LAW OF BASIC TAXATION IN THE PHILIPPINES Assessments may be classified as follows: (@) Self-Assessment - This is one in which the tax is assessed by the taxpayer himself. The amount of tax assessed is reflected in the tax return that is filed by him and the tax assessed is paid at the time he files the return. This system of simultaneous filing of return and payment of tax is known as the “pay-as-you-file” system (Sec. 49(9)(1); now, Sec. 56/AJ[1), 1997 NIRC). The tax so assessed is known as a self-assessed tax (b) Deficiency Assessment - This is an assessment made by the tax assessor whereby the correct amount of the tax is determined after ‘an examination or investigation is conducted. The liability is determined and is, therefore, assessed for the following reasons: (@) The amount ascertained exceeds that which is shown as tax by the taxpayer in his return; (b) No amount of tax is shown in the return; or, () The taxpayer did not file any return at all (Sec. 56/B)(2) and [2), 1997 NIRC). (©) Mlegal and Void Assessment - This is an assessment wherein the tax assessor has no power to act at all (Victorias Milling Co., Inc v. CTA, et al., L-24213, Mar. 13, 1968). (@ Erroneous Assessment - This is an assessment wherein the assessor has the power to assess but errs in the exercise of that power (ieid.). Thee PRINCIPLES GOVERNING TAX ASSESSMENTS. 1. Assessments are prima facie presumed correct and made in good faith. The taxpayer has the duty of proving otherwise. In the absence of proof of any irregularities in the performance of official duties, an assessment will not be disturbed. All presumptions are in favor of tax assessments (Interprovincial Autobus Co., Ine. v. Collector of Internal Revenue, 98 Phil. 290; Sy Po v. CTA, et al., G.R. No. 81446, Aug. 18, 1988; Dayrit, et al. v. Cruz, et al., L-39910, ‘Sept. 26, 1988; Cagayan Robina Sugar Milling Co. v. Court of Appeals, et al., G.R. No. 122451, Oct. 12, 2000). Failure to present proof of error in the assessment will justify judicial affirmation of said assessment (Delta Motors Co. v. Commissioner, CTA Case No. 3782, May 21, 1986; Commissioner of Internal Revenue v. Court of Appeals, et al., G.R. Nos. 104151 and 105563, Mar. 10, 1995). Hence, a party challenging an appraiser's finding of value is required to prove not only that the appraised value is erroneous but also what the proper value is (Caltex [Philippines], Inc. v. Court of Appeals, et al., G.R. No. 104781, July 10, 1998; Cagayan Robina Sugar Milling Co. v. Court of Appeals, et al., supra). 176 TAX ADMINISTRATION AND ENFORCEMENT 2, Assessments should 6t be hased on presumptions no matter how logical the presumption might be. In order to stand the test of judicial scrutiny, the assessment must be based on actual facts. The presumption of correctness of an assessment being a mere presumption, it cannot be made to rest on another presumption that the Circumstances existing in a subsequent investigative period are presumed to be those existing in a previous period. ‘A. case that illustrates this principle is Collector of Internal Revenue v. Benipayo (L-13656, Jan. 31, 1962), where the taxpayer Was investigated for amusement tax purposes. In 1949 to 1951, the BIR examiner found that the ratio of adults patronizing the taxpayer's, theater was 3 adults to 1 child. However, in 1952 to 1958, the ratio was in the reverse ~ 3 children to 1 adult. Concluding that PO.40 Uicket for adults was split into two P0.20 tax-exempt tickets for children, the examiner assessed the corresponding tax. The Court, however, held that the assessment is faulty since it merely assumes that the ratio of adult theatergoers in 1952 to 1953 is the same as that which obtained in 1949 to 1951. While the dictum is to sanction only factual assessments, it is significant to note that under existing law, the investigative methods known as inventory-taking, surveillance and prescribing presumptive sales and receipts on the taxpayer's business may also be used (Sec. 16/c]; now, Sec. 6{C], 1997 NIRC). Under the surveillance method, the taxpayer's business operations may be placed under observation or surveillance if there is reason to believe that the taxpayer is not declaring his correct income, sales or receipts for internal revenue tax purposes. ‘The findings may be used tas the basis for assessing the taxes for other months or quarters of the same or different taxable years and such assessments shall be deemed prima facie correct (Ibid.). Pursuant to the presumptive gross sales and receipts method, when it is found that a person has failed to issue receipts and invoices in violation of the law, or when there is reason to believe that the books of accounts or other records do not correctly reflect the declarations made or to be made in a return required to be filed under the provisions of the Tax Code, the Commissioner, after taking into account the sales, receipts, income or other taxable base of other persons engaged in similar businesses under similar situations or circumstances, or after considering other relevant information, may prescribe a minimum amount of such gross receipts, sales and taxable base and such amount 0 prescribed shall be prima facie correct for purposes of determining the correct internal revenue tax liabilities of such person (Ibid.). 47