(Exh. ZZ[25](https://lawphil.net/judjuris/juri2016/nov2016/gr196596so2016.html#fnt25)) and May 31, 2003 (Exh. AAA[26](https://lawphil.net/judjuris/juri2016/nov2016/gr196596so2016.html#fnt26)). These pieces of evidence were admitted by the Court of Tax Appeals in its

First Division upheld the Commissioner's assessment of deficiency income tax "for petitioner's failure to fully account for and substantiate all the disbursements from the CF-CPA."(https://lawphil.net/judjuris/juri2016/nov2016/gr196596so2016.html#fnt20) According to the Court of Tax Appeals, "it cannot ascertain whether rent income from MTO-Bookstore, Alarey, Zaide and Capri were indeed used for educational purposes."(https://lawphil.net/judjuris/juri2016/nov2016/gr196596so2016.html#fnt21) DLSU moved for reconsideration. Subsequently, it formally offered to the Court of Tax Appeals First Division, among others,(https://lawphil.net/judjuris/juri2016/nov2016/gr196596so2016.html#fnt22) the following supplemental pieces of documentary evidence: 1) Summary Schedule to Support Misplaced Vouchers for the Period of 3 Years from School Year June 1, 2001 to May 31, 2003 (Exh. XX);(https://lawphil.net/judjuris/juri2016/nov2016/gr196596so2016.html#fnt23) and 2) Schedule of Disbursement Vouchers Examined (Unlocated Documents) for the Fiscal Years Ended May 31, 2001 (Exh.

YY(https://lawphil.net/judjuris/juri2016/nov2016/gr196596so2016.html#fnt24)), May 31, 2002 (Exh. ZZ(https://lawphil.net/judjuris/juri2016/nov2016/gr196596so2016.html#fnt25)) and May 31, 2003 (Exh. AAA(https://lawphil.net/judjuris/juri2016/nov2016/gr196596so2016.html#fnt26)).

These pieces of evidence were admitted by the Court of Tax Appeals in its Resolution dated June 9, 2010.(https://lawphil.net/judjuris/juri2016/nov2016/gr196596so2016.html#fnt27) DLSU's controller, Francisco C. De La Cruz, Jr. testified: Q9: Please tell us the relevance of Exhibit "XX". A9: Exhibit "XX" provides an overview of what accounts do those inadvertently misplaced documents pertain to.

As will be shown by the other exhibits, the details of these accounts are all entered, recorded and existing in the accounting software of Petitioner. Q10: Please tell us the relevance of Exhibits "YY'', "ZZ" and "AAA".

A10: These are the details of the accounts pertaining to the inadvertently misplaced documents. Before the documents were inadvertently misplaced, these have been entered in the accounting software of Petitioner. Details were downloaded from Petitioner's accounting software.

These details include the Charge Account, the Classification of Expense per Chart Account of the University, the Cost Center per Chart of Account of the University, the Supplier Name, the Disbursement Voucher Number, the Disbursement Voucher Date, the Check Number, the Check Date, the Cost, and the Description per Disbursement Voucher. The specifics which accompany the entries were all taken from the documents before these were inadvertently misplaced. Exhibit "YY"

pertains to the details of the accounts for Fiscal Year 2001, Exhibit "ZZ" for Fiscal Year 2002, and Exhibit "AAA" for Fiscal Year 2003.(https://lawphil.net/judjuris/juri2016/nov2016/gr196596so2016.html#fnt28) Samples of the information provided in these pieces of evidence are as a.

For Fiscal Year Ended May 31, 2001 (Exhibit YY) Charge Account | Classification of Expense per Chart of Account of the University | Cost Center per Chart of Accounts of the University | Supplier Name | Disbursement Voucher No. | Disbursement Voucher Date | Check No. | Check Date | Cost | Description per Disbursement Voucher ---|---|---|---|---|---|---|---|---|--- 100-213-940 | Furniture, Fixture and Equipment | PFO Capital Projects | BARILEA WOOD WORKS | 2001050105 | 5/30/2001 | 180403 | 3-May-01 | 89,234.04 | TABLE, A 1.20 x .60(https://lawphil.net/judjuris/juri2016/nov2016/gr196596so2016.html#fnt29) b. For Fiscal Year Ended May 31, 2002 (Exhibit ZZ) Charge Account | Classification of Expense per Chart of Account of the University | Cost Center per Chart of Accounts of the University | Supplier Name | Disbursement Voucher No. | Disbursement Voucher Date | Check No.

| Check Date | Cost | Description per Disbursement Voucher ---|---|---|---|---|---|---|---|---|--- 100-213-943 | Airconditioner | PFO Capital Projects | RCC MARKETING CORPO-RATION | 2001081468 | 15-Aug-01 | 0000188442 | 16-Aug-01 | 63,249.95 | AIRCON WIN TYPE 3TR 2HP SPLIT TYPE(https://lawphil.net/judjuris/juri2016/nov2016/gr196596so2016.html#fnt30) c. For Fiscal Year Ended May 31, 2003 (Exhibit AAA) Charge Account | Classification of Expense per Chart of Account of the University | Cost Center per Chart of Accounts of the University | Supplier Name | Disbursement Voucher No. | Disbursement Voucher Date | Check No. | Check Date | Cost | Description per Disbursement Voucher ---|---|---|---|---|---|---|---|---|--- 100-026-950 | COMPUTER PRINTER | VC Academics | SILICON VALLEY COMPUTER CENTRE | 2002102047 | 10/18/2002 | 218124 | 26-Oct-2002 | 12,350.00 | PRINTER HP DESKJET 960C(https://lawphil.net/judjuris/juri2016/nov2016/gr196596so2016.html#fnt31) However, the Court of Tax Appeals First Division was unconvinced.

It simply stated that DLSU failed to sufficiently account for the unsubstantiated disbursements. Although it considered the other additional documentary evidence (Exhibits "VV" and "WW") formally offered by DLSU Exhibits "XX "

"YY" "ZZ " and "AAA"

were brushed aside without citing any reason or discussing the probative value or weight of these additional pieces of evidence.(https://lawphil.net/judjuris/juri2016/nov2016/gr196596so2016.html#fnt32) Thus: With regard the unsubstantiated disbursements from the CF-CPA, Petitioner alleged that the supporting documents were inadvertently misplaced due to migration of accounts to its new accounting software used sometime in 2001. In lieu thereof, petitioner submitted downloaded copies of the Schedule of Disbursement Vouchers from its accounting software. The Court is not convinced.

According to ICPA's findings, the petitioner was able to show only the disbursements from the CF-CPA amounting to ₱7,305,104.71, ₱8,747,116.40 and ₱6,259,078.30 for the fiscal years 2001, 2002 and 2003, respectively.(https://lawphil.net/judjuris/juri2016/nov2016/gr196596so2016.html#fnt33) The Court of Tax Appeals First Division concluded that only the portion of the rental income pertaining to the substantiated disbursements of the CF-CPA would be considered as actually, directly, and exclusively used for educational purposes.(https://lawphil.net/judjuris/juri2016/nov2016/gr196596so2016.html#fnt34) This portion was computed by multiplying the ratio of substantiated disbursements to the total disbursements per subsidiary ledgers to the total rental income, thus: Using the amounts determined for the Fiscal Year 2003, ₱6,259,078.30 | = 26.68% x ₱6,602,655.00 = ₱l,761,588.35 ---|--- ₱23,463,543.02 Hence, for 2003, the portion of the rental income that was not sufficiently proven to have been used for educational purposes amounted to ₱4,841,066.65.

This amount was used as base for computing the deficiency income tax and value-added tax. On appeal, the Court of Tax Appeals En Banc simply ruled that "petitioner again failed to fully account for and substantiate all the disbursements from the CF-CPA Account."(https://lawphil.net/judjuris/juri2016/nov2016/gr196596so2016.html#fnt35) The Court of Tax Appeals En Banc heavily relied on the findings of the ICPA that "the [substantiated] disbursements from the CF-CPA Account for fiscal year 2003 amounts to ₱6,259,078.30."(https://lawphil.net/judjuris/juri2016/nov2016/gr196596so2016.html#fnt36) However, these findings of the ICPA were made when Exhibits "XX," "YY,"

"ZZ," and "AAA" had not yet been submitted.

The additional exhibits were offered by DLSU to address the findings of the ICPA with regard to the unsubstantiated disbursements. Unfortunately, nowhere in the Decision of the Court of Tax Appeals En Banc was there a discussion on the probative value or weight of these additional exhibits.

As a rule, factual findings of the Court of Tax Appeals are entitled to the highest respect and will not be disturbed on appeal. Some exceptions that have been recognized by this Court are: (1) when a party shows that the findings are not supported by substantial evidence or there is a showing of gross error or abuse on the part of the tax court;(https://lawphil.net/judjuris/juri2016/nov2016/gr196596so2016.html#fnt37) (2) when the judgment is premised on a misapprehension of facts;(https://lawphil.net/judjuris/juri2016/nov2016/gr196596so2016.html#fnt38) or (3) when the tax court failed to notice certain relevant facts that, if considered, would justify a different conclusion.(https://lawphil.net/judjuris/juri2016/nov2016/gr196596so2016.html#fnt39) The third exception applies here. The Court of Tax Appeals should have considered the additional pieces of evidence, which have been duly admitted and formed part of the case records.

This is a requirement of due process.(https://lawphil.net/judjuris/juri2016/nov2016/gr196596so2016.html#fnt40) The right to be heard, which includes the right to present evidence, is meaningless if the Court of Tax Appeals can simply ignore the evidence. In Edwards v. McCoy:(https://lawphil.net/judjuris/juri2016/nov2016/gr196596so2016.html#fnt41) [T]he object of a hearing is as much to have evidence considered as it is to present it. The right to adduce evidence, without the corresponding duty to consider it, is vain.

Such right is conspicuously futile if the person or persons to whom the evidence is presented can thrust it aside without notice or consideration.(https://lawphil.net/judjuris/juri2016/nov2016/gr196596so2016.html#fnt42) In Ang Tibay v. Court of Industrial Relations,(https://lawphil.net/judjuris/juri2016/nov2016/gr196596so2016.html#fnt43) this Court similarly ruled that "not only must the party be given an opportunity to present his case and to adduce evidence tending to establish the rights which he asserts but the tribunal must consider the evidence presented."(https://lawphil.net/judjuris/juri2016/nov2016/gr196596so2016.html#fnt44) The Rules of Court allows the presentation of secondary evidence: RULE 130 Rules of Admissibility . . .

. Section 5. When original document is unavailable.

- When the original document has been lost or destroyed, or cannot be produced in court, the offeror, upon proof of its execution or existence and the cause of its unavailability without bad faith on his part, may prove its contents by a copy, or by a recital of its contents in some authentic document, or by the testimony of witnesses in the order stated. For secondary evidence to be admissible, there must be satisfactory proof of: (a) the execution and existence of the original; (b) the loss and destruction of the original or its non-production in court; and (c) the unavailability of the original not being due to bad faith on the part of the offeror. The admission by the Court of Tax Appeals First Division-which the En Banc affirmed-of these pieces of evidence presupposes that all three prerequisites have been established by DLSU, that is, that DLSU had sufficiently explained its non-production of the disbursement vouchers, and the cause of unavailability is without bad faith on its part.

There can be no just determination of the present action if we ignore Exhibits "XX," "YY," "ZZ,"

and "AAA," which were submitted before the Court of Tax Appeals and which supposedly contained the same information embodied in the unlocated disbursement vouchers. Exhibits "YY,"

"ZZ," and "AAA" were the downloaded copies of the Schedule of Disbursement Vouchers from DLSU's accounting software.

The Commissioner did not dispute the veracity or correctness of the detailed entries in these documents.(https://lawphil.net/judjuris/juri2016/nov2016/gr196596so2016.html#fnt45) Her objection to the additional pieces of evidence was based on the ground that "DLSU was indirectly reopening the trial of the case" and the additional exhibits were "not newly discovered evidence."(https://lawphil.net/judjuris/juri2016/nov2016/gr196596so2016.html#fnt46) An examination of these exhibits shows that the disbursements from the CF-CPA Account were used for educational purposes. These additional pieces of evidence, taken together with the findings of the ICP A, corroborate the findings of the Court of Tax Appeals in its January 5, 2010 Decision that DLSU uses "fund accounting"

to ensure that the utilization of an income (i.e., rental income) is restricted to a specified purpose (educational purpose): Petitioner's Controller, Mr. Francisco De La Cruz, stated the following in his judicial affidavit: Q: You mentioned that one of your functions as Controller is to ensure that [petitioner ]'s utilization of income from all sources is consistent with existing policies. What are some of [petitioner ]'s policies regarding utilization of its income from all sources? A: Of particular importance are the following: 1.

[Petitioner] has a long-standing policy to obtain funding for all disbursements for educational purposes primarily from rental income earned from its lease contracts, present and future; 2. In funding all disbursements for educational purposes, [petitioner] first exhausts its rental income earned from its lease contracts before it utilizes income from other sources; and 3. [Petitioner] extends regular financial assistance by way of grants, donations, dole-outs, loans and the like to St.

Yon for the latter's pursuit of its purely educational purposes stated in its AOI. The evaluation of petitioner's audited financial statements for the years 2001, 2002, and 2003 shows that it uses fund accounting.1âwphi1 The Notes to Financial Statements disclose: 2.6 Fund Accounting To ensure observance of limitations and restrictions placed on the use of resources available to the [Petitioner], the accounts of the [Petitioner] are maintained in accordance with the principle of fund accounting. This is the procedure by which resources for various purposes are classified for accounting and financial reporting purposes into funds that are in accordance with specified activities and objectives.

Separate accounts are maintained for each fund; however, in the accompanying financial statements, funds that have similar characteristics have been combined into fund groups. Accordingly, all financial transactions have been recorded and reported by fund group.(https://lawphil.net/judjuris/juri2016/nov2016/gr196596so2016.html#fnt47)

ACCORDINGLY, I vote to GRANT the Petition of De La Salle University, Inc. and to SET ASIDE the deficiency assessments issued against it. MARVIC M.V.F. LEONEN Associate Justice Footnotes (https://lawphil.net/judjuris/juri2016/nov2016/gr196596so2016.html#rnt1) TAX CODE, sec. 13 provides: Section 13. Authority ofa Revenue Officer. - Subject to the rules and regulations to be prescribed by / the Secretary of Finance, upon recommendation of the Commissioner, a Revenue Officer assigned to perform assessment functions in any district may, pursuant to a Letter of Authority issued by the Revenue Regional Director, examine taxpayers within the jurisdiction of the district in order to collect the correct amount of tax, or to recommend the assessment of any deficiency tax due in the same manner that the said acts could have been performed by the Revenue Regional Director himself. (https://lawphil.net/judjuris/juri2016/nov2016/gr196596so2016.html#rnt2) Revenue Audit Memorandum Order No. 1-00 (2000), VIII (C)(2.2) provides: 2.2 A Letter of Authority authorizes or empowers a designated Revenue Officer to examine, verify and scrutinize a taxpayer's books and records in relation to his internal revenue tax liabilities for a particular period. (https://lawphil.net/judjuris/juri2016/nov2016/gr196596so2016.html#rnt3) Revenue Memorandum Order No. 2-67 (1967), Amendment to Field Circular No. V-157 as amended by RMC No. 22-64 and RMC No. 30-65. (https://lawphil.net/judjuris/juri2016/nov2016/gr196596so2016.html#rnt4) Commissioner of Internal Revenue v. Sony Philippines, Inc., 649 Phil. 519, 530 (2010) [Per J. Mendoza, Second Division]. (https://lawphil.net/judjuris/juri2016/nov2016/gr196596so2016.html#rnt5) Per Decision, the date of the issuance is not on record. (https://lawphil.net/judjuris/juri2016/nov2016/gr196596so2016.html#rnt6) See Revenue Memorandum Circular No. 04-81, Guidelines in the Proper Enforcement of Tax Laws (July 8, 1980). (https://lawphil.net/judjuris/juri2016/nov2016/gr196596so2016.html#rnt7) 59 Phil. 244 (1933) [Per J. Malcolm, En Banc]. (https://lawphil.net/judjuris/juri2016/nov2016/gr196596so2016.html#rnt8) Id. at 257-259. (https://lawphil.net/judjuris/juri2016/nov2016/gr196596so2016.html#rnt9) Id. at 259-260. (https://lawphil.net/judjuris/juri2016/nov2016/gr196596so2016.html#rnt10) 165 Phil. 533 (1976) [Per J. Fernando, Second Division]. (https://lawphil.net/judjuris/juri2016/nov2016/gr196596so2016.html#rnt11) Id. at 542. (https://lawphil.net/judjuris/juri2016/nov2016/gr196596so2016.html#rnt12) TAX CODE, sec. 5; Commissioner of Internal Revenue v. Hantex Trading Co., Inc., 494 Phil. 306 (2005) [Per J. Callejo, Sr., Second Division]. (https://lawphil.net/judjuris/juri2016/nov2016/gr196596so2016.html#rnt13) Commissioner of Internal Revenue v. United Salvage and Towage (Phils.), Inc., 738 Phil. 335, 353 (2014) [Per J. Peralta, Third Division]. (https://lawphil.net/judjuris/juri2016/nov2016/gr196596so2016.html#rnt14) Commissioner of Internal Revenue v. Metro Star Superama, Inc., 652 Phil. 172, 184 (2010) [Per J. Mendoza, Second Division]. (https://lawphil.net/judjuris/juri2016/nov2016/gr196596so2016.html#rnt15) Rollo(G.R. No. 196596), pp. 143-144, CTA En Banc Decision dated July 29, 2010. (https://lawphil.net/judjuris/juri2016/nov2016/gr196596so2016.html#rnt16) Id. at 144. (https://lawphil.net/judjuris/juri2016/nov2016/gr196596so2016.html#rnt17) Id. at 119, CTA Decision dated January 5, 2010. (https://lawphil.net/judjuris/juri2016/nov2016/gr196596so2016.html#rnt18) Id. at 122. (https://lawphil.net/judjuris/juri2016/nov2016/gr196596so2016.html#rnt19) Rollo(G.R. No. 198841), p. 46. (https://lawphil.net/judjuris/juri2016/nov2016/gr196596so2016.html#rnt20) Id. at 132. (https://lawphil.net/judjuris/juri2016/nov2016/gr196596so2016.html#rnt21) Id. (https://lawphil.net/judjuris/juri2016/nov2016/gr196596so2016.html#rnt22) Rollo(G.R. No. 196596), pp. 140, 142-144. The other documents offered were: Statement of Receipts, Disbursement & Fund Balance for the Period June 1, 1999 to May 31, 2000 (Exhibit "VV"); and Statement of Fund Changes as of May 31, 2000 (Exhibit "WW"). (https://lawphil.net/judjuris/juri2016/nov2016/gr196596so2016.html#rnt23) Id. at 166. (https://lawphil.net/judjuris/juri2016/nov2016/gr196596so2016.html#rnt24) Id. at 167-169. (https://lawphil.net/judjuris/juri2016/nov2016/gr196596so2016.html#rnt25) Id. at l70-172. (https://lawphil.net/judjuris/juri2016/nov2016/gr196596so2016.html#rnt26) Id. at 174-179. (https://lawphil.net/judjuris/juri2016/nov2016/gr196596so2016.html#rnt27) Id. at 140. (https://lawphil.net/judjuris/juri2016/nov2016/gr196596so2016.html#rnt28) Id. at183, Judicial Affidavit of witness Francisco C. De La Cruz, Jr. dated 15 April 2010. (https://lawphil.net/judjuris/juri2016/nov2016/gr196596so2016.html#rnt29) Id. at 169. (https://lawphil.net/judjuris/juri2016/nov2016/gr196596so2016.html#rnt30) Id. at 172. (https://lawphil.net/judjuris/juri2016/nov2016/gr196596so2016.html#rnt31) Id. at 179. (https://lawphil.net/judjuris/juri2016/nov2016/gr196596so2016.html#rnt32) Id. at 145. (https://lawphil.net/judjuris/juri2016/nov2016/gr196596so2016.html#rnt33) Id. (https://lawphil.net/judjuris/juri2016/nov2016/gr196596so2016.html#rnt34) Id. (https://lawphil.net/judjuris/juri2016/nov2016/gr196596so2016.html#rnt35) Rollo(G.R. No. 198841), p. 86. (https://lawphil.net/judjuris/juri2016/nov2016/gr196596so2016.html#rnt36) Id. (https://lawphil.net/judjuris/juri2016/nov2016/gr196596so2016.html#rnt37) Commissioner of Internal Revenue v. Mitsubishi Metal Corp 260 Phil. 224, 235 (1990) [Per J. Regalado, Second Division]; Commissioner of Internal Revenue v. Metro Star Superama, Inc., 652 Phil. 172, 185 (2010) [Per J. Mendoza, Second Division]. (https://lawphil.net/judjuris/juri2016/nov2016/gr196596so2016.html#rnt38) Miguel J. Ossorio Pension Foundation, Inc. v. Court of Appeals, 635 Phil. 573, 585 (2010) [Per J. Carpio, Second Division]. (https://lawphil.net/judjuris/juri2016/nov2016/gr196596so2016.html#rnt39) BPI-Family Savings Bank, Inc. v. Court of Appeals, 386 Phil. 719, 727 (2000) [Per J. Panganiban, Third Division]. (https://lawphil.net/judjuris/juri2016/nov2016/gr196596so2016.html#rnt40) See Ginete v. Court of Appeals, 357 Phil. 36, 56 (1998) [Per J. Romero, Third Division]. (https://lawphil.net/judjuris/juri2016/nov2016/gr196596so2016.html#rnt41) 22 Phil. 598 (1912) [Per J. Moreland, First Division]. (https://lawphil.net/judjuris/juri2016/nov2016/gr196596so2016.html#rnt42) Id. at 600-601. (https://lawphil.net/judjuris/juri2016/nov2016/gr196596so2016.html#rnt43) 69 Phil. 635 (1940) [Per J. Laurel, En Banc]. (https://lawphil.net/judjuris/juri2016/nov2016/gr196596so2016.html#rnt44) Id. at 642. (https://lawphil.net/judjuris/juri2016/nov2016/gr196596so2016.html#rnt45) Rollo(G.R. No. 196596), p. 91. (https://lawphil.net/judjuris/juri2016/nov2016/gr196596so2016.html#rnt46) Id. (https://lawphil.net/judjuris/juri2016/nov2016/gr196596so2016.html#rnt47) Rollo(G.R. No. 198841), pp. 127-128. The Lawphil Project - Arellano Law Foundation [](javascript:history.back\(1\)) [](https://lawphil.net/judjuris/juri2016/nov2016/gr196596so2016.html#top)