| i i LAW OF BASIC TAXATION IN THE PHILIPPINES government offices or agencies, corporations, employers, clients or patients, tenants, lessees, vendees and from all other sources, with whom the taxpayer had previous transactions or from whom he received any income, after ascertaining that a report required by law as basis for the assessment of any internal revenue tax has not been filed or when there is reason to believe that any such report is false, incomplete A case in point on the use of the best evidence obtainable is, Sy Pov. CTA, et al., supra. In that case, there was a demand made by the Commissioner on the Silver Cup Wine Factory owned by petitioner's deceased husband, Po Bien Seng. The demand was for the taxpayer to submit to the BIR for examination the factory's books of accounts and related records. Mr. Po Bien Seng, however, did not submit the desired records, so BIR investigators raided the factory and seized different brands of alcoholic products. ‘The investigators, on the basis of the bottles of wine seized and the sworn statements of the factory’s former employees on the quantity of, raw materials consumed in the manufacture of liquor, assessed the corresponding deficiency income and specific (now, excise) taxes. The ‘Supreme Court, on appeal, upheld the legality of the assessment. €. Inventory-Taking, Surveillance and Presumptive Gross Sales and Receipts - The Commissioner is authorized at any time during the taxable year to order the inventory-taking of goods of any taxpayer as a basis for assessment. Ifthere is reason to believe that a person is not declaring his correct, income, sales or receipts for internal revenue tax purposes, his business operations may be placed under observation or surveillance. The findings made in the surveillance may be used as a basis for assessing the taxes for the other months or quarters of the same or different taxable years (Sec. 6{C], 1997 NIRC). When it is found that a person has failed to issue receipts and invoices in violation of the requirements of Secs. 113 and 237 of the ‘Tax Code, 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 the return required to be filed under the provisions of said Code, the Commissioner, after taking into account the sales, receipts, income or other taxable base of other persons engaged in similar business 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 so prescribed shalll be prima facie correct for purposes of determining the correct 182 ‘TAX ADMINISTRATION AND ENFORCEMENT ernal revenue tax liabilities of such person (Ibid.). D, Termination of Taxable Period - The Commissioner shall declare the tax period of a taxpayer terminated at any time when it, shall come to his knowledge: 1, That the taxpayer is retiring from business subject to tax; 2, That he intends to leave the Philippines or remove his property therefrom; 3. ‘That the taxpayer hides or conceals his property; oF 4, That he performs any act tending to obstruct the proceedings for the collection of the tax for the past or current quarter or year or to render the same totally or partly ineffective unless such proceedings are begun immediately. ‘The written decision to terminate the tax period shall be accompanied with a request for the immediate payment of the tax for the period so declared terminated and the tax for the preceding year or quarter, or such portion thereof as may be unpaid. Said taxes shalll be due and payable immediately and shall be subject to all the penalties prescribed unless paid within the time fixed in the demand made by the Commissioner (Sec. 6/D], 1997 NIRC). E, Fixing of Real Property Values - One important means of insuring correct tax assessment is the fixing of correct real property values. This is especially true, for instance, in income taxation where the presumptive or actual gain from the sale or other disposition of property is crucial in calculating the tax or in ad valorem taxes, like the estate and donor's gift taxes where the tax is based on correct property valuations. ‘The Commissioner is authorized to divide the Philippines into different zones or areas and shall, upon consultation with competent appraisers both from the private and public sectors, determine the fair market value of real properties located in each zone or area. For purposes of computing any internal revenue tax, the value of the property shall be whichever is the higher of: (1) the fair market value as determined by the Commissioner; or (2) the fair market value as shown in the schedule of values of the Provincial and City Assessors for real estate tax purposes (Sec. 6/E), 1997 NIRC). F. Inquiry into Bank Deposits - Examination of bank deposits enables the Commissioner to assess the correct tax liabilities of 183