 within which to assess
petitioner for de ciency VAT for the four quarters of taxable year 2007. The FAN was
issued on February 15, 2012. As a result, the assessment was issued beyond the 3-year
prescriptive period provided by law.
WHEREFORE , premises considered, the instant Petition for Review is hereby
GRANTED . Accordingly, the de ciency income tax and de ciency VAT assessments
for taxable year 2007 issued against petitioner are hereby CANCELLED .
SO ORDERED.
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 (SGD.) JUANITO C. CASTAÑEDA, JR.
Associate Justice
Caesar A. Casanova and Amelia R. Cotangco-Manalastas, JJ., concur.
Footnotes
1. Exhibit "P-1", docket, vol. II, pp. 672-680.

2. Par. 2, Summary of Admitted Facts, Joint Stipulation of Facts and Issues (JSFI), docket,
vol. II, p. 630.
3. Par. 3, Summary of Admitted Facts, JSFI, docket, vol. II, p. 631.

4. Par. 4, Summary of Admitted Facts, JSFI, docket, vol. II, p. 631.

5. Exhibit "R-9", BIR Records, pp. 415-419.

6. Exhibit "P-21", docket, vol. II, pp. 786-793.

7. Exhibit "P-22", docket, vol. II, pp. 794-796.

8. Docket, vol. I, p. 6.

9. Docket, vol. I, pp. 276-287.

10. Docket, vol. I, p. 289.

11. Docket, vol. I, pp. 306-315 and 583-589.

12. Docket, vol. II, pp. 630-636.

13. Docket, vol. II, pp. 640-643.

14. Minutes of the hearing, docket, vol. II, p. 922.

15. Exhibit "P-23", docket, vol. II, pp. 655-671.

16. Petitioner's Formal Offer of Documentary Evidence led on November 25, 2013, docket,
vol. II, pp. 930-941.

17. Docket, vol. II, pp. 983-984.

18. Minutes of the February 10, 2014 Hearing, docket, vol. II, p. 986; Exhibit "R-13", docket, vol.
I, pp. 605-613.

19. Exhibits "R-18" and "R-19", docket, vols. I and II, pp. 614-621 and 999-1003.
20. Docket, vol. III, pp. 1140-1141.

21. Docket, vol. III, pp. 1153-1155.

22. Docket, vol. III, pp. 1216-1218.

23. Docket, vol. III, pp. 1156-1179.

24. Docket, vol. III, p. 1220.

25. Issues to be Resolved, JSFI, docket, vol. II, p. 631.

26. Calma, et al. vs. Court of Appeals, et al., G.R. No. 122787, February 9, 1999.
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 27. Exhibit "R-1", BIR Records, p. 287.

28. Exhibit "R-18", Judicial Affidavit of RO Ellsworth W. Chiu, docket, vol. II, pp. 614-621.

29. Exhibit "R-3", BIR Records, p. 280.

30. Exhibit "R-4", BIR Records, p. 357.

31. Exhibit "R-6", BIR Records, pp. 261-275.

32. Exhibit "P-1", docket, vol. II, pp. 942-949.

33. Exhibits "P-3" to "P-3-B", docket, vol. II, pp. 682-709.

34. Exhibits "P-4", "P-4-A", and "P-4-B", docket, vol. II, pp. 710-721.
35. Transcript of Stenographic Notes taken on April 7, 2014, pp. 22-23 and 25.

36. Exhibit "R-14", BIR Records, pp. 284-286.

37. Exhibit "R-15", BIR Records, p. 326.

38. Exhibits "R-6" and "R-17", BIR Records, pp. 223-268.

39. Exhibit "R-16", BIR Records, pp. 341-352.

40. Commissioner of Internal Revenue vs. The Court of Appeals, et al., G.R. No. 108576,
January 20, 1999.

41. Ibid.
42. Philippine Daily Inquirer, Inc. vs. Commissioner of Internal Revenue , CTA Case No. 7853,
February 16, 2012.

43. Commissioner of Internal Revenue vs. Island Garment Manufacturing Corporation and
the Court of Tax Appeals , G.R. No. L-46644, September 11, 1987, citing Collector of
Internal Revenue vs. Alberto D. Benipayo, G.R. No. L-13656, January 31, 1962.
44. G.R. No. 136975, March 31, 2005.

45. In accordance with Section 77 (B) of the NIRC of 1997, as amended.

46. Exhibit "P-16", docket, vol. II, pp. 968-970.

47. Section 114 of the NIRC of 1997, as amended by Republic Act No. 9337.

48. Exhibit "P-17", docket, vol. II, p. 971.

49. Exhibit "P-18", docket, vol. II, pp. 972-973.

50. Exhibit "P-19", docket, vol. II, pp. 974-975.

51. Exhibit "P-20", docket, vol. II, pp. 976-977.

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