CONTEX CORPORATION v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES Court of Tax Appeals QUEZON CITY En Bane CONTEX CORPORATION, CTA EB NO. 1332 Petitioner, (CTA Case No. 8493) -versus- COMMISSIONER OF INTERNAL REVENUE, Respondent. x-------------------------------------------------x COMMISSIONER OF INTERNAL CTA EB NO. 1358 REVENUE, (CTA Case No. 8493) Petitioner, Present: -versus- DEL ROSARIO, P.J., CASTANEDA, BAUTISTA, UY, CASANOVA, FABON-VICTORINO, MINDARO-GRULLA, RINGPIS-LIBAN, and MANAHAN, ]J. Promulgated: CONTEX CORPORATION, Respondent. MAR 0 3 2017 c3:.4[ A-L. 1<-----------------------------------------------------------------------------~=--" DECISION BAUTISTA, J: The Case

DECISION CTA EB NOS. 1332 and 1358 (CTA Case No. 8493) Page2of18 These are two (2) consolidated Petitions for Reviewl under Section 3(b)2, Rule 8 of the Revised Rules of the Court of Tax Appeals ('fRRCTA") relating to the assessments issued against Contex Corporation ("Contex") for alleged income tax, value-added tax ("VAT"), expanded withholding tax ("EWT"), withholding tax on compensation ("WTC"), fringe benefit tax ("FBT"), and final withholding tax ("FWT") on dividends for calendar year ("CY") 2007 in the total amount of Forty-One Million Two Hundred Sixty-Two Thousand Six Hundred Twenty-Nine and 86/100 Pesos (Php41,262,629.86),3 seeking the Court En Bane: 1. CTA EB No. 1332- to issue a decision reversing and setting aside the Decision dated April22, 2015, as amended by the Amended Decision dated June 30, 2015, insofar as it ordered petitioner to pay deficiency income tax, WTC, FBT, and FWT for CY 2007, with deficiency and delinquency interest; or, in the alternative, to remand the case to the Second Division ("Court in Division") of the Court of Tax Appeals ("CTA") for the reopening of trial to allow petitioner to present additional evidence in support of its cause of action.4 2. CTA EB No. 1358 - to partially reconsider, reverse and set aside the cancellation of respondent's deficiency value-added tax ("VAT") assessment for CY 2007 in the Amended Decision dated June 30, 2015 and the Resolution dated August 27, 2015; and to reinstate the Decision dated April22, 2015.5 The Parties6 1 Rollo, CTA EB No. 1332, Petition for Review, pp. 7-121, with annexes; Rollo, CTA EB No. 1358, Petition for Review, pp. 6-49, with annexes. 2 "SECTION 3. Who May Appeal; Period to File Petition. - XXX XXX XXX (b) A party adversely affected by a decision or resolution of a Division of the Court on a motion for reconsideration or new trial may appeal to the Court by filing before it a petition for review within fifteen days from receipt of a copy of the questioned decision or resolution. Upon proper motion and the payment of the full amount of the docket and other lawful fees and deposit for costs before the expiration of the reglementary period herein fixed, the Court may grant an additional period not exceeding fifteen days from the expiration of the original period within which to file the petition for review." 3 Records, CTA Case No. 8493, Decision, p. 752. 4 Rollo, CTA EB No. 1332, Petition for Review, Prayer, p. 62. 5 Id., CTA EB No. 1358, Petition for Review, Prayer, p. 14. (i 6 Records, Vol. 2, Decision, pp. 752-753.

DECISION CTA EB NOS. 1332 and 1358 (CTA Case No. 8493) Page3 of18 Contex is a corporation duly organized and existing under and by virtue of Philippine laws, with principal office located at Subic, Philippines. The Commissioner of Internal Revenue (" CIR") is the government officer charged with the responsibility of assessing and collecting all internal revenue taxes, with office at Bureau of Internal Revenue ("BIR") National office Building, Agham Road, Diliman, Quezon City. The Facts As stated in the Decision7 dated April 22, 2015, the factual antecedents of this case are as follows: On June 29, 2011, [Contex] received a Preliminary Assessment Notice (["]PAN["]) dated June 10, 2011, issued by Regional Director Romulo L. Aquila, Jr., with attached Details of Discrepancies and Audit Sheets prepared by the Investigating Officer, informing [Contex] of its deficiency taxes for taxable year 2007 in the total amount of P[hp]39,559,445.42. On July 12, 2011, [Contex] filed its request to submit its reply to the PAN on or before July 31,2011. In response to the said request, a letter was issued by Regional Director Romulo L. Aquila, Jr. informing [Contex] that it may not be necessary[,] considering that a Formal Letter of Demand (["]FLO["]) and an Assessment Notice were already issued. Still, [Contex] filed its reply to the PAN on August 1,2011 to refute the findings and support its objections against the alleged deficiency taxes. On August 26, 2011, [Contex] received the FLO with attached Details of Discrepancies and Audit Result/ Assessment Notices, dated July 15, 2011, issued by Regional Director Romulo L. Aguila[], Jr., assessing [Contex] of deficiency taxes in the total amount of [Php]40,054,946.19. On September 23, 2011, [Contex] filed its protest letter assailing the assessment contained in the FLO. [Contex] also 7 Records, Vol. 2, Decision, pp. 753-758. I

DECISION CTA EB NOS. 1332 and 1358 (CTA Case No. 8493) Page4 of18 sent a letter to [the CIR] on November 21, 2011, stating that it is submitting the documents enumerated therein to support its letter dated September 23,2011. Subsequently, a letter was received by [Contex] from Revenue District Officer Rey Roberto Y. Manalili on February 7, 2012, informing [Contex] of the revised deficiency taxes pursuant to [Contex]'s request for re-investigation. A Final Decision on Disputed Assessment (["]FDDA["]) was later issued by Regional Director Araceli L. Francisco on April17, 2012, stating the basis of the assessment. Accordingly, [Contex] filed [a] Petition for Review on May 17, 2012. [The CIR] filed h[is] Answer on July 19,2012, interposing the following special and affirmative defenses: XXX XXX XXX Thereafter, the case was set for pre-trial conference on September 27, 2012. The CIR's Pre-Trial Brief was filed on September 20, 2012; while the Pre-trial Brief (For [Contex]) was filed on September 21, 2012. On October 12, 2012, the parties filed their Joint Stipulation of Facts and Issues, which was later approved in this Court's Resolution dated October 16, 2012. In the same Resolution, the pre-trial was considered terminated. During trial, both parties presented their respective documentary and testimonial evidence. After presentation, marking and identification, the Court admitted Exhibits "A" to "U" as part of [Contex]'s documentary evidence; while Exhibits "6[,"] "9[,"] "11" to "11- f[,"] "12[,"] "13[,"] "13-A[,"] and "14" to "21-a" were admitted as the CIR's documentary evidence. The case was submitted for decision on May 13, 2014, after [Contex] submitted its Memorandum on March 25, 2014 and [the CIR] filed h[is] Memorandum on May 8, 2014. I

DECISION CTA EB NOS. 1332 and 1358 (CTA Case No. 8493) PageS of18 On April 22, 2015, the Court in Division promulgated a Decision8, the dispositive portion thereof reads as follows: WHEREFORE, premises considered, the instant Petition for Review is hereby PARTIALLY GRANTED. Accordingly, the deficiency [EWT] assessment and the compromise penalties for taxable year 2007 are hereby CANCELLED AND WITHDRAWN. However, the deficiency income tax, [VAT], [WTC], [FBI], and [FWT] assessments for taxable year 2007 are hereby AFFIRMED. Accordingly, [Contex] is hereby ORDERED TO PAY [the CIR] the amount of P[hp]25,213,292.14 representing deficiency income tax, [VAT], [WTC], [FBI], and [FWT] for taxable year 2007, inclusive of the twenty-five percent (25%) surcharge imposed under Section 248[(A)](3) of the NIRC of 1997, as amended, computed as follows: Deficiency Tax Basic Tax 25% Surcharge fPhp) Total Income Tax [Php] 361,067.49 [Php] 90,266.87 [Php] 451,334.36 Value-added Tax Withholding Tax on Compensation 7,377,979.40 1,844,494.85 9,222,474.25 Fringe Benefits Tax 1,217.10 304.28 1,521.38 Final Withholding Tax Total 149,947.54 37,486.89 187,434.43 12,280,422.18 3,070,105.55 15,350,527.73 [Php] 20,170,633.71 [Php] 5,042,658.43 25,213,292.14 In addition, [Contex] is hereby ORDERED TO PAY: a) Deficiency interest at the rate of twenty percent (20%) per annum on the basic deficiency income tax, [VAT], [WTC], [FBI], and [FWT] computed from the dates indicated below until full payment thereof pursuant to Section 249(B) of the [1997 NIRC]; Tax Type Basic Tax Deficiency Interest computed from Income Tax [Php) 361,067.49 April15, 2008 Value-added Tax 7,377,979.40 January 25, 2008 Withholding Tax on Compensation January 15, 2008 Fringe Benefits Tax 1,217.10 January 10, 2008 Final Withholding Tax 149,947.54 January 15, 2008 12,280,422.18 b) Delinquency interest at the rate of 20% per annum on the total amount of P[hp]25,213,292.14 and on the 20% deficiency interest which have accrued as afore-stated in (a), computed from April 17, 2012 until full payment thereof pursuant to Section 249(C) of the [1997 NIRC].9 8 Records, Vol. 2, April 22, 2015 Decision, pp. 752-784; penned by Associate Justice Amelia R. Cotangco-Manalastas, with Associate Justices Juanito C. Castaneda, Jr. and Caesar A. Casanova concurring. 9 Id. at 782-783; emphases retained.

DECISION CTA EB NOS. 1332 and 1358 (CTA Case No. 8493) Page6of18 The Court in Division ruled that the CIR has substantially complied with the requirements of due process since the essence of due process is found in the reasonable opportunity to be heard and submit any evidence one may have in support of one's defense. It emphasized that tax assessments by tax examiners are presumed correct and made in good faith. As to income tax, the Court in Division found that Contex failed to comply with the substantiation requirements laid down by Section 34(A)(1)(b) of the 1997 National Internal Revenue Code, as amended ('1997 NIRC"), and upheld the deficiency income tax assessment relating to telephone expense; and that petitioner was unsuccessful in trying to overcome, by sufficient evidence, the presumption of correctness of the assessment relating to the disallowed depreciation. Relating to VAT, the Court in Division held that Contex did not present and offer evidence to prove that it is not liable to pay the same; hence, the presumption of correctness of the subject tax assessment remained. For WTC, Contex failed to explain by substantial evidence the discrepancy found by respondent, which led the Court in Division to uphold the item on untaxed salaries. The Court in Division, however, found that the basis of the assessment for deficiency EWT on insurance expense is incorrect, and cancelled the same for lack of factual basis. Moving on to FBT, Contex did not prove by evidence its claim that the staffhouse expense was used by the personnel of its affiliate and not by its officers; hence, the Court in Division sustained the assessment. As to FWT, the evidence presented by Contex was found to be insufficient to overcome the presumption of correctness of the assessment, on top of the presumption that the BIR personnel regularly performed their duties in preparing the same. Lastly, the Compromise Penalty was cancelled for lack of factual basis.1o Not satisfied with the Decision, Contex filed a Motion for Partial Reconsideration (with Motion to Present Additional Evidence)ll on May 11, 2015, claiming that the CIR's right to assess Contex's deficiency taxes for CY 2007 has already prescribed pursuant to Section 203 of the 1997 NIRC; that the assessments are null and void since the Revenue Officer ("RO") who conducted the audit investigation did not have the requisite authority to do so under the Letter of Authority ("LOA") issued by the Regional Director of the BIR, Revenue Region 10 Records, Vol. 2, April22, 2015 Decision, pp. 758-782. 11 Id., Motion for Partial Reconsideration (with Motion to Present Additional Evidence), pp. 794-894, with annexes.

DECISION CTA EB NOS. 1332 and 1358 (CTA Case No. 8493) Page 7of18 No. 4; and that assuming for the sake of argument that the prescriptive period was met, the deficiency income tax, VAT, WTC, FBT and FWT should nevertheless be cancelled for lack of legal and factual bases, as shown by the evidence on record. Petitioner likewise moved for leave of Court to allow the reopening of trial for presentation of additional evidence in the interest of substantial justice and in order to aid the Court in judiciously evaluating the merits of the case. On June 30, 2015, the Court in Division issued an Amended Decision12, the dispositive portion13 thereof reads: WHEREFORE, premises considered, petitioner's Motion for Partial Reconsideration (with Motion to Present Additional Evidence) is hereby PARTIALLY GRANTED and the Court's Decision dated April22, 2015 is MODIFIED. Accordingly, the deficiency [VAT] assessment for taxable year 2007 is likewise CANCELLED AND WITHDRAWN. However, the deficiency income tax, [WTC], [FBT], and [FWT] assessments for taxable year 2007 in the total amount of P[hp]15,990,817.89, inclusive of surcharge, including the payment of 20% deficiency interest and 20% delinquency interest, is hereby REAFFIRMED.14 The Court in Division, while reaffirming the rest of its Decision, found that based on the admission of both parties, sales in the amount of Php61,483,161.67 pertains to petitioner's (as seller) sales to Unet Distributor Corporation (a non-locator or a customs territory customer, as buyer). Considering that it is the buyer (as importer) in the customs territory which is liable to pay VAT, the deficiency VAT assessment was cancelled and withdrawn. This time, it was respondent who filed a Motion for Partial Reconsideration (Re: Amended Decision dated July 1, 2015)15; which was denied in a Resolution16 dated August 27, 2016. Consequently, after being granted17 an extension, Contex raised the instant case to the Court En Bane when it filed a Petition for 12 Records, Vol. 2, June 30, 2015 Amended Decision, pp. 807-926. 13 Id. at 925. 14 Emphases retained. 15 Records, Vol. 2, Motion for Partial Reconsideration (Re: Amended Decision dated July 1, 2015), pp. 945- 949. 16 Id., August 27, 2016 Resolution, pp. 971-977. 17 Rollo, CTA EB No. 1332, pp. 1-4, in relation top. P-1.

DECISION CTA EB NOS. 1332 and 1358 (CTA Case No. 8493) Page 8 of18 Review1B on August 3, 2015 docketed as CTA EB No. 1332. The CIR likewise filed his Petition for Review19 docketed as CTA EB No. 1358 on September 17, 2015, after an extension was granted20 by the Court En Bane. On October 28, 2015, the Court En Bane consolidated CTA EB No. 1358 with CTA EB No. 1332.21 On January 11, 2016, Contex filed its Comment (Re: Petition for Review dated October 2, 2015)22. On February 2, 2016, the Court En Bane issued a Resolution23 giving due course to the Petitions for Review and ordering the parties to file their respective consolidated memoranda within thirty (30) days from notice. On April 1, 2016, Contex filed its Memorandum24; while respondent failed25 to file his, despite notice. On May 4, 2016, the Court promulgated a Resolution26 submitting the case for decision; hence, this Decision. The Issues Based on the Petition for Review27 filed by Contex, the assigned errors/issues of the case are as follows: WHETHER THE COURT IN DIVISION ERRED IN NOT CANCELLING THE CIR'S DEFICIENCY INCOME TAX, WTC, FBT, AND FWT ASSESSMENTS FOR CY 2007, EVEN IF THERE IS EVIDENCE ON RECORD THAT THE 1s Rollo, CTA EB No. 1332, Petition for Review, pp. 7-121, with annexes. 19 Id., CTA EB No. 1358, Petition for Review, pp. 6-49, with annexes. 2o Id., CTA EB No. 1358, pp. 1-4, in relation top. 5. 21 Id., CTA EB No. 1332, pp. 128-129. 22 Id., Comment (Re: Petition for Review dated October 2, 2015), pp. 134-147. 23 Id., pp. 149-150. 24 Records, CTA EB No. 1332, Contex's Memorandum, pp. 158-218. (" 25 Id., CTA EB No. 1332, p. 219. 26 Id. at 221-223. 27 Id., Petition for Review, pp. 16-18.

DECISION CTA EB NOS. 1332 and 1358 (CTA Case No. 8493) Page9of18 CIR'S RIGHT TO ASSESS HAS ALREADY PRESCRIBED PURSUANT TO SECTION 203 OF THE 1997 NIRC; THAT THE CIR'S ASSESSMENTS ARE NULL AND VOID SINCE THE REVENUE OFFICER WHO CONDUCTED THE AUDIT INVESTIGATION DID NOT HAVE THE REQUISITE AUTHORITY TO DO SO UNDER SECTION 13 OF THE 1997 NIRC; THAT THE ASSESSMENT ON INCOME TAX IS DEVOID OF LEGAL AND FACTUAL BASES SINCE CONTEX WAS ABLE TO SUBSTANTIATE THROUGH EVIDENCE THE DISCREPANCIES IN ITS TELEPHONE CHARGES (PHP989,179.05) AND DEPRECIATION EXPENSE (PHP42,442.58); THAT THE WTC ASSESSMENT IS DEVOID OF LEGAL AND FACTUAL BASES SINCE CONTEX WAS ABLE TO PROVE THAT THE PHP8,114.00 DISCREPANCY BETWEEN THE SALARIES AND WAGES PER FINANCIAL STATEMENTS AND PER ALPHALIST PERTAINS TO THE NON-TAXABLE 13TH MONTH PAY OF ITS SOLE EMPLOYEE; THAT THE FBT ASSESSMENT IS DEVOID OF LEGAL AND FACTUAL BASES BECAUSE CONTEX WAS ABLE TO PROVE THAT IT DID NOT HAVE ANY MANAGERIAL OR SUPERVISORY EMPLOYEE IN CY 2007; THAT THE FWT ASSESSMENT IS DEVOID OF LEGAL AND FACTUAL BASES BECAUSE EVIDENCE ON RECORD CLEARLY SHOW THAT THE DIVIDENDS IT DECLARED ON OCTOBER 25, 2007 WERE PAYABLE TO MEDTECS-PHILIPPINE BRANCH, AND NOT TO MEDTECS-BERMUDA; THAT ASSUMING ARGUENDO THAT THE CASH DIVIDENDS WERE DECLARED IN FAVOR OF MEDTECS-BERMUDA, THERE IS NO BASIS TO APPLY THE 35% FWT RATE SINCE CASH DIVIDENDS DECLARED IN FAVOR OF A NON-RESIDENT FOREIGN CORPORATION DOMICILED IN BERMUDA f

DECISION CTA EB NOS. 1332 and 1358 (CTA Case No. 8493) Page 10of18 ARE SUBJECT TO 15% FWT RATE, AS PRESCRIBED IN SECTION 28(B)(S)(B) OF THE 1997 NIRC; THAT ASSUMING ARGUENDO THAT THE CIR'S DEFICIENCY INCOME TAX, WTC, FBT, AND FWT ASSESSMENTS FOR CY 2007 ARE VALID, THE MANNER OF COMPUTATION OF DEFICIENCY AND DELINQUENCY INTEREST PROVIDED IN THE ORIGINAL DECISION IS ERRONEOUS; AND THAT THE HIGHER INTEREST OF SUBSTANTIAL JUSTICE DICTATES THAT THE COURT IN DIVISION SHOULD HAVE ALLOWED THE REOPENING OF TRIAL FOR THE IDENTIFICATION OF DOCUMENTS IN THE BIR RECORDS, ESPECIALLY SINCE THERE IS EVIDENCE ON RECORD THAT THE DEFICIENCY TAX ASSESSMENTS HAVE ALREADY PRESCRIBED AND THAT THE ASSESSMENTS ARE NULL AND VOID. Based on the Petition for Review28 filed by the CIR, the only issue put forth was: WHETHER CONTEX IS LIABLE FOR DEFICIENCY VAT ASSESSMENT FOR CY 2007. The Ruling of the Court En Bane Contex's Arguments29 Contex claims that the CIR's right to assess has already prescribed due to the invalidity of the Waiver of the Defense of Prescription ("Waiver"); that the deficiency tax assessments are null and void since the RO who examined its books of accounts did not have the requisite authority to do so under the LOA; that the assessments should be cancelled for lack of legal and factual basis; that the Court in Division erred in the computation of deficiency and delinquency interest due; and that the higher interest of substantial justice dictates that re-opening of trial should have been allowed for the identification of documents in the BIR Records. (' 28 Rollo, CTA EB No. 1358, Petition for Review, pp. 16-18. 29 Id., CTA EB No. 1332, Contex's Memorandum, pp. 18-216.

DECISION CTA EB NOS. 1332 and 1358 (CTA Case No. 8493) Page 11 of18 The CIR's Arguments3o The CIR claims that Contex should be taxed as a regular entity and all its income should be subject to all relevant internal revenue taxes under the 1997 NIRC, such as VAT; that Contex is not qualified to avail the tax benefits clarified in Revenue Memorandum Circular ('RMC") No. 50-07; and that it is liable to pay deficiency VAT assessment. The Court En Bane finds no merit in the instant Petitions for Review. The Court En Bane can rule on the issue of prescription. As a rule, failure to raise the defense of prescription at the administrative level prevents the taxpayer from raising it at the appeal stage.31 However, this is not absolute. In the case of Bank of the Philippine Islands v. Commissioner of Internal Revenue32, the issue of prescription was only raised upon reaching the Supreme Court, yet, it was declared that the CIR could no longer collect the assessed tax due to prescription, based on Section 133, Rule 9 of the Rules of Court and on jurisprudence. In China Banking Corporation v. Commissioner of Internal Revenue34, the Supreme Court held that it is imbued with sufficient discretion to review matters, not otherwise assigned as errors on appeal, if it finds that their consideration is necessary in arriving at a complete and just resolution of the case. Records reveal that Contex failed to raise the issue of prescription at the administrative level through its Letter for 30 Rollo, CTA EB No. 1358, Petition for Review, pp. 10-14. 31 China Banking Corporation v. Commissioner of Internal Revenue, G.R. No. 172509, February 4, 2015, 749 SCRA 525. 32 G.R. No. 181836, July 9, 2014; cited in China Banking Corporation v. Commissioner of Internal Revenue, G.R. No. 172509, February 4, 2015, 749 SCRA 525. 33 "SECTION 1. Defenses and objections not pleaded. - Defenses and objections not pleaded either in a motion to dismiss or in the answer are deemed waived. However, when it appears from the pleadings or the evidence on record that the court has no jurisdiction over the subject matter, that there is another action pending between the same parties for the same cause, or that the action is barred by a prior judgment or by statute of limitations, the court shall dismiss the claim." 34 G.R. No. 172509, February 4, 2015, 749 SCRA 525.

DECISION CTA EB NOS. 1332 and 1358 (CTA Case No. 8493) Page 12of18 Extension3s, its Reply to the PAN36, its Protest to the FLD/FAN37, and its submission38 of supporting evidence. The same goes for the pleadings filed before the Court in Division, specifically in its Petition for Review39, its Pre-Trial Brie�4�, and its Memorandum41. It was only after the Court in Division promulgated the Decision on April22, 2015, through its Motion for Partial Reconsideration (with Motion to Present Additional Evidence)42 when Contex claimed the defense of prescription for the first time, and praying that the trial of the case be reopened to allow it to present evidence in support of its cause of action. The Court in Division, in order to afford due process to the CIR, ordered the latter to file its comment.43 Hence, on June 8, 2015, the CIR filed its Comment� to counter Contex's allegations. Pursuant to Section 1, Rule 9 of the Rules of Court, the fact that the CIR was given the opportunity to raise its arguments against the issue, and that the issue can be raised on appeal (in fact, the issue can be passed upon despite not being raised as a defense45) the Court En Bane finds that it can rule upon the issue of prescription. Based on evidence offered, the Court cannot determine whether the CIR's right to assess has prescribed. Contex claims that based on returns found in the BIR Records, the right of the CIR to assess the taxes has prescribed; and that while it executed a Waiver, the same is null and void for failure to comply with the requisites under Section 222(b) of the 1997 NIRC and Revenue Memorandum Order ("RMO") No. 20-90, as amended by Revenue Delegation Authority Order ("RDAO") No. 05-01. 35 Records, Vol. 1, Exhibit "B," Extension Letter, p. 411. 36 Id., Exhibit "D," Reply to the PreliminanJ Assessment Notice ("PAN"), pp. 413-417. 37 Id., Exhibit "F," Protest to Formal Letter of Demand ("FLD"), pp. 436-441. 38 Id., Exhibit "G," pp. 442-444. 39 Id., Petition for Review, pp. 16-17. 40 Id., Pre-Trial Brief (For the Petitioner), p. 217. 41 Records, Vol. 2, Memorandum, p. 9. 42 Id., Motion for Partial Reconsideration (with Motion to Present Additional Evidence), pp. 794-894, with annexes. 43 Id., Vol. 2, p. 895. 44 Id., Comment, pp. 897-904. 45 China Banking Corporation v. Commissioner of Internal Revenue, G.R. No. 172509, February 4, 2015, 749 SCRA 525. (

DECISION CTA EB NOS. 1332 and 1358 (CTA Case No. 8493) Page13 of18 While the Court En Bane has jurisdiction to rule on the issue of prescription, its final evaluation and appreciation of evidence is another matter. It must be noted that pleadings or the evidence on record must show that the claim is barred by prescription.46 Further, Section 203 of the 1997 NIRC, mandates that the CIR should issue an assessment for deficiency taxes within three (3) years from the last day prescribed by law to file the tax return or the actual date of filing of such return, whichever comes later. Any assessment notice issued beyond this three (3)-year prescriptive period shall not be valid, to wit: SECTION 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 filing 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 filed beyond the period prescribed by law, the three (3)-year period shall be counted from the day the return was filed. For purposes of this Section, a return filed before the last day prescribed by law for the filing thereof shall be considered as filed on such last day.47 As discussed in the China Banking case, to determine prescription, what is essential only is that the facts demonstrating the lapse of the prescriptive period were sufficiently and satisfactorily apparent on the record, either in the allegations of the plaintiff's complaint, or otherwise established by the evidence. Further, in the case of Dizon v. Court of Tax Appeals, et. al.4B, the Supreme Court explained that under Section 8 ofRA No. 1125, the CTA is categorically described as a court of record. As cases filed before it are litigated de novo, party-litigants shall prove every minute aspect of their cases. Therefore, no evidentiary value can be given to pieces of evidence which were not formally offered before the CTA. Pertinent is the general rule found in Section 34, Rule 132 of the Revised Rules on Evidence which reads: 46 China Banking Corporation v. Commissioner of Internal Revenue, G.R. No. 172509, February 4, 2015, 749 SCRA 525. 47 Underscoring ours. I 48 G.R. No. 140944, April30, 2008, 553 SCRA 111.

DECISION CTA EB NOS. 1332 and 1358 (CTA Case No. 8493) Page 14of18 SEC. 34. Offer of evidence. The court shall consider no evidence which has not been formally offered. The purpose for which the evidence is offered must be specified. In fact, even if a particular document is identified and marked as an exhibit, it does not mean that it has already been offered as part of the evidence of a party.49 Even in the relaxation of this rule in People v. Napat-a50, the Supreme Court still required that the evidence must have been duly identified by testimony duly recorded, and it must have been incorporated in the records of the case. In the Dizon case, the Supreme Court went on to explain that while the CTA is not governed strictly by technical rules of evidence, the presentation of the evidence is not a mere procedural technicality which may be disregarded, considering that it is the only means by which the CTA may ascertain and verify the truth of the party's claims. Hence, failure to formally offer these pieces of evidence, is fatal to a party's cause, which is aggravated by the fact that not even a single reason was advanced by the party to justify such fatal omission. Reproduced hereunder are the relevant portions of the Dizon case: A formal offer is necessary because judges are mandated to rest their findings of facts and their judgment only and strictly upon the evidence offered by the parties at the trial. Its function is to enable the trial judge to know the purpose or purposes for which the proponent is presenting the evidence. On the other hand, this allows opposing parties to examine the evidence and object to its admissibility. Moreover, it facilitates review as the appellate court will not be required to review documents not previously scrutinized by the trial court. The Court En Bane, in order to determine whether the right to assess has prescribed, needs to refer to the dates when the returns were filed. In this case, not only were the returns not offered in evidence,sl they were likewise unmarked and unidentified. Hence, the general rule found in Section 34, Rule 132 ofthe Revised Rules on Evidence applies. Moreover, Contex never even gave any reason for its failure to offer the returns as evidence in its Motion for Partial Reconsideration (with Motion to Present Additional Evidence)52. 49 Dizon v. Court of Tax Appeals, et. al., G.R. No. 140944, April30, 2008,553 SCRA 111. 50 People v. Napat-a, G.R. No. 84951, November 14, 1989, 179 SCRA 403. 51 Records, Vol. 1, pp. 397-557, with annexes. 52 Id., Vol. 2, Motion for Partial Reconsideration (with Motion to Present Additional Evidence), pp. 794- 894, with annexes.

DECISION CTA EB NOS. 1332 and 1358 (CTA Case No. 8493) PagelS of18 Therefore, the Court En Bane has reasonable grounds to declare that Contex has waived its right to offer the returns as evidence, and to deny Contex's prayer for the reopening of trial to allow it to present additional evidence in support of its cause of action. Having no basis on which to compute the running of the prescriptive period to assess, the Court cannot determine whether Contex's claim of prescription is true. It cannot likewise determine if the waivers were entered into before the right to assess has prescribed, making the determination of whether the waivers were validly entered into moot and academic. The presumption that the Revenue Officer who conducted the audit investigation has the requisite authority prevails. Contex claims that the RO who conducted the audit investigation and prepared the audit report, RO Gracita D. Agaton, did not have authority to examine its books of accounts since she was not among the ROs named in LOA No. 2007-00013004 dated October 30, 2018; and that instead, the LOA authorized RO Lailani R. Arellano and GS Esperanza G. Castro. Looking into the records, the said LOA was never offered in evidence by Contex or the CIR in order to prove who was actually granted the authority to conduct tax audit.53 It must be kept in mind that public officers like the CIR and his/her officers have in their favor the presumption of regularity in the performance of official duties, which may be rebutted by affirmative evidence of irregularity or failure to perform a duty.54 The presumption prevails until it is overcome by no less than clear and convincing evidence to the contrary.55 Therefore, unless the presumption is rebutted, it becomes conclusive.56 Every reasonable intendment will be made in support of the presumption, and in case of doubt as to an officer's act being lawful or unlawful, construction should be in favor of its lawfulness.57 53 Records, Vol. 1, Formal Offer of Evidence (For The Petitioner), pp. 397-400; Records, Vol. 2, Formal Offer of Evidence, pp. 628-634. 54 Bustillo et. al. v. People of the Philippines, G.R. No. 160718, May 12, 2010, 620 SCRA 483. 55 Id. 56 Id. 57 People of the Philippines v. de Guzman, G.R. No. 106025, February 9, 1994, 299 SCRA 795.

DECISION CTA EB NOS. 1332 and 1358 (CTA Case No. 8493) Page 16of18 Having no basis for its claim of absence of authority, the Court En Bane cannot rule in favor of Contex and the presumption of regularity of performance of the RO's audit prevails. The Court in Division correctly imputed interest. Section 247(a) in relation to Section 249(B) and 249(C) of the 1997 NIRC authorizes the imposition of deficiency and delinquency interest on all taxes under the 1997 NIRC, to wit: TITLE X STATUTORY OFFENSES AND PENALTIES CHAPTER I ADDITIONS TO THE TAX SECTION 247. General Provisions.- (a) The additions to the tax or deficiency tax prescribed in this Chapter shall apply to all taxes, fees and charges imposed in this Code. The amount so added to the tax shall be collected at the same time, in the same manner and as part of the tax. XXX XXX XXX SECTION 249. Interest. - (A) In General. -There shall be assessed and collected on any unpaid amount of tax, interest at the rate of twenty percent (20%) per annum, or such higher rate as may be prescribed by rules and regulations, from the date prescribed for payment until the amount is fully paid. (B) Deficiency Interest. - Any deficiency in the tax due, as the term is defined in this Code, shall be subject to the interest prescribed in Subsection (A) hereof, which interest shall be assessed and collected from the date prescribed for its payment until the full payment thereof. (C) Delinquency Interest.- In case of failure to pay: (

DECISION CTA EB NOS. 1332 and 1358 (CTA Case No. 8493) Page 17of18 (1) The amount of the tax due on any return required to be filed, or (2) The amount of the tax due for which no return is required, or (3) A deficiency tax, or any surcharge or interest thereon on the due date appearing in the notice and demand of the Commissioner, there shall be assessed and collected on the unpaid amount, interest at the rate prescribed in Subsection (A) hereof until the amount is fully paid, which interest shall form part of the tax. Section 247(a) of the 1997 NIRC clearly states that the additions under Chapter I, Title X are applicable to all taxes imposed under the 1997 NIRC, regardless of the title under which they are classified. Accordingly, the additions to the tax or deficiency tax, such as deficiency interest under Section 249(B) of the 1997 NIRC and delinquency interest under Section 249(C) of the 1997 NIRC are applicable to income tax, VAT, EWT, WTC, FBT, and FWT. The parties' other contentions in their respective Petitions for Review did not contain any new and/or compelling averment as they merely rehashed previously discredited arguments. Therefore, the Court En Bane finds it unnecessary to discuss the other remaining issues. WHEREFORE, the instant Petitions for Review are hereby DENIED for lack of merit. Accordingly, the Decision dated April22, 2015, the Amended Decision dated June 30, 2015, and the Resolution dated August 27, 2015, all promulgated by the Second Division of the Court of Tax Appeals, are hereby AFFIRMED. SO ORDERED. LOVELL~ BAUTISTA Associate Justice

DECISION CTA EB NOS. 1332 and 1358 (CTA Case No. 8493) Page 18of18 WE CONCUR: (With Concurnng and � senting Opinion) ROMAN G. DEL ROSARIO Presiding Justice ~~~C~Q.Jt-~~/ Sh. (With Concurrin~issenting Opinion) f(JANITO c. CASTANEDA, JR. ERLINDA P. UY Associate Justice Associate Justice CAESA~SANOVA Associate Justice ~ N.M~LAa4c~-" ~. ~ -6- .J--.. CIELITO N. MIND.AfiO-GRULLA MA. BELEN M. RINGPIS-LIBAN Associate Justice Associate Justice C~'?�~thht~--- (I concur with PJ's Concurring and Dissenting Opinion) CATHERINE T. MANAHAN Associate Justice CERTIFICATION Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court. Presiding Justice

REPUBLIC OF THE PHILIPPINES Court of Tax Appeals QUEZON CITY ENBANC CONTEX CORPORATION, CTA EB No. 1332 Petitioner, (CTA Case No. 8493) -versus- COMMISSIONER OF INTERNAL CTA EB No. 1358 REVENUE, (CTA Case No. 8493) Respondent. Present: X-------------------------------------------X COMMISSIONER OF INTERNAL REVENUE, Petitioner, -versus- DEL ROSARIO, P.J., CASTANEDA, JR., BAUTISTA, UY, CASANOVA, FASON-VICTORINO, MINDARO-GRULLA, RINGPIS-LIBAN,and MANAHAN, JJ. CONTEX CORPORATION, Promulgated : x- _____________ -~:s?_o_n~~~~ ____ ~~~~ !_~~~Z- :}11::::~ CONCURRING AND DISSENTING OPINION DEL ROSARIO, P.J.: I concur with the ponencia in denying the Petition for Review filed by the Commissioner of Internal Revenue (CIR) in CTA EB No. 1358 thereby sustaining the cancellation of the deficiency VAT

Concurring and Dissenting Opinion CTA EB Nos. 1332 & 1358 (CTA Case No. 8493) assessment for taxable year 2007 in the assailed Amended Decision of the Court in Division. With due respect, however, I dissent with the ponencta 1n denying the Petition for Review filed by Contex Corporation in CTA EB No. 1332 and affirming the assailed Amended Decision which re- affirmed the deficiency income tax, withholding tax on compensation, fringe benefit tax, and final withholding tax assessments for taxable year 2007 in the total amount of Php15,990,817.89, inclusive of surcharge, including the payment of 20�/o deficiency interest and 20% delinquency interest as adjudged in the Court in Division's Decision dated April 22, 2015. Records reveal that Contex Corporation filed a "Motion for Partial Reconsideration (with Motion to Present Additional Evidence)" of the Court in Division's Decision dated April 22, 2015. Contex argued therein, among others, that the CIR's right to assess Contex for deficiency taxes for calendar year 2007 had already prescribed when the CIR issued the Formal Letter of Demand (FLO) and Assessment Notice (FAN) dated July 15, 2011. In said Motion for Partial Reconsideration, Contex also requested for the re-opening of trial for the presentation of additional evidence to strengthen its position that that the assessments are void for being barred by prescription. Contex attached the additional documents sought to be presented to its Motion for Partial Reconsideration which included, among others, its Annual Income Tax Return or BIR Form No. 1702 for CY 2007 (Annex "A"), Monthly Remittance Returns of Income Taxes Withheld on Compensation or BIR Form No. 1601-C for January to December 2007 (Annexes "B-1'' to "B-12"), SIR Certificate of Registration (Annex "C"), and Waivers of the Defense of Prescription (Annexes "D-1" and "D-2"), most of which can also be found in the Bureau of Internal Revenue ("BIR") Records of this case. In the assailed Amended Decision, the Court in Division denied Contex's prayer for the re-opening of trial for presentation of additional evidence. In a nutshell, the Court in Division ruled that the very purpose of a motion for reconsideration is to point out findings and conclusions of a decision which in the movant's view are not supported by law or evidence. Thus, Contex cannot put forward a new issue, present additional evidence or change its theory in its Motion for Partial Reconsideration. In affirming the Court in Division's assailed Amended Decision, the ponencia reiterates that no evidentiary value can be given to pieces of evidence which were not formally offered before the CTA. It

Concurring and Dissenting Opinion CTA EB Nos. 1332 & 1358 (CTA Case No. 8493) states that since the returns were not marked, identified and offered in evidence, the general rule found in Section 34, Rule 132 of the Revised Rules on Evidence applies. The ponencia also holds that since Contex never gave any reason for its failure to offer the returns as evidence in its Motion for Partial Reconsideration, the denial of its prayer for re-openng of trial to allow it to present additional evidence was proper. I am not unaware of the recent decision of the Supreme Court in Pilipinas Shell Petroleum Corporation vs. Commissioner of Customs1 which holds that for evidence to be considered by the court, the same must be formally offered; and that even if a documentary evidence was included as part of the Bureau of Customs (BOC) Records submitted before the Court of Tax Appeals (CTA) in compliance with a lawful order of the court, it does not permit the trial court to consider the same as the Rules prohibit it. Interestingly, in the Shell case, Pilipinas Shell Petroleum Corporation (PSPC) did not request for a re-opening of the case after a judgment has been rendered for the purpose of presenting additional documents. The CTA, in making a pronouncement that fraud was committed by PSPC, relied on the factual finding contained in the Memorandum dated 2 February 2001 issued by the officials of the CIIS-IPD of the BOC. Since said Memorandum was not presented, identified, testified to or offered in evidence by either party before the trial court, albeit the same was found in the BOC Records, the Supreme Court ruled that no evidentiary value can be given to the said Memorandum. I submit that the pronouncement in the Shell case is not on all fours applicable to the present controversy owing to differing factual milieu. Unlike PSPC in the Shell case, Contex prayed, in its Motion for Reconsideration of the assailed Decision, that it be allowed to present additional evidence, consisting of tax returns and other documents, for marking in a commissioner's hearing and to formally offer the same in evidence. Contex also attached copies of said documents to its Motion for Partial Reconsideration (with Motion to Present Additional Evidence). As events turned out, Contex's Motion was denied thereby precluding it from presenting its tax returns and other documents and the Court from considering the same. After a judicious review of the records of the case, I submit that Contex's prayer for the re-opening of trial for presentation of 1 G.R. No. 195876, December 5, 2016.

Concurring and Dissenting Opinion CTA EB Nos. 1332 & 1358 (CTA Case No. 8493) additional evidence should have been granted in the paramount interest of substantial justice. Jurisprudence is replete with cases that champion the principle that every party litigant must be given the amplest opportunity for a just determination of his case, free from the severities of technicalities. 2 In Aguam vs. Court of Appeals, 3 the Supreme Court stated: "xxx the law abhors technicalities that impede the cause of justice. The court's primary duty is to render or dispense justice. "A litigation is not a game of technicalities." "Lawsuits unlike duels are not to be won by a rapier's thrust. Technicality, when it deserts its proper office as an aid to justice and becomes its great hindrance and chief enemy, deserves scant consideration from courts." Litigations must be decided on their merits and not on technicality. Every party litigant must be afforded the amplest opportunity for the proper and just determination of his cause, free from the unacceptable plea of technicalities. Thus, dismissal of appeals purely on technical grounds is frowned upon where the policy of the court is to encourage hearings of appeals on their merits and the rules of procedure ought not to be applied in a very rigid, technical sense; rules of procedure are used only to help secure, not override substantial justice. It is a far better and more prudent course of action for the court to excuse a technical lapse and afford the parties a review of the case on appeal to attain the ends of justice rather than dispose of the case on technicality and cause a grave injustice to the parties, giving a false impression of speedy disposal of cases while actually resulting in more delay, if not a miscarriage of justice." (Boldfacing supplied) Truth to tell, in BPI-Family Savings Bank vs. Court of Appeals,4 the Supreme Court ruled that tax returns submitted and attached to a Motion for Reconsideration, which clearly showed that the taxpayer incurred no tax liability, should be taken into consideration in the interest of truth and justice. In this case, the CTA dismissed the petition on the ground that BPI-Family failed to present as evidence its Annual Income Tax Return (ITR) for 1990 to establish the fact that it had not yet credited the amount being claimed for refund to its 1990 tax liability. BPI Family filed a motion for reconsideration attaching thereto a copy of its ITR for 1990 but the same was ignored by the CTA. The Court of Appeals (CA) affirmed 2 Martin Peoso and Elizabeth Peoso vs. Macrosman Dona, G.R. No. 154018, April 3, 2007. 3 G.R. No. 137672, May 31,2000. 4 G.R. No. 122480, April12, 2000.

Concurring and Dissenting Opinion CTA EB Nos. 1332 & 1358 (CTA Case No. 8493) the decision of the CTA. The Supreme Court, however, reversed the CA and held the following: "More important, a copy of the Final Adjustment Return for 1990 was attached to petitioner's Motion for Reconsideration filed before the CTA. A final adjustment return shows whether a corporation incurred a loss or gained a profit during the taxable year. In this case, that Return clearly showed that petitioner incurred P52,480, 173 as net loss in 1990. Clearly, it could not have applied the amount in dispute as a tax credit. Again, the BIR did not controvert the veracity of the said return. It did not even file an opposition to petitioner's Motion and the 1990 Final Adjustment Return attached thereto. In denying the Motion for Reconsideration, however, the CTA ignored the said Return. In the same vein, the CA did not pass upon that significant document. True, strict procedural rules generally frown upon the submission of the Return after the trial. The law creating the Court of Tax Appeals, however, specifically provides that proceedings before it shall not be governed strictly by the technical rules of evidence. The paramount consideration remains the ascertainment of truth. Verily, the quest for orderly presentation of issues is not an absolute. It should not bar courts from considering undisputed facts to arrive at a just determination of a controversy. In the present case, the Return attached to the Motion for Reconsideration clearly showed that petitioner suffered a net loss in 1990. Contrary to the holding of the CA and the CTA, petitioner could not have applied the amount as a tax credit. In failing to consider the said Return, as well as the other documentary evidence presented during the trial, the appellate court committed a reversible error. It should be stressed that the rationale of the rules of procedure is to secure a just determination of every action. They are tools designed to facilitate the attainment of justice. But there can be no just determination of the present action if we ignore, on grounds of strict technicality, the Return submitted before the CTA and even before this Court. To repeat, the undisputed fact is that petitioner suffered a net loss in 1990; accordingly, it incurred no tax liability to which the tax credit could be applied. Consequently, there is no reason for the BIR and this Court to withhold the tax refund which rightfully belongs to the petitioner." (Boldfacing supplied) More recently, in Commissioner of Internal Revenue vs. De La Salle University, lnc., 5 the Supreme Court upheld the CTA's admission of the supplemental evidence made upon filing of 5 G.R. Nos. 196596, 198841, 198941, November 9, 2016.

Concurring and Dissenting Opinion CTA EB Nos. 1332 & 1358 (CTA Case No. 8493) petitioner's motion for reconsideration. It must be emphasized that the Supreme Court sustained CTA's admission of DLSU's supplemental offer of evidence not only because CIR failed to promptly object, but more so because the strict application of the technical rules of evidence would defeat the intent of the Constitution. The Supreme Court stated: "Ill. CTA correctly admitted the supplemental evidence formally offered by DLSU. The Commissioner objects to the CTA Decision's admission of DLSU's supplemental pieces of documentary evidence. To recall, DLSU formally offered its supplemental evidence upon filing its motion for reconsideration with the CTA Division. The CTA Division admitted the supplemental evidence, which proved that a portion of DLSU's rental income was used actually, directly and exclusively for educational purposes. Consequently, the CTA Division reduced DLSU's tax liabilities. We uphold the CTA Division's admission of the supplemental evidence on distinct but mutually reinforcing grounds, to wit: (1) the Commissioner failed to timely object to the formal offer of supplemental evidence; and (2) the CTA is not governed strictly by the technical rules of evidence. First, the failure to object to the offered evidence renders it admissible, and the court cannot, on its own, disregard such evidence. The Court has held that if a party desires the court to reject the evidence offered, it must so state in the form of a timely objection and it cannot raise the objection to the evidence for the first time on appeal. Because of a party's failure to timely object, the evidence offered becomes part of the evidence in the case. As a consequence, all the parties are considered bound by any outcome arising from the offer of evidence properly presented. As disclosed by DLSU, the Commissioner did not oppose the supplemental formal offer of evidence despite notice. The Commissioner objected to the admission of the supplemental evidence only when the case was on appeal to the CTA En Bane. By the time the Commissioner raised her objection, it was too late; the formal offer, admission, and evaluation of the supplemental evidence were all fait accompli. We clarify that while the Commissioner's failure to promptly object had no bearing on the materiality or sufficiency of the supplemental evidence admitted, she was bound by the outcome of the CTA Division's assessment of the evidence.

Concurring and Dissenting Opinion CTA EB Nos. 1332 & 1358 (CTA Case No. 8493) Second, the CTA is not governed strictly by the technical rules of evidence. The CTA Division's admission of the formal offer of supplemental evidence, without prompt objection from the Commissioner, was thus justified. Notably, this Court had in the past admitted and considered evidence attached to the taxpayer's motion for reconsideration. In the case of BPI-Family Savings Bank v. Court of Appeals, the tax refund claimant attached to its motion for reconsideration with the CTA its Final Adjustment Return. The Commissioner, as in the present case, did not oppose the taxpayer's motion for reconsideration and the admission of the Final Adjustment Return. We thus admitted and gave weight to the Final Adjustment Return although it was only submitted upon motion for reconsideration. We held that while it is true that strict procedural rules generally frown upon the submission of documents after the trial, the law creating the CTA specifically provides that proceedings before it shall not be governed strictly by the technical rules of evidence and that the paramount consideration remains the ascertainment of truth. We ruled that procedural rules should not bar courts from considering undisputed facts to arrive at a just determination of a controversy. We applied the same reasoning in the subsequent cases of Filinvest Development Corporation v. Commissioner of Internal Revenue and Commissioner of Internal Revenue v. PERF Realty Corporation, where the taxpayers also submitted the supplemental supporting document only upon filing their motions for reconsideration. Although the cited cases involved claims for tax refunds, we also dispense with the strict application of the technical rules of evidence in the present assessment case. If anything, the liberal application of the rules assumes greater force and significance in the case of a taxpayer who claims a constitutionally granted tax exemption. While the taxpayers in the cited cases claimed refund of excess tax payments based on the Tax Code, DLSU is claiming tax exemption based on the Constitution. If liberality is afforded to taxpayers who paid more than they should have under a statute, then with more reason that we should allow a taxpayer to prove its exemption from tax based on the Constitution. Hence, we sustain the CTA's admission of DLSU's supplemental offer of evidence not only becuase the Commissioner failed to promptly object, but more so because the strict application of the technical rules of evidence may defeat the intent of the Constitution." (Boldfacing & underscoring supplied)

Concurring and Dissenting Opinion CTA EB Nos. 1332 & 1358 (CTA Case No. 8493) I submit that, in the present controversy, the strict application of technical rules of evidence may defeat the intent of the law in fixing a prescriptive period within which the CIR may assess taxpayers for deficiency taxes. The rationale behind the provisions on prescriptive period to assess deficiency taxes has been reiterated in SMI-ED Philippines Technology, Inc. vs. Commissioner of Internal Revenue, 6 "This court said that the prescriptive period to make an assessment of internal revenue taxes is provided 'primarily to safeguard the interests of taxpayers from unreasonable investigation.' This court explained in Commissioner of Internal Revenue v. FMF Development Corporation the reason behind the provisions on prescriptive periods for tax assessments: Accordingly, the government must assess internal revenue taxes on time so as not to extend indefinitely the period of assessment and deprive the taxpayer of the assurance that it will no longer be subjected to further investigation for taxes after the expiration of reasonable period of time. Rules derogating taxpayers' right against prolonged and unscrupulous investigations are strictly construed against the government. [T]he law on prescription should be interpreted in a way conducive to bringing about the beneficent purpose of affording protection to the taxpayer within the contemplation of the Commission which recommended the approval of the law. To the Government, its tax officers are obliged to act promptly in the making of assessment so that taxpayers, after the lapse of the period of prescription, would have a feeling of security against unscrupulous tax agents who will always try to find an excuse to inspect the books of taxpayers, not to determine the latter's real liability, but to take advantage of a possible opportunity to harass even law-abiding businessmen. Without such legal defense, taxpayers would be open season to harassment by unscrupulous tax agents. Moreover, in Commissioner of Internal Revenue v. BF Goodrich Phils.: For the purpose of safeguarding taxpayers from any unreasonable examination, investigation or assessment, our tax law provides a statute of limitations in the collection of taxes. Thus, the law on prescription, being a remedial measure, should be liberally construed in order to afford such protection. As a corollary, the exceptions to the law on prescription should perforce be strictly construed[.]" (Boldfacing and underscoring supplied) 6 G.R. No. 175410, November 12, 2014.

Concurring and Dissenting Opinion CTA EB Nos. 1332 & 1358 (CTA Case No. 8493) Thus, to ascertain the truth on whether the assessments were issued within the prescribed period, I am of the view that Contex should have been given the last opportunity to present and offer in evidence the documents attached to its Motion for Partial Reconsideration. The grant of Contex's motion is more consistent with the position taken by the CTA in a number of cases, when it liberally applied the technical rules of evidence and allowed the presentation of evidence after decisions were rendered, upon attachment of the documents sought to be presented to the litigants' motions for reconsideration. In those cases, the CTA considered the additional documents presented and offered in evidence in resolving the motions for reconsideration and issuing amended decisions. In PRHC Property Managers, Inc. vs. Commissioner of Internal Revenue, 7 the Court in Division observed that there was a discrepancy between the amount of income per ITR and that which was reflected in the Certificates of Creditable Tax Withheld. While the Court in Division found that the amount of P62,995.70 complied with the requisites for refund of excess Creditable Withholding Tax (CWT) out of the total claimed CWT of P1 ,928,458.00 for taxable year 2007, the said amount was not considered as an excess CWT since there was income tax due for the year and PRHC failed to substantiate the "prior year's excess credits". On February 1, 2012, PRHC filed its Motion for Reconsideration asking the Court to consider Annexes "A" to "N" attached thereto in re-evaluating its entitlement to the claim for refund and for it to be allowed to present its witness for the purpose of identifying the said documents. CIR did not file a comment thereon despite notice. In a Resolution dated April 16, 2012,8 the Court in Division allowed the marking and presentation of Annexes "A" to "N", in the interest of justice and, following the ruling in BPI case, held in abeyance the resolution on the motion pending submission and formal offer of said documents. After considering the additional evidence offered by PRHC, the Court in Division promulgated on October 9, 2012 an Amended Decision9 ordering the Commissioner of Internal Revenue to refund in favor of PRHC the amount of P1 ,898,655.14, representing its excess CWT for 2007. 7 CTA Case No. 8071, January 6, 2012 Decision; penned by Associate Justice Cielito N. Mindaro-Grulla and concurred by Associate Justice Juanito C. Castaneda, Jr. and Caesar A. Casanova. 8 Penned by Associate Justice Cielito N. Mindaro-Grulla and concurred by Associate Justice Juanito C. Castaneda, Jr. and Caesar A. Casanova. 9 Penned by Associate Justice Cielito N. Mindaro-Grulla and concurred by Associate Justice Juanito C. Castaneda, Jr. and Caesar A. Casanova.

Concurring and Dissenting Opinion CTA EB Nos. 1332 & 1358 (CTA Case No. 8493) Similarly, in Crescent Park 6-24 Property Holdings, Inc. vs. Commissioner of Internal Revenue, 10 the Court in Division initally denied the claim for refund of input tax attributable to zero-rated sales due to Crescent's failure to establish that the alleged sale of services to 6-24 PHI is subject to zero-rating, particularly for failure to present a Certification by PEZA that would prove that 6-24 PHI was a duly registered PEZA enterprise for the year 2009. On November 29, 2013, Crescent filed its Motion for Reconsideration, attaching thereto the PEZA Certification of 6-24 PHI for taxable year 2009, to which the CIR did not file its comment despite notice. In its February 27, 2014 Resolution,11 the Court in Division allowed Crescent to present the document for marking and thereafter, for formal offer. After giving probative value to the additional document offered by Crescent, the Court in Division issued an Amended Decision on June 18, 2014 granting Crescent's claim for refund. In Jardine Lloyd Thompson Insurance Brokers, Inc. vs. Commissioner of Internal Revenue, 12 the Court in Division finds in its Decision that Jardine has proven that the income payments of P96, 184,699.30 upon which the valid creditable taxes of P8,825, 150.89 were withheld were declared in its 2007 and 2008 Annual Income Tax Returns except for the amount of P58,332,023.13, the corresponding creditable tax withheld of which amounts to P5,309,498.52. The Court was not able to trace from the production report, general ledger and Annual ITR, the income payments of P58,332,023.13 as the Annual ITR merely provides summarized data without the supporting schedule or notes that will enlighten the Court as to the detailed items included therein. On February 28, 2014, Jardine filed its Motion for Reconsideration (With Motion to Reopen Trial of the Case and Request for Leave to Submit Details of General Ledgers}, to which respondent filed his Opposition on March 27, 2014 claiming that the additional evidence sought to be presented are not newly discovered nor were they failed to be presented due to fraud, accident, mistake or excusable negligence which would merit a new trial or additional hearing dates for the presentation of additional evidence. In a Resolution dated April 30, 2014,13 the Court in Division granted the motion in the interest of justice and pointed out that proceedings before this Court is not �1 CTA Case No. 8202 11 Penned by Associate Justice Esperanza R. Fabon-Victorino and concurred by Associate Justice Erlinda P. Uy. 12 CTA Case No. 8273, February 11, 2014; penned by Associate Justice Caesar A. Casanova and concurred by Associate Justice Juanito C. Castaneda, Jr. 13 Penned by Associate Justice Caesar A. Casanova and concurred by Associate Justice Juanito C. Castaneda, Jr. and Associate Justice Cielito N. Mindaro- Grulla.

Concurring and Dissenting Opinion CTA EB Nos. 1332 & 1358 (CTA Case No. 8493) governed strictly by technical rules of evidence, citing the BPI case. As a result, the Court in Division increased Jardine's entitlement for refund in its Amended Decision dated September 28, 2015. 14 In addition to the afore-cited PRCH, Crescent and Jardine cases, the Court in Division also allowed the re-opening of the following cases for presentation of evidence after initial judgments or decisions have been rendered, and eventually issued Amended Decisions after considering the additional evidence presented and offered: Case I Original Decision Resolution allowing Amended Decision presentation of documents CTA Case No. The March 6, 2015 The May 17, 2015 The August 27, 8610 Resolution allowed Decision of the Court the presentation of 2015 Amended Filminera document attached to Resources in Division denied the motion for Decision ordered Corporation reconsideration. The the claim for refund Court in Division the refund of vs. Commissioner highlighted, among of Internal of unutilized input others, the BPI case unutilized input tax Revenue as justification for its tax for petitioner's action. in petitioner's failure to offer the favor. 16 Board of Investments' (801) certification confirming that PGPRC (to which petitioner exclusively sold its product) is a 100% exporter15 CTA Case No. The September 22, The December 19, The October 6, 8374 2014 Decision 2014 Resolution 2015 Amended partially granted allowed petitioner to Decision increased petitioner's claim for present the amount of input 14 Penned by Associate Justice Caesar A. Casanova and concurred by Associate Justice Juanito C. Castaneda, Jr. and Associate Justice Cielito N. Mindaro- Grulla. 15 Penned by Associate Justice Amelia R. Cotangco-Manalastas and concurred by Associate Justice Juanito C. Castaneda, Jr. and Associate Justice Caesar A. Casanova. 16 Penned by Associate Justice Amelia R. Cotangco-Manalastas and concurred by Associate Justice Juanito C. Castaneda, Jr.

Concurring and Dissenting Opinion CTA EB Nos. 1332 & 1358 (CTA Case No. 8493) Case Original Decision Resolution allowing Amended Decision presentation of documents Sumisetsu refund of input tax documents attached tax refundable to Philippines, Inc. attributable to zero- to its Omnibus Motion petitioner. 18 vs. Commissioner rated sales. (1. For Partial of Internal Revenue Reconsideration of The entire claim was the Decision; 2. To not granted due to Permit Presentation the claimant's failure of Evidence with to substantiate Respect to the certain amount of Attached Documents; zero-rated sales with and 3. To Admit into official receipts. Evidence and Moreover, certain Consider for amount of input tax Purposes of payments were Resolving this Motion either the Attached unsubstantiated or Documents) has failed to meet the substantiation requirementsY CTA Case No. The September 25, The December 9, The May 25, 2015 8576 2014 Decision 2014 Resolution Amended Decision Filminera Resources denied the claim allowed the partially granted Corporation vs. Commissioner for refund of input presentation of the Petition for of Internal Revenue tax attributable to documents attached Review and zero-rated sales due to petitioner's Motion ordered the refund to insufficiency of for Reconsideration of unutilized input evidence. 19 citing BPI case. tax in petitioner's favor. 20 CTA Case Nos. The January 28, May 26, 2014 December 19, 2014 8056 & 8163 2014 Decision Resolution allowing Amended Decision denied the claim for presentation of ordered the refund 17 Penned by Associate Justice Lovell R. Bautista and concurred by Associate Justice Esperanza R. Fabon-Victorino. 18 Penned by Associate Justice Lovell R. Bautista and concurred by Associate Justice Esperanza R. Fabon-Victorino and Associate Justice Ma. Belen M. Ringpis-Liban. 19 Penned by Associate Justice Juanito C. Castaneda, Jr. and concurred by Associate Justice Caesar A. Casanova and Associate Justice Amelia R. Cotangco-Manalastas. 20 Penned by Associate Justice Juanito C. Castaneda, Jr. and concurred by Associate Justice Caesar A. Casanova and Associate Justice Amelia R. Cotangco-Manalastas.

Concurring and Dissenting Opinion CTA EB Nos. 1332 & 1358 (CTA Case No. 8493) Case Original Decision Resolution allowing Amended Decision presentation of documents refund of input tax documents cited and of input tax attributable to zero- attributable to zero- Total (Philippines) rated sales.21 attached to the rated sales. 22 Corporation Motion for vs. Reconsideration/ Commissioner of Internal Revenue New Trial citing BPI case. As mentioned in the resolution, attached petitioner's motion were an Affidavit of Merit and originals of IEIRDs. CTA Case No. The May 7, 2012 The July 13, 2012 The December 6, 8007 Decision denied the Resolution allowing 2012 Amended San Roque Power Corporation Petition for Review presentation of Decision ordered vs. for the refund of documents attached the refund of Commissioner of Internal Revenue input tax due to to petitioner's Motion unutilized excess insufficiency of for Reconsideration input tax. 24 evidence. 23 on the strength of BPI case. CTA Case No. The March 26, 2010 The May 19, 2010 The September 20, 7550 Decision denied the claim for refund of Resolution granted 2011 Amended Pilipinas Total input tax for Gas, Inc. petitioner's failure to the Motion to Re- Decision ordered vs. fully substantiate the zero-rated sales and Open the Case and the refund of Commissioner of for failure to present Internal Revenue the Quarterly VAT held in abeyance the unutilized input tax Return for the subsequent period.25 Resolution on attributable to zero- petitioner's Motion for rated sales.26 Reconsideration of the Court's Decision pending presentation of additional 21 Penned by Associate Justice Esperanza R. Fabon-Victorino and concurred by Associate Justice Lovell R. Bautista and Ma. Belen M. Ringpis-Liban. 22 Penned by Associate Justice Esperanza R. Fabon-Victorino and concurred by Associate Justice Lovell R. Bautista and Ma. Belen M. Ringpis-Liban. 23 Penned by Associate Justice Esperanza R. Fabon-Victorino and concurred by former Presiding Justice Ernesto D. Acosta and Associate Justice Erlinda P. Uy. 24 Penned by Associate Justice Esperanza R. Fabon-Victorino and concurred by former Presiding Justice Ernesto D. Acosta and Associate Justice Erlinda P. Uy. 25 Penned by Associate Justice Lovell R. Bautista and concurred by Associate Justice Caesar A. Casanova.

Concurring and Dissenting Opinion CTA EB Nos. 1332 & 1358 (CTA Case No. 8493) Case Original Decision Resolution allowing Amended Decision presentation of documents evidence. CTA Case No. The February 26, The June 1' 2010 The June 28, 2011 7751 Resolution granted 2010 Decision Amended Decision Technopeak Corporation den )ling the the re-opening of the cancelled and set vs. Petition for Review case for the reception aside the Commissioner of Internal Revenue concerning the tax of additional evidence assessment in view assessment issued to establish of petitioner's against petitioner. petitioner's availment of the The Court in Division compliance with the Amnesty Program.2B noted that petitioner requirements of the failed to present Tax Amnesty evidence in support Program. of its availment of the Tax Amnesty Program. 27 As recognized in the assailed Amended Decision and in the ponencia, Contex's tax returns are important in making a proper ruling on prescription as they will prove the dates when they were actually filed. Said dates are necessary for the Court in Division to determine when prescription began to run and when it lapsed. In view of their utmost relevance in determining whether the assessments were timely issued, such that if Contex had been allowed to present and offer the tax returns and the same were admitted in evidence, a different conclusion could have been reached by the Court in Division in resolving Contex's Motion for Partial Reconsideration, I submit that the denial of Contex's prayer to re-open the case is unjustified. Section 8 of Republic Act (RA) No. 1125, as amended by RA No. 9282, explicity provides that proceedings in the CTA shall not be governed strictly by technical rules of evidence. Thus, Contex should not have been precluded from substantiating the fact that the assessments against it were issued beyond the prescriptive period by 26 Penned by former Presiding Justice Ernesto D. Acosta and concurred by Associate Justice Caesar A. Casanova, with Separate Opinion of Associate Justice Lovell R. Bautista. 27 Penned by Associate Justice Caesar A. Casanova and concurred by former Presiding Justice Ernesto D. Acosta and Associate Justice Lovell R. Bautista. 28 Penned by Associate Justice Caesar A. Casanova and concurred by former Presiding Justice Ernesto D. Acosta and Associate Justice Lovell R. Bautista.

Concurring and Dissenting Opinion CTA EB Nos. 1332 & 1358 (CTA Case No. 8493) strict application of the technical rules of evidence, specially since in the afore-mentioned cases, the CTA has allowed the presentation of additional documents, attached to the motions for reconsideration, after decisions have been rendered. Indeed, prudence dictates that the same standards should be observed in settling similar controversy in order to maintain stability and fairness in the judicial system. In the BPI-Family Savings Bank case, 29 the Supreme Court emphasized that: "Substantial justice, equity and fair play are on the side of petitioner. Technicalities and legalisms, however exalted, should not be misused by the government to keep money not belonging to it and thereby enrich itself at the expense of its law-abiding citizens. If the State expects its taxpayers to observe fairness and honesty in paying their taxes, so must it apply the same standard against itself in refunding excess payments of such taxes. Indeed, the State must lead by its own example of honor, dignity and uprightness." All told, I vote to DENY the the Petition for Review filed by the CIR in CTA EB No. 1358 for lack of merit and to GRANT the Petition for Review filed by Contex in CTA EB No. 1332. Accordingly, the assailed Amended Decision of the Court in Division in CTA Case No. 8493 should be SET ASIDE in so far as it ruled that Contex is liable for deficiency income tax, withholding tax on compensation, fringe benefit tax, and final withholding tax assessments for taxable year 2007 in the total amount of Php15,990,817.89, inclusive of surcharge, including the payment of 20% deficiency interest and 20% delinquency interest . The case should be REMANDED to the Court in Division to allow Contex to present and offer in evidence the documents attached to its "Motion for Partial Reconsideration (with Motion to Present Additional Evidence)" dated May 11, 2015, and thereafter, for the Court in Division to make a complete determination on whether the CIR's right to assess Contex for deficiency income tax, withholding tax on compensation, fringe benefit tax, and final withholding tax assessments for taxable year 2007 has prescribed. Presiding Justice 29 Supra, Note 4.

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY ENBANC CTA EB No. 1332 (CTA Case No. 8493) ********* CONTEX CORPORATION, Petitioner, -versus- COMMISSIONER OF INTERNAL CTA EB No. 1358 REVENUE, (CTA Case No. 8493) Respondent. X- - - - - - - - - - - - - - - - - - - - - - - - X COMMISSIONER OF INTERNAL REVENUE, Petitioner, Present: -versus- DEL ROSARIO, P.J. , CASTANEDA, JR., BAUTISTA, UY, CASANOVA, FABON-VICTORINO, MINDARO-GRULLA, RINGPIS-LIBAN, and MANAHAN, JJ. CONTEX CORPORATION, Promulgated: MAR 0 3 2017 Respondent. d.'~ . P.., -~ X -- -- - - - - - - - - - - - - - - - - - - - - - - -- - -- -- - - - - - - - - - - - CONCURRING AND DISSENTING OPINION UY, J.: With all due respect to the learned ponente and my other colleagues, while I concur, in effect, on the liability of Contex Corporation for income tax, Withholding Tax on Compensation (WTC) , Fringe Benefits Tax (FBT), and Final Withholding Tax (FWT), ('

CONCURRING AND DISSENTING OPINION CTA EB Nos. 1332 and 1358 Page 2 of5 plus the corresponding surcharges, for taxable year 2007, as decreed by the Court a quo, and as affirmed by the Court En Bane, I dissent on the imposition of the deficiency interests on the WTC, FBT, and FWT, on the basis of Section 249(B) of the National Internal Revenue Code (NIRC) of 1997, and the inclusion of said deficiency interests in the computation of delinquency interests under Section 249(C) of the same Code. Section 249 of the NIRC of 1997 reads: "SEC. 249. Interest. - (A) In General. - There shall be assessed and collected on any unpaid amount of tax, interest at the rate of twenty percent (20�/o) per annum, or such higher rate as may be prescribed by the rules and regulations, from the date prescribed for its payment until the amount is fully paid. (B) Deficiency Interest. - Any deficiency in the tax due, as the term is defined in this Code, shall be subject to the interest prescribed in Subsection (A) hereof, which interest shall be assessed and collected from the date prescribed for its payment until the full payment thereof. (C) Delinquency Interest. - In case of failure to pay: XXX XXX XXX (3) A deficiency tax, or any surcharge or interest thereon on the due date appearing in the notice and demand of the Commissioner, there shall be assessed and collected on the unpaid amount, interest at the rate prescribed in Subsection (A) hereof until the amount is fully paid, which interest shall form part of the tax." (Emphases supplied) Based on the foregoing Section 249(B), the "Deficiency Interest" shall be imposed on '1a]ny deficiency in the tax due, as the term is defined in this Code", i.e., as the term "deficiency" is defined in the NIRC of 1997. Relative thereto, an examination of the said Code discloses that there are only three (3) instances where it defines the term "deficiency", and this relates only and respectively to three (3) types of internal revenue taxes, namely, income tax, estate~

CONCURRING AND DISSENTING OPINION CTA EB Nos. 1332 and 1358 tax, and donor's tax, pursuant to Sections 56(8), 93 and 104 of the NIRC of 1997, viz: "SEC. 56. Payment and Assessment of Income Tax for Individuals and Corporations.- XXX XXX XXX (B) Assessment and Payment of Deficiency Tax.- After the return is filed, the Commissioner shall examine its and assess the correct amount of the tax. The tax or deficiency income tax so discovered shall be paid upon notice and demand from the Commissioner. As used in this Chapter1, in respect of a tax imposed by this Title2, the term 'deficiency' means: (1) The amount by which the tax imposed by this Title exceeds the amount shown as the tax by the taxpayer upon his return; but the amount so shown on the return shall be increased by the amounts previously assessed (or collected without assessment) as a deficiency, and decreased by the amount previously abated, credited, returned or otherwise repaid in respect of such tax; or (2) If no amount is shown as the tax by the taxpayer upon his return, or if no return is made by the taxpayer, then the amount by which the tax exceeds the amounts previously assessed (or collected without assessment) as a deficiency; but such amounts previously assessed or collected without assessment shall first be decreased by the amounts previously abated, credited, returned or otherwise repaid in respect of such tax." (Emphasis supplied) "SEC. 93. Definition of Deficiency. -As used in this Chapter3 , the term 'deficiency' means: (a) The amount by which the tax imposed by this Chapter exceeds the amount shown as the tax by the executor, administrator or any of the heirs upon his return; but the amount so shown on the return shall first be 1 Chapter IX- RETURNS AND PAYMENT OF TAX. 2 Title II- TAX ON INCOME. 3 CHAPTER I- ESTATE TAX (under TITLE III- ESTATE AND DONOR'S TAXES).

CONCURRING AND DISSENTING OPINION CTA EB Nos. 1332 and 1358 Page 4 of5 increased by the amounts previously assessed (or collected without assessment) as a deficiency and decreased by the amounts previously abated, refunded or otherwise repaid in respect of such tax; or (b) If no amount is shown as the tax by the executor, administrator or any of the heirs upon his return, or if no return is made by the executor, administrator, or any heir, then the amount by which the tax exceeds the amounts previously assessed (or collected without assessment) as a deficiency; but such amounts previously assessed or collected without assessment shall first be decreased by the amounts previously abated, credited, returned or otherwise repaid in respect of such tax." (Emphasis supplied) "SEC. 104. Definitions. - xxx The term 'deficiency' means: (a) the amount by which the tax imposed by this Chapter-4 exceeds the amount shown as the tax by the donor upon his return; but the amount so shown on the return shall first be increased by the amounts previously assessed (or collected without assessment) as a deficiency, and decreased by the amounts previously abated, refunded or otherwise repaid in respect of such tax, or (b) if no amount is shown as the tax by the donor upon his return, then the amount by which the tax exceeds the amounts previously assessed (or collected without assessment) as a deficiency, but such amounts previously assessed or collected without assessment shall first be decreased by the amounts previously abated, credited, returned or otherwise repaid in respect of such tax." (Emphasis supplied) Such being the case, the deficiency interest under Section 249(8) should be applied only whenever there is a deficiency income tax, a deficiency estate tax, and a deficiency donor's tax. For this reason, in this case, no deficiency interest under Section 249(8) should be imposed on the deficiency WTC, F8T, and FWT, assessed against Contex Corporation. Correspondingly, the computation of the delinquency interest imposed under Section 249(C) should not as well include the said deficiency interests. A 4 CHAPTER II - DONOR'S TAX (under TITLE III - ESTATE AND DONOR'S TAXES). ~~

CONCURRING AND DISSENTING OPINION CTA EB Nos. 1332 and 1358 Correspondingly, I vote for the DELETION of: (1) the imposition of deficiency interests on Contex Corporation's basic deficiency WTC, FBT and FWT at the rate of 20�/o per annum; and (2) the inclusion of said deficiency interests in the computation of the delinquency interests to be imposed thereon. ER~.UY Associate Justice