CTA Case No. 4832 (Decision)

REPllBLJC OF THE PIULlPPINES COL1RT OF T.\X APPEALS QUP:ZON CITY F:\J{ !AST HANK AND TRl 1ST COl\'lPi\N'\., C.T.A CASE NO. 4832 COMMISSIONER 01' INTERNAL Promulgntf.:�d: REYENl IE. FEB 0 6 1997 Rep:HHief.ll. X --- - - -- - - - - -- - - --- - - -- - -- - - - - - - - - - - ----- --- --- - - - - - - - -- DECISION The case before Us involYes an assessment against the petitioner for aiJeged unremitted wi thholding taes on compensation covering the months of January, ]\larch. 1\lay and July of 1991 amounting to P4,350.327.60. inclusive of penailies incideni to tklinquency. Petitioner is a domestic coq)()ration duly organized ;md existing under and by "i11Ue of the la\'iS or the Philippines. In a letter. dated Febn1:-ry 11. 1992 (.'\nne:\ ;\. Petitinn f(1r Review). respondent infotmed the petitioner. Far East Bank & Tmst Co. (FEBTC). that upon verification it was conftrmed thnt it has not rernit!ed to the Bureau of I11tema! Reve-nue ( BlR) the lol:-1 amount of J> 1, R S4, 51 5 .oO, e:xclusivc of peoallies. corresponding to the fax \Vithheld on compensation from its employees covering the months of January,

DECISION- C.T.A. Case No. -1-832 Pnge 2 ;viarch and tday of 1991. Likewise, the follmvi.ng receipts (Payments Ordcr/Continnnlion Receipts ) submitted hy L.C. Diaz & Co., its pnyroll agent, to wit: Payment C on fi r mation jJalc l\.mount _Ot_:_dt:_ _Reci12!-- 2-8-91 P617,480.85 C9572 126 D21052434 617,226.03 4-8-91 617,808.83 C9986513 B21590124 6-7-91 C11002052 B22086398 were allegedly fake aml not issued by the DIR and authorized agent bank, hence nu payment was credited to its account. ;\ demand lor the full pilymcnt or the sum of P3.245.386.12. indudi.ng surcharge nnd interestil�om the due d;;te up to Febnwry 10, 1992, was serYed against the petitioner. T!u-u a Jetter, dated February 26. 1992, petitioner replied that the subject withholding taxes were already pic! directly to the BIR. Jieyenue L}i!dct NQ,__f._. (pp. <1R-71, RIR rec.) On March 23. 1992, petitioner received another letter, elated March 12, 1992, ii�om lhe respondent inlonni.ng it of the discovery of <mother ia ke receipt in the succeeding payments made by its payroll ngenl. The receipt for the amount of P616,184.54 representing payment of withholding tnx for July 1991 was verified and confirmed as not issued by the ColJection Agent of the BIH. nor by its accredited bank, thereby increasing the alleged deficiency nssessment for umemitted withholding taxes to P4,J50,J27.60, inclusive of penalties incident to delinquency. A protest letter, dated April 2, 1992, wns ftlecl by the petitioner through its auditors, asserting the fact that it had paid all the said \Vithholding taxes in accordance

DECISION - C.T.,\. Case No. -R32 Page ;\ with the prc>ccdure prescribed by th-: rcspoud11t as e\.idenced by the documents issued or ;Jcknm��kdgcd by the rc::;pondcnt"s duly authorit.cd <lgcnts. It further 1 1 1aintaincd that all the receipt s nrc in accountable for111. the afckeeping and &;trihution of which are strictly and cornpletely under the control and supervision of the BIR The pditioner also argued ng;Jiust the conclusion or the respondent that the re,:eipts evidenci_ng the pi1ytnent8 of the t.1ws were L1ke or spnrio11." :md thnt the petilirmer is still li:hle for the ta.\es due even hclore the oflkial investigation being conducted hy the National Bun:au of Investigation (NBJ) has reached its fin;! conclusion. Despite the a foresaid protest letter, the respondent proceeded \vith the issuance of a \\'arrant of Distrain t and1or Levy on April 23, 1992 to enforce c ollection of the de ficiency \Viihholding tax assess.ment f(n the months of .January, l\ larch. i\'iay and .lui' 1991. A Warrant ofGamishrnent, dated r\p1 il l, 1992. w a s served un June 2. 1992 tu the Govemor or the Central Dank to garnish the bank reserve of the petitioner. On April 27. 1992, the petitioner filed a request for reconsideration of the assessment and that the docket of the case be transmitted to the Appe!Jate Division for the lif1ing of the Wa1Tant of Distraint amt'or Levy. Petitioner infonned the BU that it had posted a surety bond in the amount of P4,350,327.60, issued bv the Makati lttBur<mce Cornp:111y, lnc. [Bond No. G( 1())12411 on April 14, 1992 In a letter. dated .lulv 15. J 992, respondent denied the request for reconsideration or the lifting of the \\'arrant of Distr< int Lev\� and Warrant of Uamishment. lienee. on July 22. 1992, the petitioner filed the iustanl Petition lor 148

DECISION- C.T.A. Case No. 4832 Re"ie\v \Vith UrgcHl Petition f()r Issuance of lnjunc.tion to Restr;1in 'lilx CoUec.tion Pending Appeal. rn its ;\m;\Yer, the respondent aUeged the foUmvi.ng special :md affumative defenses: "6. In an inves!igatifm conducted by respondent 's S pecial Projects Team, it was ascertained. discovered and confinned that aU the receipts (PO-CH) rdlected in petitioner's Annu<tl Reflll'l1. (W-3) suht1titted lu responllent 's \Vithhulding Tax Division, tepresentiug petit ioner ' s alleged payments of \V ithholding taxes on compensations covering January, l\ larch, l\lay and July 1991 were fake/sputious. not issued by respondent 's bureau: 7. Contrary to petitioner 's assertions, the Manager's Checks issued for the payment of the various withholding ta.'es on compensation were used in the purchase of loose st:-mps, as fbrther verified and discovered by respondent 's Special Project Team: 8. The with.holdi_ng tax payments made hy the petitioner wen: coursed tluough its payroll agenl, L.C. Diaz & Cu., aml nul through the :mthori7.cd agent hank_ II was duly veri fied :mel con firmed that the con1mnation receipts \Vere aU fake/spurious; and 9. There being no valid JKI)mcnt of the \\oithholding taxes on the various dates that they \\iere supposed to be paid and remitted by the petitioner, as withholding agent to the respondent, the assessments therefor which are embodied in the final withholding tax ( self-assessing) tiled by the petitioner with respondent ' s bureau is now final and unappealable thereby con ferring no jurisdiction upon this I lonorable C'ourl to take cognizance of !he case." (pp. 54-57, CTA records) This Cnurt, in :1 Resolution, clrted November 4. 1992., gr(llltcd the nrgent petition for the issuance of iqjunction filed by herein petitioner, prm.-ided petitioner files within len (10) days from receipt thereof a certification fl�om the Supreme Co1111 attesting to the acceptability of the bond offered by the petitioner's surety company in 149

DECISION- C.T. A. C'a;,;c No. -l-3J2 t:Tvor of the BI.R. l\lm\Ovcr, th..; Insma111.:t: ( 'onunission should likeivisc. issue: a certificate that ;,;aid smcty company is of good fin ancial standing and is authorized to transact insurance business. The bond ;,hall be for an indef inite term or period and shall remain enforceable until such time that this case shall h;P:e been finally reso!H;:d by this Court. (pp. 59-62. CT 1\ rec.) nn Nm:lllher 20, t 992, petilinner filed it Cotnpli<lllCC to the :lhove-mcntinnecl resolution by submitting Suref: nond No. G(l6)124t in the amount of I'-L350.327.60. Consequently. this Court in n Resolution. dated .January 13. J 993, (pp. 86-87, CTA rcc. ), ordered the respondent to )jft the Warrant of Distraint and/or Levy and the Wan�ant of Gnrnislm1ent issued ngainst the petitioner and enjoined the respondent 11-0Jn proceeding \Vith the collection of the alleged non-remittance of \Vithholding tax on <.:umpnsatiun pendiJ1g lhe;; linal atjudi.:aliun uf this :as. Prior to its prsentation of evidence, petitioner filed a Requst for Admission hy the respondent under Rule 26 of the Rc\-is.:d Rules of Court un February 2-l-. 1996. on the follo�ving m::1tter: "1. That the JJR J -:\ccountble Forms Di\ision is:ued to Bm Eegion 4/\.. District 25. South J\Janila the following BIR Payment Orders (l 'H form 7'-lo. 82-02-02): 1. ('11-17}77 2. C9nGSt3 3. ('9572126 .I, CJ to02052 2. That from February 1 ()') 1 to ;\ugust 1 <)') 1, 'Is. Remedios C. Sandoval \Vas the IJ1R Supervising Revenue Collection Ollicer at HLR Region 4:\. District 25. South :l:mil:l;

DEClSl(>N- C.T.A. Cas;.: 1'-n. 48.12 3. That the BIR Accountable Forms Di�vision isslKd to PhiHrust B:mk the following Coufimwtion Rec,eipts (From C'H R2-02-03). to wit: 1. D2208G398 ") B221009R3 "--� 3. B21590124 t1. B210524.H 4. That the BIR deposited in its account the follmving BPI checks drawn ag:-inst tht: :-c,cmmt of L.C. Diaz & Co.. CPAs. to wit: (heck){}" O<!t �:!i_l_!l!.lJJi I (j804-1-2 1-J0-91 P617.-!W.R5 CiROH4 3-11-91 619.226.0.1 681002 5-09-91 617.808.83 74 nxo 7-10 -91 61(>,6H4.54 Copies ofthe l'dmwgr�s Chechs :-re :-11:-ched :-s Annexes '�A� to �'A-Y�: 5. Th:1t the total sum of P2.471,200. 25 representing these BPI (L.C'. Diaz s Cr>.) check<: was credited to the acxount of the JJure;u of Internal Rewnue amVor National Treasmy - Philippines: anJ G. That Jnllotatcd at the dmsal sides of these checks ( \nncxes ".-\'' to "A-r l is any of the following c:ntries: a. (i->r the account or Far East Bank & Trust Co. c/o L.C. Di:-z. & Co. --2nd flr. LCD & Co. Union hldg. A. B oni fac,io Dri\�c. Port Area, 1\'lanila Tel if 86-43-25 b. For the accounl ofFar East B:-snl-.: & Trust Co. r/n Lf'. Dia:r (f(r_ ( 'n. - 211d tlr. 1 ( ')_) ,1(, ('p_ Uniu11 hldg. Port ;-\rea, ivJ<mila Tel# 8G-43-2Y' Petitioner nlso served upon the respondent the foiJmving lnterrogataties under Rule 25 of the Keviscd l{ules of Court to \Vii:

DECISION- C.T.A Case No. 4RJ2 Page 7 "1. Is I\Js. Rctlledios C. )andoval still employed \Vith the BIR? If yes. what capail' and in what BIR ol llce and address? 2. Is .Is. Rosatio S. Beltran still employed at BIR-R.DO 3 L l\ fandaluyong, Metro [vlaniJa'? if no Iunger but still connected with the BH. iu what oHice and address? In \vhat capacity?" (pp. 90-97. CTA re.) Respondent's Reply filed on i\.larch 30. 1993 slated that : "I. He AD0-IIT8 the L-,c uf issuance by 1 espuntk;nt � s Accountable Forms Division < HliL�e No. 4-A. Revenue District ( )lllcc No. 25, ;outh T\Ianila, of the Yarious Payment Orders (r'O's) enumerated under par<graph I of the Request ior Admission. but slates in connection there\\:ith that said Payment Orders although subsequcnlly issued h.. said H.evenue J )istricls lor pament of unremitted \<vithholding tax of the petitioner t!x the v;rious amounts ;tated therein \Yere therealter veriiled hy respondent ' s Special Projects Team to have been used by di1 Terent !axp;-yers for the purchase of documentary stamps. the p ayments or \Vhich '''ere e J fected else\vhere and for smaller amounts compared to those stated in the P:1ymenl U11.krs i<.:ucd to the petitioner using the vmious [BPI] ida!l<ger's Chet:ks issued for the at:counl of tht: pet i I inner: 2. He i\Di\.UTS that Ms. Remedios C. Sandoval \<vas a supcn.1stng Revenue Collection U!Ti.:cr at Revenue R egion No. 4A, Revenue Disttict No. 25. South I\.�Janila hom June 1989 to July 1991 under paragraph 2; 3. He ADMITS thai respondent ' s Acwuntable l'"urms Division issued to Philtrust Bank the v:1rious Conlinnation Receipts enumerated under paragraph 3 of the Request for Admission but states in coruJection therewith that the same were subsequently issued by the Sflid kmk to different tfl-xpayers other lh!ln the petitioner herein for vaduus payments uf documentaty stamps, said payments having bee11 effected outside Revenue Region No. 4A, Man.il<1 as vetified hy respondent's Special Projecls Team: 4. He AD1\.UTS that the tot:-tl Mllount of P2,47l.200.25 representing the various lBI'll l\�l:mager�s Checks with the L:OtTesponding annotations at the dor':al sides thereof "For the aL:count of Far East Dank & Tnl<>l Co .. etc.,. ( Annc'\es �'A" to ��A-.r. l{tqucst

DEctSIUN- C.T.A C:lSC '40. -1-832 for . \dmission) stnted ill p:ragrnphs 4, 5, ;md (j respe..:t ively, or tl ie Request for Admission, was credited to the account of respondent " s burcm and-'or the National Treasury of the Phi li ppi n es but st:-lcs in connection therewith that sai d checks were :-ctuallv and ultimatelv used.- by various taxpayem other than the petitioner to purcha;e doeument:-ry stamps. the paym.:nt of which \Vcre effected outside l<.evenuc Rt'giun No. -:1/\ as subsequently verified by respondent ' s Special Project Tearn: 5. Respondent in t111<1wer to the intenogatories embodied in the Request for Admission stales that the 201 Files of respondent's Personnel Divisinn indic;Jtes tiH present pc_lsition and a.ssignmenf of 1\ls. Remedios C. Sandoval, Revenue 0111cet UL Collection Branch. Revenue Region 41\, Manil<1.'. (pp. 109-1 12, CTA rec.) On April 2, 1993, Petitioner fiJed a 1\lanifcstation (p.113. CTA rcc.) stating that the qualifying statements in paragra ph I. 3, and 5 ot the respondenrs reply to request for admission. dated l\1:-reh 23. IC)<JJ. are cvidcnti:- ry nwtters and therefore not proper statements in the s<1id reply. This Court is tasknl to resolve the vital issue of whether or nul the pe titioner acllwlly paid the alleged unremitted withholdi11g ta:-.:: 011 compnsatiou for the months of JanHary. MarciL ,Jay anc'l July or try) 1' ami. if so. then petit ioners should no longer he held li<1ble for the disputed withholding tax assc:sment. Petitioner initiallY offered in C\idencc the Continuation leccipts (CR "s) nnd Payrnent Orders (PU's), to prove !lwt it paid and remitted the questioned withholding employees and the CR�s by the employees of Philtrust Bank. an accredited collection agent of the respondent to accept payments fill- the goverlllnent.

DECISION- C.T. r\. C:.sc No. 4832 Page 0 Respondent ad mitted in its JZply to Request 1or :\dtnisinu (pp. 1 09-ll 1. CTA rec.) the ftct of issuance h� respondent's Accounttblc ronns JJi,.ision to Revenue Region No. 4�, \. Revenue District UHice No. 25, the Per. and to PhiJtrust Banl., the ( 'R �s. hut stated in c mmec!ion therewith that said receipts were veritied by the respondent's special project !emu to ha,.c been issued to Jjfleren! !C!pgyy_rr:; other lhnn In its Fonn:-1 Ofkr of Additional (Rchullal) E,,;dem.:e. tht: petitioner prescntt:d the Monthly Remittance R elums of lncotne Taxes \Vithheld for the pe r iods covered, cluJ� stamped received b:v the BLR, and the retumed Bank of Philippine Islands (UPl) checks drmvn ag:1i.nst the ;-ccount of LC. Ditz & Co.. CP i\ 's, ptyabk to the BIR bearing the smne <Hnounts for the s:-me tax liabilities as prool of panncnt of the dispukd withholding !axes. In addition. pdiliuner <tsserled !hal lite armolalions on the dorsal side or the dle(kS \\.hich st;lkS. "For the r\..:.coUIJ( of 1-'ar L;sf 13<111k & Ttust Co.'', proves :hat lhe payment lo liH: nm was made l(lr the <lCCOIIIlt oil he peliliolli..T and not for L.C. Din & Co .. CP:\ � s. as alleged hy the respondent. In her Comment to petitiom::r"s f(mnal offer of addition<! e,�idence. respondent argued tlwt the liliHg of the 1on!hly Remil!a!lcc Re!um of Income Ta.,:ec;, Withheld dne<;; I)Ot hy itcff prm�c the Jlil)'!llCtlf nr the displltCd \Vithhnfding (:l'\C ;lllcfllcitlter cloe the rell1med checks show thai they were issued in payment lor withholding taxes. According to respondent"s witness. Ms. Rosmio Beltnm, District Collection Supervisor - J\�landaluyong. H.evenue District 4 J. the subject checks were presented to her lw a

DECISION- C.T.A. Case No. 4832 Page 10 representative of L.C. Diaz as payment for the purchase of loose documenta1y stamps. Remittance Adviccs and Pl'lil receipts (Exhs. 10 to 13-C, inclusive) for the deposits made by fvis. Beltran to PNB-Mandaluyong included the checks in question. The Comparative Data on Documents Gathered (Exh. 5, p. 148, Bill. rec.) prepared by respondent's witness, l\1r. Leodegario G. Tenorio, Overall Supervisor of the Special Project Team of the Bill., showed the following fmdings: Per Records ofAcctg. Dept of Per Records ofBIR CoUection Offic:ers and BIR (>ilkes FEBTC c:lo L.C. Diaz P.O. No. Exhs. Date Taxpayer Amount Exhs. Taxpayer Amount Cll471lll77 ll/7/YJ FEBTC c/o L.C. !Jinz P616,61l4.54 5 Job's lnt'l Corp p 55U.UU 5 C9986513 B-3 4i819! FEBTC c/o L.C. Dinz 619,226.03 House ofJnvestment 5 C9572126 A-3 2i8191 FEBTC c/o L.C. Dinz 617,'180.85 .5 cio L.C.Diaz 68,64 7.43 C110020.52 C-3 617,808.83 617/91 FEBTC du L.C. DiUL Exha. Rente! Brokerage Inc. 180.71 9 Islwnls lulegn�led 7; 3-b Offshore Services. Inc. 5,837.50 C.R.No. Exha. Date Taxpayer AmoWlt 6, 3- Taxpayer AmolUlt B22100983 8/7/91 FEBTC c/o L.C. Diaz P6J 6.68�1.5 R, 3-rl Security Bank p 1,009.35 B21590124 B 619,226.03 622.60 4/8/91 FEBTC c/o L.C. Diaz 617.48085 Jinuny G. Sy 150 00 B21052434 A R220Ril391! r 218/91 FEBTC to L.C. Dinz ll17,1!01!.1!3 Unified Re. Dev'l. In. ll/7/91 FFRTr c/o r..r. Oin7 Queen� Tnt' I. Placement. Center, Inc. 656.63 Respondent's witnesses, namely: 1. Mr. Cannelino Pansacola, Setuor Vice Pres. of Philtrust Bank; 2. Ms. Carmelita S. J. Pascual, Assistant Division Chief, Revenue Accounting Division of the DIR; and 3. Mr. Ceasario Rivera, Jr., Collection Chief Officer , Revenue District 33: in their testimonies during the hearings conducted on February 22, 1994, March 22, 1994 and June 7, 1994, respectively, all testified before this Coutt as to the truthfulness and conectness of the recordings of the BlR with regard to the above-mentioned PO's and CR's. And e;:ve;:n lht: wilnt:ss for lht: pdiliunt:r, Ms. Rt:mt:dius Sandoval, Rt:wnut: Collection Officer, Revenue District 33, attested in her "Salaysay" to the r\nti-Graft

DECISION- C. T.A. Case No. 4832 Page 11 Division of the NBI on :tvlareh 19, 1992 that she issued the subjectP.O. No. 9986513 to the House of Investments c/o L. C. Diaz & Co. in the amount of P68,647.43 and P.O. No. 11002052 to Island Integrated Offshore Sen.i.ce Inc. (Bacolod) in the amount ofP5,837.50 and not in favor of petitioner Far East Bank & Ttust Co.. From the foregoing facts and evidence presented, this Court holds that there are two sets of Confumation Receipts and Payment Orders, !:me of which was issued to petitioner and the other SP.t to different taxp<!yers as listed on the Comparative Data on Documeni,:o Gathered (Exh. 5). Therefore, the corollaty issue of which one is fake/spurious and which one is genuine should be detetmined first before We can resolve the issue on the alleged liability of the petitioner over the disputed withholding tax assessment for the months of January, 1\'larch, May and July 1991. Pditium:r fur its part, uift:rt:d in t:vidt:nct: a Comparison Chart on lht: Enlargt:d Signatures of Remedios Sandoval appearing on the questioned Payment Orders (Exh. M1v1), the testimony and DAP Report (Exh. 00-1) of their cxpctt witness, Mr. Desiderio A Pagui, a fotmer NBI Document Examiner, which Report states in part, the following conclusions: "In view of the foregoing ftndings, the scientiftc conclusions anived at for each of the spec.ifted purpose of examinations are: 1. The questioned and standard signatures "Remedios C. Sandoval" were written by one and the same person. 2. The Teller's questioned and standard signatures/initials (in the appearance of capital Jetter ") L " were written by one and the same person. 15

DECISION- C.T.A. Case No. 4832 Page 12 3. The tluee (3) questioned FA'ilviENT ORDERS and the tluee (3) questioned CONFIRMA'TION RECEIPTS contained characteristics and qualities of genuine printing impressions of the CB Forms similar with those appeating on their respective standard CB Fotms used in these comparative examinations. This indicates that (a) the questioned and standard Payment Orders could have been ptinted from one printing machine, and (b) the questioned and standard Confumation Receipts could have been printed from one ptinting machine." (Underscoring ours, p. 4, Exh. 00-1, Petitioner's Exhibit found in a separate folder) On the other hand, the respondent offered the testimony and Questioned Documents Repot1 No. 15-194 (Exh. 16, pp. 215-217, CTA rec.) of Ms. Carolyn Pitoy, Document Examiner II of the NBI, pertinent portion of said report read as follows: "PURPOSE OF EXM1INATION: 1. To detetmine whether or not the questioned Central Bank Confmnation Rt:ct:ipls, qut:stiont:d BIR Payrnt:nl Ordt:rs and lht: standard/sample Central Rank Confinnation Receipts and BIR Payment Orders were printed from one and the same source/machine. 2. To detennine whether or not the questioned Central Bank Confumation Receipts and questioned BIR Payment Orders were altered. FINDINGS: Scientific comparative examinations of the specimens submitted under stereoscopic microscope, m agnifying lens, ultra-violet light and with the aid of photographic enlargements reveal the following: 1. There exist signitkant fundamental differences in printing characteristics between the questioned and the standard/sample Central Bank Confumation receipl<;, such as m:

DECISION- C.T.A. Case No. 4832 Page 13 quality of print; absence of security watennark in the questioned Central Bank Confumation receipts; absence of fluorescence reaction of serial numbers under the ultra-violet light in the questioned CB confumation receipts; size and printing lay-out; other printing defects. 2. There exist significant fundamental differences in printing characteristics between the questioned and the standard/sample DIR Payment Orders, such as in: quality of print; size and printing lay-out; ink reaction under Ultra-violet light; other printing defects. 3. There are no evidences of alterations on the three (3) questioned Central Bank Confmnation receipts and on the lhrt:t: (3) qut:stiunt:d BIR Paymt:nt On.lt:rs. CONCLUSION: 1. The questioned and the standard/sample Central Bank Contirmation receipts were not printed from one and the same source/machine. 2. The questioned and the standard/sample BIR Payment Orders were not printed from one and the same source machine. 3. The questioned Central Bank Confmnation Receipts and BIR Payment Orders were not altered." This Court is inclined to give more credence to the above-mentioned repot1 submitted by the NBI. The conclusions made by the NBI Documents Examiner explicitly declared that the CR's and PO's they examined were not Qrinted b the same

DECISION- C. T.A. Case No. 4832 Page 14 source/machine in contrast with the findings of the expeli witness for the petitioner that seemed dubious about their conclusions when it stated that the questioned documents "could have been" ptinted from one printing machine. In addition, contrary to the findings of Atty. Desiderio A. Pagui, the petitioner's expert witness, that the signature of Remedios Sandoval appealing in the questioned documents (Exh. l\1Ivl), even from a l<yman ' s point of view, are noticeably different from the signah1res of Remedios Sandoval appearing in the standard documents issued by the Central Bank (Exh. NN). Moreover, a careful scmtiny of the questioned documents as compared with the standard documents issued by the Central Bank would reveal that the type and texture of the paper used for ptinting are disturbingly different from the ordinary confinan tion receipts and payment orders issued by the BIR, not to mention the obvious discrepancy in wlur and printing Lht:n:uf. Nulit;t:ablt: Lou is lht: st:rial numbt:r appt:aring in tht: questioned CR's and PO's which are imprints from an electric typewriter and not ptintcd altogether with the document itself similar to the standard documents. Thus, it is clear that the fake CR's and PO's were printed with blank serial numbers. The setial number of a genuine CR or PO was copied to make it appear that the same is the genuine one. Also, the font size of the serial number is bigger and thinner as compared with the standard CR's and PO's which is a little bit smaller and thicker. Likewise, the number four (4) in the questioned CR (#2159012'1) was ptinted as compared with the number .1 appearing in the standard CR. (#21590124). Lastly, the Payment Order

DECISION - C.T.A. Case No. 4832 Page 15 and Bank Con1irmation Receipts requested for verification, were issued as follmvs, to wit: (p. 35, BUt rcc.) Payment order: Date Iss ued To whom Issued Serial Numbers 4/18/91 RR4 A, Manila C11002052 11127/90 -do- C9572126 -do- C9986513 1123/91 Bank Confirmation Receipt: 2-0R-91 Philtmst R220R639R 10-11-90 -do- B21052434 -do- B21590124 1-03-91 This was cet1itied to by .tvlr. Annando A. Duran, Chief Accountable Fotms Division, BIR, in his letter, dated February 7, 1992, addressed to .tvlr. Cecilio T. Marcelo, Director U, Asst. Overall Coordinator, Special Project Team. Thus, although the PO's were issued to Revenue Region 4A, Revenue District No. 25, and the CR 's to Philtmst Bank, the same were verified to have been issued to variou s taxpayers other than the petitioner for the p urc hase of documentary stamp tax (Exh. 4, pp. 145-147, DIR rec.). Undoubtedly, the Confmnation Receip ts and Payment Orders presented by the petitioner are fake and spurious. On the argument raised by the petitioner that BPI checks of L.C. Diaz & Co. CPA's, itemized as follows: LC Diaz's Date Amount QUESTIONED BPI Cunfrrmaliun Paymt:nl Check No. Receipt No. Order No. 680442 1110/91 BIR P617,480.85 B21052434 C9572126

I.>ECISION - C'.T.A Case No. --l-fU2 P<lge 16 ()8074.:1 3'1 L91 BJR Gl9.22r,.OJ D21590124 ('()'-)))(>51 J 681002 )!01)!91 BIR 617.808.83 B22086398 ('110 02052 7473RO 7/1() 91 BlR 616.684.54 1-322100983 Cll47R877 \\"ere ued to pay petitioner's withho!cli11g tax liabilities for the pe1iod in question. the CuU11 givt:s weight to the !imlings of the Bm st:-ting that the checks (h :l\m were used to p;ty for the purchase of loose documentary stmnps tax (Exh. 4, supr.). The checks thereof which reads as follows: "Deposited to the account of the B ureau of Intern:-.) 1\J:mdalu�ong Branch, RD0-31. It was ascertained by the BIR that it was I'NJJ \Vhich cleared the said checks instead of Philtrust Bank. to which the receipts were issued. That being the case, no valid payments for \Vithholding taxes were actually made by the peliliom:r. lknce, pelilium:r is still liable to pay the disputed lax assessmt'nl. It is also import:ml to note at tlus juncture that rvith respect to P.( >. No. 99R6513, dated ,..\pril 8. 1991, l..C. Dia7�s rcprcscnt<1tivc has on his hand on the same _ . \-}.1ic b :trc clients of I_ <'. r>ia7 & C'c_l.. II is th(.'l�efore clr.:u� thai J <' r>ia7 8, <' is o. - ' 1 a\vare of this scheme considering that the' have in their possession tlw same payment order number for hnth of its clients. II w oul d h:we put them on the holll seeing l\\o P.O. �s \Vith the same serial number lor two dilterent clients and lor diJlerent atllounts

DECJSlON- C.T.r\. Case No. 4R32 P;ge J 7 of tnxes p;1itl. Il is our b.:lid th at LC'. Diaz & Co. . CP1\ �s. the ;J((-0\Illting firm hired hy the pctitiow.:r lo prepare its payroll and remit to the Bm the >vithholding taxes on compensntion. nnd frnm �.vhom the t:1ke or spurious receipts originnfcd. is the hest par!' to unmask the mystery behind this clandestine infringement or the law. I hweH::r, this slwll not be our tn:lill coJKern. But it is worth mentioning at this poi_nt that a report linding J c. Di;l7 /v ( 'o. liHbk for n�llsilic;ltinn (lf' onieial dnclltl\C111S h:lS :!ready been transmitted to the fisc:1l's Oflice in l'vlanila for possible prosecution (see TSN, Hearing of !\larch 15, 1995. pp. 17-18). This \Vas cotwborated by petitioner's witness, l\Js. Eleanor RachelJ\larliJ. an agent ol the NUl /\nti-gt�al1 Division. \Vhen she testified that L.C. Diaz should he held liable lor the falsification of documents. pertinen t portion of her testimony tTJd as foiJows: '\Judgt:' .:\rosta What did you do after thai dt:daralion? Upon 1 ecei\ ing that decl:lralion, what clid you dn n;ith it? Whnl action did yott do n:ith it? A We requin:d her to support her st;-tlemcnt hy me;ms of the reports covering this payment order and also make a follm,y up to the niH_ Ollice in 1\ landaluyon_g where !hi ese j checks were used to purchase th{ e J documentary stamps instead of having been paid f(n withholding ta:-;- . .Judgt� Acosta What is the result of your action? What happened or wlwt i the recommend:-tim' of the N}l? A. In this c:se. we recommend th:Jt T ,.C. Diaz he hcldliahlc lor the fal.;j; fi(,alioll of the ofTicial diKIIIliCiltS.

DECISION- C.T.A. Case No. 4832 Page 18 Judge Acosta All right. And that is on record? A. Yes, Your Honors." (TSN, March 15, 1995, pp. 15-17) Failure of L.C. Diaz & Co., CPA's, to remit to the BIR the withholding taxes on compensation, is imputable to the petitioner, as its principal. Petitioner therefore remains liable to pay the disputed withholding tax assessment. WHF:RF:FORK, in view of all the foregoing, this petition is herehy OTSMTSSF:O. The decision of the Respondent, dated July 15, 1992, denying the request for reconsideration and the lifting of the Warrant of Distraint/Levy and Warrant of Garnishment is hereby affmned. The demand for payment as embodied in respondent's letters dated, .February 11, 1992 and March 12, 1992 addressed to the petitioner are hereby upheld. The MICI Bond No. G (16) 1241 posted by petitioner, issued on April 24, 1992 by Makati Insurance Company, Inc., in the amount P4,350,327.60 rt:prt:st:nling unpaid withholding laxt:s on cumpt:nsaliuns fur January, March, :May and July 1991, inclusive of penalties and incident to delinquency is hereby declared forfeited in favor of the respondent, Commissioner of Internal Revenue. Petitioner and the Makati Insurance Company, Inc., as surety, are jointly and severally liable for the said amount and the additional delinquency interest at the rate of twenty per cent (20%) per annum from March 12, 1992, date of demand, until the total amount is fully paid should be collected from the petitioner.

DECISION- C.T.A. Case No. 4832 Page 19 SO ORDERED. II I I CONCUR: RAMON 0. DE VEY Associate Judge 2\Q. ERNESTO D. ACOSTA Presiding Judge CERTIFICATION I hereby certifY that this decision was reached after due consultation with the members of the Court of Tax Appeals in accordance with Section 13, Article Vill of the Constitution. Q__ ERNESTO D. ACOSTA Presiding Judge Court of Tax Appeals