CTA Case No. 2578 (Decision)

l(li:Pf.HtH.H' 011 ., H!i. ?lHlh ?lKit:... /u COUi~T OF ...... PP�t~..l..S OC ll7.0l'l CJTY '. /.sPOUSES RAUL M. GONZALEZ & PACITA T. GONZALEZ, Petitioners, - versus - THE COMMISSIONER OF C.T.A. CASE NO. 2578 INTERNAI. REVENUE , Respondent. X- - - - - - - - - - - X DE C I S I 0 N Petitioners Raul M. Gonzalez and Pacita T � . Gonzalez are husba n d�and'wife, ~esidin~ and with postal address at 204M~ Paterno St., San Juan, Rizal. Upon audit and investigation by the office of respondent Commissioner of Internal Revenue of the income tax returns filed by them for the years 1966 and 1967, petitione rs were to found have failed to substantiate or support their claimed deductions ~iom gro~s inc~me to arrive at net income~ (pp. 4 & 15, BIR records.) In his letter dated August lBr 1969 , the assistant regional director of Re'Je�nue Region No. 6, Quezbn City, Bureau of Internal Revenue, theref o re requested petitioner Raul M. Gonzalez to bring with him and present his documentary evidence hnd/or ~~ oof s in support of his claimed .._) 1 <') ..J '"'

'' DECISION - CTA CASE NO. 25 7 8 - 2- deductions in order that the examination of the income tax returns may be completed as soon as possible' . (p. 17, BIR reco r ds.) Petitioner Raul M. Gonzalez having failed to ap pear at ~h~ 2'lrir r�~:;s and on the date specified by the 0~~iGtQnt regional director or notify his office of a more c:om1en ien t appointment, Assessment Notice No. 30-1-6033195-71-66 dated February 29, 1972 and Assessment Notice No. 30-l-636288-71-67 da ted March 15, 1972 requiring the payment of the respective amount of f'542.26 and .1?18,121.04 as deficiency income tax for the y~ars 1966 and 1967 were issued against petitioners. (Exhs. "1" & "2", pp. 9 & 22, BIR records; An ne:.-e s "A" & "B" to the petition for review, p . 5, C'rA r?cords.) These assessment notices were received by peti- tioners on April 17, 19 72. (Annex "C" to the petition for review, p. 6, CTA records.) By their letter dated April 18 , 1972 to the acting regional director of Quezon City, petitioners protested the aforesaid deficiency income tax assessments on the ground that they W'2re "base less and unjustified." And except for the bare statement of petitioner Raul M. Gonzalez that "Even a cursory perusal of my income tax

DECISION - CTA CASE NO. 2578 - 3- returns will clearly show that the itemized ~~ductions which I claimed, while not substan- tiated with documents, carried specifications whereby your office could have counterchecked as to veracity" (pp. 23-24, BIR records; Annex "C" to petition for review, p p . 6-7, CTA records.),, no records to support the claimed deductions we re submitted. To make petitioners realize that under revenue regulations any claim for deduction must b~ substantiated and that no ha rassme nt was meant by respondent, the assistant regional director on October 12, 1972 aqain requested petitioner Raul M. Gonzalez to appear at his office and present evidence or documentary proofs to support their claimed deductions. (p. 27, BIR records.) Likewise, petitioners failed to appear at the designated time and place. As a final appeal, respondent in his letter dated April 27, 1973 pointed out to petitioners the announcement of the President of the Philippines regarding {1) _taxpayers who deliberately evade the payment of their taxes, anr1 ( 2) .taxpayers who continue to avoid payment of their delinquent. accounts notwithstanding the demands made upon them.

DECI.:JION - CTA CASE NO. 2578 - 4- Petitioners were therefore requested to contact the chief of the collection branch of Revenue Region No. 6, Quezon City, regarding the status of their case for verification, settlement or any appropriate action. (p. 35, BIR records.) As usual, petitioners failed to appear at the designated place, time and date. 'I'o enforce collection of the deficiency income tax for the years 1966 and 1967 under the assessment notices issued on Fberuary 29, 1972 and March 15, 1972, respondent caused the issuance upon petitioner Raul M. Gonza1e~ on December 14, 1973 a warrant of levy on real property . (p. 39, BIR records.) While he refused to acknowledge receipt of the warrant, a copy thereof was served on him on January 17, 1974. (p. 41, BIR records.) . Hence, the present peti- tion for review with motion for suspension of coll ection of tax filed with this Court on January 28, 1974. Under paragraph 11 of their petition for review, petitioners allege "that the right of respondent to assess and collect the disputed deficiency income taxes has already prescribed considering that more than five (5) years has J ., 1' �~ ,.u .) j _

DECISION - CTA CASE NO. 2578 - 5 �- already el~psed from the time the returns were filed." No evidence whatsoever was presented by petitioners to prove this allegation, although it was specifically denied by respondent in his answer and with tbe special and affirmative defense that the assessment notices were iss ue~ well within the prescribed period provided for under Section 331 (now Section 313) _of the National Internal Revenue Code and the right. of respon.lcnt to assess the deficiency income tuxes involved herein has not ~et prescribed. At any rate, the records of this case clearly show that the 19&6 income tax return of petitioners was filed with the BUrewof Internal Revenue on April 17, 1967 while the 1967 income tax return was filed un April 9, 1968. (pp. 4 & 15, BIR records.) A3 s c ssmcnt Notice No. ~o-1-6033195-71-66 request i ng pe citioners to pay the amount of P546.26 as deficiency income tax for 1966 was issued by respondent on February 29, 1972 while Assessment Notice No. 30-1-636288-71-67 requiring them to pay the sum of P8,121.04 representing deficiency income tax for 1967 was issued on March 15, 1972. (Exhs. 11 1" & "2", pp. 9 & 22, BIR records.) These assessment notices were received by peti-

DECISimJ - CTA C~SE NO. 2578 - .6 - tioners on April 17, 1972. (Par. 2, Petition tor Review. ) For purposes of the prescriptive periods established by SectionG 331 and 332 (now Sections 313 and 319) .of the Nationz1l Inter�nal Revenue Code, an assessment is deemed made when the not 1ce is released, mailed or sent by the Com- missioner of Internal Revenue to the taxpayer. Failure of the ta~<:payer to receive the assessmat within the prescriptive period will not affect the validity of the assessment if it was mailed and released within said period. (Basilan Estates vs. Commif.Eioner of Internal Revenue, L-22492, September 5, 1967, 21 SCRA 17; Nava vs. Collector of Internal Revenue, L-19470, January 30, 1965, 13 SCRA 104: Republic vs. Alano, L-18865: September 28, 1964, 12 SCRA 24.) Her e , in the present case, the assessment notices were not only issued by respondent, but were also received by petitioners, within the fivG - year prescriptive period provided for by law. It is thus clear beyond doubt that the right of respondent to assess the deficiency income tax involved hGrein has not as yet prescribed. The decisive question involved in this case f � ! 1'"'1 .,::) c'_ I

DECISION - CTA CASE NO. 2578 -7 - is whether or not petitioners have been able to substantiate the deductions claimed by them in their 1966 and 1967 income tax returns, the Glsallowance of which by respondent resulted in the deficiency income ta:< asse;;smen�ts of P546. 26 and i'i8,121.04. At the outset, it should be stated that tax assessments arc presumed to be correct unless the contrary is shown, and the burden of proof rests upon the taxpayer to overcome this presumption. As a matter of fact, the burden of the taxpayer con- testing the validity o r correctness of an assess- ment is to prove not only that the Commissioner of Internal Reve nue is wr::ong but that he (tax- payer) is right. {Line Gu t:ierrez vs. Collector: of Internal Revenue, CTA Case No. 504, January 28, 1962; Esso Standard Fertilizer & Agricultural Chemical Co., Inc. (Philippines) vs. Commissioner of Interna~ Revenue, CTA Cases Nos. 1862, 1879, 1888, 1893 & 1896, May 30, 1980; Augusto L. Guanzon vs. Efren I. Plana, Commissioner of Internal Revenue, CTA Case No. 2821, August 27, 1980; Tan Guan vs. Court of Tax Appeals, L-23676, April 27, 1967 , 19 SCRA 903.) And if the tax- payer fails to appear and present evidence or

DECISION - CTA CASE NO. 2578 - .8 - proof in support of his allegations in his petition for review, conformably to the doctrine of the presumption in favor of the correctness of the tax assessment (Inter-provincial Auto-bus Co., Inc. vs. Collector of Internal Hevenue, L-6741, January 31, 1956, 98 Phil. 290; Collecto r of Internal Revenue vs. Bohol Land Transportation Co., L-13099 and 13462, April 29, 1960, 107 Phil. 905) ~ the Co u ~ t of Tax Appeals will merely sustain the assessment against t.he taxpayer. (Esso S tanda:rd Fert i lizer & Agricultural Chemical co., Inc. (Philip - pines ) ys. Commissioner of Internal Revenue, .�.YJ?E.?�> Even more, where deduction for expenses is disal lowed by the Commissioner of Internal Revenue, it is incurnben t upon the t:a.>;payer to prove that the expense is allowable under the law. The tax�- payer must show that the amount allegedly spent was actually spent and that it is an ordinary and necessary expense in car rying on the trade or business of the taxpayer. And if the deduction represents compensation for: services, the law fur t.he'r requires t hat (l) yayment must be for services .::t,::tually r:endered and ( 2) _the compen- sation paid must be reasonable in amount. (Sec. 70, Revenue Regulations No. 2; Sec. 30, '} ~ n .J -�- �,}

DECISION - CTA CASE NO. 2578 - 9- ~ational Internal Revenue Code.) Furthermore, any claim for deduction must be sub�;tantic:ted by recor.d showing- in detail the amount and nature of the expenses incurred. (Sec. 6&, Revenue Regulations No. 2.) The bare statement of a taxpayer that an item of expense is ordinary and necessary, unaccompanied by adequate evidence, has no weight with cl1e Commissioner of Internal Revenue or with the courts . (De Vera vs. Collectc~ of Internal Revenue, CTA Case No . 167, March 23, 1969; Basilan Es~ates vs. Commissioner of Internal Revenue, L-22494, September 5, 1967, 21 SCRA 17; see also Limpan Investment Corporation vs. Com- missioner of Internal P..evenue, CTA Case No. 2424, October 29, 1980.) Well-settled is the rule that income tax deduction is a matter of legislative grace and the burden of proof clearly showing the right to the claimed deduction is upon the taxpayer . (Hospital de San Juan de Dies vs. Commissioner of Internal Revenue, CTA Case No. 1693, August 29, 19&9.) On these points, the Supreme Court has reite- rated in clear and unequivocal terms, in the recent cases of Atlas Consolidated Mining & Development Corporation vs. Commis::ioner of

DECISION - CTA CASE NO. 2578 - 10 - Internal Revenue, L-26911, January 27, 1981, and Commissioner of Internal Revenue vs. Atlr ~ Consolidated Mining. & Development Corporation and Court of T ~x Appeals, L-26924, January 27, 1981, that: ~The principle is recognized that when a t axpayer claims a deduction, he must point to some specific provision of the statute in which that deduction is authorized and must be able to prove that he is entit.led to the deduction which the law allows. As previously adverted to, the law allowing expenses as deduction from gross income for purposes of the income tax is Section 30(a) (1) of the National Internal Revenue ~vhich allows a deduction of "all the ordinary and necessar�y expenses paid or i ncurred during the taxable year in carrying on any trade ox: business." An item of expenditure, in order to be ~eductible unde~ this section of the statute, must fal l squarely within its language. \'Je come, then, to the statutory test of deductibility where it is axiomatic that to be deductible as a business expense, three conditions are imposed, namely: ( l) the expense must be ordinary and neccsiary, (2) it must be paid or incurred within the "taxable year, and (3) it must be paid or in- curred in cariying in a trade or busi- lless. In addition, not or:ly must the taxpayer meet the business test, he must substantially prove by evidence or records the deductions claimed under the law, otherwise, the same will be disallowed. The mere alle- gzttion of the taxpayer tha t an item of expense is ordinary and necessary does not justify its deduction. In the light of these basic principles governing deductions from gross income and the 1 0'1 .t:)..

DECL . . CTA CAS~ UO. ?578 - 11 - special and affirmative defense of respondent that upon a~dit and investigation of the income tax returns filed by petitioners for the year s 1966 and 1967, petitioners were found to have failed to present or submit any documentary evidence and/or proof to support their deduc tions claimed, hence, assessment notices in the amoun l: of P546 . 26 and PB,l21.04 , respectively, were issued against them, we will now proceed to examine the evidence presented by them during i. : lr~ h(>!ld.n 9 of this case before this Court: and ti ~termine whether they have properly substantiated t heir claimed deduc t ions in their 1966 and 1967 income t. rP: returns to L'e entitled to deduct the same. Afte r all, the hearing before this Court par takes of a trial ~-e .!]g,Y� and the Com:: t is autha:i..zed to receive evidence, summon witnesses, and~ve both parties, the Government and the taxpayer, opportunity to p ~ esent and argue their sides, so that the true and coJ.:rect arr.ount of the tax to be collected may be determined .:tnd decided. (Collector of Internal Revenue vs. Batangas Transportation Company and Laguna- Tayabas Bus Company, L-9692, January 6, 1958, 102 Phil. 822.) For better understanding of t_,'} ' ' I"") /w , )

DECISION - CTA CASE NO. 25 78 - 12 - the case and easier appraisal of the evidence presented, attached hereto and made an integral par;t of this decision is lmnex "A" whiC'h consists of the list of the exhibits proffered by peti- tioners to substantiate their claimed deductions, showing, among others, the valu e all(\ 21r,oun t of Lhc expenses incurred. The deductions claimed by petitioners in their 1966 and 1967 income tax returns which wer e disallowed b y respondent are as fo ll ows: 1966 {p. 6, BIR records) 1. Income t ax pa id in 1965 ~ 110.49 2. Mes senger - clerk, persona l, 1,200.00 being salaried employee (hu sband) Total ~1,310 . 49 1967 (p. 19, BIR records) 1. Others El25,473.19 For 19 66, respondent correc t l y disallowed the deduction of income tax p a id in the amount of Pll0.49. Clearly, income tax is not allow- able as a deduction from gross income under Section 30 (c) (_1) (A) of tbe Nati onal Internal Revenue Code. The second item, which is salary paid to messenger-clerk Alfredo Salapatan (see itemized deductions,p. 1, BIR records), can not �_, (. ' I � ,;,_ '1

- .' DECISION - CTA CASE NO. 2578 - 13 - also be allowed as a deduction for failure of petitioner to present evidence for its justification. (See Formal Offer of Evidence.) Respondent's ~i s allow ance s for 1966 should therefore be sus- tained. In their 1967 income tax return (p. 15, BIR records) ..Pet i tioners claimed taxe n, interest, contribu t ions and others as deductible expenses. None of the first three items were disallowed. Only the expenses in the total amount of P25,473.19 itemized under No. 7 as "others" were not allowed on the ground that these "were unsupported." (See audit sheet, p. 19, BIR / r e c o r� d s . ) To substantiate these deductions, petitioners subm i tted the exhibits listed in Annex "A" of this De c i sion. (See attached annex; petitioners' memorandum, p. 117, CTA record s and Fo r mal Of f er of Ev idence.) An examination of the exhibits enumerated in Annex "A" will show that Exhibits "G", "G-1" ' . " H"' ",J"' " M.", "N", "0", P 11 11 11 Q" and "Z" pertain 1 to interest while "F", "F~l" and "F-2" refer to taxes paid. Since interests and taxes are not disputed and were allowed as deductions in the

- --- - DECISION - CTA CASE NO. 2578 �- 14 - year in question , the above-mentioned exhibits maybe disregarded. The same applies to Exhibits "V", "U -1." , "V", "V-1" and "AA" which are supporting papers for expenses incurred in 1965 and 1966 , which are not in issue. This leaves only Exhibits "I", "I<", "K-1", "K-2", "K-3", "L", "L-1", "T , I 11 ~\A-1" I "AA-2", "P...A�-3." and "AA-4" for the Court. to consider. Exhibit "I" is the certification of the Mandaluyong Police attesting to the loss of the following articles during the robbery committed at petitioner'~ residence on February 1, 1967: 1. 3 bottles of White Horse Whisky P 49.00 2. 1 National bread toaster 70.00 3. 1 Avegon radio transistor l20.00 4. 1 Chariot table clock 45.00 �rotal ?284.00* The certification indicates the robbery to have been committed on February lt 1967, yet petitioners claimed the s ame losses as deduct1ons in their 1966 income tax return at higher valuations than those in the certification. (See itemized *The total value per certification is Pl59.00 but the correct total should be ~284.00.

DECISION - CTA CASS NO. 2578 - 15 - deductions for 1966, p. 1, BIR r.ecords.) . As these losses were not disallowed in 1966, obviously they should no longer be deductible in 1967. Exhibits "L", "L-ln and "K", "K-1", which a.re notices from the Security Bank and Trust Co., debiting peti~:ioners savings accou i.t for a r e turned f raudulent check were offered by petitioners to prove losses of P5,666.27 which they claimed in their 1967 tax return. T. e mer e notice for~ returned fraudulent check is not sufficient to establish that said check was a loss. Additional evidence should have be en introduced to show that it wa a never recovered despite exhaustive efforts to collect. To be d educ tible, a l o~ s must be actually sustained during the taxat.le year 1 evi- denced by a cl Qsed and completed transaction, and not compensa t ed for by insurance or othe rwise. (Sec. 30Ll7 Lc7, National Internal Revenue Code.) The amount of P5,666.27 c annot therefore be allowed as a loss for 196 7 . Similarly not deductible are the bank charges pertaining to the returned fraudulent check in the amounts of ~2.74 and P23.94 evidenced by Exhibits "K-2" and "K-3", as it was not shown that the check was paid in connection with ~ }- 4 ~ r' i �J '�J 1

DECISION - CTA CASE NO. 25 7 8 - 16 -- petitioners' trade or business , any transac tio n entered into for profit or a casua2. t y l oss . (Sec . 30 f.d7 L.27, id .) Exhibit nrr " is a ce r tif ica tio n ma d e by Rosario Tibayan for rental payments for the years l964, 1965, 1966 and 1967 at P230.00 a month , on her apart~ent leased t~ petitioners located at 1085 i'Jashin9ton Str-eet where they operate6 a drugstore. (t.s.n., pp. 5-7 , hear ing on September 7 , 1979.) Inasmuch Gl.S it is uncontcst .: . thai: s:: ~d apartment was used mainly for ~til -o : 8rs' business in 1967, rentals amounting to J?:2,7~o.co (')!:J.'~S-� pending to one yea r 's r ent may be allow c~ as a deduction for 1967 . (See itemized deductions for 1966, p. 1, BI.R records; also t.�~.L., pp . 21- 22, hearing on Sep�tember 7, 1979 and E'\i'~1i bit "I" showing residence of petitioners at th~ time of robbery on February 1, 1967 to be nl corner Lerma and P. Cruz SLreela.) Exhibits "AA --1. 11 to 11 AA-3" are receipts from Ester Aniban issued to petitioners for rental payments on a lot space for the months of Junef July and another month in 1967 at PSO.OO a month. During t he hear ing of the ca se before th i s Court, �..;� ~) q ...J /~ .. ...,

DECISION - CTA CASE NO. 25 7 8 ~ 17 - petitioner Raul Gonzalez testified to their [enting a vacant space bes i de their house in Mandaluyong which was utilized as a garage for vehicles used to deliver drugs in c onnection with their drug- store business starting from 1965 to 1966, up to the time they left the place. ( t.s . n., pp. lC� J./, hearing on September 7, 1979.) As "proof of on- going transaction'', he also produced Exhibit ~AA-4" which is a receipt fur rental of the same space for Febru ry, 1971 paid on July 7, 1971. Since this was not controverted by respondent, rentals at PSO a month for one year in the amount of P600.00 may likewise be allowed as a deductible expense for 1967. In resume, petjtioners' deficiency income tax liabilities for 'hn years 1966 and 1967 are recomputed as follows: 1966 Net income per return ~ 9,781.93 Add: Unallowable deductions Income tax paid in 1965 P 110.49 Messenger-clerk, personal_l,200.00 Total disallowed __ 1 ' 310 ~ 49_ Ne t i ncome pe r dec ision P11,092.4 2 Less: Personal exemption P3,000.00 Additional exemption _4 1 000 �.9.2_ P7,0.QO.OQ

.. DECISION CTA CASE NO. 2578 - 18 - Net taxable income ~4,092.42 Income tax due thereon Less: Amount paid 188.00 Balance of tax due 1.07.00 Add: 18% maximum interest Total amount due and collectible 81.00 14.58 1967 Net income per retur n Pi 2 ,9:.. 9 .2 4 Add: Unallowable deductions Others l'l25,473.19 Less : Allowed deduct i ons 1. Rent-drugstor e, clinic, shop P2,7GO.OO 2. Ren t.-�gar age _!: 60.Q. 00 --~2?0. OQ. space Total disallowed � Ei2? _J_l;_~ .19 Net income per decision P35,032.43 Lns s: Personal exemption ~ 3,000.0 0 Additional exempl inn Net taxable income _!LOOO.OO P. 7,000.00 ~28,032.43 Income tax due thereon ~ 5,890.00 - Less: Amount paid 353.00 Balance of tax due Add: 18% maximum in t erest !l 5,537.00 Total amount due and collectible __ 9...;. 96.66

'' D:CC ISION - CTA CASE NO. 2578 - 19 - We sec no significance in petitioners ' .:lllsgation that on April 2, 1973 they "ava iled of the tax amnesty decreed by th~, Pr 2s ident of the Philippines, their payment being evidenced by Official Centr a l Bank Receipt No. 271611 E, dated Apri l 2, 1973; and tha t by virtue of such payme nt and as decreed by the P:esident, payment under the tax amnesty could have cured whatever tax deficiencies, i f any, that may have been as9 cns~ ~ ~gainst petitioners." {par . 6, Petition fo r Rev iew . ) . On \:his point, responden t. co rre ctly obse rved that petitioners could no~ avail o f the tax amnesty c.nder PreBid e ntial Del..!tee No. 23, z.s amended ~y Pres idential Decr ee No. 67, for the simple reason that under the express provision of Section 4 of Revenue Regulations No. 15- 72, dated December 11: 1972, implementing t.he above- mentioned decrees, a taxpayer cannot avail of tbe immunities of thf-' said am nesty when a noti~i: Bureau of Internal Re~1ue Efior to the effectivity of Revenue Regulations No. 8-72, (the first i mpl ement i ng regulations) ,which date was .Qp_!:_?ber 20, . 1972. In this case the notice of assessment being contested by petitioners was issued on r-tar_ch 15, ..

DECISION - CTA CASE NO. 2578 - 20 - 1972 or seven months before the effectivity of Pr 8sidcntial Decree No. 23, as amended. And that prt itioners, likewise, could not avail of the benefits of the tax amnesty under Presidential Decree No. 68, dated November 24, 1972, Re- "Condonation of Delinquent Tax Accounts and Tax Amnesty on Contested Assessments Subject to Ccr tain Conditions," for the obvious r C c;....~ �� L . ... the deadline for payment of the reduced assessments c: . ...; __ ._ 'be said decree was February 28, 197 3, whereas petitioners hereon paid only on April 2, 1973. (paLs. 11 & 12, special and affirmative defensea, Answer.) Nor do we find tenable the contention of petitioners that since they have received tax refunds from the office of respondent and have been issued tax clearances on their travels abroad, petitioners are absolved, under the p~inciple of e s toppel, of their tax liab i lities. Settl e d is the rule that the Government i s not estopped by the mistakes of its officers or agents. (Bachrach Motor Co. vs. Unson, 50 Phil. 981; Pineda, et al.. vs. Court of First Instance of Tayabas, et al., and Commissioner of Internal Revenue, L-23676,

DECISION - CTA CASE NO. 2578 - 21 - Ap1~il 27, 1967, 19 SCRA 903.) . As elucidated by the Supreme Cour t in Vera vs. Fernandez, L-31364, Hi:u::ch 20, 1979, G9 SCP.l\ 1.99, ta.>~es are the life- bl ood of the Government and their prompt and certain availability are imperious need. Upon taxation depends the Go�.;ernment's ability to cerve the people for whose benefit taxes are collected. To saf egu ard such inte r est, neglect or omission of government officials entr uste1 with the assessment and coll ection of taxes should not be allowed to bring harm or detriment to the people, in the same manner as private persona mai be made to sutfer individual l y on account of his own negligence, the presumption b�1ing that tbey take good c.J.re of their personal affair. This should not hold true to government officials with respect to matters not of their own personal concern. This is the philosophy behind the governrnenL 1 3 ~~cept ion, as a gen eral rule, from the operation o� the principle of estoppel. (See also Atlas Consolidated Mining and Development Corporation vs. Commissioner of Internal Revenue, L-26911 and Commissione r of Internal Revenue vs. Atlas Consolidated Mining and Development Corporation and Court of Tax

DECISION - CTA CASE NO. 2578 -� 22 - Appeals , L-26924, J anuary 27, 1981.) No~etheless, as explained by respondent, tax r efunds which are allowed by the Bureau of Internal Re:v' .~ �n1e on the fa ce of the income tax returns are c1 v;� l.t with s c..~~a rately and that re.:::und checks are issued before an investigation is made on the income tax returns filed by taxpayers. And the tax clearances issued by respondent in favor of petitioners are not conclusive proofs that peti- tioners have no tax deficiencies or liabilities, for such clearances were issued before the de- iciency tax was discovered and before the ~~~e ss ment notices wer e sent by responden t ~~~~ ~~G pe r field investigation and audit. (pars. 9 ~ 10, special and affirmative defenses, Answer.) Accordingly, petitioners spouses Raul M. Gonzalez and Pacita T. Gonzalez are he reby ordered to pay the amounts of P95.58 and P6,533.66, or a total of ~6, 629.24, t.o respondent Commissioner of Internal Revenue ac deficiency income tax and interest for the years 1966 and 1967, plus the surcharges and interest which have accrued there- on incident to delinquency, pursuant to Section 51(e) _of the National Internal Revenue Code, as amended. The compromise penalty of ~300.00 for '.: ' I ') ._l ,_; ,)

DECISION �� CTA CASE NO. 2578 - 23 - each year suggested by respondent in his defi- ciency assessments should not however be imposed and collected without the agreement and conformity of petitioners. And it does not appear that pe Litioners accepted the imposition of the corn- promise amounts. (Wonder Mechanical Engineering Corporation va. Court of Tax Appeals, L-22805 & L-27858, June 30, 1975, 64 SCRA 555~ see also Collector of Internal Revenue vs. University of Santo Tomas, L-11274 & L-11280, November 28, 1958, 104 Phi l. 1062; Philippine I n t e rnational Fair, Inc. vs. Collector of Internal Revenue, L-12928 & 12932, March 31, 1962, 4 SCRA 774.) ~-IHEREFORE, the decision appealed from is modified as indicated in the above opinion of the Court. With costs. SO ORDERED. Quezon City, Metro Manila 1 July 23, 1981. ~~~~- - .;., J AMAN 'l'E ... ILLERVV Presiding Judge CONCUR: /) / --1�/ ; cJt)tZU-~ ~~ )> . ALF~. REYES , ( / Associate Judge ! t J I t ...... .. ; . 1

EXH. NO. DA'I'E PAYEE PA..T-<.TIClJl.ARS M:DUNT CT......li..SSIFICJ' ..:ON 1966 1967 F, F-1 & l-31-68 City Treasurer Payment for municipal 1icens0s F-2 for 1966 & 1967 ~ 54 }? 54 tax::s G~ G-1 & 2-20-78 sss sss Ledger & pa:::;::5l:x::x:>k cerli- H fication of interest payment for 1967 ~2,382.40 i:r~<zrest I 2-20-78 Certification of Mandaluyong Police Station of robbery com- ,C.,.0_. mitted in residence of peti- tioners to show losses: ,. c, 3 btls. of whisky - ~49 1 Nat ' l bread toaster 70 '""" ' 1 Avcgon table radio :.20 1 Chariot table clock 45 !? 284.00 losses J 6-7-78 Industrial Statement of account of Finance Corp. interest charges !:1 210.16 il 881.93 interest K & K-1 11-10-67 Debit meJTO for returned fraudulent check p 5,666.27 losses K-2 11-10-67 Debit merro for charges on above check p 2.74 bank charges K-3 1-16-68 Debit n~rno for collection ch0.rges on above check p 23.94 bank charges r�

EX.'.-!. NO. D.\TE PAYE� PARTICULARS AI>KY.R.JT CL!\SSIFICP.TION 1966 1967 L & L-1 Security Ban~ & Trust Co. pass- lx::Dk of Rafael Gonzalez showing al:ove charges M, N & 0 Records of United General Industr1es showing interest pay- ments of petitioners which were withdrawn as manifested in open court on Sept. 7, 1979, t.s . n . , . p . 25 i n te r e s t .~ p &Q 3- 30-67 Rarron G. Somes Receipt signed by Ranon G. Somes '.-...t-_.~,, (.,.- for inten~s t paid to him by petitioner for accrued interest and OL~er miscellaneous expenses incurred in connection with their purchase of a house and lot in fvJ' .andaluyong, Rizal frOi11 the former ttl, 28 2. 00 interest T 2-18-75 ..~osar io Tibaya'1 Certification as to payment of rentals at 1085 Washington St., S~Ttpaloc, ~~ila which was used by Dra. Gonzalez in connection with her businesses for the years 1964, 1965, 1966 and 1967 ~2,760.00 fi2,760.00 rent U & U-1 lJ c 1::-29-65 Vouchers for payment of sala:y to k1astac io Espe for Nov. 1965 ~140 Dec. 1965 140 salar y (""~- #

&'\H. NO. DATE PAYEE PA..R:TICUTJ-RS N�XX.JNT CLASSIFICATION 1966 1967 v& 3-66 Vouchers for payment of salary \ ]- 1 3-26-65 to Eduardo Rosal as follovJs: v March 1966 fl250.00 V-1 March 1965 250.00 salary interest z 10-22-67 Sara_o f.i.-:Jtors, Inc. Receipt for do.vr.-payr:v2nt on jeep to prove pay-rrcnt of interest on installments A�:.,_ 7-7-66 Ester Aniban Re'lt ..=cr.� garage space for t �...:, /eticles used fo:c deliveries in connection with dru.:;storc ~ -.,; business of petitioners for ~ 50.00 July 1966 -1 li,A-1 7-10-67 -- de - - do - for J�une 1967 I'!SO.OO Pl50.00 ren:: AA-2 8-lC-67 for July 1967 50.00 N-1-3 ll-10-67 - do - - 60 - for - 1967 - 50.00 AA-4 7-7-71 - do - - do - for Feb. 1971 ~50.00 -do- - do - ~