ROBERT CHRISTOPHER M. CARMONA, doing business under the name SAGA CASTING AND PRODUCTIONS v. COMMISSIONER OF INTERNAL REVENUE

RFPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY FIRST DIVISION ROBERT CHRISTOPHER M. CTA CASE NO. 8484 CARMONA, doing business under Members: the name SAGA CASTING AND DEL ROSARIO, Chairperson, PRODUCTIONS, UY, and MINDARO-GRULLA, JJ. Petitioner, Promulgated: -versus - A_--- ----_, JAN 20 2015 ~ q�. L{'J.Q�~� COMMISSIONER OF INTERNAL ------------- REVENUE, R"pond,nt. x- - - - - - - - - - - - - - - - - - - - - - DECISION DEL ROSARIO, PJ.: This is a Petition for Review filed on May 7, 2012 by petitioner Robert Christopher M. Carmona, doing business under the name Saga Casting and Productions, seeking to set aside a decision (by inaction) of respondent Commissioner of Internal Revenue on petitioner's protest of the Final Assessment Notice (FAN) dated July 25, 2011 and the cancellation and withdrawal of alleged deficiency income tax and value-added tax (VAT) assessments for taxable year 2007 in the aggregate amount of THIRTY TWO MILLION NlNE HUNDRED EIGHTY ONE THOUSAND FOUR HUNDRED FIFTY EIGHT PESOS and 90/100 (P32,981,458.90), as shown in the FAN. THE PARTIES Petitioner is the owner of Saga Casting and Productions, a sole proprietorship engaged in the business of managing corporate affairs and

DECISION Robert Christopher M. Carmona, doing business under the name ofSaga Casting and Productions vs. Commissioner of1nternal Revenue CTA Case No. 8484 Page 2 of9 events, duly registered with the Department of Trade and Industry as such, with business address at Unit 305, No. 3 Brixton Street, Barangay Kapitolyo, Pasig City. 1 Respondent is the Commissioner of Internal Revenue (CIR), who is duly appointed and empowered to perform the duties of her office, including, among others, the duty to act upon protests against preliminary and final assessments, as provided by law.2 THE FACTS On July I, 2009, respondent issued a Letter Notice (LN) No. 041- RLF-07-00-000153 to validate the discrepancies in the reported sales of petitioner with that of the purchases of his customers, as shown below: Per Summary List ot' Purcl;ases s~b~1itted I 54, 047,436.36 I by your customers _------------~-~--L+..-.-.------ 14,491,232.25 Sales per Tax Returns tiled 39,556,204.11 Under-declaration on Sales -~-~-- - � � Percentage (%) of Discrepat)(;j 73.19 ___ - , ---� �--~- Attached to the said LN were the Details of Taxpayer's Customer Records.4 On September 25, 2009, respondent issued Letter of Authority No. 000472065 and a Notice of Informal Conference6 for petitioner's failure to respond to the LN. As a result of said investigation, petitioner received on June 3, 2010 a Preliminary Assessment Notice (PAN) dated March 29,2010, with attached annexes described as "Details of Discrepancies"7 and "Details ofTaxpayer's Customer's Rccords"8 issued by respondent.9 1 Par. 3, Summary of Admitted Facts, Joint Stipulation of Facts and Issues (JSFI); p. 239, CTA Docket. 2 Par.4, Summary of Admitted Facts. JSFI; p 239, CTA Docket. 3 Exhibit "A". 4 CTADocket,pp. 1275-1276. 5 CTA Docket, p. 1664. 6 CTA Docket, p. 1665. 7 CTA Docket, pp. 1282-1283. 8 CTA Docket, p. 1284. 9 Exhibit "C", CTA Docket, pp. 1281-1283.

DECISION Robert Christopher M ('armona. doing business under the name of'Saga ( 'asting and Productions vs. Commissioner of1nternal Revenue CTA Case No. 8484 Page 3 of9 On May 12, 201 1, respondent issued an Amended PAN, with attached "Details of Discrepancies" which reduced the subject assessment. 10 On August 11,2011, petitioner received a FAN 11 dated July 25,2011, assessing petitioner of the following deficiency taxes for the year 2007: I. Value-Added Tax P.18, I06,645.69 II. Income Tax 14,874,813.21 Total amount due .P.3 2,981 ,458.90 On September 9, 2011, petitioner, through counsel, filed his protest12 against the said FAN, pursuant to Section 228 of the NIRC of 1997, as amended. The CIR failed to act on petitioner's protest within the 180-day period from November 8, 201 I, the date when petitioner submitted the documents m. support ofh'ts protest. 1�1 On May 7, 2012, petitioner filed the instant Petition for Review. In her Answer, 11 respondent em. raised the following special and ' affirmative defenses: a) The deficiency VAl assessment in the amount of P18,106,645.69 and deficiency Income Tax assessment in the amount of P14,874,813.21 were issued in accordance with law and suffers no infirmity; b) Verification disclosed that the discrepancy in the reported sales of petitioner and purchases of his customers was revealed by the Reconciliation of Listing for Enforcement and Third Party Matching - BOC Data Program as declared in petitioner's tax returns; hence, assessed in accordance with Sections 31, 32, 106 and 108 of the NIRC of 1997, as amended. Revenue Memorandum Order No. 32-2007 and Third Party Matching-Bureau of Customs Data Program; c) Revenue Memorandum Order No. 17-2009 covers the income tax and VAT liabilities of individual and corporate taxpayers who were issued �1 CTA Docket, pp. 68-70. 11 Exhibit "H", CTA Docket, p. 1460. 12 Exhibit "1", CTA Docket. p. 1463. 13 Exhibit 'T', CTA Docket, p. 1533. 14 CTA Docket, pp.194 to 203.

DECISION Robert Christopher M. ('armona. doing business under the name of'Sagu ( 'osting and Productions vs. Commissioner of1nlernul Revenue CTA Case No. 8484 Page 4 of9 Letter Notices based on TRS and Consolidated RELIEF-SLSP and TPM- BOC Data Programs covering taxable years 2007; d) Contrary to petitioner's assertion, there is no forum-shopping in the instant case; e) All presumptions are in favor of the correctness of tax assessments; and, f) Failure to present proof of error in the assessment will justify judicial affirmation of said assessment. After the Pre-Trial Conference on August 10, 2012, 15 the parties filed their Joint Stipulations of Facts and Issues 16 on August 30, 2012, After approving the parties' Joint Stipulations of facts and Issues, the Court issued the Pre-Trial Order17on October 12,2012. Trial ensued, wherein the parties presented their respective evidence. Petitioner presented Carmi na L. Alba; 18 Derwin D. Evangelista; 19 and Robert Christopher M. Carmona,20 as his witnesses, and his documentary evidence, which the Court admitted in its Resolution21 dated May 12, 2014, except for Exhibits "1", "J", "1.", ''0'', "C)-1", "0-2'', "P'', "P-1", "P-2", "Q", "Q-1", "Q-2 ""' ' ""RY"' "' ""SY' "-1""T' ' "''/"."l' ,J""Z".-l1J"- 1" "V" ""AV-A1-"1'""' W"'C" C""W' "-1C"C' -"IW"'-' 2""CC"' -X2""' "X-1 ' "'AA'" ' "DD", "DD-1", "DD-2", "l:E", "EE-1", "FF" and "FF-1". On June 3, 2014, respondent presented her witness, BIR Revenue Officer IV, Ma. Corazon P. de Jesus, 22 and her documentary evidence, marked as Exhibits "1" to "24", inclusive of sub-markings, which were admitted in the Reso1ution 20 dated July 31,2014. The parties having filed their respective memoranda within the extended period granted by the Court/4 the case was deemed submitted for decision on July 21, 2014 25 15 CTA Docket, p. 236. 16 CTA Docket, p. 238. 17 CTA Docket, pp. 264 1o 274. 18 Minutes of Hearing dated May 9, 2013. CTA Docket p. 499. 19 Minutes of Hearing dated January 30. 2014, CTA Docket p. 1233. 20 Minutes of Hearing dated October 24.2013, CTA Docket p. 1029. 21 CTA Docket, pp. 1729 to 1730. 22 Minutes of Hearing dated June 3, 2014, CTA Docket p. 1758. 23 CTA Docket, p. 1778. 24 CTA Docket, pp. 1796 to 1825 & 1827 to 1834. 25 CTA Docket, p. 1836.

DECISION Robert Christopher M. C'armona, doing husiness under the name ofSagu C'asling und Productions vs. Commissioner qf'lnternul Revenue CTA Case No, 8484 Page 5 of9 ISSUES As stipulated by the parties, the following are the issues 26 to be resolved: I. Whether the second I>A/investigation against petitioner for the same taxable year is valid and legal? 2. Whether the assessment/s made against petitioner is valid and legal? 3. Whether the required investigation was conducted by the revenue examiners of the Bureau ofinternal Revenue pursuant to its own relevant issuances? 4. Whether petitioner incurred any alleged VAT deficiency for taxable year 2007? 5. Whether or not petitioner is liable for deficiency Income Tax in the amount or !ll4,874,813.2I and deficiency VAT in the amount of 1218, I06,645.69 for the calendar year 2007? 6. Whether or not petitioner was informed of the law and the facts upon which the assessments were based? 7. Whether or not the assessments were made in accordance with law? The foregoing issues boil down to the principal issue of: "Whether or not petitioner may be held liable for deficiency income tax and VAT in the aggregate amount of P32,981,458.90, inclusive of surcharges, interest and penalties for taxable year 2007?" THE COURT'S RULING The Court shall first resolve the issue of whether or not respondent CIR issued the assailed FAN within the three-year prescriptive period. 26 CTA Docket, p. 238 . .I SF!.

DECISION Robert Christopher M. ('armona, doing husiness under the name o,/Sago Costing and Productions vs. Commissioner of1nternol Revenue CTA Case No. 8484 Page 6 of9 Pursuant to Section 203 of the National Internal Revenue Code (NIRC) of 1997, as amended, respondent CIR has three (3) years to assess and collect an internal revenue tax, viz: "SEC. 203. Period o/Limitution Upon Assessment and Collection. - Except as provided in Section 222, internal revenue taxes shall be assessed within three years after the last day prescribed by law for the filing of the ��cturn, and no proceeding in court without assessment for the collection of such taxes shall 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-year period shall be counted from the day the return was filed. For purposes of this section, a return is filed before the last day prescribed by law for the filing thereof shall be considered as filed on such last da) .--(Emphasis supplied) Clearly, the three-year period within which an assessment may be made shall be reckoned ll�om the period fixed by law for the filing of the tax return or the actual date of filing, whichever is later. The government is mandated to assess deficiency 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 oftime. 27 To determine the last day for respondent CIR to assess petitioner for deficiency income tax and VAT for calendar year ending December 31, 2007, the Court shall first ascertain the date when the three-year prescriptive period should be reckoned. Pursuant to Section 74 of the NIRC of 1997, as amended,28 petitioner filed his Annual income Tax Return (ITR) for taxable year ending December 3 1 , 2 0 0 7 o n A p r i l l 1 , 2 0 0 8 . 29 27 Commissioner of Internal Revenue vs. FMF Development Corporation, G.R. No. 167765, June 30, 2008. 28 Sec. 74. Declaration o/lncome Toxfiu� Individuals�- (A)In General. Fxcept as otherwise provided in this Section, every individual subject to income tax under Sections 24 and 25(A) of this Title, who is receiving self-employment income, whether it constitutes the sole source of his income or in combination "ith salaries. wages and other fixed or determinable income, shall make and file a declaration of his estimated income for the current taxable year on or before April 15 of the same taxable year. Xxx (B) Return and Payment of Estimated Income Tax by Individuals. - xxx The fourth instalment shall be paid on or before April 15 of the following calendar year when the final adjusted income tax return is due to be filed.

DECISION Robert Christopher M ( 'armona, doing husiness under the name ofSagu ( 'usling and Producrions vs. Commissioner of'Jnlernal Revenue CTA Case No. 8484 Page 7 of9 On the other hand, petitioner tiled his Quarterly VAT Returns for taxable year 2007 pursuant to Section 114 of the NIRC of 1997, as amended/0 on the fi:Jllowing dates: Taxable Quarter Date of Filing 1sl <)uarter. CY 2007 - 24-April 200731 - - -I --- - 2"' Quarter. CY 2007 31 July 200F - 3.'d Quarter. CY 2667 - ---~ .. --�- 24 October 200733 41h Quarter. CY-2067 ---- - 31 January 200834 Thus, applying Section 203 of the NIRC of 1997, as amended, and absent any waiver or the statute of limitations executed by petitioner, the BIR had the following dates within which to issue the FAN, Assessment Notice Nos. F-041-LNTF-07-VT-060 and F-041-LNTF-07-IT-060 and Details of Discrepancy fi:Jr purposes of assessing petitioner for deficiency income tax and VAI lor taxable year ending December 31, 2007: Income Tax Taxable Due Date Date of .... ---���� Date of Date of Year Filing of Issuance of Petitioner's I for Filing Petitioner's Last ay for Receipt of Income Tax Issua lCe of FAN of Income Return the FAN Tax B t's Deli ency Return In com eTax with BIR Asse ment 2007 I 15 April 11 April 15 April July 25, 2011 August 11, 2008 2Oil 2011 2008 --- ~ -�-�--�- -- 29 Exhibit "GG", CTA Docket. p. 1660. 30 SEC. 114. Return and Payment of Value-Added Tax.- (A)In General. - Every person liable to pay the value-added tax imposed under this Title shall tile a quarterly return of the amount of his gross sales or receipts within twenty-five (25) days following the close of each taxable quarter prescribed for each taxpayer: provided. however, That VAT-registered persons shall pay the value-added tax on a monthly basis. 31 BIR Records, p. 194. 32 BIR Records, p. 150. 33 BIR Records, p. 32. 34 BIR Records, p. 30.

DECISION Robert Christopher Al. Carmona, doing business under the name of'Soga Casling and Pmductions vs. Commissioner of' Internal Revenue CTA Case No. 8484 Page 8 of9 Value-Added Tax Taxable I ue Date Date of Last lay for Date of Date of Quarter f r Filing Filing of Jssua nee of Issuance of Petitioner's Petitioner's Receipt of of Quarterly Bl R's FAN ( uarterly Defi iency the FAN VAT VAT Return V \T August II, Return Asse: sment 2011 ' ith BIR 151 Quarter, 5 April 24 April I 25 l..pril CY 2007 2007 2007 2 II 0 2no Quarter, 25 July �--� CY 2007 2007 31 July 2007 I 31 Ju y 2010 3ro Quarter, ---- 22 October I 2S 0 ;- July 25, 2011 CY 2007 2: October :Iober 2007 2007 2 II 0 41h Quarter, . ... ----- CY 2007 2: January 31 January I 31 J nuary 2008 2008 2 Ill ---- -------- -�---- Based on the foregoing illustration, the three-year prescriptive period to assess petitioner for deficiency income tax and VAT for the year 2007 under Section 203 of the NIRC of 1997, as amended, had already prescribed. Having thus prescribed, respondent em. had no more authority to assess petitioner for deficiency income tax and VAT for the year 2007. As a consequence, the FAN dated July 25, 2011, with attached Assessment Notice Nos. F-041-LNTF-07-VT-060 and F-041-LNTF-07-IT-060 and Details of Discrepancy arc void for having been issued beyond the three- year prescriptive period provided by law. With the above conclusion thus reached, the Court finds no need to discuss the other issues raised by the parties for being moot and academic. WHEREFORE, premises considered, the instant Petition for Review is hereby GRANTI<:D. Accordingly, the Final Assessment Notice dated July 25, 2011 and the attached Assessment Notice Nos. F-041-LNTF-07-VT-060 and F-041-LNTF-07-IT-060 assessing and demanding from petitioner the payment of deficiency income tax and VAT in the total amount of P32,981,458.90 for the taxable year 2007 are hereby CANCELLED and WITHDRAWN.

DECISION Robert Christopher M Carmona, doing business under the name ofSaga Casting and Productions vs. Commissioner ofInternal Revenue CTA Case No. 8484 Page 9 of9 SO ORDERED. Presiding Justice WE CONCUR: r. �. ~�~~ 0 :.r- NN�.. M&.;~ . 6 a-wU... � MINDARO-GRULLA ER~P.UY Associate Justice Associate Justice CERTIFICATION Pursuant to Section 13 of Article VIII 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