FORT BONIFACIO DEVELOPMENT CORPORATION v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY SECOND DIVISION FORT BONIFACIO Petitioner, CTA CASE NO. 10566 DEVELOPMENT CORPORATION, Members: -versus- RINGPIS-LIBAN, Chairperson, MODESTO-SAN PEDRO, and FERRER-FLORES, JJ Promulgated: ;N~~~~~S~~~~~~~E, l;' }.::,;,/ Respondent. C\L \~;')I t�v )( - - - - - - .- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - ~ - - - - - - - - - )( DECISION FERRER-FLORES, J.: The Petition for Review prays for the Court to order the cancellation and withdrawal of respondent's assessment against petitioner for alleged deficiency value-added ta)( (VAT) for the period January 1, 2014 to June 30, 2014, in the total amount of P656,446,244.25, inclusive of interest. 1 THE PARTIES Petitioner Fort Bonifacio Development Corporation is a domestic corporation, duly organized and e)(isting under Philippine law with office address at 2/F Bonifacio Technology Center, 31st Street comer 2nd Avenue, Bonifacio Global City, Taguig City, Philippines. It is primarily engaged in the development of a 440-hectare area in Fort Bonifacio for residential, commercial, business, mi)(ed development, institutional, recreational, tourism, sports, amusement, people movers, security systems, and other purposes, and it is registered with the Bureau of Internal Revenue (BIR) under Ta)(payer Identification Number (TIN) 004-707-554-000, and with the 1 Philippine Economic Zone Authority (PEZA)2 1 Statement ofthe Case, Pre-Trial Order dated September 12,2022, Docket- Vol. 2, p. 723. Par. 1.1, Admitted Facts, Joint Stipulation ofFacts and Issues (JSFI), Docket - Vol. 2, p. 695.

DECISION CTA Case No.10566 Fort Bonifacio Development Corporation vs. Commissioner ofInternal Revenue Page 2 of36 Respondent is the duly appointed Commissioner of Internal Revenue (CIR) vested under the appropriate laws with the authority to carry out the functions, duties and responsibilities of his office, including, inter alia, the power to decide disputed assessments and to cancel and abate tax liabilities pursuant to the provisions of the National Internal Revenue Code (NIRC) of 1997, as amended, other tax laws, and rules and regulations. He may be served summons, pleadings, and other processes of this Court at his office at the 5th Floor BIR National Office Building, BIR Road, Diliman, Quezon City.3 ANTECEDENTS (ADMINISTRATIVE LEVEL) Petitioner received the Letter of Authority (LOA) No. eLA201100086820 dated October 3, 2014 from the BIR Large Taxpayers Service (LTS),4 authorizing Revenue Officers (ROs) Margie Padre, Ivy Claudette Puno and Group Supervisor (GS) Mariesol Girang to examine petitioner's books of accounts and other accounting records for VAT for the period January 1, 2014 to June 30, 2014, signed by Officer-In-Charge (OIC) - Assistant Commissioner of the Large Taxpayers Service, Nestor S. Valeroso. 5 Subsequently, on March 17, 2017, petitioner received the Preliminary Assessment Notice (PAN) dated March 16, 2017 - from the LTS, proposing to assess petitioner for deficiency VAT in the total amount of !>657,831,579.82, inclusive of interests and compromise penalties, for January 1, 2014 to June 30, 2014.6 On April 10, 2017, petitioner then received the Formal Letter of Demand (FLD) dated April 10, 2017.7 The FLD assessed petitioner alleged deficiency VAT for the first semester of 2014 in the total amount of !>664,868,918.41, inclusive of interests and compromise penalties, broken down as follows: 8 Tax Type Basic Tax Due Interest Total VAT 428,104,763.97 236,689' 154.44 664,793,918.41 Compromise Penalties 75,000.00 Total 75,000.00 664,868,918.41 Par. 1.2, Admitted Facts, JSFI, Docket- Vol. 2, p. 696. 4 Exhibit "P-4", Docket- Vol. 2, pp. 884 to 886; Exhibit "R-1 ", BIR Records (Exhibit "R-8"), p. 3. Par. 1.3, Admitted Facts, JSFI, Docket- Vol. 2, p. 696. !d.; Exhibit "P-5", Docket- Vol. 2, pp. 887 to 905; Exhibit "R-4", BTR Records (Exhibit "R-8"), pp. 311 to 330. Exhibit "P-6", Docket- Vol. 2, pp. 906 to 927; Exhibit "R-5", BIR Records (Exhibit "R-8"), pp. 334 to 355. Par. 1.5, Admitted Facts, JSFI, Docket- Vol. 2, p. 696.

DECISION CTA Case No .. 10566 Fort Bonifacio Development Corporation vs. Commissioner ofInternal Revenue Page 3 of36 Thereafter, on May 10, 2017, petitioner filed its letter dated May 9, 2017 (Request for Reinvestigation) with the BIR.9 On June 1, 2021, respondent issued the Final Decision on Disputed Assessment (FDDA), which was received by petitioner on June 2, 2021. 10 The FDDA assessed petitioner with alleged deficiency VAT for the period from January 1, 2014 to June 30, 2014 in the total amount of P656,446,244.25, inclusive ofinterest, broken down as follows: 11 I Tax Type Basic Tax Due Interest Total I 316,098,785.16 340,347,459.09 I VAT 656,446,244.25 I PROCEEDINGS BEFORE THIS COURT The present Petition for Review was filed on July 1, 2021. 12 Respondent then filed his Answer on November 29, 2021,13 In the Resolution dated December 16, 2021, 14 the case was referred to mediation at the Philippine Mediation Center-Court of Tax Appeals (PMC- CTA), and the parties were ordered by the Court to immediately proceed and to personally appear or through their authorized representative at the PMC- CTA on February 10, 2022. The PMC-CTA, however, later issued the Back to Court Report on March 1, 2022,15 stating that mediation was refused by petitioner. Respondent then transmitted the BIR Records of the present case on May 27,2022. 16 The Pre-Trial Conference was set and held on June 23, 2022. 17 Prior thereto, Petitioner's Pre- Trial Brief was filed on June 20, 2022, 18 while \ Exhibit "P-7", Docket- Vol. 2, pp. 928 to 937. 10 Exhibit "P-8", !d. at 938 to 942; Exhibit "R-7", BIR Records (Exhibit "R-8"), pp. 773 to 782. 11 Par. 1.6, Admitted Facts, JSFI, Docket- Vol. 2, p. 697. 12 Docket- Vol. I, pp. 6 to 38. 13 !d. at 275 to 295. 14 !d. at 297 to 298. 15 !d. at 311. 16 Ex- Parte Compliance dated May 27,2022, Docket- Vol. I, pp. 316 to 317. 17 Resolution dated March 14, 2022, Docket- Vol. I, pp. 309 to 31 0; Minutes of the hearing held on, and Order dated, June 23,2022, Docket- Vol. I, pp. 346 and 353 to 355, respectively. 18 Docket- Vol. I, pp. 324 to 335.

DECISION CTA Case No. 10566 Fort Bonifacio Development Corporation vs. Commissioner oflnternal Revenue Page 4 of36 respondent submitted his Compliance on June 21, 2022,19 attaching his Pre- Trial Brief20 In the meantime, on June 28, 2022, petitioner filed its Urgent Motion to Suspend Collection of Tax Liability ("Urgent Motion ''),21 to which respondent failed to file his comment.22 At the hearing held for the said Urgent Motion on July 21, 2022, petitioner presented the testimony of its Comptroller, Ms. Anna Lisa P. Mesina.23 Subsequently, petitioner filed its Formal Offer ofEvidence (In support of Petitioner's Urgent Motion to Suspend Collection of Tax Liability ["Urgent Motion"}) on August 5, 2022,24 to which respondent filed his Comment (On Petitioner's Formal Offer of Evidence dated 5 August 2022) on August 10,2022.25 On August 16, 2022, the parties filed their Joint Stipulation of Facts and lssues,26 which was admitted and approved by the Court in the Order dated August 25, 2022,27 thereby deeming the termination of the Pre-Trial. The Pre-Trial Order was then issued on September 12,2022.28 Trial ensued, with both parties presenting and offering their respective documentary and testimonial evidence. Petitioner offered the testimonies of the following individuals, namely: (1) Ms. Winnie C. Ramos,29 petitioner's Assistant Tax Manager; (2) Ms. Mesina,30 petitioner's Comptroller; and, (3) Mr. Joel M. Ganalon,31 the Court-commissioned Independent Certified Publie Accountant (ICPA).32\. 19 Docket- Vol. I, pp. 338 to 339. 20 !d. at 341 to 344. 21 !d. at 378 to 395. 22 Records Verification Report dated August 30, 2022 issued by the Judicial Records Division of this Court, Docket- Vol. 2, p. 721. 23 Exhibit "P-26", Docket- Vol. I, pp. 359 to 372; Minutes of the hearing held on, and Order dated, July 21, 2022, Docket- Vol. 2, pp. 499 to 50 I. 24 Docket- Vol. 2, pp. 505 to 513. 25 Id. at 716 to 718. 26 !d. at 695 to 703. 27 !d. at 720. 28 !d. at 723 to 732. 29 Exhibit "P-18", Docket- Vol. I, pp. 246 to 263; Minutes of the hearing held on, and Order dated, September 22, 2022, Docket- Vol. 2, pp. 747, and 749 to 750, respectively. . 30 Exhibit "P-26", Docket- Vol. I, pp. 359 to 372; Minutes of the hearings held on, and Orders dated, September 22, 2022 and January 24, 2023, Docket- Vol. 2, pp. 747, 749 to 750, 858, and 861 to 862, respectively. 31 Exhibit "P-19", Docket - Vol. 2, pp. 832 to 850; Minutes of the hearing held on, and Order dated, January 24, 2023, Docket- Vol. 2, pp. 858, and 861 to 862, respectively. 32 Oath of Commission dated September 22, 2022, Docket- Vol. 2, p. 748; Minutes of the hearing held on, and Order dated, September 22, 2022, Docket- Vol. 2, pp. 747, and 749 to 750, respectively.

DECISION CTA Case No. 10566 Fort Bonifacio Development Corporation vs. Commissioner ofInternal Revenue Page 5 of36 The Report ofthe said ICPA was submitted on November 8, 2022.33 On February 23, 2023, petitioner filed its Formal Offer ofEvidence,34 to which respondent filed his Comment/Opposition (On Petitioner's Formal Offer of Evidence) on March 9, 2023.35 In the Resolution dated August 4, 2023,36 the Court admitted petitioner's offered exhibits, except Exhibits "P- 11-EEEE-18" and "P-11-EEEE-40", for not being found in the records. Petitioner then filed a Motion for Reconsideration (Re: Resolution dated August 04, 2023) on September 4, 2023,37 to which respondent filed his Comment/Opposition (Re: Motion for Reconsideration dated 1 September 2023) on October 9, 2023.38 In the Resolution dated May 27, 2024,39 the Court denied petitioner's Motion for Reconsideration (Re: Resolution dated August 04, 2023). In the meantime, per its Resolution dated November 28, 2023,40 the Court partially granted petitioner's Urgent Motion to Suspend Collection of Tax Liability, enjoining and prohibiting respondent from implementing the Warrant ofDistraint and/or Levy (WDL) and the Warrants of Garnishment, and ordering respondent and any of his officers and/or employees to cease and desist from committing any and all acts to collect on petitioner's alleged deficiency VAT assessment subject of this case. On December 13, 2023, respondent filed his Motion for Reconsideration (Re: Resolution dated 28 November 2023/1 via registered mail, to which petitioner filed its Comment on Respondent's Motion for Reconsideration Dated 13 December 2023, on February 12, 2024.42 In the Resolution dated March 27, 2024,43 the Court denied respondent's Motion for Reconsideration (Re: Resolution dated 28 November 2023) for lack of merit. For his part, respondent presented the testimony of RO Ivy Claudette C.Puno44 \ 33 Exhibit "P-12", Docket- Vol. 2, pp. 753 to 822. 34 Docket- Vol. 2, pp. 867 to 877. 35 Docket- Vol. 3, pp. 1064 to 1066. 36 !d. at 1072 to 1075. 37 !d. at 1076 to 1080. 38 Id. at 111 7 to 1119. 39 /d.at1184to1187. 40 !d. at 1122 to 1139. 41 !d. at 1151 to 1159. 42 /d.at1171to1176. 43 Id. at 1179 to 1182. 44 Exhibit "R-9", Docket- Vol. 3, pp. 1056 to 1061; Minutes of the hearing held on, and Order dated, November 28,2023, Docket- Vol. 3, pp. 1140 to 1142.

DECISION CTA Case No. 10566 Fort Bonifacio Development Corporation vs. Commissioner ofInternal Revenue Page 6 of36 On December 11, 2023, respondent filed his Formal Offer of Evidence,45 to which petitioner failed to file its comment.46 In the Resolution dated May 27, 2024,47 the Court admitted all of respondent's offered exhibits. Respondent filed a Manifestation on January 26, 2024,48 stating that he will adopt the arguments stated in the Answer in place of the Memorandum; while the Petitioner's Memorandum was filed on August 22, 2024. 49 The case was considered submitted for decision on September 9, 2024. 50 THE STIPULATED ISSUE The parties stipulated the following issue for this Court's resolution, VIZ.: Whether or not petltwner is liable to pay the amount of Php656,446,244.25 for deficiency Value-Added Tax, including compromise penalty for the period January 1, 2014 to June 30, 2014, plus 25% surcharge and 20% deficiency and delinquency interest for late payment, pursuant to Section 249(C) of the NIRC of 1997, as amended; and delinquency interest at the rate of 12% per annum from January 1, 2018 until the amount is fully paid pursuant to Section 249(C) of the NIRC of 1997, in relation to Section 249(A) of the same Code, as amended by the Tax Reform for Acceleration and Inclusion (TRAIN) Law.51 Petitioner's arguments: Petitioner argues that the deficiency tax assessments are null and void as they were issued in violation of its right to due process. Petitioner posits that the assessment is void since respondent's FLD and FDDA are not final demands for payment and petitioner's tax liability remains indefinite. Petitioner, thus, claims that the assessment is void since respondent's FLD I 45 Docket- Vol. 3, pp. 1143 to 1149. 46 Records Verification dated February 13, 2024 issued by the Judicial Records Division of this Court, Docket- Vol. 3, p. 1177. 47 !d. atpp. 1184 to 1187. 48 Id. at 1163 to 1165. 49 !d. at 1196 to 1224. 50 Minute Resolution dated September 9, 2024, Docket- Vol. 3, p. 1225. 51 Issues, JSFI, Docket- Vol. 2, p. 697.

DECISION CTA Case No. 10566 Fort Bonifacio Development Corporation vs. Commissioner ofInternal Revenue Page 7 of36 and FDDA failed to clearly state the law and facts on which the assessments are made; and that the assessments have no factual and legal bases. Respondent's counter-arguments: In his Answer, respondent contends that the Court's power of judicial review over his decisions on disputed assessments is by nature exclusive and appellate; hence, petitioner should not be allowed to raise issues for the first time on appeal. For respondent, the assessment notices provide for the demand for payment of the tax deficiency of petitioner and the audit examination was properly conducted; thus, the resulting assessments are valid. Assuming arguendo that respondent failed to indicate the definite total deficiency tax liability of petitioner, the amount of deficiency tax must not be nullified in its entirety. Respondent posits that the assessments were made in accordance with prevailing laws and rules, and that the recent decisions of the Court regarding the technicalities on respondent's letters and notices should not be applied retroactively. Finally, respondent maintains that petitioner is liable for deficiency VAT for the period January 1, 2014 to June 30,2014 and compromise penalty. THE COURT'S RULING The present Petition for Review is partly meritorious. The FDDA is void for failure to indicate a ftxed and definite amount of tax liability to be paid by petitioner.. Petitioner argues that the FLD and FDDA are invalid because it is not a definite demand for payment of tax due and petitioner's alleged tax liabilities remain indefinite. We agree only insofar as the FDDA is concerned. An assessment "refers to the determination of amounts due from a person obligated to make payments."52 In the context in which it is used in the NIRC, an assessment is a written notice and demand made by the BIR \ 52 SMI-ED Philippines Technology, Inc. vs. Commissioner of Internal Revenue, G.R. No. 175410, November 12,2014.

DECISION CTA Case No. 10566 Fort Bonifacio Development Corporation vs. Commissioner ofInternal Revenue Page 8 of36 on the taxpayer for the settlement of a due tax liability that is there definitely set and fixed. 53 In Commissioner of Internal Revenue vs. Pascor Realty and Development Corporation, et al., 54 the Supreme Court emphasized the requirement for an assessment to contain a specific demand for payment within a prescribed period in this wise: An assessment contains not only a computation of tax liabilities, but also a demand for payment within a prescribed period. It also signals the time when penalties and interests begin to accrue against the taxpayer. To enable the taxpayer to determine his remedies thereon, due process requires that it must be served on and received by the taxpayer. XXX. XXX XXX XXX To start with, an assessment must be sent to and received by a taxpayer, and must demand payment of the taxes described therein within a specific period. Thus, the NIRC imposes a 25 percent penalty, in addition to the tax due, in case the taxpayer fails to pay the deficiency tax within the time prescribed for its payment in the notice of assessment. Likewise, an interest of 20% per annum, or such higher rate as may be prescribed by rules and regulations, is to be collected from the date prescribed for its payment until the full payment. (Emphases added) As a corollary, in Commissioner of Internal Revenue vs. Fitness By Design, Inc. (Fitness By Design case),55 the Supreme Court again emphasized the importance of the issuance of a valid formal assessment, i.e., that it must be a demand for payment of the taxes described, within a specific period, and that the amount of tax liability for which the taxpayer is accountable must be definite, viz.: ... the Final Assessment Notice is not valid if it does not contain a definite due date for payment by the taxpayer. XXX XXX XXX The issuance of a valid formal assessment is a substantive prerequisite for collection of taxes. Neither the National Internal Revenue Code nor the revenue regulations provided for a 'specific definition or form of an assessment.' However, the National Internal Revenue Code defines its explicit functions and effects. An assessment does not only include a computation of tax liabilities; it also includes a demand for payment within a period prescribed. Its main purpose is to determine the amount that a taxpayer is liable to pay. \ 53 Adamson, eta!. vs. Court ofAppeals, eta!., et seq., G.R. Nos. 120935 and 124557, May 21, 2009. 54 G.R. No. 128315, June 29, 1999. 55 G.R. No. 215957, November 9, 2016.

DECISION CTA Case No. 10566 Fort Bonifacio Development Corporation vs. Commissioner ofInternal Revenue Page 9 of36 XXX XXX XXX A final assessment is a notice 'to the effect that the amount therein stated is due as tax and a demand for payment thereof.' This demand for payment signals the time 'when the penalties and interests begin to accrue against the taxpayer and enabling the latter to determine his remedies[.]' Thus, it must be 'sent to and received by the taxpayer, and must demand payment of the taxes described therein within a specific period.' The disputed Final Assessment Notice is not a valid assessment. First, it lacks the definite amount of tax liability for which respondent is accountable. It does not purport to be a demand for payment of tax due, which a final assessment notice should supposedly be. An assessment, in the context of the National Internal Revenue Code, is a 'written notice and demand made by the [Bureau of Internal Revenue] on the taxpayer for the settlement of a due tax liability that is there definitely set and fixed.' Although the disputed notice provides for the computation of respondent's tax liability, the amount remains indefinite. It only provides that the tax due is still subject to modification, depending on the date of payment. Thus: The complete details covering the aforementioned discrepancies established during the investigation of this case are shown in the accompanying Annex 1 of this Notice. The 50% surcharge and 20% interest have been imposed pursuant to Sections 248 and 249 (B) of the [National Internal Revenue Code], as amended. Please note, however, that the interest and the total amount due will have to be adjusted if prior or beyond April 15, 2004. (Emphasis Supplied) Second, there are no due dates in the Final Assessment Notice. This negates petitioner's demand for payment. Petitioner's contention that April 15, 2004 should be regarded as the actual due date cannot be accepted. The last paragraph of the Final Assessment Notice states that the due dates for payment were supposedly reflected in the attached assessment: In view thereof, you are requested to pay your aforesaid deficiency internal revenue tax liabilities through the duly authorized agent bank in which you are enrolled within the time shown in the enclosed assessment notice. (Emphasis in the original) However, based on the findings of the Court of Tax Appeals First Division, the enclosed assessment pertained to remained unaccom plished. Contrary to petitioner's view, April 15, 2004 was the reckoning date of accrual of penalties and surcharges and not the due date for payment of tax liabilities. The total amount depended upon when \

DECISION CTA Case No. 10566 Fort Bonifacio Development Corporation vs. Commissioner ofInternal Revenue Page 10 of36 respondent decides to pay. The notice, therefore, did not contain a definite and actual demand to pay. Compliance with Section 228 of the National Internal Revenue Code is a substantive requirement. It is not a mere formality. Providing the taxpayer with the factual and legal bases for the assessment is crucial before proceeding with tax collection. Tax collection should be premised on a valid assessment, which would allow the taxpayer to present his or her case and produce evidence for substantiation. (Emphases and underscoring added) In this case, the FDDA56 provides in part, as follows: It is requested that your aforesaid deficiency tax be paid immediately upon receipt hereof, inclusive of penalties incident to delinquency. This is ourfinal decision. (Emphasis added) Notably, the FDDA does not indicate a valid due date for payment. In particular, the due date reflected in the Assessment Notice is "March 31, 2021 ",57 although the same was only issued on "0 1 JUN 2021 ",58 and received by petitioner on June 2, 2021.59 Clearly, the prescribed due date stated therein for the payment of the alleged deficiency tax already lapsed when the FDDA and the corresponding Assessment Notice were received by petitioner, making it impossible for petitioner to comply with. It is as if the due date therein "remained unaccomplished", thus, negating compliance with the requirement that the assessment must contain a demand for payment within a prescribed period. To be sure, as held in the Fitness By Design case, an assessment must demand payment of the taxes described therein within a specific period. Considering that the subject Assessment Notice accompanying the FDDA failed to properly indicate the due date when the subject deficiency tax must be paid, no proper demand thereof within a specific period was validly made. Hence, the FDDA dated June 1, 2021, wherein respondent failed to provide the definite amount of tax to be paid and to state the valid due date for the payment of the subject deficiency tax in the attached Assessment Notice is void. \ 56 Exhibit "P-8", Docket- Vol. 2, at p. 941; Exhibit "R-7", BlR Records (Exhibit "R-8"), at p. 779. 57 Exhibit "P-8", Docket- Vol. 2, at p. 942. 58 Ibid. 59 Exhibit "P-8", Docket- Vol. 2, pp. 938 to 942; Exhibit "R-7", BIR Records (Exhibit "R-8"), pp. 778 to 782.

DECISION CTA Case No. 10566 Fort Bonifacio Development Corporation vs. Commissioner ofInternal Revenue Page 11 of36 Nonetheless, it is already settled that a decision of respondent on a disputed assessment differs from the assessment itself. Hence, the invalidity of one does not necessarily result in the invalidity of the other.60 Considering the infirmity of the FDDA does not affect the validity of the FLD, and that the latter does not suffer from the same defect as the FDDA, the same should stand as valid. Petitioner is liable for deficiency VAT for the period January 1, 2014 to June 30, 2014. In the FLD dated April 10, 2017, with attached Details of Discrepancies and Audit Result/Assessment Notice,61 petitioner was assessed for deficiency VAT and compromise penalty for the period January 1, 2014 to June 30, 2014, in the aggregate amount of P664,868,918.41, inclusive of increments, summarized as follows: VAT p 34,967,422.79 p 7,758,789,738.66 Receipts subjected to VAT per VAT Returns 11,905,623.26 1,096,068,725.59 Add: Adjustments/Disallowances 668,295,679.54 Undeclared Sales per SLS vs TPI 380,900,000.00 Unaccounted Source of Cash Unsupported Non-VAT Official Receipt per OR Listing Undeclared Sales from sale of property p 8,854,858,464.25 Output tax thereon P545,900,531.98 p 1,062,583,015.71 Less: Allowable Input Tax 7,196,217.98 249,324,015.09 Allowable Input Tax per VAT Returns 176,088.41 p 813,259,000.62 Less: Disallowances/Adjustments 265,357,459.18 385,154,236.65 Disallowed Input Tax - Unsupported Input Tax per 23,846,751.32 p 428,104,763.97 SLP vs TPI 236,689,154.44 Disallowed input tax per TN Verification p 664,793,918.41 Unsupported Presumptive Input Tax Overclaimed Input Tax - Sources of Input per FS vs VAT Return VAT Due Less: VAT Payments Basic Deficiency VAT Add: Interest (July 26, 2014 to April 30, 20 17) TOTAL DEFICIENCY VALUE-ADDED TAX ADMINISTRATIVE PENALTY P 50,000.00 ' \ Compromise Penalty- Failure to file and/or pay any internal revenue tax at the time or times required by law or regulation s~., �6 Commissioner of Internal Revenue vs. Liquigaz Philippines Corporation, et G.R. Nos. 215534 and 215557, Aprill8, 2016. 61 Exhibit "P-6", Docket- Vol. 2, pp. 906 to 927; Exhibit "R-5", BIR Records (Exhibit "R-8"), pp. 334 to 355.

DECISION CTA Case No. 10566 Fort Bonifacio Development Corporation vs. Commissioner ofInternal Revenue Page 12 of36 Compromise Penalty- Failure to make, file or submit 25,000.00 75,000.00 the complete SLP or supply correct and accurate p 664,868,918.41 information therein at the time required TOTAL AMOUNT DUE The following items, which are discussed in detail hereafter, comprise the subject assessment: a) Undeclared Sales per Summary List of Sales (SLS) vs. Third :P 34,967,422.79 Party Information (TPI) :P 11,905,623.26 :P 668,295,679.54 b) Unaccounted Source of Cash :P 380,900,000.00 :P 7,196,217.98 c) Unsupported Non-VAT Official Receipt (OR) per OR Listing :P 176,088.41 d) Undeclared Sales from sale ofproperty :P 265,357,459.18 e) Disallowed Input Tax- Unsupported Input Tax per SLP vs TPI f) Disallowed input tax per TIN Verification :P 23,846,751.32 g) Unsupported Presumptive Input Tax h) Overclaii:ned Input Tax - Sources of Input per Financial Statements (FS) vs VAT Return a. Undeclared Sales per SLS vs. TPI- ?34,967,422. 79 Based on the comparison of petitioner's SLS and TPI, respondent found alleged undeclared sales ofP34,967,422.79:62 Per SLS :P 191,380,312.54 Per TPI 226,347,735.33 Discrepancy- Undeclared Sales p 34,967,422.79 Petitioner argues that the assessment has no factual and legal basis and that respondent did not provide copies or details of the confirmation letters to petitioner to validate the TPI. Petitioner's argument has legal basis. It correctly cited pertinent portions of Revenue Memorandum Order (RMO) No. 46-2004 issued on September 2, 2004,63 which states: III. PROCEDURES XXX XXX XXX Action on Protested LNs due to TPI discrepancy \ 62 Schedule I, "Annex- A", Exhibit "P-6", Docket- Vol. 2, pp. 912 to 914. and Exhibit "R-5", BIR Records (Exhibit "R-8"), pp. 347 to 349. 63 SUBJECT: Additional Supplement and Guidelines in Handling Letter Notices with Discrepancies Arising from Data Matching Processes as defined in Revenue Memorandum Order (RMO) Nos. 34- 2004 and 30-2003, as amended by RMO Nos. 42-2003 and 24-2004, which remain Unserved, have been Served but are Without Response, or are Under Protest by Taxpayers.

DECISION CTA Case No. 10566 Fort Bonifacio Development Corporation vs. Commissioner ofInternal Revenue Page 13 of36 XXX XXX XXX 3. Obtain Sworn Statements from TPI sources (Annexes 'B' and 'C') attesting to the veracity of the data provided. XXX XXX XXX 4. Provide the taxpayer a brief 'grace period' (no more than ten [10] days) to reconcile the figures in his Sworn Statement against those of the TPI source. (Emphasis added) The above-mentioned provision confirms that the BIR is required to verify the amounts it obtained from its computerized/third-party matching by securing confirmation or certification from the TPI source. Respondent avers that it sent confirmation letters to petitioner's customers to support the TPI.64 Records show that respondent indeed sent confirmation letters to the TPI sources.65 However, examination of the subject documents reveals that only Store Specialist Inc. certified its purchases in the amount of P64,123,923.79 as opposed to petitioner's declared sales from the same customer of P56,259,936.35, showing a discrepancy ofP7,863,987.44.66 The rest of the confirmation letters are not certified by the TPI sources. To stress, without obtaining sworn statements from TPI sources, the data gathered from the computerized/third party matching are left unverified, and the resulting assessment is void for lack of factual and legal basis based on the case of Commissioner of Internal Revenue vs. Hantex Trading Co., Inc.,67 wherein the Supreme Court held that, in order to be valid, an assessment must be based on actual facts supported by credible evidence. In any event, petitioner claims that timing differences in the reporting of taxable purchases by third parties as against the reporting of sales by petitioner, and inaccurate or erroneous reporting on the part of certain third parties are the reasons for the discrepancies. In the case of petitioner's sales to its customer Store Specialist, Inc., the latter allegedly erred in "reporting of input taxes on payments of security deposits or reimbursable claims or event sponsorship payments that were directly used for the event expenses. These were covered with non-VAT official receipts (ORs) and the TPis should not have reported the purchases as input tax credits in its VAT \ 64 Par. 39, Answer, Docket- Vol. I, p. 287. 65 BIR Records (Exhibit "R-8"), pp. 567 to 575. 66 !d. at 573 to 574. 67 G.R. No. 136975, March 31,2005.

DECISION CTA Case No. 10566 Fort Bonifacio Development Corporation vs. Commissioner ofInternal Revenue Page 14 of36 reporting. Other payments include security deposits, reimbursement of real property taxes (RPT) and construction bonds, which are all not subject to VAT and were covered by non-VAT ORs."68 The Court-commissioned ICPA, however, reports that he was not able to verify the TPI "because the information provided by the BIR does not present the breakdown on a per transaction level of the amounts and transaction references".69 As an alternative way to verify any unrecorded sales, the ICPA compared petitioner's gross taxable sales per general ledger (GL) with the amount reported in its quarterly VAT Returns as shown in Annex 1-13 of the ICPA Report. He then traced the amounts recorded in petitioner's gross taxable sales GL account and cash receipts schedule to the related VAT supporting documents of the various customers identified in the BIR assessment. This resulted in a discrepancy of P1,832,235.97, which shows that petitioner reported sales that are lower than those indicated in the VAT supporting documents. 70 Be that as it may, both petitioner and the ICPA failed to substantiate the security deposits, reimbursement of RPT and construction bonds paid by Store Specialist, Inc., which are allegedly covered by non-VAT ORs. Thus, this assessment item should be adjusted to the amount of P7,863,987.44, representing the discrepancy between petitioner's SLS and the amount certified by its customer Store Specialist Inc. per confirmation letter sent by respondent. b. Unaccounted source o[cash- Pll,905,623.26 After comparing petitioner's Summary List of Purchases (SLP) against the sales declarations per third parties, respondent found that the amounts per TPI are larger than those in petitioner's SLP. Respondent then assessed petitioner of an alleged unaccounted source of cash amounting to P11,905,623.26: 71 Per TPI p 32,715,544.25 Per SLP 20,809,920.99 Discrepancy -Unaccounted source of cash p 11,905,623.26 68 Pars. 35 to 40, Petition for Review, Docket- Vol. I, pp. 15 to 16. 69 Verification of the alleged unrecorded sales, Exhibit "P-12", Docket- Vol. 2, p. 784. 70 Exhibit "P-12", Docket- Vol. 2, at pp. 784 to 785. Refer also to Q&A No. 13 to 14, Exhibit "P-19", Docket- Vol. 2, pp. 835 to 836. 71 Schedule 2, "Annex- A", Exhibit "P-6", Docket- Vol. 2, p. 915, and Exhibit "R-5", BIR Records (Exhibit "R-8"), p. 346.

DECISION CTA Case No. 10566 Fort Bonifacio Development Corporation vs. Commissioner ofInternal Revenue Page 15 of36 As previously discussed, respondent is required to verify the amounts it obtained from its computerized/third-party matching by securing confirmation or certification from the TPI source. If unverified, the resulting assessment is void for lack of factual and legal basis. Further, respondent's findings of petitioner's under-declaration of purchases does not, by itself, necessarily result in the imposition of VAT. What is critical to be shown in the imposition or assessment of VAT is that the taxpayer is paid or ought to be paid an amount of money or its equivalent, in consideration of a sale, and not when said taxpayer purchases or disburses an amount of money to purchase goods or properties. Simply put, the VAT is imposed on the sale, not on the purchases. Moreover, even if these alleged unaccounted purchases are to be treated as unaccounted sources of cash, which are subject to output VAT, the same will be offset by recording the equivalent payments as expenses or purchases from which input tax credits may be claimed. Hence, no additional VAT will result from the said transactions. While all presumptions are in favor of the correctness of tax assessments, the assessment itself should not be based on mere presumptions no matter how reasonable or logical the presumption might be.72 In order to stand judicial scrutiny, the assessment must be based on actual facts. The presumption of correctness of assessment, being a mere presumption, cannot be made to rest on another presumption. 73 For lack of factual basis, the deficiency VAT assessment arising from petitioner's alleged unaccounted source of cash ofP11,905,623.26 should be cancelled. c. Unsupported Non-VAT Official Receipt per OR Listing ?668,295, 679.54 Respondent's verification disclosed that petitioner's non-VAT receipts per summary of ORs amounting to P668,295,679.54 are unsupported."~\' 72 The Collector of Internal Revenue vs. Alberto D. Benipayo, G.R. No. L-13656, January 31, 1962; Commissioner of Internal Revenue vs. Island Garment Mam!facturing Corporation, et al., G.R. No. L- 46644, September 11, 1987. 73 Commissioner ofInternal Revenue vs. Hantex Trading Co., Inc., supra. 74 Schedule 3, "Annex- A", Exhibit "P-6", Docket- Vol. 2, pp. 916 to 922, and Exhibit "R-5", BIR Records (Exhibit "R-8"), pp. 339 to 345.

DECISION CTA Case No. 10566 Fort Bonifacio Development Corporation vs. Commissioner ofInternal Revenue Page 16 of36 Petitioner avers that the bulk of this assessment item pertains to sales to PEZA-registered entities enjoying zero-rated and/or exempt transactions; hence, notsubject to 12% VAT.75 In support of its protest to the FLD, petitioner submitted to respondent Certificates of Registration and Certifications issued by the PEZA to the following customers, amounting to P252,949,473.75, viz.: PEZA Certificate/ Customer Name Amount Certification ANTHEM SOLUTIONS, INC. (Annex 3-1, Exhibit (Exhibit "R-8") C3/CUSTOMERCONTACTCHANNELS pp. 403 to 404 PHILIPPINES, LTD. "P-12") 76 p 43,170,278.07 pp. 40 I to 402 DATA HORIZON PHILS, INC. p.400 HATCHASIA.COM, INC. 93,639,495.12 p.399 IP CONVERGE DATA SERVICES, INC. 651,491.56 LOGICA (PHILIPPINES) INC. pp. 397 to 398 5,460,446.10 p. 395 NEC TELECOM SOFTWARE PHILS., INC. 5,488,737.26 REAL PROPERTY INNOVATIVE 12,279,046.74 pp. 391-394 SOLUTIONS, INC. 6,415,299.24 pp. 388 to 389 SHORE SOLUTIONS, INC. 2,465,440.00 pp. 386 to 387 4,740,182.51 pp. 380 to 381 ST. LUKE'S MEDICAL CENTER, INC. 32,439,879.25 pp. 384 to 385 22,525,459.83 TERADATA GCC (PHILIPPINES), INC. pp. 382 to 383 TOWERS WATSON GLOBAL BUSINESS 23,673,718.07 SERVICES, INC. p 252,949,473.75 TOTAL Respondent's examiners considered the Certificates of Registration and Certifications issued by the PEZA to be sufficient in their memorandum report dated January 21, 2021.77 The ICPA reports that the remaining assessment for unsupported non- VAT ORs could comprise of either the following or just portions thereof, to wit: 78 Particulars Reference Amount Sale of Development Rights (Alpha Plus Property Annex 3-2-A p 174,832,000.00 Holdings) Annex 3-2-B 90,050,788.37 Annex 3-2-C 32,731,416.57 Construction Bond (various) Annex 3-2-D 30,384,445.00 Security Deposits (various) St. Luke's Medical Center SOA Adjustments 75 Par. 46, Petition for Review, Docket- Vol. I, p. 18. 76 USB (Exhibit "P-11 "). 77 Exhibit "R-6", BIR Records (Exhibit "R-8"), pp. 732 to 749. 78 Exhibit "P-12", Docket- Vol. 2, at p. 792.

DECISION CTA Case No. 10566 Fort Bonifacio Development Corporation vs. Commissioner ofInternal Revenue Page 17 of36 RPT reimbursements (various) Annex 3-2-E 10,241,896.60 Annex 3-2-F 5,507,207.34 Principal loan repayment (Bonifacio Transport Corporation) Annex 3-2-G (79,681.99) Total p 343,668,071.89 Adjustments Petitioner submitted various ORs/9 Statements of Account (SOAs),80 and journal entries from its computerized accounting system (CAS)81 to support petitioner's non-VAT receipts. An examination by the Court shows that the following are supported by the aforementioned documents, viz. : Supported by Official Receipts (Exhibits "P-11-CCCC-1" to "P- 11-CCCC-125" and "P-11-CCCC-128" to "P-11-CCCC-271 ") Customer Name Amount Nature Security Deposits ACTIVATIONS ADVERTISING I' 50,000.00 Construction Bond Sale of Development Rights AFFINITY HEALTH & WELLNESS 538,902.00 Adjustments ALPHA PLUS PROPERTY HOLDI 174,832,000.00 Security Deposits Security Deposits ALVEO LAND CORP. (OFFICE) (0.01) Adjustments AMERICAN MOTORCYCLES, 10,000.00 Adjustments Construction Bond ANTHEM SHOPPES INC. 20,000.00 Security Deposits and RPT ARIA RESTAURANT CONCEPTS INC. reimbursements - Construction Bond and Security ARMYNAVY BURGER AND BURRI 9,743.32 Deposits Adjustments ATLASSIAN PHILIPPINES, IN 748,128.00 Security Deposits RPT reimbursements AYALA CORPORATION- HONDA 596,250.00 Security Deposits AYALA GREENFIELD DEVELOPM 591,255.00 Security Deposits AYALA PROPERTY MANAGEMENT (25,366.77) B + B STUDIO RPT reimbursements and Security BANCO DE ORO UNIBANK INC 22,477.26 Deposits BANK OF THE PHILIPPINE IS 127,562.50 BASES CONVERSION DEV'T. A Adjustments 5,895.63 Security Deposits 167,567.20 Security Deposits, RPT reimbursements and Construction BELAGUA CORPORATION (FULL 367,092.00 BEYOND FORT GLOBAL INC. (0.02) Bond BF CORPORATION Construction Bond 64,650.00 Construction Bond BGNORTH PROPERTIES INC. 16,007,200.37 Adjustments BGSOUTH PROPERTIES, INC. 18,523,600.00 Security Deposits and Adjustments BGWEST PROPERTIES, INC. BONIFACIO ESTATE SERVICES 30,000.00 BONIFACIO GAS CORPORATION - 29,345.77 79 Exhibits "P-11-CCCC-1" to "P-11-CCCC-271 ", USB (Exhibit "P-11 "). 80 Exhibits "P-11-DDDD-1" to "P-11-DDDD-137", USB (Exhibit "P-11"). 81 Exhibits "P-11-EEEE-1" to "P-11-EEEE-17", "P-11-EEEE-19" to "P-11-EEEE-39", and "P-11-EEEE- 41" to "P-11-EEEE-54", USB (Exhibit "P-11 ").

DECISION CTA Case No. 10566 Fort Bonifacio Development Corporation vs. Commissioner ofInternal Revenue Page 18 of36 BONIFACIO HOTEL VENTURES 250,125.00 RPT reimbursements Principal loan repayment BONIFACIO TRANSPORT CORP 4,889,583.93 (Bonifacio Transport Corporation) BREWS AND BLUES INC. 833,160.00 BRITISH CHAMBER OF COMMER 90,000.00 Security Deposits BRITISH UNITED 10,000.00 Security Deposits CAG LEARNING SYSTEMS, INC. Security Deposits CASUAL CLOTHING - CATS MOTORS, INC. Adjustments CELINE MARKETING CORPORATION 50,000.00 Security Deposits CHEFS AT THE FORT, INC. 28,906.25 RPT reimbursements (6,095.49) CINCO CORPORATION Adjustments - Adjustments CITIMAX GROUP INC. Construction Bond and Security CLARKSVILLE FOOD INC. 351,150.00 COFFEE MASTERS, INC. (SEA Deposits CREACTIVATIONS, INC 7, I 00,000.00 Construction Bond and Security CREATIVE LAB INC. I ,000,000.00 DAIICHI PROPERTIES INC. Deposits DATEM, INC. (0.01) Construction Bond DEL MONTE PHILIPPINES, IN 100,000.00 DRAUGHT GASTRO-PUB, INC. (17,857.14) Adjustments 13,000,000.00 Security Deposits EASTERN TELECOMMUNICATION 7,000,000.00 ERICKA ALEXANDRIA (3,466, 111.80) Adjustments EST. CUE, INC. 351,812.10 Construction Bond ESTIMA, INC. Construction Bond EVENTECHNIQUE INC. 68,250.00 Security Deposits EVERY NATION LEADERSHIP I 10,000.00 Security Deposits EXPERCS INC. Construction Bond and Security FAMILY VACCINE - FOODPARKS BY RAINTREE. IN Deposits 30,000.00 Security Deposits FORT STRIP, INC. 10,000.00 Adjustments FORTE SHOWROOM- DIMENSIO - Security Deposits FORTHINKER INC. Security Deposits FRESH HEALTHY JUICE BOOST (0.05) GEARHEAD INC. (JBL) 80,850.00 Adjustments GLOBAL ASIA 69,513.00 Adjustments Security Deposits GLOBAL CITY AUTO SALES IN 922,747.83 Security Deposits GOURDO'S INC. (2001010097 Security Deposits and RPT GREEN TEE INC. UNITED COL 802,420.20 reimbursements GREENLIFE ORGANICS, 50,000.00 Construction Bond and Security GRUPO ATHLETICA INC. 86,650.00 Deposits - Security Deposits Security Deposits 20,000.00 Adjustments 105,000.00 Security Deposits 86,193.00 Security Deposit and RPT reimbursements - Security Deposits 10,000.00 Adjustments 1,762,794.00 Security Deposits Security Deposits

DECISION CTA Case No. 10566 Fort Bonifacio Development Corporation vs. Commissioner ofInternal Revenue Page 19 of36 H & F RETAIL CONCEPTS INC (8,996.00) Adjustments Construction Bond and Security HAPPY LEMON GROUP PHILS I 522,288.00 HINGE INQUIRER PUBLICATIO 30,000.00 Deposits HW-ANGS, INC. 50,000.00 Security Deposits ICONIC ADVANTAGE INT'L., Security Deposits - IKKORYU FUKUOKA RAMEN INC Adjustments INTELLIGENT BEAUTY SKIN S 1,033,344.00 Construction Bond and Security IP VENTURES, INC. 86,369.25 JALA PELOS INC. 92,164.03 Deposits Security Deposits JOLLIBEE FOODS CORPORATION 799,119.00 Security Deposits JUST FOR KIDS, INC. (LITT Construction Bond KARLA ROCHELLE 313,000.22 Security Deposits and RPT KATSURAMEN, INC. 66,370.19 reimbursements KENRICH SIDEFAME CORP 30,000.00 Security Deposits Security Deposits KICHITORIA FOODS CORPORAT 1,596,097.50 Construction Bond KIMUKATSU, INC. (45,000.00) KLAB CYSCORPIONS, INC. Adjustments LINEARGROUP PHILS INC. 1,301,664.00 Construction Bond and Security L'OPERA INC. 548,650.66 LOVING LOKAL RESTAURANT I (0.05) Deposits M2.0 COMMUNICATIONS, INC. (0.01) Security Deposits MAKATIDEVELOPMENTCORPOR 64,642.80 MANCOR PERFORMANCE CLINIC 296,900.40 Adjustments MANILA WATER TOTAL 30,000.00 Adjustments MASTER SPORTS CORP. Security Deposits MAXICUISINE, INC. 4,000,000.00 Security Deposits MC HOME DEPOT (FORT BONIF 87,500.01 Security Deposits 90,405.00 Security Deposits MCTEVES LAUNDRY SERVICES RPT reimbursements MDC BUILDPLUS, INC. - Security Deposits MEGAWIDE CONSTRUCTION COR Adjustments 126,877.05 Construction Bond MELVILLE REALTY CORP. (MO 2,486,369.84 RPT reimbursements MERCATO CENTRALE PHILIPPI 96,714.24 Construction Bond and Security MR. FRANKS HOTDOG & NACHO 4,796.31 MY MAMOU FOOD CONCEPTS IN Deposits NATION BROADCASTING CORP. 1,000,000.00 Adjustments NEW BOMBAY FOODS INC. NEW GOLDEN CITY BUILDERS 238,960.00 Security Deposits 30,000.00 Security Deposits and RPT NEW KANLAON CONSTRUCTION NITRO ASIA COMPANY INC. 191,986.66 reimbursements 21,225.60 Security Deposits 130,437.50 Construction Bond and Security 14,452.50 12,000,000.00 Deposits Security Deposits 408,800.68 RPT reimbursements 57,261.20 Security Deposits Construction Bond Security Deposits and RPT reimbursements Security Deposits

DECISION CTA Case No. 10566 Fort Bonifacio Development Corporation vs. Commissioner ofInternal Revenue Page 20 of36 NO LIMITS FOODS INCORPORA 1,000,000.00 Security Deposits ORICA PHILIPPINES, INC. PACIFIC LICENSING STUDIO 54,477.90 Security Deposits PETALUMA PROPERTIES INC. PHILIPPINE ARMY 100,000.00 Security Deposits PHILIPPINE FAMILYMART CVS 255,125.00 RPT reimbursements PHILIPPINE NATIONAL BANK 10,000.00 Security Deposits PHILIPPINE SAVINGS BANK- PINOY DINER CORPORATION 481,896.00 Construction Bond and Security Deposits PRU LIFE INSURANCE CORP. QUORUM INTERNATIONAL INC. 432.76 Security Deposits RALPH'S WINES & SPIRITS RED RIBBON BAKESHOP, INC. 102,316.43 Construction Bond and Security REGAL ENTERTAINMENT, Deposits RUSTAN COFFEE CORP. - STA SABRE CONSTRUCTION & DEY' 64,156.50 Security Deposits SCOTTLAND INC. (THE SPA) 1,925,576.50 Construction Bond and Security SENSERV ENTERPRISE Deposits SIETE COMIDA CORPORATION SIMPLY MOVING 30,000.00 Security Deposits SNAPSNACK FOODS CORP. SOUTH STAR DRUG INC. 14,940.00 Security Deposits SPORTS PLEX PHILS. INCORP 45,625.00 RPT reimbursements ST. LUKE'S MEDICAL CENTER 30,000.00 Security Deposits STORE SPECIALIST INC. SUNVISION CABLE, INC. 337,620.00 RPT reimbursements SUYENCORP. 29,125.00 RPT reimbursements THE BURGERS UNLIMITED INC THE IDEAFIRST COMPANY, IN RPT reimbursements and Security TIME CONCEPTS SALES, INC. TRIMARK BHS VENTURES, INC 285,404.00 Deposits UNIGLOBE TRAVELWARE CO. UP JUNIOR MARKETING - Adjustments ASSOCIATION UR'E ADPORTAL SOLUTIONS (0.1 0) Adjustments VA BENE PASTA DELI 50,000.00 Security Deposits VODKATEKA, INC. W GLOBAL REALTY, INC. 250,277.40 Security Deposits W OFFICES, INC. WHITEPLANET INC. 14,399.91 Security Deposits (0.01) Adjustments RPT reimbursements and St. Luke's 30,599,560.00 Medical Center SOA Adjustments Construction Bond, Security 9,601,565.10 Deposits and RPT reimbursements - Adjustments 246,179.48 Security Deposits and RPT reimbursements - Adjustments 20,000.00 Security Deposits - Adjustments 54,364.50 Security Deposits 146,556.00 Security Deposits Security Deposits 20,000.00 50,000.00 Security Deposits Security Deposits and Construction 875,328.00 Bond 141,006.60 Security Deposits 376,204.41 RPT reimbursements 375,187.50 RPT reimbursements 114,300.00 Security Deposits \

DECISION CTA Case No. 10566 Fort Bonifacio Development Corporation vs. Commissioner ofInternal Revenue Page 21 of36 WHOLELIVING CORPORATION 1,622,592.00 Construction Bond and Security WINGKING FOOD STATION 10,800.00 Deposits WUMACO INC. 311,307.20 Security Deposits YELLOW CAB PIZZA CO 67,453.10 TOTAL Security Deposits and RPT p 325,901,569.83 reimbursements Security Deposits Supported by Statements of Account Exhibit No. Customer Name Amount Nature "P-11-DDDD-23" RPT CATS MOTORS, INC. p 57,812.50 "P-11-DDDD~35" reimbursements FORT STRIP, INC. 154,137.50 RPT "P-I1-DDDD-59" L'OPERA INC. "P-11-DDDD-68" MANCOR PERFORMANCE CLINIC - reimbursements "P-11-DDDD-113" SR METALS INC "P-11-DDDD-123" - Security Deposits UNIGLOBE TRAVELWARE CO. I RPT TOTAL 86,179.36 reimbursements 51,750.00 p 349,879.36 Supported by Journal Entries Exhibit No. Customer Name Amount Nature Construction Bond "P-11-EEEE-9" BGWEST PROPERTIES, INC. p 16,349,900.82 and "P-11-EEEE- and RPT BRAND ON DEMAND 60,000.00 reimbursements 11" EQUIPMENT RENTAL 50,000.00 Security Deposits "P-11-EEEE-12" and "P-11-EEEE- Security Deposits Security Deposits 13" Security Deposits Security Deposits "P-11-EEEE-24" Security Deposits Security Deposits "P-11-EEEE-29" GERMAN-PHILIPPINE CHAMBER 100,000.00 "P-11-EEEE-41" PERCEPTIONS 50,000.00 "P-11-EEEE-42" PET CITY HOBBY 50,000.00 "P-11-EEEE-46" SATCHMIGROUP INC. 30,000.00 "P-ll-EEEEc48" SUYEN CORPORATION 30,000.00 TOTAL p 16,719,900.82 Considering that the foregoing documents submitted by petitioner show that the transactions were not subject to 12% VAT, these amounts should be deducted from respondent's assessment and only the amount P72,374,855.78 should be retained for being unsupported, computed as follows: Unsupported Non-VAT Official Receipt per OR Listing p 668,295,679.54 Less: Supported by PEZA certificates of registration and p 252,949,473.75 certifications 325,901,569.83 \ Supported by ORs

DECISION CTA Case No. 10566 Fort Bonifacio Development Corporation vs. Commissioner ofInternal Revenue Page 22 of36 Supported by SOAs 349,879.36 595,920,823.76 Supported by Journal Entries 16,719,900.82 p 72,374,855.78 Adjusted unsupported Non-VAT ORs per OR Listing d. Undeclared sales {rom sale o(property- ?380,900,000.00 Respondent found a discrepancy in petitioner's sale of property by comparing the amount per deed of sale against the zonal valuation, computed as follows: 82 Deed of Sale Zonal Value OR Per square meter p 30,000.00 p 100,000.00 p 29,068.90 Total Selling Price 5,370.00 sqms. 5,370.00 sqms. 5,370.00 sqms. Less: Declared per OR Undeclared Sales P161,100,000.00 p 537,000,000.00 P !56, I00,000.00 156, I00,000.00 !56, I00,000.00 p 5,000,000.00 p 380,900,000.00 In its protest to the FLD, petitiOner explained that the foregoing amount pertained to the transaction with Alpha Plus Property Holdings Corp. (Alpha Plus) but claimed that it did not sell a piece of land, but that Alpha Plus purchased an additional development right as regulated by the City Government of Taguig, which subjects certain development restrictions based on the approved masterplan. Essentially, petitioner "sold to Alpha Plus air rights taken from its lots to be transferred to the lot of Alpha Plus so it could construct taller buildings (i.e. with more allowable gross floor area or 'GFA') on Alpha Plus' lots in BGC" .83 To support the foregoing, petitioner submitted to respondent the Agreement on Assignment of Lease between petitioner and Alpha Plus and the approval of transfer of development rights issued by the City of Taguig,84 and the ORs pertinent to the transaction.85 Respondent's examiners considered petitioner's explanation and recommended to cancel the subject assessment item: 86 It was found that per Deed of Sale executed by both parties, the selling price was P30,000.00 per square meter for the lot with a total area of 5,370 square meters, hence, it resulted to a selling Pl56,100,000.00. The difference of P5,000,000.00 was already subjected to VAT on September~ Re~rds 82 Schedule 4, "Annex- A", Exhibit "P-6", Docket- Vol. 2, p. 923, and Exhibit "R-5", BIR (Exhibit "R-8"), p. 338. 83 Exhibit "P-7", Docket- Vol. 2, at pp. 930 to 931. 84 Exhibit "R-8", BIR Records, pp. 371 to 375. 85 !d. at 378 to 379. 86 Exhibit "R-6", !d. at 744 to 745.

DECISION CTA Case No. 10566 Fort Bonifacio Development Corporation vs. Commissioner ofInternal Revenue Page 23 of 36 � 10, 2013, evidenced by the Official Receipt attached on page 689. Hence, the assessment on this item is hereby cancelled. Based on the documents submitted, petitioner is able to prove that the transaction did not involve the sale of a piece of land but only additional development right; hence, use of the corresponding zonal value is not necessary. The Court finds respondent's examiners' recommendation to be in order; thus, this assessment item should be cancelled. e. Disallowed Input Tax - Unsupported Input Tax per SLP vs. TPI - P7, 196,217.98 Respondent's verification of petitioner's SLP revealed that the purchases therein exceed the declared sales of the suppliers as reflected in the gathered TPI, consequently, the overclaimed input tax for said excess purchases should be disallowed. The amount P7,196,217.98 is computed as:s7 Purchases per SLP p 154,933,157.06 Per TPI 116,206,476.86 Overclaimed purchases Unsupported purchases- No TPI p 38,726,680.20 Total 21,241,802.96 VAT rate (12%) Unsupported input tax p 59,968,483.16 0.12 p 7,196,217.98 The BIR Records show that respondent sent confirmation letters to the TPI sources.88 An examination of the subject documents, however, reveals that only the following customers certified the respective amounts of sales to petitioner:89 Name of Customer Amount Certified Other Remarks (For January- June p 633,044.30 Professional Maintenance Group 2014) (Zero-rated Sales) McCann World Group Philippines Inc. p 8,336,835.89 p 182,120.04 TOTAL p 5,418,276.89 (For July- October 20 14) p 13,755,112.78 The rest of the confirmation letters that are not certified by the TPI sources are left unverified, and the resulting assessment is void for lack of~ 87 Schedule 5, "Annex -A", Exhibit "P-6", Docket- Vol. 2, p. 924, and Exhibit "R-5", BIR Records (Exhibit "R-8"), p. 337. 88 BIR Records (Exhibit "R-8"), pp. 691 to 692 and 694 to 714. 89 Id. at 71 I to 714.

DECISION CTA Case No. I0566 Fort Bonifacio Development Corporation vs. Commissioner ofInternal Revenue Page 24 of36 factual and legal basis. To reiterate, in order to be valid, an assessment must be based on actual facts supported by credible evidence.90 Petitioner avers that there are timing differences and error in recording of the TPI.91 Said allegation, however, was not substantiated and proven by petitioner. Thus, from respondent's schedule of unsupported purchases and computation of unsupported input tax, only the amount P730,500.31 should be retained as an assessment item: Professional Maintenance Group Inc. SLP TPI Difference McCann Worldgroup Philippines Inc. Pl4,417,452.33 p 8,336,835.89 p 6,080,616.44 Total VAT rate (12%) 5,425,163.00 5,418,276.89 6,886.11 Unsupported input tax Pl9,842,615.33 Pl3,755,112.78 p 6,087,502.55 0.12 p 730,500.31 f Disallowed input tax per TIN Verification- P 176, 088.41 Respondent found that petitioner allegedly claimed input tax on purchases from non-VAT registered and unregistered taxpayer amounting to P176,088.41, broken down as follows: 92 Registered Name Purchases Input Tax 8mm Media Concepts Co p 29,464.25 p 3,535.71 8mm Media Concepts Co (29 ,464.25) (3,535.71) Daniel Tan Photography 40,178.58 4,821.43 Empress Cool Airconditioning Empress Cool Airconditioning 246,428.58 29,571.43 Marcelo J Capalungan Jr 439.17 52.70 Personnel Management Assoc of the Phils Rollstar General Contractor 466,071.42 55,928.57 Rollstar General Contractor 714,285.67 85,714.28 TOTAL p 1,467,403.42 p 176,088.41 The Court examined petitioner's SLPs93 and found the same purchases listed therein. \ 90 Refer to Commissioner ofInternal Revenue vs. Hantex Trading Co.. Inc.. supra. 91 Exhibit "P-12", Docket- Vol. 2, at pp. 794 to 795. 92 Schedule 6, "Annex - A", Exhibit "P-6", Docket - Vol. 2, p. 925, and Exhibit "R-5", SIR Records (Exhibit "R-8"), p. 336. 93 Exhibits "P-11-B-1" to "P-11-B-6", USB (Exhibit "P-11").

DECISION CTA Case No. 10566 Fort Bonifacio Development Corporation vs. Commissioner ofInternal Revenue Page 25 of36 Relative thereto, petitioner submitted ORs of the foregoing purchases of services,94 which was examined by the ICPA. Further examination by the Court shows that purchases from Daniel Tan Photography and Marcelo J. Capalungan, Jr. are supported by non-VAT 0Rs,95 purchase from Personnel Management Association of the Philippines is unsubstantiated, and purchases from Rollstar General Contractor (Rollstar) are supported by VAT-registered ORs, to wit: Exhibit No. Vendor Name Net ofVAT Input Tax "P-11-FFFF-4" Rollstar General Contractor p 466,071.42 p 55,928.57 "P-11-FFFF -5" Rollstar General Contractor 714,285.67 85,714.28 TOTAL p 1,180,357.09 p 141,642.85 Moreover, Rollstar's ORs were printed with BIR Authority to Print issued in the year 2013 and was valid until2018.96 Thus, only input taxes in the adjusted amount of P34,445.56 should be disallowed, computed as follows: Disallowed input tax per TIN verification p 176,088.41 Less: Purchases supported by VAT-registered ORs 141,642.85 Adjusted disallowed input tax p 34,445.56 g. Unsupported Presumptive Input Tax- ?265,357,459.18 Respondent disallowed petitioner's claimed presumptive input tax (PIT) amounting to P265,357,459.1897 for being unsupported.98 The ICPA reports that petitioner's PIT came from the effectivity of Republic Act (R.A.) No. 7716 on January 1, 1996 when VAT was imposed for the first time on the sale of real properties. Upon the effectivity of R.A. No. 8424 on January 1, 1998, the provision on transitional input tax credits was retained.99 Petitioner argues that its entitlement to the PIT on its land acquisition has long been settled by the Supreme Court in several cases involving herein \ 94 Exhibits "P-11-FFFF-1" to "P-11-FFFF-5", !d. 95 Exhibits "P-11-FFFF-1" to "P-11-FFFF-3", !d. 96 Exhibits "P-11-FFFF-4" to "P-11-FFFF-5", !d. 97 Line 20D, Exhibit "P-9-e", Docket- Vol. 2, p. 949. 98 Schedule 7, "Annex -A", Exhibit "P-6", Docket - Vol. 2, p. 926, and Exhibit "R-5", BIR Records (Exhibit "R-8"), p. 335. 99 Exhibit "P-12", Docket- Vol. 2, at pp. 801 to 802.

DECISION CTA Case No. 10566 Fort Bonifacio Development Corporation vs. Commissioner ofInternal Revenue Page 26 of36 petitioner. In all cases which have already become final, the Supreme Court decided in favor of petitioner. 100 The Court finds the same in order. Petitioner submitted its inventory list of properties as of February 29, 1996, 101 in accordance with Revenue Regulations (RR) No. 7-95. 102 The claimed transitional/presumptive input tax, which was reported in January and February 1996,103 came from its purchase of land from the government computed as follows: 104 Total land area (214 hectares) 2,140,000.00 sqm. Acquisition cost per sqm Total land acquisition cost X p 33,283.88 Presumptive Input tax rate Presumptive Input tax p 71,227,503,200.00 8% p 5,698,200,256.00 Utilization of the foregoing transitional/PIT credits started in the 4th quarter 1996 in the amount of'P28,413,783.00. 105 Succeeding utilization of petitioner's PIT is summarized herein, to wit: 106 SC Case No. Tax Period Amount G.R. No. 181092 4th Quarter- 1996 p 269,340,469.45 G.R. No. 173425 Ist Quarter - 1997 G.R. No. 175707 2"d Quarter - 1997 3 59,652,009.4 7 G.R. No. 170680 3rd Quarter- 1997 486,355,846.78 G.R. No. 167606 4th Quarter- 1997 347,741,695.74 G.R. No. 180035 1st Quarter - 1998 15,036,891.26 Total 77,151,020.46 p I ,555,277,933.16 In the year 1999, petitioner's PIT was reduced or adjusted by P1,704,134,656.00 in view of the reconveyance of properties to the Bases Conversion Development Authority (BCDA) pursuant to an Agreement with the latter dated September 17, 1999. 107 Hence, by the end ofthe TY 1999, petitioner's PIT balance is P2,170,849,772.00. 108 In tracing the movements in the subject PIT, the ICPA noted that petitioner "first claim[s] as credits against current output VAT, any amount of input VAT from current period purchases. Thus, any current period~\, 100 Exhibit "P-7", !d. at 931. 101 Exhibit "P-20", USB (Exhibit "P-11 "). 102 SUBJECT: Consolidated Value-Added Tax Regulations. 103 Exhibits "P-16-a" and "P-16-b", Docket- Vol. 2, pp. I026 to 1027. 104 Exhibit "P-12", !d. at 803. 105 Fort Bonifacio Development Corporation vs. Commissioner(){ Internal Revenue. G.R. Nos. 158885 and 170680, April2, 2009. Refer also to Exhibit "R-8" (BIR Records), pp. 576 to 640. 106 Exhibit "P-12", Docket- Vol. 2, at p. 804. 107 Exhibits "P-21-A" to "P-21-C", USB (Exhibit "P-11"). 108 Exhibit "P-11-T, !d.

DECISION CTA Case No. 10566 Fort Bonifacio Development Corporation vs. Commissioner ofInternal Revenue Page 27 of36 output VAT, in excess over the current period input VAT will then be allowed as offset against the PIT balance." 109 The following shows petitioner's output tax and the corresponding input taxes offset against it until the 3rct quarter of the TY 2003, to wit: Exhibit No. TY 2000 Input Tax -Current Output tax Purchases "P-11-U" 1st Quarter p 15,365,729.32 p 26,746,353.83 "P-11-V" 2"d Quarter I04,3 89,211.68 I06,152, I66.06 20,372,872.59 "P-1 1-W" yct Quarter 15,488,331.40 52,537,888.03 "P-11-X" 4th Quarter p 166,996,769.50 20,378,288.94 Total p 194,434,072.35 Output tax still due -to be offset against PIT p 27,437,302.85 PIT, beginning balance p 2,170,849,772.00 PIT, ending balance p 2,143,412,469.15 Exhibit No. TY 2001 Input Tax- Current Output tax Purchases p 258,369,395.84 "P-11-Y" Ist Quarter p 19,235,660.17 37,526,701.59 "P-11-Z" 2"d Quarter 20,896,259.91 41,970,952.30 I 7,450,550.31 38,791,672.79 "P-11-AA" 3'd Quarter 9,984,999.56 p 376,658,722.52 p 309,091,252.57 "P-11-BB" 4th Quarter p 67,567,469.95 p 2,143,412,469.15 p 1,834,321,216.58 Total Output tax still due - charge to PIT PIT, beginning balance PIT, ending balance Exhibit No. TY 2002 Input Tax - Current Output tax Purchases p 96,595,890.16 "P-11-CC" I st Quarter p 16,524,342.33 24,277,129.23 "P-11-DD" 2"ct Quarter 14,970,145.56 54,849,861.42 8,022,592.30 "P-11-EE" yct Quarter 5,180,526.68 4,897,629.49 "P-11-FF-2" 4th Quarter p 180,903,407.49 p 44,414,709.68 P 136,488,697.8 I Total p 1,834,321,216.58 p 1,697,832,518.77 Output tax still due- to be offset against PIT PIT, beginning balance PIT, ending balance Exhibit No. TY 2003 Input Tax- Current Output tax Purchases p 16,266,312.44 "P-11-GG" I st Quarter p 13,360,853.99 "P-11-HH" 2"ct Quarter I 0,859,599.57 II ,876,906.19 14,770,812.20 "P-11-11" 3rct Quarter 18,527,553.59 p 38,991,265.76 Total p 46,670,772.22 Output tax still due -to be offset against PIT p 7,679,506.46 PIT, beginning balance p I ,697,832,518.77 PIT, ending balance p I ,690,153,012.31 109 Exhibit "P-12", Docket- Vol. 2, at p. 807. \

DECISION CTA Case No. 10566 Fort Bonifacio Development Corporation vs. Commissioner ofInternal Revenue Page 28 of36 The ICPA also noted that petitioner did not report any PIT in the subsequent quarterly VAT returns until the 2nd quarter of 2014. 110 He, however, found that petitioner carried over input taxes in the amount of P617,068.84,lll "which was carved out from the PIT balance xxx and claimed as credits against output VAT in the 4th quarter of2003." 112 Petitioner computed the amount of PIT claimed in the 2nd quarter of 2014 which is available for use as follows: 113 Area in sgm Gross Amount VAT 2,140,000 Original lot acquired (640,000) p 71,227,503,200.00 p 5,698,200,256.00 Return of 64 hectares (21 ,301 ,683,200.00) (1 '704, 134,656.00) ----~~~~--~ p 3,994,065,600.00 Values of lot acquired from BCDA: p 795,381,949.00 72,307,449.91 City Center ( 10-1) Cathedral Site 241 ,640,969.00 ______2_:1,_96_7.:..._,3_60_._82_ p 94,274,810.73 Presumptive input VAT p 3,994,065,344.00 Applied against output VAT (746,533,097.38) VAT on subsequent land delivered by BCDA 94,274,810.73 Adjustments: p 3,341,807,057.35 VAT included in the standard cost of sold lots (2005-2012) VAT Refund case (1 ,521,17 1,665.0 I) Available for use (1 ,555,277 ,933.16) p 265,357,459.18 The Court notes that the return of 64 hectares (640,000 sqm) of land and the lots acquired from BCDA are in accordance with petitioner's Agreement with BCDA dated September 17, 1999 as mentioned previously. 114 In computing for the PIT available for use, however, the Court notes a discrepancy of P256.00 (P3,994,065,600.00 mmus P3,994,065,344.00) in the adjusted PIT. Following petitioner's computation, the PIT available as of the 2nd quarter of2014 is only 1'262,639,089.19, computed as follows: \ 110 Exhibit "P-12", Docket- Vol. 2, at p. 816. Ill Exhibit "P-1 1-JJ", USB (Exhibit "P-11"). 112 Exhibit "P-12", Docket- Vol. 2, at p. 818. 113 Exhibit "P-24", USB (Exhibit "P-11 "). 114 Exhibit "P-21-A", USB (Exhibit "P-11 ").

DECISION CTA Case No. 10566 Fort Bonifacio Development Corporation vs. Commissioner ofInternal Revenue Page 29 of36 Original lot acquired p 5,698,200,256.00 Return of 64 hectares (1 ,704, 134,656.00) Adjusted PIT p 3,994,065,600.00 Add: VAT on subsequent land delivered by BCDA 94,274,810.73 Total p 4,088,340,41 0. 73 Less: Applied against output tax 3,825,701,321.54 p 262,639,089.19 Per VAT Refund Cases SC Decisions: Tax Period G.R. No. Amount p 28,413,783.00 4th Quarter- 1996 158885 269,340,469.45 4th Quarter - 1996 181092 359,652,009.47 1st Quarter - 1997 173425 486,355,846.78 347,741,695.74 2nd Quarter - 1997 175707 15,036,891.26 Jfd Quarter - 1997 170680 77,151,020.46 4th Quarter - 1997 167606 239,524,111.84 27,437,302.85 1st Quarter - 1998 180035 p 1,583,691,716.16 309,091,252.57 Per quarterly VAT returns: 136,488,697.81 720,837,940.37 1,521,171,665.01 1999 8,296,575.30 2000 2001 2002 2003 VAT included in the standard cost of sold lots (2005-20 12) PIT Available for use Considering that petitioner claimed the amount P265,357,459.18, 115 the difference of P2,718,369.99 (P265,357,459.18 less P262,639,089.19) will be retained as a disallowance. h. Overclaimed Input Tax - Sources of Input per FS vs. VAT Return - ?23,846, 751.32 Respondent compared petitioner's Audited Financial Statements (AFS) with VAT returns and found an alleged overclaimed input tax of P23,846,751.32, broken down as follows: 116 Particulars Tax Base Cost of Real Estate Sold/Purchases Development Cost, beg. p 1' 116,634,000.00 p 163,363,000.00 Development Cost, end 953,271,000.00 Cost of Services: Technical services and project management p 39,956,000.00 65,615,000.00 ' Repairs and maintenance 20,370,000.00 Miscellaneous 5,289,000.00 115 Line 20D, Exhibit "P-9-e", Docket- Vol. 2, p. 949. 116 Schedule 8, "Annex-A", Exhibit "P-6", Docket - Vol. 2, p. 927, and Exhibit "R-5", BIR Records (Exhibit "R-8"), p. 334.

DECISION CTA Case No. 10566 Fort Bonifacio Development Corporation vs. Commissioner ofInternal Revenue Page 30 of36 Marketing and Selling Expenses p 397,212,000.00 Management fees 72,318,000.00 Marketing fees p 469,530,000.00 Per Note 16 (368,577.00) Management & Marketing fees unpaid 469,161,423.00 p 67,424,000.00 General and Administrative Expenses 16,193,000.00 I 04,235,000.00 12,263,000.00 Professional fees 3,362,000.00 3,511,399,000.00 2,505,000.00 P4,326,036,423.00 Estate Management fees 1,595,000.00 0.12 Director's fees 1,274,000.00 P519,124,370.76 1,112,000.00 (566,817,873 .40) Utilities and water subsidy P( 47,693,502.64) 507,000.00 P(23,846,751.32) Insurance 320,000.00 (23,846,751.32) 9,943,000.00 Communications p 38,580,000.00 Security I ,549,000.00 3,472,819,000.00 Janitorial I ,353,000.00 Repairs and maintenance Transportation Supplies Entertainment, amusement and rec. Others Additions: Property and Equipment Investment Property Equipment Construction in progress Input tax perFS 1"(307,949,83 7 .86) Less: Input tax claimed per VAT Return (25 8,868,035.54) July to December January to June Overclaimed input tax- FS vs VAT Return 1st Semester 2nd Semester Petitioner avers that the foregoing assessment is "arbitrary and relies heavily on presumption and inferences, as it was quite probable that certain items in the AFS were left out by the examiners resulting into the discrepancy when compared to the VAT Returns." According to petitioner, respondent's examiners did not consider Note 29 of its AFS, the supplemental information required by the BIR per RR No. 15-2010, which shows that petitioner's total input taxes for the year 2014 amount to P1,350,129,000.00. 117 Further, the apportioning of the amounts per periods covered by the LOA by simple division instead of actually determining which amounts pertain to which periods is purely speculative. 118 \ 117 Exhibit "P-I 0", Docket- Vol. 2, at p. 1020. 118 Petitioner's Memorandum, Docket- Vol. 3, at pp. 1221 to 1223.

DECISION CTA Case No. 10566 Fort Bonifacio Development Corporation vs. Commissioner ofInternal Revenue Page 31 of36 The ICPA then made a comparison of the total input taxes per Note 29 with the quarterly VAT returns II9 and revealed the following: I20 Particulars Reference Input Tax Per Quarterly VAT Returns Annex 7-1 f>1 ,339,222,971.92 Per Supplemental Information Required by the Exhibit P-1 0 Bureau of Internal Revenue under RR No. 15- 1,350,129,000.00 2010 in the 2014 AFS (P 10,906,028.0~ Discrepancy From the foregoing, it is clear that petitioner's input taxes declared in its AFS exceed the amount reported in its quarterly VAT returns for TY 2014. The Court finds for petitioner. Pursuant to Section 5(A) of the NIRC of 1997, as amended, respondent has the power to obtain information in determining the liability of any person for any internal revenue tax by examining any book, paper, record, or other data which may be relevant or material to such inquiry. This means that all of petitioner's books and records and supporting documents can and should be examined by respondent so that the deficiency tax liability determined by the audit is said to be based on facts, not on assumptions. In this case, respondent failed to ascertain the portion of petitioner's input taxes per AFS that pertain to the period January to June 2014. This information would have been obtained by examining petitioner's records and supporting documents. However, under the assumption that petitioner's purchases are distributed equally during the year, respondent's examiners divided the amounts picked out from the AFS by two to estimate the portion pertaining to the period January to June 2014. Thus, the resulting disallowance of allegedly over-claimed input taxes lacks factual basis and should be cancelled. Petitioner is not liable for the compromise penalty imposed. Respondent also imposed administrative penalties of P75,000.00, viz. :I2I \ 119 Exhibits "P-9-a" to "P-9-1", Docket- Vol. 2, pp. 943 to 960. 120 Exhibit "P-12", Docket- Vol. 2, at p. 821. 121 Exhibit "P-6", Docket- Vol. 2, at pp. 906 and 909, and Exhibit "R-5", BIR Records (Exhibit "R-8"), pp. 352 and 355.

DECISION CTA Case No. 10566 Fort Bonifacio Development Corporation vs. Commissioner ofInternal Revenue Page 32 of36 II. Administrative Penalty p 50,000.00 Compromise Penalty - Failure to file and/or pay any internal revenue tax at 25,000.00 the time or times required by law or regulation p 75,000.00 Compromise Penalty- Failure to make, file or submit the complete SLP or supply correct and accurate information therein at the time required Total Such imposition, however, cannot be sustained. Under RMO No. 7- 2015, 122 "compromise penalties are only amounts suggested in settlement of criminal liability, and may not therefore be imposed or exacted on the taxpayer" in the event that a taxpayer refuses to pay the same. It is well- settled that the Court has no jurisdiction to compel a taxpayer to pay the compromise penalty because by its very nature, it implies a mutual agreement between the parties in respect to the thing or subject matter that is so compromised, and the choice of paying or not paying it distinctly belongs to the taxpayer. 123 Absent a showing that herein petitioner consented to the compromise penalty, its imposition should be cancelled. The imposition of the same without the conformity of the taxpayer is illegal and unauthorized. 124 In sum, petitioner is liable for deficiency VAT for the period January to June 2014, in the total amount ofP13,111,977.06, summarized below: Receipts subjected to VAT per VAT Returns P7,758,789,738.66 Add: Adjustments/Disallowances p 7,863,987.44 80,238,843.22 Undeclared Sales per SLS vs. TPI 72,374,855.78 P7,839,028,581.88 Unsupported Non-VAT Official Receipt per OR p 940,683,429.83 Listing p 545,900,531.98 Output tax thereon 730,500.31 542,417,216.12 Less: Allowable Input Tax 34,445.56 Allowable Input Tax per VAT Returns Less: Disallowances/Adjustments 2,718,369.99 Disallowed Input Tax- Unsupported Input Tax p 398,266,213.71 , per SLP vs. TPI 385,154,236.65 Disallowed input tax per TIN Verification p 13,111,977.06 Unsupported Presumptive Input Tax VAT Due Less: VAT Payments Basic Deficiency Value-Added Tax 122 SUBJECT: The Revised Consolidated Schedule of Compromise Penalties for Violations of the National Internal Revenue Code. 123 The Philippines International Fair, Inc. vs. The Collector of Internal Revenue, et a!., G.R. Nos. L- 12928 and L-12932, March 31, 1962. 124 Commissioner ofInternal Revenue vs. Lianga Bay Logging Co., Inc., eta!., G.R. No. L-35266, January 21' 1991.

DECISION CTA Case No. 10566 Fort Bonifacio Development Corporation vs. Commissioner ofInternal Revenue Page 33 of36 In addition to the foregoing basic deficiency taxes, petitioner is liable to a penalty of 25% surcharge imposed on the basic deficiency taxes pursuant to Section 248(A)(3) of the NIRC of 1997, which reads: SEC. 248. Civil Penalties.- (A) There shall be imposed, in addition to the tax required to be paid, a penalty equivalent to twenty-five percent (25%) of the amount due, in the following cases: XXX XXX XXX (3) Failure to pay the deficiency tax within the time prescribed for its payment in the notice of assessment; xxx Moreover, in accordance with Section 249(B) of the NIRC of 1997, as amended, petitioner is liable to pay deficiency interest at the rate of 20% per annum computed from the date prescribed for its payment until the full payment thereof. However, with the effectivity of R.A. No. 10963, otherwise known as the TRAIN Law, on January 1, 2018, the 20% deficiency interest shall be computed until December 31, 2017 only, while the rate of 12% per annum shall be imposed starting January 1, 2018 until full payment of the deficiency taxes due. Notably, the TRAIN Law amended (i) the interest rates in Section 249 of the NIRC, as amended, (ii) the computation of deficiency interest from the date prescribed for its payment until the full payment thereof, or upon issuance of a notice and demand by the CIR, whichever comes earlier, and (iii) provides that the deficiency and delinquency interest prescribed under Subsections (B) and (C) thereof shall not be imposed simultaneously. In the present case, the Assessment Notice bears the date April 30, 2017 125 as the time prescribed to pay the total amount due found in respondent's assessment. Likewise, pursuant to Section 249(C) of the NIRC of 1997, as amended, petitioner is liable to pay delinquency interest at the rate of 12% per annum computed from May 1, 2017 until full payment thereof. Thus, for the period January to June 2014, petitioner is liable to pay the aggregate amount of P28,581,157.39, consisting of basic deficiency VAT, surcharge, and deficiency and delinquency interests computed as of December 31, 2017 as follows: "' 125 Exhibit "P-6", Docket- Vol. 2, p. 910, anJExhibit "R-5", B1R Records (Exhibit "R-8"), p. 351.

DECISION CTA Case No. 10566 Fort Bonifacio Development Corporation vs. Commissioner ofInternal Revenue Page 34 of36 Basic deficiency VAT p 13,111,977.06 Add: 25% Surcharge 3,277,994.26 20% Deficiency Interest 7,256,491.41 (July 26,2014 to April 30, 2017) p 23,646,462.73 [P13,111,977.06 X 20% X (1,010/365days)] 1,760,238.02 Total Amount Due- Apri130, 2017 3,174,456.64 20% Deficiency Interest: p 28,581,157.39 (May 1, 2017 to December 31, 2017) [P13,111,977.06 X 20% X (245/365days)] 20% Delinquency Interest: (May 1, 2017 to December 31, 20 17) [P23,646,462.73 X 20% X (245/365days)] Total Amount Due- December 31,2017 WHEREFORE, in light of the foregoing considerations, the present Petitionfor Review is PARTIALLY GRANTED. Accordingly, respondent's administrative penalties being imposed in the total amount ofP75,000.00, as reflected in the Formal letter of Demand, for the period January 1, 2014 to June 30, 2014 is CANCELLED for lack of merit. However, the deficiency value-added tax assessment for the period January 1, 2014 to June 30, 2014 is UPHELD WITH MODIFICATIONS. Hence, petitioner is ORDERED TO PAY respondent the aggregate amount of P28,581,157.39 as of December 31, 2017, representing basic deficiency VAT, surcharge and interest, broken down as follows: Basic deficiency VAT p 13,111,977.06 Add: 25% Surcharge 3,277,994.26 20% Deficiency Interest (July 26, 2014 to April 30, 20 17) 7,256,491.41 Total Amount Due- April 30, 2017 P23,646,462. 73 20% Deficiency Interest (May 1, 2017 to December 31, 20 17) 1'760,238.02 20% Delinquency Interest (May I, 2017 to December 31, 20 17) 3,174,456.64 Total Amount Due- December 31,2017 P28,581,157.39 In addition, petitioner is ORDERED TO PAY respondent delinquency interest at the rate of 12o/o per annum on the total amount due of P23,646,462.73 as of April 30, 2017, as determined above, or equivalent to the amount ofP7,774.18 126 per day, from January 1, 2018 until full payment thereof pursuant to Section 249(C) of the National Internal Revenue Code of 1997, as amended by the Tax Reform for Acceleration and Inclusion Law, and implemented by Revenue Regulations No. 21-2018. \ 126 P23,646,462.73 multiplied by 12% divided by 365 days.

DECISION CTA Case No.l0566 Fort Bonifacio Development Corporation vs. Commissioner ofInternal Revenue Page 35 of36 Lastly, pursuant to Section 13 of Republic Act No. 9282, considering that this decision is partly favorable to the national government, the Bureau of Internal Revenue, through respondent, is hereby authorized to seize and distraint any goods, chattels, or effects, and the personal property, including stocks and other securities, debts, credits, bank accounts, and interests in and rights to personal property and/or levy the real property of petitioner in sufficient quantity to satisfy the tax or charge with any increment thereto incident to delinquency. SO ORDERED. ~/.~~ CORA~N G. FERRER- LO S Associate Justice We Concur: On leave MA. BELEN M. RINGPIS-LIBAN Associate Justice ATTESTATION I attest 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's Division. cia Justice Acting Second Division Chairperson

DECISION CTA Case No. 10566 Fort Bonifacio Development Corporation vs. Commissioner ofInternal Revenue Page 36 of36 CERTIFICATION Pursuant to Article VIII, Section 13 of the Constitution and the Acting Division Chairperson's Attestation, 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