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DLVLLCMLN1 CCkCkA1ICN, kespondent.
G.k. No. 1636S3 Iu|y 19, 2011

- 1he owner of 80 of Lhe ouLsLandlng shares of respondenL llllnvesL
Alabang, lnc. (lAl), respondenL llllnvesL uevelopmenL Corporauon (luC) ls a
holdlng company whlch also owned 67.42 of Lhe ouLsLandlng shares of
llllnvesL Land, lnc. (lLl).
- luC and lAl enLered lnLo a ueed of Lxchange wlLh lLl whereby Lhe former
boLh Lransferred ln favor of Lhe lauer parcels of land appralsed aL
- ln exchange for sald parcels whlch were lnLended Lo faclllLaLe developmenL
of medlumrlse resldenual and commerclal bulldlngs, 463,094,301 shares of
sLock of lLl were lssued Lo luC and lAl.
- lLl requesLed a rullng from Lhe 8l8 Lo Lhe eecL LhaL no galn or loss should
be recognlzed ln Lhe aforesald Lransfer of real properues.
- 8l8 lssued 8ullng no. S3404697 ndlng LhaL Lhe exchange ls among Lhose
conLemplaLed under Secuon 34 (c) (2) of Lhe old nl8C whlch provldes LhaL
!"#$ &'(" $) *$++ +,'** -. )./$&"(0.1 (2 3)$3.)45 (+ 4)'"+2.)).1 4$ '
/$)3$)'6$" -5 ' 3.)+$" (" .7/,'"&. 2$) ' +4$/8 (" +9/, /$)3$)'6$" $2 :,(/,
'+ ' ).+9*4 $2 +9/, .7/,'"&. +'(1 3.)+$"; '*$". $) 4$&.4,.) :(4, $4,.)+; "$4
.7/..1("& 2$9) !<# 3.)+$"+; &'("+ /$"4)$* $2 +'(1 /$)3$)'6$"."
- ln Lhe meanume, luC also exLended advances ln favor of lLs amllaLes,
namely, lAl, lLl, uavao Sugar CenLral Corporauon (uSCC) and llllnvesL
CaplLal, lnc. (lCl).
- luC also enLered lnLo a Shareholders' AgreemenL wlLh 8eco Perrera 1L LLd.
(8PL) for Lhe formauon of a Slngapore-based [olnL venLure company called
llllnvesL Asla Corporauon (lAC), Lasked Lo develop and manage luC's 30
ownershlp of lLs 8Com Cmce 1ower ro[ecL (Lhe ro[ecL).
- LaLer, luC recelved from Lhe 8l8 a lormal nouce of uemand Lo pay
declency lncome and documenLary sLamp Laxes, plus lnLeresLs and
compromlse penalues.
- 1he foregolng declency Laxes were assessed on Lhe Laxable galn
supposedly reallzed by luC from Lhe ueed of Lxchange lL execuLed wlLh lAl
and lLl, on Lhe dlluuon resulung from Lhe Shareholders' AgreemenL luC
execuLed wlLh 8PL as well as Lhe arm's lengLh" lnLeresL raLe and
documenLary sLamp Laxes lmposable on Lhe advances luC exLended Lo lLs
- lAl slmllarly recelved from Lhe 8l8 a lormal Leuer of uemand for declency
lncome Laxes.
- WlLhln Lhe reglemenLary perlod of LhlrLy (30) days from nouce of Lhe
assessmenL, boLh luC and lAl led Lhelr respecuve requesLs for
reconslderauon/proLesL, on Lhe ground LhaL Lhe declency lncome and
documenLary sLamp Laxes assessed by Lhe 8l8 were bere of facLual and
legal basls.
- ln vlew of Lhe fallure of peuuoner Cl8 Lo resolve Lhelr requesL for
reconslderauon/proLesL wlLhln Lhe aforesald perlod, luC and lAl led a
peuuon for revlew wlLh Lhe C1A pursuanL Lo Secuon 228 of Lhe 1997 nl8C.
- C1A: WlLh Lhe excepuon of Lhe declency lncome Lax on Lhe lnLeresL lncome
luC supposedly reallzed from Lhe advances lL exLended ln favor of lLs
amllaLes, lL cancelled Lhe resL of declency lncome and documenLary sLamp
Laxes assessed agalnsL luC and lAl for Lhe years 1996 and 1997.

lnsofar as documenLary sLamp Laxes on loan agreemenLs and promlssory
noLes are concerned, Secuon 180 of Lhe nl8C provldes follows:

Sec. 180. Stamp tax on a|| |oan agreements, prom|ssory notes, b|||s of
exchange, drahs, |nstruments and secur|nes |ssued by the government
or any of |ts |nstrumenta||nes, cernhcates of depos|t bear|ng |nterest
and others not payab|e on s|ght or demand. - Cn all loan agreemenLs
slgned abroad whereln Lhe ob[ecL of Lhe conLracL ls locaLed or used ln
Lhe hlllpplnes, blll of exchange (beLween polnLs wlLhln Lhe hlllpplnes),
dras, lnsLrumenLs and securlues lssued by Lhe CovernmenL or any of lLs
lnsLrumenLallues or cerucaLes of deposlLs drawlng lnLeresL, or orders
for Lhe paymenL of any sum of money oLherwlse Lhan aL slghL or on
demand, or on all promlssory noLes, wheLher negouable or non-
negouable, excepL bank noLes lssued for clrculauon, and on each
renewal of any such noLe, Lhere shall be collecLed a documenLary sLamp
Lax of 1hlrLy cenLavos (0.30) on each Lwo hundred pesos, or fracuonal
parL Lhereof, of Lhe face value of any such agreemenL, blll of exchange,
dra, cerucaLe of deposlL or noLe: rovlded, 1haL only one
documenLary sLamp Lax shall be lmposed on elLher loan agreemenL, or
promlssory noLes lssued Lo secure such loan, whlchever wlll yleld a
hlgher Lax: rovlded however, 1haL loan agreemenLs or promlssory noLes
Lhe aggregaLe of whlch does noL exceed 1wo hundred y Lhousand
pesos (230,000.00) execuLed by an lndlvldual for hls purchase on
lnsLallmenL for hls personal use or LhaL of hls famlly and noL for buslness,
resale, barLer or hlre of a house, loL, moLor vehlcle, appllance or
furnlLure shall be exempL from Lhe paymenL of documenLary sLamp Lax
provlded under Lhls Secuon.

When read ln con[uncuon wlLh Secuon 173 of Lhe 1993 nl8C,63 Lhe foregolng
provlslon concededly applles Lo " (a)ll loan agreemenLs, wheLher made or
slgned ln Lhe hlllpplnes, or abroad when Lhe obllgauon or rlghL arlses from
hlllpplne sources or Lhe properLy or ob[ecL of Lhe conLracL ls locaLed or used
ln Lhe hlllpplnes." Correlauvely, Secuon 3 (b) and Secuon 6 of 8evenue
8egulauons no. 994 provlde as follows:

Secnon 3. Dehn|non of 1erms. - lor purposes of Lhese 8egulauons, Lhe
followlng Lerm shall mean:
(b) 'Loan agreement' - refers Lo a conLracL ln wrlung where one of Lhe
parues dellvers Lo anoLher money or oLher consumable Lhlng, upon Lhe
condluon LhaL Lhe same amounL of Lhe same klnd and quallLy shall be
pald. 1he Lerm shall lnclude credlL faclllues, whlch may be evldenced by
credlL memo, advlce or drawlngs.

1he Lerms 'Loan AgreemenL" under Secuon 180 and "MorLgage' under
Secuon 193, boLh of Lhe 1ax Code, as amended, generally refer Lo
dlsuncL and separaLe lnsLrumenLs. A loan agreemenL shall be Laxed
under Secuon 180, whlle a deed of morLgage shall be Laxed under
Secuon 193.

Secnon 6. Stamp on a|| Loan Agreements. - All loan agreemenLs
wheLher made or slgned ln Lhe hlllpplnes, or abroad when Lhe
obllgauon or rlghL arlses from hlllpplne sources or Lhe properLy or
ob[ecL of Lhe conLracL ls locaLed ln Lhe hlllpplnes shall be sub[ecL Lo Lhe
documenLary sLamp Lax of LhlrLy cenLavos (0.30) on each Lwo hundred
pesos, or fracuonal parL Lhereof, of Lhe face value of any such
agreemenLs, pursuanL Lo Secuon 180 ln relauon Lo Secuon 173 of Lhe 1ax

ln cases where no formal agreemenLs or promlssory noLes have been
execuLed Lo cover credlL faclllues, Lhe documenLary sLamp Lax shall be based
on Lhe amounL of drawlngs or avallmenL of Lhe faclllues, whlch may be
evldenced by credlL/deblL memo, advlce or drawlngs by any form of check or
wlLhdrawal sllp, under Secuon 180 of Lhe 1ax Code.

We nd LhaL Lhe lnsLrucuonal leuers as well as Lhe [ournal and cash vouchers
evldenclng Lhe advances luC exLended Lo lLs amllaLes ln 1996 and 1997
qua||hed as |oan agreements upon wh|ch documentary stamp taxes may be

8Ik ku||ng No. 10899 dated 1S Iu|y 1999: lnLeromce memos evldenclng
lendlngs or borrowlngs exLended by a corporauon Lo lLs amllaLes are akln Lo
promlssory noLes, hence, sub[ecL Lo documenLary sLamp Laxes.

IN1LkNAL kLVLNUL, kespondent.
G.k. No. 169899 Iebruary 06, 2013

- hllacor ls a domesuc corporauon organlzed under hlllpplne laws and ls
engaged ln Lhe buslness of reLall nanclng. 1hrough reLall nanclng, a
prospecuve buyer of a home appllance - wlLh nelLher cash nor any credlL
card - may purchase appllances on lnsLallmenL basls from an appllance
dealer. Aer hllacor conducLs a credlL lnvesugauon and approves Lhe
buyer's appllcauon, Lhe buyer execuLes a unllaLeral promlssory noLe ln favor
of Lhe appllance dealer. 1he same promlssory noLe ls subsequenLly asslgned
by Lhe appllance dealer Lo hllacor.
- hllacor recelved demand leuers and Lhe correspondlng assessmenL
nouces. hllacor proLesLed Lhe assessmenL and clalmed LhaL Lhe accredlLed
appllance dealers were requlred by law Lo amx Lhe documenLary sLamps on
all promlssory noLes purchased unul Lhe enacLmenL of 8epubllc AcL no.
7660, oLherwlse known as An AcL 8auonallzlng lurLher Lhe SLrucLure and
AdmlnlsLrauon of Lhe uocumenLary SLamp 1ax, whlch Look eecL on !anuary
13, 1994.
- hllacor led a peuuon for revlew before Lhe C1A ulvlslon.
- 1he C1A ruled LhaL hllacor ls llable for Lhe uS1 on Lhe lssuance of Lhe
promlssory noLes and Lhelr subsequenL Lransfer or asslgnmenL.

h||acor |s not ||ab|e for the DS1 on the |ssuance of the prom|ssory notes.
- Secnon 180. Stamp tax on prom|ssory notes, b|||s of exchange, drahs,
cernhcates of depos|t, debt |nstruments used for depos|t subsntutes and
others not payab|e on s|ght or demand.-Cn all bllls of exchange (beLween
polnLs wlLhln Lhe hlllpplnes), dras, or cerucaLes of deposlLs, debL
lnsLrumenLs used for deposlL subsuLuLes or orders for Lhe paymenL of any
sum of money oLherwlse Lhan aL slghL or on demand, on all promlssory
noLes, wheLher negouable or nonnegouable excepL bank noLes lssued for
clrculauon, and on each renewal of any such noLe, Lhere shall be collecLed a
documenLary sLamp Lax of LwenLy cenLavos on each Lwo hundred pesos, or
fracuonal parL Lhereof, of Lhe face value of any such blll of exchange, dra
cerucaLe of deposlL, debL lnsLrumenL, or noLe. [emphasls supplled,
underscores ours]

ISSUL: Who |s ||ab|e for the tax?
- Secnon 173. Stamp taxes upon documents, |nstruments, and papers. -
upon documenLs, lnsLrumenLs, and papers, and upon accepLances,
asslgnmenLs, sales, and Lransfers of Lhe obllgauon, rlghL, or properLy
lncldenL LhereLo, Lhere shall be levled, collecLed and pald for, and ln respecL
of Lhe Lransacuon so had or accompllshed, Lhe correspondlng documenLary
sLamp Laxes prescrlbed ln Lhe followlng secuons of Lhls 1lLle, by Lhe person
maklng, slgnlng, lssulng, accepung, or Lransferrlng Lhe same, and aL Lhe
same ume such acL ls done or Lransacuon had: rovlded, LhaL wherever one
parLy Lo Lhe Laxable documenL en[oys exempuon from Lhe Lax hereln
lmposed, Lhe oLher parLy LhereLo who ls noL exempL shall be Lhe one
dlrecLly llable for Lhe Lax.
- 1he persons prlmarlly llable for Lhe paymenL of Lhe uS1 are Lhe person (1)
maklng, (2) slgnlng, (3) lssulng, (4) accepung, or (3) Lransferrlng Lhe Laxable
documenLs, lnsLrumenLs or papers. Should Lhese parues be exempLed from
paylng Lax, Lhe oLher parLy who ls noL exempL would Lhen be llable.
- hllacor dld noL make, slgn, lssue, accepL or Lransfer Lhe promlssory noLes.
1he acLs of maklng, slgnlng, lssulng and Lransferrlng are unamblguous. 1he
buyers of Lhe appllances made, slgned and lssued Lhe documenLs sub[ecL Lo
Lax, whlle Lhe appllance dealer Lransferred Lhese documenLs Lo hllacor
whlch llkewlse lndlspuLably recelved or "accepLed" Lhem.
- "Acceptance," however, ls an acL LhaL ls noL even appllcable Lo promlssory
noLes, buL only Lo bllls of exchange. under Secuon 132 of Lhe negouable
lnsLrumenLs Law (whlch provldes for how accepLance should be made), Lhe
acL of accepLance refers solely Lo bllls of exchange. lLs ob[ecL ls Lo blnd Lhe
drawee of a blll and make hlm an acLual and bound parLy Lo Lhe lnsLrumenL.
- lurLher, ln a rullng adopLed by Lhe 8l8 as early as 1933, accepLance has
already been glven a narrow denluon wlLh respecL Lo lncomlng forelgn bllls
of exchange, noL Lhe common usage of Lhe word "accepung" as ln recelvlng:
1he word "accepung" appearlng ln Secuon 210 of Lhe nauonal lnLernal
8evenue Code has reference Lo lncomlng forelgn bllls of exchange whlch are
accepLed ln Lhe hlllpplnes by Lhe drawees Lhereof. Accordlngly, Lhe
documenLary sLamp Lax on frelghL recelpLs ls due aL Lhe ume Lhe recelpLs
are lssued and from Lhe LransporLauon company lssulng Lhe same. 1he facL
LhaL Lhe LransporLauon conLracLor lssulng Lhe frelghL recelpLs shls Lhe
burden of Lhe Lax Lo Lhe shlpper does noL make Lhe lauer prlmarlly llable Lo
Lhe paymenL of Lhe Lax.
- 1hls rullng, Lo our mlnd, furLher clarles LhaL a parLy Lo a Laxable Lransacuon
who "accepLs" any documenLs or lnsLrumenLs ln Lhe plaln and ordlnary
meanlng of Lhe acL (such as Lhe shlpper ln Lhe clLed case) does noL become
prlmarlly llable for Lhe Lax.
- ln Lhe same way, hllacor cannoL be made prlmarlly llable for Lhe uS1 on Lhe
lssuance of Lhe sub[ecL promlssory noLes, [usL because lL had "accepLed" Lhe
promlssory noLes ln Lhe plaln and ordlnary meanlng.
- ln Lhls regard, Secuon 173 of Lhe 1997 nl8C assumes maLerlallLy as lL
deLermlnes llablllLy should Lhe parues who are prlmarlly llable Lurn ouL Lo
be exempLed from paylng Lax, the other party to the transacnon then
becomes ||ab|e.
- kevenue kegu|anons No. 92000 lnLerpreLs Lhe law more wldely so LhaL all
parues Lo a Lransacuon are prlmarlly llable for Lhe uS1, and noL only Lhe
person maklng, slgnlng, lssulng, accepung or Lransferrlng Lhe same becomes
llable as Lhe law provldes. lL provldes:
SLC. 2. Nature of the Documentary Stamp 1ax and ersons L|ab|e for
the 1ax. -
(a) ln Ceneral. =,. 1$/9>."4')5 +4'>3 4'7.+ 9"1.) =(4*. ?@@ $2 4,. A$1.
(+ ' 4'7 $" /.)4'(" 4)'"+'/6$"+B @4 (+ (>3$+.1 '&'("+4 C4,. 3.)+$" >'8("&;
+(&"("&; (++9("&; '//.36"&; $) 4)'"+2.))("&C 4,. 1$/9>."4 $) 2'/(*(45
.D(1."/("& 4,. '2$).+'(1 4)'"+'/6$"+B =,9+; (" &.".)'*; (4 >'5 -.
(>3$+.1 $" 4,. 4)'"+'/6$" (4+.*2 $) 93$" 4,. 1$/9>."4 9"1.)*5("& +9/,
'/4B !"# %& '() *+,-). '(),)'% .(+// 0) /1+0/) &%, '() &2// +3%2"' %& '()
'+4 52)E F)$D(1.1; ,$:.D.); 4,'4 '+ -.4:.." 4,.>+.*D.+; 4,. +'(1 3')6.+
>'5 '&).. $" :,$ +,'** -. *('-*. $) ,$: 4,.5 >'5 +,'). $" 4,. /$+4 $2
4,. 4'7B
(b) Lxcepuon. G,.".D.) $". $2 4,. 3')6.+ 4$ 4,. 4'7'-*. 4)'"+'/6$" (+
.7.>34 2)$> 4,. 4'7 (>3$+.1 9"1.) =(4*. ?@@ $2 4,. A$1.; 4,. $4,.) 3')45
4,.).4$ :,$ (+ "$4 .7.>34 +,'** -. 4,. $". 1()./4*5 *('-*. 2$) 4,. 4'7B
- lL would seem LhaL hllacor ls Lhe person who ulumaLely beneLs from Lhe
lssuance of Lhe noLes, lf noL Lhe lnLended payee of Lhese noLes. PCWLvL8,
Lhese observauons perLaln Lo facLs and lmpllcauons LhaL are found ouLslde
Lhe Lerms of Lhe documenLs under dlscusslon and are conLradlcLory Lo Lhelr
ouLrlghL Lerms.
- 1o conslder Lhese exLernallues would go agalnsL Lhe docLrlne LhaL the
||ab|||ty for the DS1 and the amount due are determ|ned from the
document |tse|f - exam|ned through |ts form and face - and cannot be
aected by proof of facts outs|de |t.
- Secuon 42 of 8egulauons no. 26, whlch was lssued by Lhe ueparLmenL of
llnance on March 26, 1924:
Secnon 42. kespons|b|||ty for payment of tax on prom|ssory notes. =,.
3.)+$" :,$ +(&"+ $) (++9.+ ' 3)$>(++$)5 "$4. '"1 '"5 3.)+$"
4)'"+2.))("& $) 9+("& ' 3)$>(++$)5 "$4. /'" -. ,.*1 ).+3$"+(-*. 2$) 4,.
3'5>."4 $2 4,. 1$/9>."4')5 +4'>3 4'7.
- 1he rule uses Lhe word "can" whlch ls permlsslve, raLher Lhan Lhe word
"shall," whlch would make Lhe llablllLy of Lhe persons named denlLe and
uncondluonal. ln Lhls sense, a person uslng a promlssory noLe can be made
llable for Lhe uS1 lf he or she ls:
(1) among Lhose persons enumeraLed under Lhe law l.e., 4,. 3.)+$" :,$
>'8.+; (++9.+; +(&"+; '//.34+ $) 4)'"+2.)+ 4,. 1$/9>."4 $) ("+4)9>."4,
(2) lf Lhese persons are exempL, a non exempL parLy Lo Lhe Lransacuon.
- ln our vlew, lL makes more sense Lo lnclude persons who beneL from or
have an lnLeresL ln Lhe Laxable documenL, lnsLrumenL or Lransacuon. 1here
appears no reason for dlsungulshlng beLween Lhe persons who make, slgn,
lssue, Lransfer or accepL Lhese documenLs and Lhe persons who have an
lnLeresL ln Lhese and/or have caused Lhem Lo be made, slgned or lssued.
1hls also llmlLs Lhe opporLunlues for avoldlng Lax. Moreover, Lhere are cases
when maklng all relevanL parues Laxable could help our admlnlsLrauve
omcers collecL Lax more emclenLly. ln Lhls case, Lhe 8l8 could slmply collecL
from Lhe nanclng companles, raLher Lhan go aer each and every
appllance buyer or appllance seller. Powever, Lhese are mauers LhaL are
wlLhln Lhe prerogauves of Congress so LhaL any lnLerference from Lhe CourL,
no mauer how well-meanlng, would consuLuLe [udlclal leglslauon. AL besL,
we can only alr our vlews ln Lhe hope LhaL Congress would Lake nouce.

h||acor |s not ||ab|e for the DS1 on the ass|gnment of prom|ssory notes.
- hllacor, as an asslgnee or Lransferee of Lhe promlssory noLes, ls noL llable
for Lhe asslgnmenL or Lransfer of promlssory noLes as Lhls Lransacuon ls noL
Laxed under Lhe law.
- Secuon 176 lmposes a uS1 on Lhe Lransfer of due bllls, cerucaLes of
obllgauon, or shares or cerucaLes of sLock ln a corporauon, aparL from
Secuon 173 whlch lmposes Lhe uS1 on Lhe lssuance of shares of sLock ln a
- Secuon 178 lmposes Lhe uS1 on cerucaLes of proLs, or any cerucaLe or
memorandum showlng lnLeresL ln a properLy or accumulauons of any
corporauon, and on all Lransfers of such cerucaLe or memoranda.
- Secuon 198 lmposes Lhe uS1 on Lhe asslgnmenL or Lransfer of any
morLgage, lease or pollcy of lnsurance, aparL from Secuons 183, 184, 183,
194 and 193 whlch lmpose lL on Lhe lssuances of morLgages, leases and
pollcles of lnsurance.
- lndeed, Lhe law has seL a pauern of expressly provldlng for Lhe lmposluon of
uS1 on Lhe Lransfer and/or asslgnmenL of documenLs evldenclng cerLaln
Lransacuons. 1hus, we can safely conclude LhaL where Lhe law dld noL
speclfy LhaL such Lransfer and/or asslgnmenL ls Lo be Laxed, Lhere would be
no basls Lo recognlze an lmposluon.
- Secnon 198. Stamp tax on ass|gnments and renewa|s of certa|n
|nstruments. - H3$" .'/, '"1 .D.)5 '++(&">."4 $) 4)'"+2.) $2 '"5
>$)4&'&.; *.'+. $) 3$*(/5 $2 ("+9)'"/.; $) 4,. ).".:'* $) /$"6"9'"/. $2 '"5
'&)..>."4; /$"4)'/4; /,')4.); $) '"5 .D(1."/. $2 $-*(&'6$" $) ("1.-4.1".++
-5 '*4.)("& $) $4,.):(+.; 4,.). +,'** -. *.D(.1; /$**./4.1 '"1 3'(1 '
1$/9>."4')5 +4'>3 4'7; '4 4,. +'>. )'4. '+ 4,'4 (>3$+.1 $" 4,. $)(&("'*
- lf we look closely aL Lhls provlslon, we would nd LhaL an asslgnmenL or
Lransfer becomes Laxable only ln connecuon wlLh morLgages, leases and
pollcles of lnsurance. 1he llsL does noL lnclude Lhe asslgnmenL or Lransfer of
evldences of lndebLedness, raLher, lL ls Lhe renewal of Lhese LhaL ls Laxable.
- 1he presenL case does noL lnvolve a renewal, buL a mere Lransfer or
asslgnmenL of Lhe evldences of lndebLedness or promlssory noLes. A
renewal would lnvolve an lncrease ln Lhe amounL of lndebLedness or an
exLenslon of a perlod, and noL Lhe mere change ln person of Lhe payee.

SLAICCDS, INC., kespondent. G.k. No. 170389 Cctober 20, 2010

- Cn !une 7, 1999, respondent Aquafresh Seafoods Inc. sold Lo hlllps
Seafoods, lnc. Lwo parcels of land, lncludlng lmprovemenLs Lhereon, locaLed
aL 8arrlo 8anlca, 8oxas ClLy, for Lhe conslderauon of hp 3,100, 000.
- 8espondenL Lhen led a CaplLal Calns 1ax 8eLurn/Appllcauon for
Cerucauon AuLhorlzlng 8eglsLrauon and pald Lhe amounL of
hp186,000.00, represenung Lhe Cap|ta| Ga|ns 1ax (CG1) and Lhe amounL of
hp46,300.00, represenung Lhe Documentary Stamp 1ax (DS1) due from
Lhe sald sale.
- SubsequenLly, 8evenue ulsLrlcL Cmcer Cll C. 1abanda lssued CerucaLe
AuLhorlzlng 8eglsLrauon no. 1071477.
- 1he 8l8, however, recelved a reporL LhaL Lhe loLs sold were undervalued for
Laxauon purposes. So, lL conducLed an occular lnspecuon over Lhe
- Aer Lhe lnvesugauon, lL was concluded LhaL Lhe sub[ecL properues were
commerclal wlLh a zonal value of hp2,000.00 per square meLer.
- So, 8eglonal ulrecLor Sacamos senL 2 AssessmenL nouces apprlslng
respondenL of CG1 and DS1 defenc|es ln Lhe sum of hp1,372,171.46 and
hp336,267.62, respecuvely.
- 1hus, respondenL senL a leuer proLesung Lhe assessmenLs made by ulrecLor
Sacamos. Powever, lL was denled.
- SC, respondenL led a peuuon for revlew before Lhe C1A seeklng Lhe
reversal of Lhe denlal of lLs proLesL.
- C1A cancelled respondenL's assessmenLs for declency caplLal agalnsL Lax
and documenLary sLamp Laxes.
- 8ullng ln favor of respondenL, Lhe C1A oplned LhaL LhaL Lhe exlsung 8evlsed
Zonal values ln Lhe ClLy of 8oxas should prevall for purposes of deLermlnlng
respondenL's Lax llablllues.
- euuoner Lhen appealed Lo Lhe C1A Ln 8anc.
- 1he C1A Ln 8anc ruled LhaL Lhe 1993 8evlsed Zonal values of 8eal roperues
should prevall.
- Pence, Lhls peuuon. Sald courL relled on Secuon 6 (L) of Lhe nauonal
lnLernal 8evenue Code (nl8C) whlch requlres consulLauon from appralsers,
from boLh Lhe publlc and prlvaLe secLors, ln xlng Lhe zonal valuauon of
properues. 1he C1A Ln 8anc held LhaL peuuoner falled Lo prove any
amendmenL eecLed on Lhe 1993 8evlsed Zonal values of 8eal roperues aL
Lhe ume of Lhe sale of Lhe sub[ecL properues.

WPL1PL8 C8 nC1 1PL 8LCul8LMLn1 Cl CCnSuL1A1lCn Wl1P CCML1Ln1
A8AlSL8S 8C1P l8CM 1PL 8lvA1L Anu u8LlC SLC1C8S ln
uL1L8MlnlnC 1PL lAl8 MA8kL1 vALuL Cl 1PL Su8!LC1 LC1S lS ALlCA8LL
ln 1PL CASL A1 8A8.
- under Secnon 27(D)(S) of the NIkC of 1997, a CC1 of slx (6) percenL ls
lmposed on Lhe galns presumed Lo have been reallzed ln Lhe sale, exchange
or dlsposluon of lands and/or bulldlngs whlch are noL acuvely used ln Lhe
buslness of a corporauon and whlch are LreaLed as caplLal asseLs based on
Lhe gross selllng prlce or falr markeL value as deLermlned ln accordance wlLh
Secuon 6(L) of Lhe nl8C, whlchever ls hlgher.
- under Secnon 196 of the NIkC, uS1 ls based on Lhe conslderauon
conLracLed Lo be pald or on lLs falr markeL value deLermlned ln accordance
wlLh Secuon 6(L) of Lhe nl8C, whlchever ls hlgher.
- 1hus, |n determ|n|ng the va|ue of CG1 and DS1 ar|s|ng from the sa|e of a
property, the power of the CIk to assess |s sub[ect to Secnon 6(L) of the
NIkC, whlch provldes:

Secnon 6. ower of the Comm|ss|oner to Make Assessments and
rescr|be Add|nona| kequ|rements for 1ax Adm|n|stranon and
Lnforcement. -
(L) Author|ty of the Comm|ss|oner to rescr|be kea| roperty Va|ues -
1he Commlssloner ls hereby auLhorlzed Lo dlvlde Lhe hlllpplnes lnLo
dlerenL zones or area and shall, upon consu|tanon w|th competent
appra|sers both from the pr|vate and pub||c sectors, deLermlne Lhe falr
markeL value of real properues locaLed ln each zone or area. lor
purposes of compuung lnLernal revenue Lax, Lhe value of Lhe properLy
shall be, whlchever ls hlgher of:
(1) Lhe falr markeL value as deLermlned by Lhe Commlssloner, or
(2) Lhe falr markeL value as shown ln Lhe schedule of values of Lhe
rovlnclal and ClLy Assessors.

- Whlle Lhe Cl8 has Lhe auLhorlLy Lo prescrlbe real properLy values and dlvlde
Lhe hlllpplnes lnLo zones, Lhe law ls clear LhaL Lhe same has Lo be done
upon consulLauon wlLh compeLenL appralsers boLh from Lhe publlc and
prlvaLe secLors.
- lL ls undlspuLed LhaL aL Lhe ume of Lhe sale of Lhe sub[ecL properues found
ln 8arrlo 8anlca, 8oxas ClLy, Lhe same were classled as "88," or resldenual,
based on Lhe 1993 8evlsed Zonal value of 8eal roperues.
- euuoner, Lhus, cannoL unllaLerally change Lhe zonal valuauon of such
properues Lo "commerclal" wlLhouL rsL conducung a re-evaluauon of Lhe
zonal values as mandaLed under Secuon 6(L) of Lhe nl8C.
- 1hls CourL agrees wlLh Lhe observauon of Lhe C1A LhaL "zonal valuauon was
esLabllshed wlLh Lhe ob[ecuve of havlng an 'emclenL Lax admlnlsLrauon by
mlnlmlzlng Lhe use of dlscreuon ln Lhe deLermlnauon of Lhe Lax based on
Lhe parL of Lhe admlnlsLraLor on one hand and Lhe Laxpayer on Lhe oLher
hand.'" Zonal value ls deLermlned for Lhe purpose of esLabllshlng a more
reallsuc basls for real properLy valuauon.
- S|nce |nterna| revenue taxes, such as CG1 and DS1, are assessed on the
bas|s of va|uanon, the zona| va|uanon ex|snng at the nme of the sa|e
shou|d be taken |nto accounL.

8CNIIACIA S C, pennoner, vs. nCNCkA8LL CCUk1 CI 1Ak ALALS AND
G.k. No. 81446 August 18, 1988

- euuoner ls Lhe wldow of Lhe laLe Mr. o 8len Slng who dled ln 1980.
- ln Lhe Laxable years 1964 Lo 1972, the deceased o 8|en S|ng was Lhe sole
proprleLor of Sllver Cup Wlne lacLory (Sllver Cup for brevlLy), 1allsay, Cebu.
Pe was engaged ln Lhe buslness of manufacLure and sale of compounded
llquors, uslng alcohol and oLher lngredlenLs as raw maLerlals.
- Cn Lhe basls of a denunclauon agalnsL Sllver Cup allegedly "for Lax evaslon
amounung Lo mllllons of pesos", an lnvesugauon was conducLed.
- Accordlngly, a leuer and a subpoena duces mecum were lssued agalnsL
Sllver Cup requesung producuon of Lhe accounung records and oLher
relaLed documenLs for examlnauon.
- Mr. o 8len Slng dld noL produce hls books of accounLs as requesLed.
- 1hls prompLed Lhe Leam Lo enLer Lhe facLory bodega of Sllver Cup and selzed
dlerenL brands of alcohol producLs.
- Cn Lhe basls of Lhe Leam's reporL of lnvesugauon, Lhe respondenL Cl8
assessed Mr. o 8len Slng declency lncome Lax for 1966 Lo 1970 and for
declency speclc Lax for 1964 Lo 1972.

ISSUL: WheLher or noL Lhe assessmenLs have valld and legal bases.

kULING: Sec. 16. ower of the Comm|ss|oner of Interna| kevenue to make
xxx xxx xxx
(b) Ia||ure to subm|t requ|red returns, statements, reports and other
documents. I G,." ' ).3$)4 ).J9().1 -5 *': '+ ' -'+(+ 2$) 4,. '++.++>."4 $2
'" "'6$"'* ("4.)"'* ).D."9. 4'7 +,'** "$4 -. 2$)4,/$>("& :(4,(" 4,. 6>. K7.1
-5 *': $) ).&9*'6$" $) :,." 4,.). (+ ).'+$" 4$ -.*(.D. 4,'4 '"5 +9/, ).3$)4 (+
2'*+.; ("/$>3*.4.; $) .))$".$9+; 4,. A$>>(++($".) $2 @"4.)"'* L.D."9. +,'**
'++.++ 4,. 3)$3.) 4'7 $" 4,. -.+4 .D(1."/. $-4'("'-*.B

@" /'+. ' 3.)+$" 2'(*+ 4$ K*. ' ).J9().1 ).49)" $) $4,.) 1$/9>."4 '4 4,. 6>.
3).+/)(-.1 -5 *':; $) :(**29**5 $) $4,.):(+.; K*.+ ' 2'*+. $) 2)'919*."4 ).49)" $)
$4,.) 1$/9>."4+; 4,. A$>>(++($".) +,'** >'8. $) '>."1 4,. ).49)" 2)$> ,(+
$:" 8"$:*.1&. '"1 2)$> +9/, ("2$)>'6$" '+ ,. /'" $-4'(" 4,)$9&,
4.+6>$"5 $) $4,.):(+.; :,(/, +,'** -. 3)(>' 2'/(. /$))./4 '"1 +9M/(."4 2$) '**
*.&'* 39)3$+.+.

1he law ls speclc and clear. 1he rule on Lhe "best ev|dence obta|nab|e"
applles when a Lax reporL requlred by law for Lhe purpose of assessmenL ls
noL avallable or when Lhe Lax reporL ls lncompleLe or fraudulenL.

ln Lhe lnsLanL case, Lhe perslsLenL fallure of Lhe laLe o 8len Slng and Lhe
hereln peuuoner Lo presenL Lhelr books of accounLs for examlnauon for Lhe
Laxable years lnvolved le Lhe Commlssloner of lnLernal 8evenue no oLher
legal opuon excepL Lo resorL Lo Lhe power conferred upon hlm under Secuon
16 of Lhe 1ax Code.

Co||ector of Interna| kevenue vs. keyes: Where Lhe Laxpayer ls appeallng Lo
Lhe Lax courL on Lhe ground LhaL Lhe CollecLor's assessmenL ls erroneous, lL ls
lncumbenL upon hlm Lo prove Lhere whaL ls Lhe correcL and [usL llablllLy by a
full and falr dlsclosure of all perunenL daLa ln hls possesslon. CLherwlse, lf Lhe
Laxpayer connes hlmself Lo provlng LhaL Lhe Lax assessmenL ls wrong, Lhe Lax
courL proceedlngs would seule noLhlng, and Lhe way would be le open for
subsequenL assessmenLs and appeals ln lnLermlnable successlon.

1ax assessmenLs by Lax examlners are presumed correcL and made ln good
falLh. 1he Laxpayer has Lhe duLy Lo prove oLherwlse. ln Lhe absence of proof of
any lrregularlues ln Lhe performance of duues, an assessmenL duly made by a
8ureau of lnLernal 8evenue examlner and approved by hls superlor omcers
wlll noL be dlsLurbed. All presumpuons are ln favor of Lhe correcLness of Lax

Cn Lhe whole, we nd LhaL Lhe fraudulenL acLs deLalled ln Lhe declslon under
revlew had noL been sausfacLorlly rebuued by Lhe peuuoner.

1he exlsLence of fraud as found by Lhe respondenLs can noL be llghLly seL
aslde absenL subsLanual evldence presenLed by Lhe peuuoner Lo counLeracL
such ndlng.

8AkCN VDA. DL MANIAGC, et a|., as he|rs of the |ate Iuan G. Man|ago,
respondents. G.k. No. L36181 Cctober 23, 1982

- ln 1967, Lhe laLe Iuan G. Man|ago (subsuLuLed ln Lhese proceedlngs by hls
wlfe and chlldren) submlued Lo peuuoner Cl8 condenual denunclauon
agalnsL Lhe Meralco Securlues Corporauon for Lax evaslon for havlng pald
lncome Lax only on 23 of Lhe dlvldends lL recelved from Lhe Manlla
LlecLrlc Co. for Lhe years 1962-966, Lhereby allegedly shorLchanglng Lhe
governmenL of lncome Lax due from 73 of Lhe sald dlvldends.
- euuoner Cl8 caused Lhe lnvesugauon of Lhe denunclauon aer whlch he
found and held LhaL no declency corporaLe lncome Lax was due from Lhe
Meralco Securlues Corporauon on Lhe dlvldends lL recelved from Lhe Manlla
LlecLrlc Co., slnce under Lhe law Lhen prevalllng (secuon 24[a] of Lhe
nauonal lnLernal 8evenue Code) "ln Lhe case of dlvldends recelved by a
domesuc or forelgn resldenL corporauon llable Lo (corporaLe lncome) Lax
under Lhls ChapLer . . . .only LwenLyve per cenLum Lhereof shall be
reLurnable for Lhe purposes of Lhe Lax lmposed under Lhls secuon."
- 1he Commlssloner lnformed Manlago of hls ndlngs and rullng and
Lherefore denled Manlago's clalm for lnformer's reward on a nonexlsLenL
- So, Manlago led a peuuon for mandamus.
- 1he respondenL [udge rendered a declslon granung Lhe wrlL prayed for and
orderlng Lhe Commlssloner of lnLernal 8evenue Lo assess and collecL from
Lhe Meralco Securlues Corporauon Lhe sum of 31,840,612.00 as declency
corporaLe lncome Lax for Lhe perlod 1962 Lo 1969 plus lnLeresLs and
surcharges due Lhereon and Lo pay 23 Lhereof Lo Manlago as lnformer's

DISCUSSICN: 8espondenL [udge has no [urlsdlcuon Lo Lake cognlzance of Lhe
case because Lhe sub[ecL mauer Lhereof clearly falls wlLhln Lhe scope of cases
now excluslvely wlLhln Lhe [urlsdlcuon of Lhe CourL of 1ax Appeals.

Secnon 7 of kepub||c Act No. 112S, enacLed !une 16, 1934, granLed Lo Lhe
CourL of 1ax Appeals excluslve appellaLe [urlsdlcuon Lo revlew by appeal,
among oLhers, declslons of Lhe Commlssloner of lnLernal 8evenue ln cases
lnvolvlng dlspuLed assessmenLs, refunds of lnLernal revenue Laxes, fees or
oLher charges, penalues lmposed ln relauon LhereLo, or oLher mauers arlslng
under Lhe nauonal lnLernal 8evenue Code or oLher law or parL of law
admlnlsLered by Lhe 8ureau of lnLernal 8evenue. 1he law Lransferred Lo Lhe
CourL of 1ax Appeals [urlsdlcuon over all cases lnvolvlng sald assessmenLs
prevlously cognlzable by courLs of rsL lnsLance, and even Lhose already
pendlng ln sald courLs.

1he quesuon of wheLher or noL Lo lmpose a declency Lax assessmenL on
Meralco Securlues Corporauon undoubLedly comes wlLhln Lhe purvlew of Lhe
words "dlspuLed assessmenLs" or of "oLher mauers arlslng under Lhe nauonal
lnLernal 8evenue Code . . . .

ln Lhe case of 8|aquera vs. kodr|guez, et a|, Lhls CourL ruled LhaL "4,.
1.4.)>("'6$" $2 4,. /$))./4".++ $) ("/$))./4".++ $2 ' 4'7 '++.++>."4 4$ :,(/,
4,. 4'73'5.) (+ "$4 '&)..'-*.; 2'**+ :(4,(" 4,. N9)(+1(/6$" $2 4,. A$9)4 $2 ='7
O33.'*+ '"1 "$4 $2 4,. A$9)4 $2 P()+4 @"+4'"/.; 2$) 9"1.) 4,. 3)$D(+($"+ $2
Q./6$" R $2 L.39-*(/ O/4 S$B TTUV; 4,. A$9)4 $2 ='7 O33.'*+ ,'+ .7/*9+(D.
'33.**'4. N9)(+1(/6$" 4$ ).D(.:; $" '33.'*; '"5 1./(+($" $2 4,. A$**./4$) $2
@"4.)"'* L.D."9. (" /'+.+ ("D$*D("& 1(+394.1 '++.++>."4+ '"1 $4,.) >'W.)+
')(+("& 9"1.) 4,. S'6$"'* @"4.)"'* L.D."9. A$1. $) $4,.) *': $) 3')4 $2 *':
'1>("(+4.).1 -5 4,. X9).'9 $2 @"4.)"'* L.D."9.B"

1hus, even assumlng arguendo LhaL Lhe rlghL granLed Lhe Laxpayers aecLed
Lo quesuon and appeal dlspuLed assessmenLs, under secuon 7 of 8epubllc AcL
no. 1123, may be avalled of by sLrangers or lnformers llke Lhe laLe Manlago,
Lhe mosL LhaL he could have done was Lo appeal Lo Lhe CourL of 1ax Appeals
Lhe rullng of peuuoner Commlssloner of lnLernal 8evenue wlLhln LhlrLy (30)
days from recelpL Lhereof pursuanL Lo secuon 11 of 8epubllc AcL no. 1123. Pe
falled Lo Lake such an appeal Lo Lhe Lax courL. 1he rullng ls clearly nal and no
longer sub[ecL Lo revlew by Lhe courLs.

lL ls furLhermore a well-recognlzed rule LhaL mandamus only lles Lo enforce
Lhe performance of a mlnlsLerlal acL or duLy and noL Lo conLrol Lhe
performance of a dlscreuonary power. urely admlnlsLrauve and dlscreuonary
funcuons may noL be lnLerfered wlLh by Lhe courLs. ulscreuon, as Lhus
lnLended, means Lhe power or rlghL conferred upon Lhe omce by law of acung
omclally under cerLaln clrcumsLances accordlng Lo Lhe dlcLaLes of hls own
[udgmenL and consclence and noL conLrolled by Lhe [udgmenL or consclence
of oLhers. Mandamus may noL be resorLed Lo so as Lo lnLerfere wlLh Lhe
manner ln whlch Lhe dlscreuon shall be exerclsed or Lo lnuence or coerce a
parucular deLermlnauon.

Moreover, slnce Lhe omce of Lhe Commlssloner of lnLernal 8evenue ls charged
wlLh Lhe admlnlsLrauon of revenue laws, whlch ls Lhe prlmary responslblllLy of
Lhe execuuve branch of Lhe governmenL, mandamus may noL lle agalnsL Lhe
Commlssloner Lo compel hlm Lo lmpose a Lax assessmenL noL found by hlm Lo
be due or proper for LhaL would be LanLamounL Lo a usurpauon of execuuve

" "D|screnon," when applled Lo publlc funcuonarles, means a power or rlghL
conferred upon Lhem by law of acung omclally, under cerLaln clrcumsLances,
unconLrolled by Lhe [udgmenL or consclences of oLhers. A pure|y m|n|ster|a|
acL or duLy ln conLradlcuon Lo a dlscreuonal acL ls one whlch an omcer or
Lrlbunal performs ln a glven sLaLe of facLs, ln a prescrlbed manner, ln
obedlence Lo Lhe mandaLe of a legal auLhorlLy, wlLhouL regard Lo or Lhe
exerclse of hls own [udgmenL upon Lhe proprleLy or lmproprleLy of Lhe acL
done. lf Lhe law lmposes a duLy upon a publlc omcer and glves hlm Lhe rlghL
Lo declde how or when Lhe duLy shall be performed, such duLy ls dlscreuonary
and noL mlnlsLerlal. 1he duLy ls mlnlsLerlal only when Lhe dlscharge of Lhe
same requlres nelLher Lhe exerclse of omclal dlscreuon or [udgmenL."

1hus, aer Lhe Commlssloner who ls speclcally charged by law wlLh Lhe Lask
of enforclng and lmplemenung Lhe Lax laws and Lhe collecuon of Laxes had
aer a maLure and Lhorough sLudy rendered hls declslon or rullng LhaL no Lax
ls due or collecuble, and hls declslon ls susLalned by Lhe SecreLary, now
MlnlsLer of llnance (whose acL ls LhaL of Lhe resldenL unless reprobaLed),
such declslon or rullng ls a valld exerclse of dlscreuon ln Lhe performance of
omclal duLy and cannoL be conLrolled much less reversed by mandamus. A
conLrary vlew, whereby any sLranger or lnformer would be allowed Lo usurp
and conLrol Lhe omclal funcuons of Lhe Commlssloner of lnLernal 8evenue
would creaLe dlsorder and confuslon, lf noL chaos and LoLal dlsrupuon of Lhe
operauons of Lhe governmenL.

Conslderlng Lhen LhaL respondenL [udge may noL order by mandamus Lhe
Commlssloner Lo lssue Lhe assessmenL agalnsL Meralco Securlues Corporauon
when no such assessmenL has been found Lo be due, no declency Laxes may
Lherefore be assessed and collecLed agalnsL Lhe sald corporauon. Slnce no
Laxes are Lo be collecLed, no lnformer's reward ls due Lo prlvaLe respondenLs
as Lhe lnformer's helrs.

lnformer's reward ls conungenL upon Lhe paymenL and collecuon of unpald or
declency Laxes. An lnformer ls enuLled by way of reward only Lo a percenLage
of Lhe Laxes acLually assessed and collecLed. Slnce no assessmenL, much less
any collecuon, has been made ln Lhe lnsLanL case, respondenL [udge's wrlL for
Lhe Commlssloner Lo pay respondenLs 23 lnformer's reward ls gross error
and wlLhouL facLual nor legal basls.

CCLLLC1Ck CI IN1LkNAL kLVLNUL, (now Comm|ss|oner), pennoner, vs.
AL8Lk1C D. 8LNIAC, respondent.
G.k. No. L-136S6 Ianuary 31, 1962

- 8espondenL ls Lhe owner and operaLor of Lhe Lucena 1heaLer locaLed ln Lhe
munlclpallLy of Lucena, Cuezon.
- lL was found ouL LhaL respondenL had dlsproporuonaLely lssued Lax-free 20-
cenLavo chlldren's uckeLs.
- uurlng Lhe years 1949 Lo 1931 Lhe average rauo of adulLs and chlldren
paLronlzlng Lhe Lucena 1heaLer was 3 Lo 1, l.e., for every Lhree adulLs
enLerlng Lhe LheaLer, one chlld was also admlued, whlle durlng Lhe perlod ln
quesuon, Lhe proporuon ls reversed - Lhree chlldren Lo one adulL.
- lrom Lhls, lL was concluded LhaL respondenL musL have fraudulenLly sold
Lwo Lax-free 20-cenLavo uckeLs, ln order Lo avold paymenL of Lhe
amusemenL Lax prescrlbed ln Secuon 260 of Lhe nauonal lnLernal 8evenue
- 1hus, peuuoner lssued a declency amusemenL Lax assessmenL agalnsL

ISSUL: WCn Lhere ls sumclenL evldence ln Lhe record showlng LhaL
respondenL, durlng Lhe perlod under revlew, sold and lssued Lo hls adulL
cusLomers Lwo Lax-free 20-cenLavo chlldren's uckeLs, lnsLead of one 40-
cenLavo uckeL for each adulL cusLomer, Lo cheaL or defraud Lhe CovernmenL.

C1A kULING: Assessments shou|d not be based on mere presumpnons no
mauer how reasonab|e or |og|ca| sa|d presumpnons may be. Assumlng
arguendo LhaL Lhe average rauo of adulLs and chlldren paLronlzlng Lhe Lucena
1heaLer from 1949 Lo 1931 was 3 Lo 1, Lhe same does noL glve rlse Lo Lhe
lnference LhaL Lhe same condluons exlsLed durlng Lhe years ln quesuon (1932
and 1933). 1he facL LhaL almosL Lhe same rauo exlsLed durlng Lhe monLh of
!uly, 1933 does noL provlde a sumclenL lnference on Lhe condluons ln 1932
and 1933. . .

ln order Lo sLand Lhe LesL of [udlclal scruuny, Lhe assessmenL musL be based
on acLual facLs. 1he presumpuon of correcLness of assessmenL belng a mere
presumpuon cannoL be made Lo resL on anoLher presumpuon LhaL Lhe
clrcumsLances ln 1932 and 1933 are presumed Lo be Lhe same as Lhose
exlsung ln 1949 Lo 1931 and !uly 1933. ln Lhe case under conslderauon Lhere
are no subsLanual facLs Lo supporL Lhe assessmenL ln quesuon. ...

SC kULING: Amrmed C1A ku||ng. lraud ls a serlous charge and, Lo be
susLalned, lL musL be supporLed by clear and convlnclng proof whlch, ln Lhe
presenL case, ls lacklng.

WhaL respondenL appears Lo have admlued was LhaL durlng a cerLaln llmlLed
perlod he had adopLed a sorL of rebaLe sysLem appllcable Lo cases where
adulLs and chlldren came ln group and were all charged 20 cenLavo admlsslon
uckeLs. 1hls pracuce was, however, dlsconunued when he was lnformed by
Lhe 8ureau of lnLernal 8evenue LhaL lL was noL ln accordance wlLh law.

GCN2ALL2, Secretary of Iusnce, L. M. CAMUS LNGINLLkING CCkCkA1ICN
(represented by LUIS M. CAMUS and LINC D. MLNDC2A), kespondents.
G.k. No. 177279 Cctober 13, 2010

INGLLS NC1LS: lL conLalns lnformauon as Lo Lhe varlous lLems of lncome,
deducuons and credlLs wlLh such denlLeness as Lo permlL Lhe compuLauon
and assessmenL of Lhe Lax. (Cl8 v Conzales)

Where Lhe reLurn was made on Lhe wrong form, lL was held LhaL Lhe llng
Lhereof dld noL sLop Lhe runnlng of Lhe perlod of llmlLauons, and where Lhe
reLurn was very declenL, Lhere was no reLurn aL all.

- A fraud lnvesugauon was conducLed for all lnLernal revenue Laxes Lo
ascerLaln/deLermlne Lhe Lax llablllues of respondenL L. M. Camus
Lnglneerlng Corporauon (LMCLC) for Lhe Laxable years 1997, 1998 and
- 1he audlL and lnvesugauon agalnsL LMCLC was preclplLaLed by Lhe
lnformauon provlded by an "lnformer" LhaL LMCLC had subsLanual
underdeclared lncome for Lhe sald perlod.
- lor fallure Lo comply wlLh Lhe subpoena duces Lecum lssued ln connecuon
wlLh Lhe Lax fraud lnvesugauon, a crlmlnal complalnL was lnsuLuLed by Lhe
8l8 agalnsL LMCLC for vlolauon of Secuon 266 of Lhe nl8C (l.S. no. 00-936
of Lhe Cmce of Lhe ClLy rosecuLor of Cuezon ClLy).
- 8ased on daLa obLalned from an "lnformer" and varlous cllenLs of LMCLC, lL
was dlscovered LhaL LMCLC led fraudulenL Lax reLurns wlLh subsLanual
underdeclarauons of Laxable lncome for Lhe years 1997, 1998 and 1999.
- euuoner Lhus assessed Lhe company of LoLal declency Laxes amounung Lo
430,938,003.90 (lncome Lax - 318,606,380.19 and value-added Lax [vA1] -
112,331,623.71) coverlng Lhe sald perlod.
- euuoner referred Lo Lhe SecreLary of !usuce for prellmlnary lnvesugauon
lLs complalnL agalnsL LMCLC. lL alleged LhaL desplLe Lhe recelpL of Lhe nal
assessmenL nouce and formal demand, LMCLC falled and refused Lo pay Lhe
declency Lax assessmenL whlch had become nal and execuLory as a resulL
of Lhe sald Laxpayer's fallure Lo le a proLesL Lhereon wlLhln Lhe LhlrLy (30)-
day reglemenLary perlod.
- 1he SecreLary of !usuce laLer denled lLs peuuon for revlew.
- So, euuoner challenged Lhe rullng of respondenL SecreLary vla a ceruorarl
peuuon ln Lhe CA.
- 1he CA rendered Lhe assalled declslon denylng Lhe peuuon and concurred
wlLh Lhe ndlngs and concluslons of respondenL SecreLary.
- 8espondenL SecreLary concurred wlLh Lhe Chlef SLaLe rosecuLor's
concluslon LhaL Lhere ls lnsumclenL evldence Lo esLabllsh probable cause Lo
charge prlvaLe respondenLs under Lhe above provlslons, based on Lhe
followlng ndlngs:
(1) Lhe Lax declencles of LMCLC for Laxable years 1997, 1998 and
1999 have all been seuled or LermlnaLed, as ln facL LMCLC was
lssued a CerucaLe of lmmunlLy and Leuer of 1ermlnauon, and
avalled of Lhe L8A and vA programs,
(2) Lhere was no prlor deLermlnauon of Lhe exlsLence of fraud,
SEC. 266. Failure to Obey Summons. Any person who, being duly summoned to appear to testify, or to appear and produce books of accounts, records,
memoranda, or other papers, or to furnish information as required under the pertinent provisions of this Code, neglects to appear or to produce such books of
accounts, records, memoranda, or other papers, or to furnish such information, shall, upon conviction, be punished by a ne of not less than Five thousand pesos
(P5,000) but not more than Ten thousand pesos (P10,000) and suffer imprisonment of not less than one (1) year but not more than two (2) years.
(3) Lhe assessmenL nouces are unnumbered, hence lrregular and
(4) Lhe books of accounLs and oLher accounung records may be
sub[ecL Lo audlL examlnauon only once ln a glven Laxable year
and Lhere ls no proof LhaL Lhe case falls under Lhe excepuons
provlded ln Secuon 233 of Lhe nl8C, and
(3) peuuoner commlued forum shopplng when lL led Lhe lnsLanL
case even as Lhe earller crlmlnal complalnL (l.S. no. 00-936)
dlsmlssed by Lhe ClLy rosecuLor of Cuezon ClLy was sull pendlng

ISSUL: WheLher LMCLC and lLs corporaLe omcers may be prosecuLed for
vlolauon of Secuons 234 (AuempL Lo Lvade or uefeaL 1ax) and 233 (Wlllful
2 3
lallure Lo Supply CorrecL and AccuraLe lnformauon and ay 1ax).

kULING: 1he prlvaLe respondenLs were already noued LhaL lnasmuch as Lhe
revenue omcers were noL glven Lhe opporLunlLy Lo examlne LMCLC's books of
accounLs, accounung records and oLher documenLs, sald revenue omcers
gaLhered lnformauon from Lhlrd parues. Such procedure ls auLhorlzed under
Secuon 3 of Lhe nl8C, whlch provldes:

SLC. S. ower of the Comm|ss|oner to Cbta|n Informanon, and to
Summon, Lxam|ne, and 1ake 1esnmony of ersons. - ln ascerLalnlng Lhe
correcLness of any reLurn, or ln maklng a reLurn when none has been
made, or ln deLermlnlng Lhe llablllLy of any person for any lnLernal
revenue Lax, or ln collecung any such llablllLy, or ln evaluaung Lax
compllance, Lhe Commlssloner ls auLhorlzed:
(A) 1o examlne any book, paper, record or oLher daLa whlch may be
relevanL or maLerlal Lo such lnqulry,
(8) 1o obLaln on a regular basls from any person oLher Lhan Lhe
person whose lnLernal revenue Lax llablllLy ls sub[ecL Lo audlL or
lnvesugauon, or from any omce or omcer of Lhe nauonal and local
governmenLs, governmenL agencles and lnsLrumenLallues, lncludlng
Lhe 8angko SenLral ng lllplnas and governmenL-owned or -conLrolled
corporauons, any lnformauon such as, buL noL llmlLed Lo, cosLs and
volume of producuon, recelpLs or sales and gross lncomes of
Laxpayers, and Lhe names, addresses, and nanclal sLaLemenLs of
corporauons, muLual fund companles, lnsurance companles, reglonal
operaung headquarLers of mulunauonal companles, [olnL accounLs,
assoclauons, [olnL venLures or consorua and reglsLered parLnershlps,
and Lhelr members,
(C) 1o summon Lhe person llable for Lax or requlred Lo le a reLurn, or
any omcer or employee of such person, or any person havlng
possesslon, cusLody, or care of Lhe books of accounLs and oLher
accounung records conLalnlng enLrles relaung Lo Lhe buslness of Lhe
person llable for Lax, or any oLher person, Lo appear before Lhe
Commlssloner or hls duly auLhorlzed represenLauve aL a ume and
place specled ln Lhe summons and Lo produce such books, papers,
records, or oLher daLa, and Lo glve Lesumony,
(u) 1o Lake such Lesumony of Lhe person concerned, under oaLh, as
may be relevanL or maLerlal Lo such lnqulry,
x x x x

- We have held LhaL Lhe lack of consenL of Lhe Laxpayer under lnvesugauon
does noL lmply LhaL Lhe 8l8 obLalned Lhe lnformauon from Lhlrd parues
lllegally or LhaL Lhe lnformauon recelved ls false or mallclous. nor does Lhe
lack of consenL preclude Lhe 8l8 from assesslng declency Laxes on Lhe
Laxpayer based on Lhe documenLs.
- ln Lhe same veln, hereln prlvaLe respondenLs cannoL be allowed Lo escape
crlmlnal prosecuuon under Secuons 234 and 233 of Lhe nl8C by mere
lmpuLauon of a "cuuous" or dlsqualled lnformanL under Secuon 282
SEC. 254. Attempt to Evade or Defeat Tax. Any person who willfully attempts in any manner to evade or defeat any tax imposed under this Code or the payment
thereof shall, in addition to other penalties provided by law, upon conviction thereof, be punished by a ne of not less than Thirty thousand pesos (P30,000) but not
more than One hundred thousand pesos (P100,000) and suffer imprisonment of not less than two (2) years but not more than four (4) years: Provided, That the
conviction or acquittal obtained under this Section shall not be a bar to the ling of a civil suit for the collection of taxes.
SEC. 255. Failure to File Return, Supply Correct and Accurate Information, Pay Tax, Withhold and Remit Tax and Refund Excess Taxes Withheld on
Compensation. Any person required under this Code or by rules and regulations promulgated thereunder to pay any tax, make a return, keep any record, or supply
any correct and accurate information, who willfully fails to pay such tax, make such return, keep such record, or supply such correct and accurate information, or
withhold or remit taxes withheld, or refund excess taxes withheld on compensations at the time or times required by law or rules and regulations shall, in addition to
other penalties provided by law, upon conviction thereof, be punished by a ne of not less than Ten thousand pesos (P10,000) and suffer imprisonment of not less
than one (1) year but not more than ten (10) years.
slmply because oLher Lhan dlsclosure of Lhe omclal reglsLry number of Lhe
Lhlrd parLy "lnformer," Lhe 8ureau lnslsLed on malnLalnlng Lhe
condenuallLy of Lhe ldenuLy and personal clrcumsLances of sald

CLAIM: 1he assessmenL nouces were lnvalld for belng unnumbered and Lhe
Lax llablllues Lhereln sLaLed have already been seuled and/or LermlnaLed.
- A nonce of assessment ls: YOZ 1./*')'6$" $2 1.K/(."/5 4'7.+ (++9.1 4$ '
Y4Z'73'5.) :,$ 2'(*+ 4$ ).+3$"1 4$ ' F).IO++.++>."4 S$6/. !FOS# :(4,("
4,. 3).+/)(-.1 3.)($1 $2 6>.; $) :,$+. ).3*5 4$ 4,. FOS :'+ 2$9"1 4$ -.
:(4,$94 >.)(4B =,. S$6/. $2 O++.++>."4 +,'** ("2$)> 4,. Y4Z'73'5.) $2 4,(+
2'/4; '"1 4,'4 4,. ).3$)4 $2 ("D.+6&'6$" +9->(W.1 -5 4,. L.D."9. [M/.)
/$"19/6"& 4,. '91(4 +,'** -. &(D." 19. /$9)+..
- 1he formal leuer of demand calllng for paymenL of Lhe Laxpayer's
declency Lax or Laxes shall state the fact, the |aw, ru|es and regu|anons
or [ur|sprudence on wh|ch the assessment |s based, otherw|se the
forma| |euer of demand and the nonce of assessment sha|| be vo|d.
- As lL ls, Lhe formallLy of a conLrol number ln Lhe assessmenL nouce ls noL a
requlremenL for lLs valldlLy buL raLher Lhe conLenLs Lhereof whlch should
lnform Lhe Laxpayer of Lhe declarauon of declency Lax agalnsL sald
Laxpayer. 8oLh Lhe formal leuer of demand and Lhe nouce of assessmenL
shall be vold lf Lhe former falled Lo sLaLe Lhe facL, Lhe law, rules and
regulauons or [urlsprudence on whlch Lhe assessmenL ls based, whlch ls a
mandaLory requlremenL under Secuon 228 of Lhe nl8C.
- Secuon 228 of Lhe nl8C provldes LhaL Lhe Laxpayer shall be lnformed ln
wrlung of Lhe law and Lhe facLs on whlch Lhe assessmenL ls made.
CLherwlse, Lhe assessmenL ls vold.
- 1o lmplemenL Lhe provlslons of Secuon 228 of Lhe nl8C, 88 no. 12-99 was
enacLed. Secuon 3.1.4 of Lhe revenue regulauon reads:
3.1.4. Iorma| Leuer of Demand and Assessment Nonce. - =,. 2$)>'*
*.W.) $2 1.>'"1 '"1 '++.++>."4 "$6/. +,'** -. (++9.1 -5 4,.
A$>>(++($".) $) ,(+ 19*5 '94,$)(0.1 ).3).+."4'6D.B 6() /)7), %&
5)3+"5 8+//1"9 &%, *+#3)"' %& '() '+4*+#),:. 5);81)"8# '+4 %, '+4).
.(+// .'+') '() &+8'.< '() /+=< ,2/). +"5 ,)92/+-%".< %, >2,1.*,25)"8) %"
=(18( '() +..)..3)"' 1. 0+.)5< %'(),=1.)< '() &%,3+/ /)7), %& 5)3+"5
+"5 +..)..3)"' "%-8) .(+// 0) ?%15@ =,. +'>. +,'** -. +."4 4$ 4,.
4'73'5.) $"*5 -5 ).&(+4.).1 >'(* $) -5 3.)+$"'* 1.*(D.)5B 7 7 7B (Lmphasls
- 1he lormal Leuer of uemand daLed AugusL 7, 2002 conLalns noL only a
deLalled compuLauon of LMCLC's Lax declencles buL also deLalls of Lhe
specled dlscrepancles, explalnlng Lhe legal and facLual bases of Lhe
assessmenL. lL also relLeraLed LhaL ln Lhe absence of accounung records
and oLher documenLs necessary for Lhe proper deLermlnauon of Lhe
company's lnLernal revenue Lax llablllues, Lhe lnvesugaung revenue
omcers resorLed Lo Lhe "8esL Lvldence CbLalnable" as provlded ln Secuon
6(8) of Lhe nl8C (Lhlrd parLy lnformauon) and ln accordance wlLh Lhe
procedure lald down ln 8MC no. 23-2000 daLed november 27, 2000.

1ax amnesty |s a genera| pardon to taxpayers who want to start a c|ean tax
s|ate. lL also glves Lhe governmenL a chance Lo collecL uncollecLed Lax from
Lax evaders wlLhouL havlng Lo go Lhrough Lhe Ledlous process of a Lax case.
1ax amnesLy llke LhaL of a Lax exempuon musL be consLrued sLrlcLly agalnsL
Lhe Laxpayer and llberally ln favor of Lhe Laxlng auLhorlLy.
- LMCLC ls noL qualled Lo avall of Lhe vA granung Laxpayers Lhe prlvllege
of lasL prlorlLy ln Lhe audlL and lnvesugauon of all lnLernal revenue Laxes
for Lhe Laxable year 2000 and all prlor years under cerLaln condluons,
conslderlng LhaL rsL, lL was lssued a An on lebruary 19, 2001, and
second, lL was Lhe sub[ecL of lnvesugauon as a resulL of verled
lnformauon led by a 1ax lnformer under Secuon 282 of Lhe nl8C duly
recorded ln Lhe 8l8 Cmclal 8eglsLry as Condenual lnformauon (Cl) no.
29-200033 even prlor Lo Lhe lssuance of Lhe An.
- Clven Lhe expllclL condluons for Lhe granL of lmmunlLy from audlL under
88 no. 2-99, 88 no. 8-2001 and 88 no. 10-2001, we hold LhaL respondenL
SecreLary gravely erred ln declarlng LhaL peuuoner ls now esLopped from
assesslng any Lax declency agalnsL LMCLC aer lssuance of Lhe
aforemenuoned documenLs of lmmunlLy from audlL/lnvesugauon and
seulemenL of Lax llablllues. lL ls axlomauc LhaL Lhe SLaLe can never be ln
esLoppel, and Lhls ls parucularly Lrue ln mauers lnvolvlng Laxauon. 1he
errors of cerLaln admlnlsLrauve omcers should never be allowed Lo
[eopardlze Lhe governmenL's nanclal posluon.

WlLh regard Lo Lhe vlolauon of Lhe general rule ln Secuon 233 of Lhe nl8C
allowlng Lhe examlnauon and lnspecuon of Laxpayer's books of accounLs
and oLher accounung records only once ln a Laxable year.
- As correcLly polnLed ouL by peuuoner, Lhe dlscovery of subsLanual
underdeclarauons of lncome by LMCLC for Laxable years 1997, 1998 and
1999 upon verled lnformauon provlded by an "lnformer" under Secuon
282 of Lhe nl8C, as well as Lhe necesslLy of obLalnlng lnformauon from
Lhlrd parues Lo ascerLaln Lhe correcLness of Lhe reLurn led or evaluauon
of Lax compllance ln collecung Laxes (as a resulL of Lhe dlsobedlence Lo Lhe
summons lssued by Lhe 8ureau agalnsL Lhe prlvaLe respondenLs), are
clrcumsLances warranung excepuon from Lhe general rule ln Secuon 233.
- 1he subsLanual underdeclared lncome ln Lhe reLurns led by LMCLC for
1997, 1998 and 1999 ln amounLs equlvalenL Lo more Lhan 30 (Lhe
compuLauon ln Lhe nal assessmenL nouce showed underdeclarauons of
almosL 200) consuLuLes prlma facle evldence of fraudulenL reLurn under
Secuon 248(8) of Lhe nl8C.
- 1ax assessmenLs by Lax examlners are presumed correcL and made ln good
falLh, and all presumpuons are ln favour of Lhe correcLness of a Lax
assessmenL unless proven oLherwlse. We have held LhaL a Laxpayer's
fallure Lo le a peuuon for revlew wlLh Lhe CourL of 1ax Appeals wlLhln Lhe
sLaLuLory perlod rendered Lhe dlspuLed assessmenL nal, execuLory and
demandable, Lhereby precludlng lL from lnLerposlng Lhe defenses of
legallLy or valldlLy of Lhe assessmenL and prescrlpuon of Lhe CovernmenL's
rlghL Lo assess. lndeed, any ob[ecuon agalnsL Lhe assessmenL should have
been pursued followlng Lhe avenue paved ln Secuon 229 (now Secuon
228) of Lhe nl8C on proLesLs on assessmenLs of lnLernal revenue Laxes.
- 8ecords bear ouL LhaL Lhe assessmenL nouce and lormal Leuer of
uemand daLed AugusL 7, 2002 were duly served on LMCLC on CcLober 1,
2002. rlvaLe respondenLs dld noL le a mouon for reconslderauon of Lhe
sald assessmenL nouce and formal demand, nelLher dld Lhey appeal Lo Lhe
CourL of 1ax Appeals. Secuon 228 of Lhe nl8C61 provldes Lhe remedy Lo
dlspuLe a Lax assessmenL wlLhln a cerLaln perlod of ume. lL sLaLes LhaL an
assessmenL may be proLesLed by llng a requesL for reconslderauon or
relnvesugauon wlLhln 30 days from recelpL of Lhe assessmenL by Lhe
Laxpayer. no such admlnlsLrauve proLesL was led by prlvaLe respondenLs
seeklng reconslderauon of Lhe AugusL 7, 2002 assessmenL nouce and
formal leuer of demand.