Po v. Court Of Tax Appeals

SARMIENTO, J.:

This is an appeal from the decision1 of the respondent Court of Tax Appeals, dated September 30,1987, which affirmed an earlier decision of the correspondent Commissioner of Internal Revenue in assessment letters dated August 16, 1972 and September 26, 1972, which ordered the payment by the petitioner of deficiency income tax for 1966 to 1970 in the amount of P7,154,685.16 and deficiency specific tax for January 2, 1964 to January 19, 1972, in the amount of P5,595,003.68. We adopt the respondent court's finding of facts, to wit: Petitioner is the widow of the late Mr. Po Bien Sing who died on September 7, 1980. In the taxable years 1964 to 1972, the deceased Po Bien Sing was the sole proprietor of Silver Cup Wine Factory (Silver Cup for brevity), Talisay, Cebu.

He was engaged in the business of manufacture and sale of compounded liquors, using alcohol and other ingredients as raw materials. On the basis of a denunciation against Silver Cup allegedly "for tax evasion amounting to millions of pesos" the then Secretary of Finance Cesar Virata directed the Finance-BIR--NBI team constituted under Finance Department Order No. 13-70 dated February 19, 1971 (Exh- 3, pp. 532-553, Folder II, BIR rec.) to conduct the corresponding investigation in a memorandum dated April 2, 1971 (p.

528, Folder II, BIR rec.). Accordingly, a letter and a subpoena duces tecum dated April 13,1971 and May 3,1971, respectively, were issued against Silver Cup requesting production of the accounting records and other related documents for the examination of the team. (Exh.

11, pp. 525-526, Folder II, BIR rec.). Mr. Po Bien Sing did not produce his books of accounts as requested (Affidavit dated December 24, 1971 of Mr. Generoso. Quinain of the team, p.

525, Folder H, BIR rec.). This prompted the team with the assistance of the PC Company, Cebu City, to enter the factory bodega of Silver Cup and seized different brands, consisting of 1,555 cases of alcohol products. (Exh.

22, Memorandum Report of the Team dated June 5, 1971, pp. 491-492, Folder II, BIR rec.). The inventory lists of the seized alcohol products are contained in Volumes I, II, III, IV and V (Exhibits 14, 15, 16, 17, and 18, respectively, BIR rec.). On the basis of the team's report of investigation, the respondent Commissioner of Internal Revenue assessed Mr. Po Bien Sing deficiency income tax for 1966 to 1970 in the amount of P7,154,685.16 (Exh.

6 pp. 17-19, Folder I, BIR rec.) and for deficiency specific tax for January 2,1964 to January 19, 1972 in the amount of P5,595,003.68 (Exh. 8, p. 107, Folder I, BIR rec.).

Petitioner protested the deficiency assessments through letters dated October 9 and October 30, 1972 (Exhs. 7 and 9, pp. 27-28; pp. 152-159, respectively, BIR rec.), which protests were referred for reinvestigation. The corresponding report dated August 13, 1981 (Exh.

1 0, pp. 355, Folder I, BIR rec.) recommended the reiteration of the assessments in view of the taxpayer's persistent failure to present the books of accounts for examination (Exh. 8, p. 107, Folder I, BIR rec.), compelling respondent to issue warrants of distraint and levy on September 10, 1981 (Exh.

11, p. 361, Folder I, BIR rec.). The warrants were admittedly received by petitioner on October 14, 1981 (Par.

IX, Petition; admitted par. 2, Answer), which petitioner deemed respondent's decision denying her protest on the subject assessments. Hence, petitioner's appeal on October 29,1981.2 The petitioner assigns the following errors: I RESPONDENT INTENTIONALLY ERRED IN HOLDING THAT PETITIONER HAS NOT PRESENTED ANY EVIDENCE OF RELEVANCE AND COMPETENCE REQUIRED TO BASH THE TROUBLING DISCREPANCIES AND SQUARE THE ISSUE OF ILLEGALITY POSITED ON THE SUBJECT ASSESSMENTS.

II RESPONDENT COURT OF TAX APPEALS PALPABLY ERRED IN DECIDING THE CASE IN A WAY CONTRARY TO THE DOCTRINES ALREADY LAID DOWN BY THIS COURT. III RESPONDENT COURT OF TAX APPEALS GRAVELY ERRED IN FINDING PO BEEN SING TO HAVE INCURRED THE ALLEGED DEFICIENCY TAXES IN QUESTION.3 We affirm. Settled is the rule that the factual findings of the Court of Tax Appeals are binding upon this Honorable Court and can only be disturbed on appeal if not supported by substantial evidence.4 The assignments of errors boils down to a single issue previously raised before the respondent Court, i.e.

, whether or not the assessments have valid and legal bases. The applicable legal provision is Section 16(b) of the National Internal Revenue Code of 1977 as amended. It reads: Sec. 16.

Power of the Commissioner of Internal Revenue to make assessments.- x x x x x x x x x (b) Failure to submit required returns, statements, reports and other documents. - When a report required by law as a basis for the assessment of an 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 of Internal Revenue 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 or fraudulent return or other documents, 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.

The law is specific and clear. 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.

In the instant case, the persistent failure of the late Po Bien Sing and the herein petitioner to present their books of accounts for examination for the taxable years involved left the Commissioner of Internal Revenue no other legal option except to resort to the power conferred upon him under Section 16 of the Tax Code. The tax figures arrived at by the Commissioner of Internal Revenue are by no means arbitrary.ℒαwρhi৷ We reproduce the respondent court's findings, to wit: As thus shown, on the basis of the quantity of bottles of wines seized during the raid and the sworn statements of former employees Messrs. Nelson S. Po and Alfonso Po taken on May 26, and 27,1971, respectively, by the investigating team in Cebu City (Exhs.

4 and 5, pp. 514-517, pp. 511-513, Folder 11, BIR rec.), it was ascertained that the Silver Cup for the years 1964 to 1970, inclusive, utilized and consumed in the manufacture of compounded liquours and other products 20,105 drums of alcohol as raw materials 81,288,787 proof liters of alcohol. As determined, the total specific tax liability of the taxpayer for 1964 to 1971 amounted to P5,593,003.68 (Exh. E, petition, p.

10, CTA rec.) Likewise, the team found due from Silver Cup deficiency income taxes for the years 1966 to 1970 inclusive in the aggregate sum of P7,154,685.16, as follows: 1966 - P207,636.24 1967 - 645,335.04 1968 - 1,683,588.48 1969 - 1,589,622.48 1970 - 3,028,502.92