REPUBLIC OF THE PHILIPPINES

COURT OF TAX APPEALS

QUEZON CITY

FIRST DIVISION
*************

HANTEX TRADING CO., INC.,

Petitioner,

C.T.A. CASE NO. 5126

Members :
- versus -
ACOSTA, Chairman
BAUTISTA, and
CASANOVA, Jl

COMMISSIONER OF INTERNAL REVENU E, Promulgated:

Respondent.

X- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

DECISION
BAUTISTA, L, J. :

This is a remanded case stemming from the Decision of the Honorable Supreme

Court dated March 31, 2005 in the case docketed as "Commissioner of Internal

Revenue vs. Hantex Trading Co., Inc., G.R. No. 136975", setting aside the Court of

Appeals' Decision which reversed this Court's Decision in CTA Case No. 5126 1 upholding the

1987 deficiency income and sales tax assessments against Hantex Trading Co., Inc., the

dispositive portion of which reads as follows:

1
Hantex Trading Co., Inc. vs. Commissioner of Internal Revenue, December 11, 1997.
 DECISION
C.T.A. CASE NO. 5126
Page 2

"IN UGHT OF ALL THE FOREGOING, the petition is GRANTED.

The Decision of the Court of Appeals is SET ASIDE. The records are
REMANDED to the Court of Tax Appeals for further proceedings"'
conformably with the decision of this Court. No costs.

so ORDt:""RED. H

Petitioner is a registered general partnership duly organized and existing under the

laws of the Philippines and is engaged in the importation of plastic products. Based on the

investigation conducted by the agents of the Economic Intelligence and Investigation Bureau

(EIIB), 2 it was recommended that assessment and collection from petitioner of the total

amount of P41,916,937. 76 be made. Subsequently, on April 15, 1991, then Assistant

Commissioner for Col lection Jaime Maza issued a demand letter to the petitioner for the

payment of a deficiency income and sales tax for 1987 in the amounts of P13,414,226.40

and P14,752,903.28, respectively. On the same date, Assessment Notices Nos. FAS-1-87-91-

001654 and FAS-4-87-91-001655 were issued against the petitioner requiring it to pay the

amounts of Pl3,414,226.40 (interest being increased from P3)13,825.08 to P5,030,334.90)

and P14,752,903.28 as its deficiency income and sales taxes, respectively for 1987.

Petitioner protested the aforementioned deficiency tax assessments. The same was

denied by the respondent in a letter dated December 10, 1993. On July 6, 1994, petitioner

filed with this Court the instant petition for review.

In a Decision of December 11, 1997, this Court denied the Petition for Review and

ordered petitioner to pay the respondent its defidency income and sales taxes for the year

1987 in the modified amounts of Pl1,182,350.26 and P12,660,382.46, respectively, plus a

20% delinquency interest per annum on both deficiency taxes. In holding that the

assessments made by respondent against petitioner have valid and legal bases, this Court

ratiocinated, thus:

2
Acting on a confidential information that petitioner's 1987 importations were understated in its accounting
records.

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DECISION
C.T.A. CASE NO. 5126
Page 3

""Ole issue should be ruled in the affirmative as petitioner has failed to rebut
the validity or correctness of the aforementioned tax assessments. It is incongruous
for petitioner to prove its cause by simply drawing an inference unfavorable to the
respondent by attacking the source documents (Consumption Entries} which were
the bases of the assessment and whic/1 were certified by the Chiefs of the Lollection
Division, Manila International Container Port and the Port of Manila, as having been
processed and rel~ased in the name of the petitioner after payment of duties and
taxes and the duly certified copies of Financial Statements secured from the
Securities and Exchange Commission. Any such inference cannot operate to relieve
petitioner from bearing its burden of proof and this Court has no warrant of
absolution. The Court should have been persuaded to grant the reliefs sought by the
petitioner should it have presented any evidence of relevance and competence
required, like that of a certification from the Bureau of Customs or from any other
agencies, attesting to the fact that those consumption entries did not really belong to
them.

The burden of proof is on the taxpayer contesting the validity or correctness

of an assessment to prove not only that the Commissioner of Internal Revenue is
wrong but that the taxpayer is right (Tan Guan vs. CTA, 19 SCRA 903}, otherwise the
presumption in favor of the correctness of tax assessment stands (Sy Po vs. CTA, 164
SCRA 524). The burden of proving the illegality of the assessment lies upon the
petitioner alleging it to be so. In the case at bar, petHioner miserably failed to
discharge this duty.

XXX XXX XXX

Further, petitioner, in seeking to exculpate itself from the assessments

alleged that the tax assessments were .based on documents which were mere xerox
copies of import entries, thus, not admissible adminjstratively or judicially against it,
hence, the assessments were not based on actual facts but on mere presumptions.
We ruled en contrario to the stand of the petitioner.

Section 16(b) authorizes the Commissioner to assess taxes on the basis of

the best evidence obtainable in case of failure on the part of the taxpayer to submit
the required returns, statement, records and other documents. Based on the records
presented, petitioner fails to submit the required books and other financial records
when requested. As held by the Supreme Court in the case of Sy Po vs. Court of Tax
Appeals, supra, the rule on the 'best evidence obtainable' applies when a tax report
required by law for the purpose of assessment is not available or when the tax report
is incomplete or fraudulent. Hence, the questioned documents may be used by the
respondent as basis for the assessment of any internal revenue tax.

XXX XXX

By the use of this method the Commissioner makes or amends the return
from his own knowledge and from such information as he can obtain thru testimony
or otherwise. Assessments made as such are deemed prima facie correct and
sufficient for all legal purposes. The taxpayer has the duty of proving otherwise. As
earlier adverted t~ petitioner failed to discharge this duty.

Where the taxpayer is appealing to the Tax Court on the ground that the
Collector's assessment is erroneous, it is incumbent upon him to prove what is the
correct and just liability by a full and fair disclosure of all pertinent data in his
possession. Otherwise, if the · taxpayer confines himself to proving that the
assessment is wrong, the Tax Court proceedings would settle nothing, as the way
would be left open for subsequent assessments and appeals in interminable
succession. (Sy Po vs. Court of Tax Appeals, supra.)"
 DECISION
C.T.A. CASE NO. 5126
Page 4

Not satisfied with the above Decision of this Court, both parties filed their respective

motions for reconsideration .

3
In a Resolution promulgated on February 27, 1998, this Court denied both motions

for lack of merit.

Petitioner then elevated the case to the Court of Appeals through a Petition for
5
Review. 4 On September 30, 1998, the Court of Appeals rendered its Decision granting

petitioner's Petition for Review thereby reversing this Court's Decision of December 11,

1997. The Court of Appeals resolved the issues raised in this wise :

"We are in full accord with the clear observations of the petitioner that the
CTA has inescapably committed grave abuse of discretion amounting to lack or
excess ofjurisdiction in the case at bench.

The income and sales tax deficiency assessments made by the respondent
BIR Commissioner against the petitioner were unlawful and baseless.

Unlawfu~ because it violates the fundamental rights of the petitioner

guaranteed under Sedion 1, Article III of the Bill of Rights of the Philippine
Constitution_ xxx

XXX XXX XXX

Baseless, because the deficiency tax assessments issued and imposed upon
by the BIR against the petitioner were basically computed and based from data
secured in 1987 from photocopies (xerox) of the alleged consumption entry
documents purportedly in the name of the petitioner in 1987. It should be noted that
the xerox/photocopies consisting of sixty (sic) (68) pages (Exhibits "F-r to "F-68")
while otherwise uncontested and uncontroverted by · the respondent BIR
Commissioner were never authenticated nor verified under oath by the EIIB and the
BIR investigators and their officials. In fact, the respondent BIR Commissioner,
miserably failed to adduce any proof/evidence prima facie or a probable cause to
establish correctness and sufficiency of his informauon obtained through testimony or
otherwise in order to formulate his own belief and knowledge. There is nothing in
the record whatsoever to show that respondent complied with the pertinent provision
of Section 16(b) of National Internal Revenue Code (NIRC) of 1977, which provides,
inter alia, 'that the Commissioner shall make oi amend the return form his own
knowledge and from such information as he can obtain through testimony or
otherwise, which shall be prima facie corred and sufficient for all legal purposes. ' In
the instant case, no proof was presented that in the preparation of the tax deficiency
assessments in question, the Commissioner ever made or amended the income and
sales tax returns of the petitioner for the year 1987. This lends support to a well-
established rule in our jurisprudence that:

3
Rollo, pp. 279-280.
4
Docketed as CA-G.R. SP No. 47172.
5
Hantex Trading Co., Inc. vs. Commissioner ofintemal Revenue, CA-G .R. SP No. 47172, Rollo, pp. 421-449 .

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DECISION
C.T.A. CASE NO. 5126
Page 5

'In order to stand the test of 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. ' (Commissioner of Internal Revenue vs.
Benipayo, L-13656, and SCRA 182, underlining ours)'

The respondent claims that he has the power to make assessments on the
basis of information he can obtain, citing the same provision of Section 16(b) of the
Tax Code. In other words, the respondent submits that under the 'best evidence
obtainable' method of assessing taxes,. he issued the deficiency assessments based
only on the information obtained from the HIB.

Respondent's premise is wrong. His argument should have been based on

the ''best evidence" rule stating that the original document must be produced. If it
could not be produced, secondary evidence must be adduced This is the rationale of
Rule 130 of the revised Rules of Court on the admissibility of documentary evidence.

The respondent's contention that the original copies of the consumption

entries could no longer be produced in court, because they have already been
destroyed and eaten by termites gathered from the testimony of the Chief of the
Investigation Division of the HIB, would not at all suffice to satisfy with the
requirements of Rule 130 on the Best Evidence Rule and the Secondary Evidence
Rule (Section 2 in relation to Section 4 thereof), of the same Rules.

In the instant case, significant is the fact that the public officer charged with
the custody of the consumption entry documents was never presented in court (CTA}
to lend credence to the alleged loss of the originals. Chief Flores' testimony, if at a/~
is merely hearsay in character, and therefore, inadmissible in evidence.

XX"X

Respondent also tries to justify that the certifications of the C.flief Collector of
the Manila International Container Port and the Chief Go/lector of the Port of Manila
would amount to an authentication of the contents of the photocopies of the
consumption entry documents while the import entries of the petitioner were duly
processed and released from their ports after payment of duties and taxes.

We do not agree.

Their certifications do not serve as authentication and verification. There

was no showing that these Collection Chiefs of the ports of the Bureau of Customs
are the public officers charged with the legal custody of the consumption entry
documents. What their letters wouldpurport are merely enumerated entry numbers
and dates of release and payments without simply identifying any of the sixty-eight
(68) consumption entry documents.

Specifically, the certifications made by the two Customs Collection Chiefs

under the guise of supporting the petitioner's alleged tax deficiency assessments
invoking the 'best evidence obtainable' should not be permitted to supplant the 'Best
Evidence Rule ~ more particularly under Section ?, Rule 130 of the Rules of Court, x.rr

XX"X XXX XXX

In the present case, the records show that the BIR did not conduct its own
separate investigation when the docket of the case was transmitted to it by the HIB.
It simply and solely relied on the findings and report made by tiJe HIB agents. .rrx
The BIR has therefore no factual basis to determine the tax liabilities of the petitioner
because it is merely hearsay evidence to utilize the contents of the unauthenticated

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 DEOSION
C.T.A. CASE NO. 5126
Page 6

and unverified photocopies of the consumption entries in its computations of the

1987 deficiency tax assessments against petitioner. xxx

XXX

The CTA should not just brush aside the legal requisites provided for under
the pertinent provisions of the Rules of Court in the matter of the admissibility of
public documents. Substantive rules of evidence should nat be disregarded by the
CTA. xxx"

Aggrieved by the said decision rendered by the Court of Appeals, respondent

6
Commissioner appealed to the Honorable Supreme Court through a Petition for Review

under Rule 45 of the Rules of Court praying for the reversal of the Decision of the Court of

Appeals and for the reinstatement of the ruling of the CTA.

On March 31, 2005, the Supreme Court rendered its Decision granting petitioner's

(herein responden~s) Petition for Review thereby setting aside the Decision rendered by the

Court of Appeals and remanding the case to this Court for further proceedings.

Hence, this case before Us.

The issues in this case remain: Whether the final assessment against petitioner for

deficiency income tax and sale tax for its 1987 importation of resins and calcium bicarbonate

is based on competent evidence and the law and the total amount of deficiency taxes due

from petitioner for 198~ if any.

The Supreme Court, in disposing of the case, applied the "in the higher interest of

justice" principle so that instead of dismissing the petition for lack of merit, it remanded the

case to the CTA for further proceedings, to wit:

"On the disposition of the case, the Court has two options, namely, to
deny the petition for lack of merit and affirm the decision of the CA, without
prejudice to the petitioner's (heren responden~s) issuance of a new
assessment against respondent (herein petitioner) based on credible
evidence; or to remand the case to the CTA for further proceedings, to
enable the petitioner (herein respondent) to adduce in evidence certified true
copies or duplicate original copies of the Consumption Entries for the
respondent's (herein petitioner's) 1987 importations, if there be any, and the
correct tax deficiency assessment thereon, without prejudice to the right of
the respondent (herein petitioner) to adduce controverting evidence, so that
6
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Commissimer of Internal Revenue vs. Hantex Trading Co., Inc., G.R. No. 136975 .

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 DECISION
C.T.A. CASE NO. 5126
Page 7

the matter may be resolved once and for all by the CTA. In the higher
interest of justice to both the parties, the Court has chosen the latter option .
After all, as the tax Court of the United States emphasized in Harbin v.
Commissioner of Internal Revenue, taxation is not only practical; it is vital-.
The obligation of good faith and fair dealing in carrying out its provision is
reciprocal and, as the government should never be over-reaching or
tyrannical, neither should a taxpayer be permitted to escape payment by the
concealment of material facts."

Thus, respondent was given the opportunity before this Court to present the certified

true copies or duplicate original copies of the Consumption Entries for the petitioner's 1987

importations in order to finally determine petitioner's deficiency taxes for 1987, if any. He

then submitted certifications and letters from the National Statistics Office, International

Container Terminal Services, Inc., Asian Terminal, Inc., Bureau of Customs, and the

Chairman of the Tariff Commission, from whom he had requested for certified true copies or

duplicate original copies of the Consumption Entries for the petitioner's 1987 importations.

The Administrator of the National Statistics Office issued a Certification that the

office cannot provide copies to herein respondent of the import entries of herein petitioner

as it is bound by the confidentiality clause of Section 4, Commonwealth Act 591, which

provides that " ... the data furnished to the National Statistics Office (NSO) will be kept

STRICTLY CONFIDENTIAL and shall not be used as evidence in court for purposes of

taxation, regulation of investigation; nor shall such data or information be divulged to any

person except authorized employees of the National Statistics Office, nor shall such data be

published except in the form of summaries of statistical tables in which no reference to an

individual corporation, association, partnership, institution or business enterprise shall

appear. xxx 7 Likewise, respondent presented in evidence the letter of t he National

Statistics Office informing this Court that it cannot provide Us with the data as requested for

the earliest data in its electronic files is 1991. 8

7
Exhibit "18"
B Exhibit "19"
 DECISION
C.T.A. CASE NO. 5126
Page 8

9
Additionally, a letter from the Chairman of the Tariff Commission was submitted by

respondent informing the latter that he could not f urnish the requested documents

considering that the Tariff Commission only mai ntained import entries for a period of five (5)

years and the earliest data they have in file is f rom the year 2000. The Bureau of Internal

Revenue has no records either of the 1987 importation of Hantex Trading Co., Inc. as
10
attested to by its Chief of Records Division.

Lastly, the International Container Terminal Services, Inc. (ICTSI), 11 wrote

respondent that it has no records pertaining to the importation of petitioner in 1987.

In sum, respondent failed to present t he duplicate originals or certified true copies of

the import entries he used as basis in the issuance of the final assessment against petitioner

as mandated by the Supreme Court. Without such duplicate originals or certified true copies

of the import entries, the said final assessment becomes devoid of factual basis and is

invalid. Hence, the same should be cancelled and set aside.

As already elucidated by the Supreme Court before it remanded the case to this

Court, the best evidence obtainable under Section 16 of the 1977 NIRC, as amended, which

provision authorizes the Commissioner to assess taxes on the basis of the best evidence

obtainable in case of failure on the part of the taxpayer to submit the required returns,

statement, records and other documents, does not include mere photocopies of the records

or documents and that for tax assessments to be presumed correct, they must be based on

sufficient evidence. To quote:

"Central to the second issue is Section 16 of the NIRC of 1977, as

amended, which provides that the Commissioner of Internal Revenue has the
power to make assessments and prescribe additional requirements for tax
admi nistration and enforcement. Among such powers are those provided in
paragraph (b) thereof, which we quote:

9
Exhibit " 20"
10
Exhibit "21 "
11
Exhibit "22"

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DECISION
C.T.A. CASE NO. 5126
Page 9

(b) Failure to submit required reports, statements, reports

and other documents. - When a report required by law as a basis
for the assessment of any national internal revenue tax shall not be
forthcoming within the time fixed by law or regulation or when there
is reason to believe that any such report is false, incomplete or
erroneous, the Commissioner shall assess the proper tax on the best
evidence obtainable.

In case a person fails to file a required return or other

document at the time prescribed by law, or willfully or otherwise files
a false of fraudulent return or other document, the Commissioner
shall make or amend the return from his own knowledge and from
such information as he can obtain through testimony or otherwise,
which shall be prima facie correct and sufficient for all legal
purposes.

This provision applies when the Commissioner of Internal Revenue

undertakes to perform her administrative duty of assessing the proper tax
against a taxpayer, to make a return in case of a taxpayer's failure to file one,
or to amend a return already filed with the BIR.

The petitioner (herein respondent) may avail herself of the best

evidence or other information or testimony by exercising her power or
authority under paragraphs (1) to (4) of Section 7 of the NIRC:

1. To examine any book, paper, record or other data

which may be relevant or material to such inquiry;

2. To obtain information from any office or officer of

the national and local governments, government agencies or
its instrumentalities, including the Central Bank of the
Philippines and government owned or controlled corporations;

3. To summon the person liable for tax or required

to file a return, or any officer or employee of such person, or
any person having possession, custody, or care of the books of
accounts and other accounting records containing entries
relating to the business of the person liable for tax, or any
other person, to appear before the Commissioner or his duly
authorized representative at a time and place specified in the
summons and to produce such books, papers, records, or
other data, and to give testimony;

4. To take such testimony of the person concerned,

under oath, as may be relevant or material to such inquiry; ...

The 'best evidence' envisaged in Section 16 of the 1977 NIRC, as

amended, includes the corporate accounting records of the taxpayer who is
the subject of the assessment process, the accounting records of other
taxpayers engaged in the same line of business, including their gross profit
and net profit sales. Such evidence includes data, record, paper, document
or any evidence gathered by the internal revenue officers from other

/
DECISION
C.T.A. CASE NO. 5126
Page 10

taxpayers who had personal transactions from whom the subject taxpayer
received any income; and record, data, document and information secured
from government offices or agencies, such as the SEC, the Central Bank of
the Philippines, the Bureau of Customs, and the Tariff and Customs
Commission .

The law allows the BIR access to all relevant or material records and
data in the person of the taxpayer. It places no limit or condition on the type
or form of the medium by which the record subject to the order of the BIR is
kept. The purpose of the law is to enable the BIR to get at the taxpayer's
records in whatever form they may be kept. Such records include computer
tapes of the said records prepared by the taxpayer in the course of business.
In this era of developing information-storage tech nology, there is no valid
reason to immunize companies with computer-based, record-keeping
capabilities from the BIR scrutiny. The standard is not the form of the record
but where it might shed light on the accuracy of the taxpayer's return.

XXX XXX XXX

We agree with the contention of the petitioner (herein respondent)

that the best evidence obtainable may consist of hearsay evidence, such as
the testimony of third parties or accounts or other records of other taxpayers
similarly circumstanced as the taxpayer subject of the investigation, hence,
inadmissible in a regular proceeding in the regular courts. Moreover, the
general rule is that administrative agencies such as the BIR are not bound by
the technical rules of evidence. It can accept documents which cannot be
admitted in a judicial proceeding where the Rules of Court are strictly
observed. It can choose to give weight or disregard such evidence,
depending on its trustworthiness.

However, the best evidence obtainable under Section 16 of

the 1977 NIRC, as amended, does not indude mere photocopies of
records/ documents. The petitioner (herejn respondent), in making a
preliminary and final tax deficiency assessment against a taxpayer, cannot
anchor the said assessment on mere machine copies of records/documents.
Mere photocopies of the Consumption Entries have no probative
weight if offered as proof of the contents thereof. The reason for
this is that such copies are mere scraps of paper and are of no
probative value as basis for any deficiency income or business tax
against a taxpayer. Indeed, in United States vs. Davey, the U.S. Court of
Appeals (2nd Circuit) ruled that where the accuracy of a taxpayer's return is
being checked, the government is entitled to use the original records rather
than be forced to accept purported copies which present the risk of error or
tampering.

In Collector of Internal Revenue v. Benipayo, the Court ruled that the

assessment must be based on actual facts. The rule assumes more
importance in this case since the xerox copies of the Consumption Entries
furnished by the informer of the EIIB were furnished by yet another informer.
While the EIIB tried to secure certified copies of the said entries from the
Bureau of Customs, it was unable to do so because the said entries were

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DECISION
C.T.A. CASE NO. 5126
Page 11

allegedly eaten by termites. The Court can only surmise why the EIIB or the
BIR, for that matter, failed to secure certified copies of the said entries from
the Tariff and Customs Commission or from the National Statistics Office
which also had copies thereof. It bears stressing that- under Section 1306 of
the Tariff and Customs Code, the Consumption Entries shall be the required
number of copies as prescribed by regulations. The Consumption Entry is
accomplished in sextuplicate copies and quadruplicate copies in other places.
In Manila, the six copies are distributed to the Bureau of Customs, the Tariff
and Customs Commission, the Declarant (Importer), the Terminal Operator,
and the Bureau of Internal Revenue. Inexplicably, the Commissioner and the
BIR personnel ignored the copy of the Consumption Entries filed with the BIR
and relied on the photocopies supplied by the informer of the EIIB who
secured the same from another informer. The BIR, in preparing and issuing
its preliminary and final assessments against the respondent, even ignored
the records on the investigation made by the District Revenue officers on the
respondent's (herein petitioner's) importation for 1987.

The original copies of the Consumption Entries were of prime

importance to the BIR. This is so because such entries are under oath and
are presumed to be true and correct under penalty of falsification or perjury.
Admissions in the said entries of the importers' documents are admissions
against interest and presumptively correct.

In fine, then, the petitioner (herein respondent) acted arbitrarily and

capriciously in relying on and giving weight to the machine copies of the
Consumption Entries in fixing the tax deficiency assessments against the
respondent (herein petitioner).

XXX XXX XXX

We agree with the contention of the petitioner (respondent herein}

that, as a general rule, tax assessments by tax examiners are presumed
correct and made in good faith. All presumptions are in favor of the
correctness of a tax assessment. It is to be presumed, however, that such
assessment was based on sufficient evidence. xxx

However, the prima facie correctness of a tax assessment does not

apply upon proof that an assessment is utterly without foundation, meaning it
is arbitrary and capricious. Where the BIR has come out with a 'naked
assessment,' t:e./ without any foundation character, the determination of the
tax due is without rational basis. In such a situation, the U.S. Court of
Appeals ruled that the determination of the Commissioner contained in a
deficiency notice disappears. Hence/ the determination by the CTA must rest
on all the evidence introduced and its ultimate determination must find
support in credible evidence.

The issue that now comes to fore is whether the tax deficiency
assessment against the respondent (petitioner herein) based on the certified
copies of the Profit and Loss Statement submitted by the respondent
(petitioner herein) to the SEC in 1987 and 1988, as well as certifications of
Tomas and Danganan, is arbitrary, capricious and illegal. The CTA ruled that

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 DECISION
C.T.A. CASE NO. 5126
Page 12

the respondent (petitioner herein) failed to overcome the prima facie

correctness of the tax deficiency assessment issued by the petitioner (herein
respondent), xxx

XXX XXX XXX

· We are not in full accord with the find ings and ratiocination of the
CTA. Based on the letter of the petitioner (herein respondent) to the
respondent (herein petitioner) dated December 10, 1993, the tax deficiency
assessment in question was based on (a) th e findings of the agents of the
EIIB which was based, in turn, on the photocopies of the Consumption
Entries; (b) the Profit and Loss Statements of the respondent (herein
petitioner) for 1987 and 1988; and (c) the certification of Tomas and
Danganan dated August 7, 1990 and August 22 1990:
1

XXX XXX XXX

In fine, the petitioner (herein respondent) based her finding that the
1987 importation of the respondent (herein petitioner) was underdeclared in
the amount of P105 1 761 1 527.00 on the worthless machine copies of the
Consumption Entries. Aside from such copies, the petitioner (herein
respondent) has no other evidence to prove that the respond ent {herein
petitioner) imported goods costing P105,761,527.00. The petitioner (herein
respondent) cannot find solace on the certifications of Tomas and Danganan
because they did not authenticate the machine copies of the Consumption
Entries, and merely indicated the entry numbers of Consumption Entries and
the dates when the Bureau of Customs released the same. xxx

Even if the Court would concede to the petitioner/s (herein

respondent~) contention that the certification of Tomas and Danganan
authenticated the machine copies of the Consumption Entries referred to in
the certification/ it appears that the total cost of importations inClusive of
advance sales tax is only P64r324,953.00 - far from the amount of
P105,7161 527.00 arrived at by the EIIB and the BIR 1 or even the amount of
Pll0,0791 491.61 arrived at by Deputy Commissioner Deoferio1 Jr. As gleaned
from the certifications of Tomas and Danganan, the goods covered by the
Consumption Entries were released by the Bureau of Customs, from which it
can be presumed that the respondent must have paid the taxes due on the
said importation. The petitioner [herein respondent) did not adduce any
documentary evidence to prove otherwise.

Thus, the computations of the EIIB and the SIR on the quantity and
J costs of the importation of the respondent in t he amount of P105,761,527.00
for 1987 have no factual basis, hence, arbitrary and capricious. The
petitioner cannot rely on the presumption that she and the other
employees of the BIR had regularly performed their duties. As the
Court held in Collection of Internal Revenue v. Benipayo, in order to
I
stand judicial scrutiny, the assessment must be based on facts. The
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presumption of the correctness of an assessment, being a mere presumption,
cannot be made to rest on another presumption.

)
DECISION
C:~.A .CASE NO. 5126
Page 13

Moreover, the uncontroverted fact is that the BIR District

Revenue Office had repeatedly examined the 1987 books of
accounts of the respondent showing its importations, and found
that the latter had minimal business tax liability. In this case, the
presumption that the District Revenue officers performed their duties in
accordance with the law shall apply. There is no evidence on record that the
said officers neglected to perform their ·duties as mandated by law; neither is
there evidence aliunde that the contents of the 1987 and 1988 Profit and
Loss Statements submitted by the respondent (herein petitioner) with the
SEC are incorrect.

Admittedly, the respondent (herein petitioner) did not adduce

evidence to prove its correct tax liability. However, considering that
it has been established that the petitioner's (herein respondent's}
assessment is barren of factual basis, arbitrary and illegal, such
failure on the part of the respondent cannot serve as a basis for a
finding by the Court that it is liable for the amount contained in the
said assessment; otherwise, the Court would t hereby be committing a
travesty." (Emphasis Ours.)

Considering the above pronouncement of the Supreme Court and after hearing duly

conducted as recited in t he findings of the Court, t he Assessment issued against the

petitioner for its 1987 importation is hereby cancelled .

WHEREFORE, premises considered, the Petition for Review is hereby GRANTED.

Accordingly, the assessments for deficiency income and sales t axes under Assessment

Notice Nos. FAS-1-87-91-001654 and FAS-4-87-91-001655, respectively, covering t he

taxable year are hereby CANCELLED and WITHDRAWN.

SO ORDERED.
 DEOSION
C.T.A. CASE NO. 5126
Page 14

WE CONCUR:

~ -o~
ERNESTO D. ACOSTA
Presiding Justice

CAESA~NOVA
Associate Justice

CERTIFICATION
Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that the

conclusions in the above Decision were reached in consu ltation before the case was

assigned to the writer of the opinion of the Court's Division.

L~.~
ERNESTO D. ACOSTA
Presiding Justice
Chairperson, First Division

_j