SALCEDO RISTORANTE ITALIANO, INC. v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY SECOND DIVISION SALCEDO RISTORANTE CTA CASE NO. 8880 ITALIANO, INC., Members: Petitioner, -versus- Castaneda, Jr., Chairperson, Casanova, and Manahan, 11. COMMISSIONER OF Promulgated: INTERNAL REVENUE, DEC 12 2017 J: J"3 j)}tf Respondent. x----------------------------------------------------------------------------------x RESOLUTION CASTANEDA, JR., J.: For resolution before the court are the "Motion for Partial Reconsideration (of the DECISION)" of petitioner Salcedo Ristorante Italiano, Inc. (Salcedo) and the "MOTION FOR RECONSIDERATION (of the Decision dated 22 June 2017)" of respondent Commissioner of Internal Revenue (CIR). The parties failed to file their respective comments on the motions despite the opportunity provided. 1 Both motions assail the June 22, 207 Decision of the court with the following dispositive portion: 9t-- 1 September 18, 2017 Resolution .

RESOLUTION CTA Case No. 8880 "WHEREFORE, in vie of the foregoing, the instant Petition for Review is PARTLY GRA TED. The value-added tax, expanded withholding tax and withholdi g tax on compensation assessments, including the imposition of t e compromise penalties, are hereby CANCELLED. However, petitioner is ORDERED to pay deficiency income tax in the amount of P1,285, 42.00, inclusive of the 25% surcharge imposed under Section 248(A (3) of the NIRC of 1997. In addition, petitioner i ORDERED to pay: (a) Deficiency inter st at the rate of 20% per annum on the basic defic ency income tax of P1,028,513.60 computed from April 15, 2009 until full payment thereof pursua t to Section 249(8) of the NIRC of 1997, as amend d; and, (b) Delinquency int rest at the rate of 20% per annum on the total amoun of P1,285,642.00 (representing basic deficiency inco e tax of P1,028,513.60 and 25% surcharge of 257,128.40) and on the deficiency interest which ave accrued as afore-stated in (a), computed from eptember 5, 20142 until full payment thereof pursua t to Section 249(C) of the NIRC of 1997, as amend d. SO ORDERED." After careful deliberation, e find no merit in the motions of both parties. On the one hand, petiti ner moves for the cancellation and reversal of the income tax asse sment on the grounds that the Formal Assessment Notice (FAN) was i sued beyond the prescriptive period,3 that there was error in finding hat the "Best Evidence Rule" adopted was applicable and proper' an that, finally, the disallowed expenses due to non-withholding were roper and acceptable adjustments to income. 5 On the other hand, respo dent moves for dismissal of Salcedo's petition for lack of merit and s ecifically for the reconsideration of the r- court's holding that the three- ear prescriptive period under Section 2 Exhibit P-9, Division Docket p. 197. ECISION), Division Docket, p. 276. ECISION), Division Docket, p. 278. 3 Motion for Partial Reconsideration (of the ECISION), Division Docket, p. 279. 4 Motion for Partial Reconsideration (of the 5 Motion for Partial Reconsideration (of the

RESOLUTION CTA Case No. 8880 203 of the tax code applies in tead of the ten-year period in cases of fraud or of false returns under Section 222.6 Petitioner's arguments o the application of the Best Evidence Rule and the disallowance of e penses for non-withholding have been sufficiently discussed in the ssailed decision.? Other than a bare assertion and a general state ent that petitioner submitted all the documents requested by the Revenue Officer,8 petitioner failed to identify the nature and type of documents submitted and explain how these documents justify the c ncellation of the assessment. In fact, during trial petitioner failed to resent in court the same documents it submitted to the respondent t oppose the assessment.9 Petitioner should keep in mind that tax assessments are presumed correct and made i good faith, with the taxpayer having the burden of proving other ise. In the absence of proof of any irregularities in the performan e of duties, an assessment duly made by a revenue examiner and a proved by his superior officers will not be disturbed. All presumption are in favor of the correctness of tax assessments. 10 Failure to present eviden e for the court's consideration to rebut this presumption is fatal to p titioner's cause. This court is a highly specialized body that reviews ax cases and conducts trial de novo. 11 Clearly, petitioner was remiss i presenting crucial pieces of evidence in the de novo proceedings be~ re the CTA and failed to prove relevant aspects of its defense against t e income tax assessment. With respect to the issu of prescription raised by both parties, the court remains unconvinc d that its factual findings should be revisited. Salcedo argues that the t ree-year prescription of the income tax assessment had already set-in when the FAN was issued on May 8, 2013. Nonetheless, petitioner id not address why Section 223 of the tax code when the running of he statute of limitations is suspended should not apply, even when it could no longer be located in the address registered with the res ondent. The assailed decision precisely Je__ 6 Motion for Reconsideration (of the Decisio dated 22 June 2017), Division Docket, pp. 276-278. 7 Decision, Division Docket, pp. 266-272. 8 Motion for Partial Reconsideration (of the ECISION), Division Docket, p. 278. 9 Decision, Division Docket, p. 269. �1 Commissioner ofInternal Revenue v. Trarters Royal Bank, G.R. No. 167134, March 18, 2015. 11 Commissioner ofInternal Revenue v. Phi}{ppine Airlines, Inc., G.R. No. 215705-07, February 22, 2o17. 1� I

RESOLUTION CTA Case No. 8880 focused on this issue which pe itioner failed to rebut with a convincing explanation: "As early as Februa 2012, respondent's examiners have been attempting to serve t e NIC and, thereafter, the PAN, to representatives of the petiti ner in its registered address, without success. Revenue Officer Etorma later on learned from the building administrator that Salcedo moved out of building. In fact, the building administrator issued Certification dated February 29, 2012, which stated that petitione "does not have any existing lease contract with Classica Tower Condominium Assoc. Inc. and [is] no longer occupying Unit GF-1 at 114 H.V. dela Costa St., Salcedo Village, Makati City." Furthermore, the tax ayer Salcedo admitted that it ceased commercial operations som time in June 2012 and yet failed to inform the respondent of th cessation of the business and update the BIR registration system. Consequently, pursu nt to Section 223, the running of prescription against the re pondent CIR's right to assess was suspended beginning Februa 29, 2012 when its examiner was able to confirm that the taxpayer oved out of its registered address. By this time, however, the three year prescription for the right to assess valued-added tax, expanded ithholding tax and withholding tax on compensation had already se in. Accordingly, except f r the income tax assessment, the respondent's right to ass ss Salcedo is already barred by prescription." (citations omitt d) Contrary to petitioner's statements, respondent through its revenue examiner exerted due iligence in attempting to reach Salcedo several times and to serve th various processes related to the tax audit. Respondent's efforts p oved futile, however. It was only in February 2012 when respond nt was able to confirm that, in fact, petitioner had already left its r gistered address without proper notice when it finally secured a writt n certification from petitioner's lessor. Petitioner failed to dispute this fact, hence, the application of Section 223. In view of the foregoing, e find no cogent reason to disturb the conclusions in the June 22, 20 7 Decision. ~

RESOLUTION of both parties are DENIED for lack CTA Case No. 8880 Page 5 of 5 ~~ c.~o.-u~l ~ . WHEREFORE, the juANITO c. CASTANEDA, JR. of merit. Associate Justice SO ORDERED. WE CONCUR: ~~~.~ CATHERINET.MANAHAN CAESA~ANOVA Associate Justice Associate Justice