Aznar v. Court Of Tax Appeals

ESGUERRA, J.:

Petitioner, as administrator of the estate of the deceased, Matias H. Aznar, seeks a review and nullification of the decision of the Court of Tax Appeals in C.T.A. Case No. 109, modifying the decision of respondent Commissioner of Internal Revenue and ordering the petitioner to pay the government the sum of P227,691.77 representing deficiency income taxes for the years 1946 to 1951, inclusive, with the condition that if the said amount is not paid within thirty days from the date the decision becomes final, there shall be added to the unpaid amount the surcharge of 5%, plus interest at the rate of 12% per annum from the date of delinquency to the date of payment, in accordance with Section 51 of the National Internal Revenue Code, plus costs against the petitioner. It is established that the late Matias H. Aznar who died on May 18, 1958, predecessor in interest of herein petitioner, during his lifetime as a resident of Cebu City, filed his income tax returns on the cash and disbursement basis, reporting therein the following: Year Net Income Amount of Tax Paid Exhibit 1945 P12,822.00 P114.66 pp. 85-88 B.I.R. rec.

1946 9,910.94 114.66 38-A (pp. 329-332 B.I.R rec.) 1947 10,200.00 132.00 39 (pp. 75-78 B.I.R rec.) 1948 9,148.34 68.90 40 (pp. 70-73 B.I.R. rec.) 1949 8,990.66 59.72 41 (pp. 64-67 B.I.R. rec.) 1950 8,364.50 28.22 42 (pp. 59-62, BIR rec.) 1951 6,800.00 n o n e 43 (pp. 54-57 BIR rec.). The Commissioner of Internal Revenue having his doubts on the veracity of the reported income of one obviously wealthy, pursuant to the authority granted him by Section 38 of the National Internal Revenue Code, caused B.I.R. Examiner Honorio Guerrero to ascertain the taxpayer's true income for said years by using the net worth and expenditures method of tax investigation. The assets and liabilities of the taxpayer during the above-mentioned years were ascertained and it was discovered that from 1946 to 1951, his net worth had increased every year, which increases in net worth was very much more than the income reported during said years.

The findings clearly indicated that the taxpayer did not declare correctly the income reported in his income tax returns for the aforesaid years. Based on the above findings of Examiner Guerrero, respondent Commissioner, in his letter dated November 28, 1952, notified the taxpayer (Matias H. Aznar) of the assessed tax delinquency to the amount of P723,032.66, plus compromise penalty. The taxpayer requested a reinvestigation which was granted for the purpose of verifying the merits of the various objections of the taxpayer to the deficiency income tax assessment of November 28, 1952.

After the reinvestigation, another deficiency assessment to the reduced amount of P381,096.07 dated February 16, 1955, superseded the previous assessment and notice thereof was received by Matias H. Aznar on March 2, 1955. The new deficiency assessment was based on the following computations: 1 9 4 6 Net income per return P9,910.94 Add: Under declared income 22,559.94