Soumak Collections, Inc. v. Commissioner of Internal Revenue

THIRD DIVISION [C.T.A. CASE NO. 8686. February 24, 2016.] SOUMAK COLLECTIONS, INC. , petitioner , vs. THE COMMISSIONER OF INTERNAL REVENUE , respondent. DECISION RINGPIS-LIBAN , J p : STATEMENT OF THE CASE The Petition for Review seeks to set aside the Final Decision on Disputed Assessment (FDDA) dated July 8, 2013 finding Soumak Collections, Inc. liable for alleged deficiency income tax, value-added tax (VAT), expanded withholding tax (EWT), and documentary stamp tax (DST) in the aggregate amount of P2,827,881.27 for taxable year 2008. STATEMENT OF FACTS Petitioner Soumak Collections, Inc. is a domestic corporation duly organized and validly existing under Philippine laws, with business office at 101 Bormaheco Condominium, Zapote Street cor. Metropolitan Avenue, Makati City. 1 It engages in, conducts, and carries on the business of buying, selling, distributing, marketing at wholesale and retail insofar as may be permitted by law, all kinds of goods, commodities, wares and merchandise of every kind and description, and enters into all kinds of contracts for the export, import, purchase, acquisition, sale at wholesale or retail and other disposition for its own account as principal or in representative capacity as manufacturer's representative, merchandise broker, indentor, commission merchant, factors or agents, upon consignment of all kinds of goods, wares, merchandise or products whether natural or artificial. 2 On the other hand, respondent is the duly appointed Commissioner of the Bureau of Internal Revenue (BIR) vested with the authority to carry out the functions, duties, and responsibilities of said office, including, inter alia , the power to issue assessments, to decide disputed assessments, and to cancel and abate tax liabilities, pursuant to the provisions of the National Internal Revenue Code (NIRC) of 1997, and other tax laws, rules and regulations. She holds office at the BIR National Office Building, Agham Road, Diliman, Quezon City. On October 13, 2009, respondent issued a Letter of Authority, which petitioner received on October 28, 2009, authorizing the examination of petitioner's books of accounts and other accounting records for all internal revenue taxes covering taxable year 2008. 3 Consequently, respondent required petitioner to submit documents pertinent to the investigation. 4 Respondent sent petitioner a Final Notice 5 dated January 5, 2010 in connection with the subject investigation, which petitioner received on January 14, 2010. 6 Thereafter, petitioner transmitted the required documents to respondent. 7 Subsequently, respondent issued a Notice for Informal Conference, which was received by petitioner on October 6, 2011. 8 On October 20, 2011, petitioner replied to the said notice for informal conference and submitted additional documents. 9 On November 15, 2011, petitioner received a letter dated November 3, 2011 from respondent, stating that certain claimed input taxes were disallowed because some of petitioner's suppliers did not issue receipts, and attached therewith is a revised computation of the deficiency taxes. 10 Petitioner replied to the letter dated November 3, 2011 and submitted again additional documents on December 9, 2011. 11 However, respondent still disallowed petitioner's input tax through a letter which was received by petitioner on December 13, 2011. 12 Respondent issued a Preliminary Assessment Notice (PAN) with Details of Discrepancies both dated December 23, 2011, which was received by petitioner on January 2, 2012. 13 On January 11, 2012, a Waiver of the Defense of Prescription was executed by Yolanda P. Johnson, President and General Manager of the petitioner. 14 On January 12, 2012, respondent issued a Formal Assessment Notice (FAN), informing petitioner of its income tax, VAT, EWT, and DST deficiencies for taxable year 2008, detailed as follows: 15 CAIHTE INCOME TAX Taxable income/(loss) per ITR P526,827.00 Add: Unsupported Expenses (Annex B) 531,147.72 Taxable Income per Audit P1,057,974.72 Basic Income Tax Due P370,291.15 Less: Tax Paid per ITR Prior year excess tax credit P849,854.00 Creditable tax withheld - Total P849,854.00 Less: Deductions/Disallowance Disallowed prior years excess tax credit P849,854.00 Excess tax credit carried over to 787,146.76 (787,146.76) succeeding quarter Basic Deficiency Income Tax P1,157,437.91 Add: Interest (04/16/09 to 2/20/12) 659,581.06 TOTAL AMOUNT DUE P1,817,018.97 ============ VALUE-ADDED TAX Vatable Sales per Return P12,720,419.86 Less: Creditable Input Tax P1,526,450.38 Claimed Input Taxes 696,923.23 Less: Deductions from Input Tax Unsupported Input Taxes (Annex B) P90,041.65 Disallowed Input Taxes claimed per 102,742.91 192,784.56 504,138.67 Return (Schedule 1) VAT Payable/(Excess Input Tax) P1,022,311.71 Less: Tax Paid per Return 720,737.95 Basic Deficiency Value-Added Tax P301,573.76 Add: Interest (01/26/09 to 02/20/12) 185,075.41 TOTAL AMOUNT DUE P486,649.17 ============ EXPANDED WITHHOLDING TAX Basic Tax Due (Schedule 2) P3,970.39 Add: Interest (1/16/09 to 2/20/12) 2,458.38 TOTAL AMOUNT DUE P6,428.77 ============ DOCUMENTARY STAMP TAX Basic Tax Due (Schedule 2) P31,692.00 Add: 50% Surcharge P15,846.00 Interest (01/06/09 to 02/20/12) 19,796.65 35,642.65 TOTAL AMOUNT DUE 67,334.65 ============ Thereafter, petitioner filed its protest to the FAN. Respondent received the protest letter on January 17, 2012. 16 This was followed by another letter sent by petitioner to respondent dated February 8, 2012, stating that it attached thereto a copy of the tally it prepared and photocopies of its January, February, and 1st Quarter of 2008 returns for the latter's appreciation. 17 Petitioner paid basic tax due for EWT in the amount of P3,970.39 and interest as of the time of payment on March 27, 2012. 18 This is the same basic tax due forming part of the EWT assessed in the FDDA in the total amount of P7,625.33. 19 Petitioner paid the basic tax due for DST in the amount of P31,692.00, surcharge in the amount of P15,846.00, and interest as of the time of payment on March 27, 2012. 20 These amounts are the same basic tax due and surcharge forming part of the DST assessed in the FDDA in the total amount of P76,885.66. 21 On June 19, 2012, petitioner sent a letter to respondent, manifesting that the disallowed prior year's excess tax credit amounting to P849,854.00 claimed in the income tax return for 2008 did not appear in petitioner's income tax return for 2007, and based on the reported Financial Statement for 2007, the said amount was the balance of Deferred Tax Assets for the year 2007. 22 Thereafter, respondent sent petitioner a letter dated November 29, 2012, which was received by petitioner on December 4, 2012. In the said letter, respondent informed petitioner that its case was already forwarded to the Assessment Division for the issuance of the FDDA. 23 On July 8, 2013, respondent issued the FDDA with Details of Discrepancies, which petitioner received on July 11, 2013. 24 In the said FDDA, respondent assessed petitioner for deficiency income tax in the amount of P2,165,835.87, deficiency VAT in the amount of P577,534.41, deficiency EWT in the amount of P7,625.33, and deficiency DST in the amount of P76,885.66, all inclusive of interest. As a result, petitioner filed the instant Petition for Review 25 on August 7, 2013. Respondent filed her Answer 26 by registered mail on October 18, 2013. In the Answer, respondent interposed as her special and affirmative defenses the following: that "Assessment 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; that the Court of Tax Appeals, being a court of special jurisdiction, can take cognizance only of matters that are clearly within its jurisdiction; that Section 3, Rule 4 of the Revised Rules of the Court of Tax Appeals provides that only decisions of the Commissioner of Internal Revenue (CIR) in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the National Internal Revenue Code (NIRC) or other laws administered by the Bureau of Internal Revenue can be subject of appeal before this Court. And considering that the petitioner failed to file the necessary supporting documents, the assessment in the instant case already became final and executory, and demandable; that the Final Decision on Disputed Assessment issued on July 8, 2013 which adopted the findings embodied in the Formal Assessment Notice (FAN) and its Details of Discrepancies both dated January 12, 2013 for failure of the petitioner to submit any supporting paper/documents to its protest, reflects the internal revenue liabilities of the petitioner for the taxable year 2008 as a result of its failure to pay Income Tax in the amount of P2,165,835.87, VAT in the amount of P577,534.41, Expanded Withholding Tax in the amount of P7,625.33, Withholding Tax on Compensation in the amount of P15,344.73, and Documentary Stamp Tax in the amount of P76,885.66, exclusive of the 50% surcharges and 20% interest per annum; that the bases of the findings in the aforementioned assessment are enumerated in the Details of Discrepancies. DETACa Thereafter, the case was set for Pre-Trial Conference on January 23, 2014. 27 Subsequently, petitioner's Pre-Trial Brief 28 and the Pre-Trial Brief (for the Respondent) 29 were filed on January 20, 2014 and January 16, 2014, respectively. On February 25, 2014, the parties filed with this Court their Joint Stipulation of Facts. 30 The Pre-Trial Order 31 was later issued by the Court on May 19, 2014. During trial, both parties presented their respective documentary and testimonial evidence. After presentation, marking, identification, and offer of evidence, the Court admitted as part of petitioner's documentary evidence Exhibits "P-1" to "P-22", with the exception of Exhibits "P-21", "P-21-L", "P-21-M", and "P-21-N", which were denied admission for petitioner's failure to submit the originals for comparison. 32 On the other hand, the Court admitted as part of respondent's evidence Exhibits "R-1" to "R-7-a"; while Exhibits "R-8" and "R-8-a" were denied admission for failure to correspond with the documents actually marked. 33 Petitioner filed its Memorandum 34 on February 18, 2015. Respondent failed to submit her Memorandum as per Records Verification Report 35 of the Court's Judicial Records Division dated February 20, 2015. In the Resolution dated March 9, 2015, 36 the Court declared the case submitted for decision. STATEMENT OF ISSUES The parties submitted the following issues 37 for this Court's disposition: "1. Whether petitioner is liable for the following taxes for the fiscal year 2008: A. income taxes in the total amount of P2,165,835.87. B. value-added taxes in the total amount of P577,534.41." DISCUSSION/RULING JURISDICTION OF THE COURT Section 228 of the National Internal Revenue Code of 1997, as amended, provides: "SEC. 228. Protesting of Assessment. When the Commissioner or his duly authorized representative finds that proper taxes should be assessed, he shall first notify the taxpayer of his findings: Provided, however , that a pre-assessment notice shall not be required in the following cases: xxx xxx xxx The taxpayers shall be informed in writing of the law and the facts on which the assessment is made; otherwise, the assessment shall be void. Within a period to be prescribed by implementing rules and regulations, the taxpayer shall be required to respond to said notice. If the taxpayer fails to respond, the Commissioner or his duly authorized representative shall issue an assessment based on his findings. Such assessment may be protested administratively by filing a request for reconsideration or reinvestigation within thirty (30) days from receipt of the assessment in such form and manner as may be prescribed by implementing rules and regulations. Within sixty (60) days from filing of the protest, all relevant supporting documents shall have been submitted; otherwise, the assessment shall become final. If the protest is denied in whole or in part, or is not acted upon within one hundred eighty (180) days from submission of documents, the taxpayer adversely affected by the decision or inaction may appeal to the Court of Tax Appeals within thirty (30) days from receipt of the said decision, or from the lapse of the one hundred eighty (180)-day period; otherwise, the decision shall become final, executory and demandable." Respondent issued the FAN on January 12, 2012, which petitioner protested on January 17, 2012. 38 On February 8, 2012, petitioner submitted documents such as the tally sheet that petitioner prepared and the photocopies of its January, February, and 1st Quarter of 2008 returns. 39 Respondent released the FDDA denying the said protest on July 8, 2013, and petitioner received the FDDA on July 11, 2013. 40 Accordingly, petitioner had thirty (30) days from July 11, 2013 or until August 10, 2013 within which to appeal the adverse decision of respondent. Petitioner filed the instant Petition for Review on August 7, 2013, hence, the Court has jurisdiction over this case. The Court shall now proceed to determine whether petitioner is liable for the assessed deficiency taxes. Petitioner was assessed for alleged deficiency income tax, VAT, EWT, and DST for taxable year 2008, computed as follows: 41 Basic Tax Interest Total I. Income Tax P1,157,437.91 P1,008,397.96 P2,165,835.87 II. VAT 301,573.76 275,960.65 577,534.41 III. EWT 3,970.39 3,654.94 7,625.33 IV. DST 31,692.00 45,193.66 76,885.66 Total P1,494,674.06 P1,333,207.21 P2,827,881.27 =========== =========== =========== I. DEFICIENCY INCOME TAX P2,165,835.87 Respondent assessed petitioner for deficiency income tax covering taxable year 2008 amounting to P2,165,835.87, inclusive of interest, computed as follows: 42 Taxable income (loss) per ITR P526,827.00 Add: Unsupported Expenses (Annex B) 531,147.72 Taxable Income per Audit P1,057,974.72 Basic Income Tax Due (35%) P370,291.15 Less: Tax Paid per ITR Prior year excess tax credit P849,854.00 Creditable tax withheld - Total P849,854.00 Less: Deductions/Disallowance Disallowed prior year's excess tax credit P849,854.00 Excess tax credit carried over to succeeding quarter 787,146.76 1,637,000.76 (787,146.76) Basic Deficiency Income Tax P1,157,437.91 Add: Interest (04/16/09 to 08/23/13) 1,008,397.96 TOTAL AMOUNT DUE P2,165,835.87 =========== The resolution of whether or not the 2008 deficiency income tax assessment of P2,165,835.87 is correct basically hinges on the propriety of the expenses and tax credits disallowed by respondent, namely: aDSIHc A. Unsupported expenses P531,147.72 B. Disallowed prior year's excess tax credit P849,854.00 C. Amount carried over to succeeding year P787,146.76 A. Unsupported Expenses P531,147.72 Invoking Section 34 (A) (1) (b) of the NIRC of 1997, as amended, respondent disallowed petitioner's claimed expenses in the aggregate amount of P531,147.72 for being unsupported by official receipts or invoices. 43 While petitioner concedes to the disallowance of the amount of P63,147.00, petitioner asserts that the remaining amount of P468,000.72 (P531,147.72 less P63,147.00) has been substantiated by official receipts and invoices. 44 However, perusal of the evidence submitted would lead to the following unsupported expenses totaling P121,320.10, detailed as follows: Supporting Documents Per BIR's Audit 45 (Exhibit Number) Per this Court's Verification Allowable Disallowed Disallowed Sales Official Expense Expense CV# Amount Invoice Receipt Deduction Input VAT Deduction Romeo Roderico Valdizno 3892 P6,300.00 P6,300.00 Apolinar Maylon Jr. 3872 2,866.09 "P-21-B" "P-21-C" P2,866.09 - Apolinar Maylon Jr. 3870 14,000.00 "P-21-F" 12,500.00 P1,500.00 - Teresa Marble Corp. 3861 32,450.00 32,450.00 Oscar Bullan 3853 54,100.00 54,100.00 E. Murio, Inc. 37,747.50 37,747.50 Ocean-link Container Term, Inc. 3816 24,924.21 24,924.21 First Imperial Cargo 3799 42,568.41 42,568.41 Nanette Kagaoan 3792 49,062.00 "P-21-AA" "P-21-AA" 27,733.03 3,328.07 18,000.90 Crispin Lohan 3788 5,200.00 5,200.00 Nanette Kagaoan 3787 2,940.00 "P-21-H" "P-21-G" 2,625.00 315 - Eusebio Cruz 3907 3,125.00 3,125.00 Teresa Marble Corp. 4047 64,900.00 "P-21-I" 57,946.43 6,953.57 - Crispin Lohan 4038 1,386.00 1,386.00 Osmundo Esguerra 4033 41,852.58 41,852.58 Toyotacars Motor Parts 4078 15,680.00 15,680.00 PLDT/BIR Form 2307 under the name of Fibex Phils., Inc. 5,917.19 5,917.19 Best Shipping Lines 4032 13,353.75 13,353.75 Eliza Reyes 4031 40,500.00 "P-21-K" 40,500.00 - Nanette Kagaoan 4029 5,446.43 5,446.43 Nora Abastillas 4026 4,400.00 4,400.00 Nora Abastillas 3965 13,800.00 13,800.00 Eliza Reyes 4010 30,546.45 30,546.45 Eliza Reyes 4009 7,942.08 7,942.08 Joel Tiyad 4007 38,313.00 38,313.00 Eliza Reyes 4006 40,095.00 "P-21-P" 40,095.00 - Crispin Lohan 4003 12,200.00 12,200.00 Daniel Ramon Viloria 3997 22,674.63 "P-21-R" 20,245.21 2,429.42 - Salvador Yasona 3995 3,920.40 3,920.40 Eliza Reyes 3991 80,190.00 "P-21-T", 80,190.00 - "P-21-U" Marina Nabejet/Office 3955 3,045.00 3,045.00 Warehouse Joel Tiyad 4135 57,750.00 57,750.00 First Imperial Cargo 4134 (377,357.00) (377,357.00) Nanette Kagaoan 4130 92,960.00 "P-21-W" "P-21-X" 81,340.00 9,760.80 1,859.20 Crispin Lohan 4128 2,989.00 2,989.00 Vivien D. Smith 4121 13,860.00 13,860.00 Eliza Reyes 4107 19,500.00 "P-21-Z" 19,500.00 - P531,147.72 P385,540.76 P24,286.86 P121,320.10 =========== =========== ========== =========== Thus, the Court will sustain the disallowance of the amount of P121,320.10 as deduction from petitioner's taxable gross income for the year 2008 in accordance with Section 34 (A) (1) (b) of the NIRC of 1997, as amended, which states: "SEC. 34. Deductions from Gross Income. . . . (A) Expenses. (1) Ordinary and Necessary Trade, Business or Professional Expenses. xxx xxx xxx (b) Substantiation Requirements. No deduction from gross income shall be allowed under Subsection (A) hereof unless the taxpayer shall substantiate with sufficient evidence, such as official receipts or other adequate records: (i) the amount of the expense being deducted, and (ii) the direct connection or relation of the expense being deducted to the development, management, operation and/or conduct of the trade, business or profession of the taxpayer. B. Disallowed Prior Year's Excess Tax Credit P849,854.00 Pursuant to Section 76 of the NIRC of 1997, as amended, respondent disallowed the prior year's excess tax credit in the total amount of P849,854.00 as per evaluation of petitioner's 2007 Annual Income Tax Return (ITR) which does not have excess tax credit to be carried over to the succeeding taxable year 2008. 46 Records reveal that petitioner did not submit evidence such as the prior year's ITR and Certificates of Creditable Tax Withheld at Source (BIR Form No. 2307) to refute the afore-mentioned disallowance. Moreover, petitioner did not contest the disallowance since the filing of its Petition for Review up to the submission of its Memorandum. Thus, being an erroneous claim of tax credit on the part of petitioner, respondent's disallowance thereof should be upheld. C. Amount Carried Over to Succeeding Years P787,146.76 Respondent disallowed excess tax credit carried over to succeeding taxable years in the amount of P787,146.76 in order to allegedly recapture the tax benefit realized by petitioner. 47 The Court opines that it is improper for respondent to add back such amount. Respondent failed to state her basis in establishing the allegation that petitioner used the excess tax credit in the succeeding years. Since the tax benefit will be in the succeeding years, at most, petitioner may only be assessed in the said succeeding years. In sum, petitioner is liable to pay basic deficiency income tax for taxable year 2008 in the amount of P105,169.28, computed as follows: ETHIDa Taxable income/(loss) per ITR P526,827.00 Add: Unsupported Expenses 121,320.10 Taxable Income per Audit P648,147.10 Basic Income Tax Due P226,851.49 Less: Tax Payments for the first three quarters 121,682.21 Basic Deficiency Income Tax P105,169.28 ========== II. DEFICIENCY VALUE-ADDED TAX P577,534.41 Respondent computed the deficiency VAT assessment in the amount of P577,534.41, inclusive of interest, as follows: 48 Vatable Sales per Return P12,720,419.86 Output Tax (12%) P1,526,450.38 Less: Creditable Input Tax Claimed Input Taxes P696,923.23 Less: Deductions from Input Tax Unsupported Input Taxes (Annex B) P90,041.65 Disallowed Input Taxes Claimed per Return (Schedule 1) 102,742.91 192,784.56 504,138.67 VAT Payable/(Excess Input Tax) P1,022,311.71 Less: Tax Paid per Return 720,737.95 Basic Deficiency Value-Added Tax P301,573.76 Add: Interest (01/26/09 to 08/23/13) 275,960.65 TOTAL AMOUNT DUE P577,534.41 ============= Two items of the assessment are vital in the determination of whether or not petitioner is liable of any deficiency VAT for taxable year 2008, namely: 1. Unsupported Input Taxes P90,041.65 2. Disallowed Input Taxes Claimed per Return P102,742.91 A. Unsupported Input Taxes P90,041.65 Pursuant to Sections 110 and 113 of the NIRC of 1997, as amended, respondent disallowed unsupported input tax credits claimed by petitioner in the amount of P90,041.65, detailed as follows: 49 CV# Input VAT Best Shipping Lines 4032 P1,430.75 Nanette Kagaoan 4029 653.57 Ramon Daniel Viloria 3997 2,451.28 Marina Nabejet/Office Warehouse 3955 326.25 P4,861.85 Eliza Reyes 3896 P7,118.44 Joel Tiyad 3895 39,618.86 Nanette Kagaoan 3894 8,522.40 Joselito Roxas 3878 1,446.43 Apolinar Maylon, Jr. 3872 343.93 Apolinar Maylon, Jr. 3870 1,500.00 Joel Tiyad 3834 2,571.43 Eliza Reyes 3832 6,463.89 Eusebio Cruz 3821 4,350.00 Luminaire Printing 3819 803.57 First Imperial Cargo 3799 4,560.90 Nanette Kagaoan 3792 3,328.08 Nanette Kagaoan 3939 1,467.86 Crispin Lohan 3918 428.51 Sobair Comilao 3911 330.00 Toyota Motor Parts 4078 1,680.00 PLDT/BIR From 2307 under Fibex Phils 645.51 P85,179.80 Total Unsupported Input Tax P90,041.65 50 =========== Petitioner asserts that out of the total disallowance of P90,041.65, P55,863.67 was not claimed as input tax and P29,768.15 was properly supported by official receipts and/or sales invoices; thus, only the balance of P4,409.83 should be disallowed. 51 The Court finds petitioner's contention of unclaimed input taxes in the amount of P55,863.67 meritorious. The schedules of input taxes 52 for the months of January to December 2008 disclose that the said input taxes were not claimed by petitioner as input tax credits for the subject year. Therefore, it is erroneous on the part of respondent to disallow the amount of P55,863.67, detailed below, since petitioner did not derive any tax benefit therefrom: CV# Input VAT Eliza Reyes 3896 P7,118.44 Joel Tiyad 3895 39,618.86 Joselito Roxas 3878 1,446.43 Joel Tiyad 3834 2,571.43 Eusebio Cruz 3821 4,350.00 Crispin Lohan 3918 428.51 Sobair Comilao 3911 330.00 Total P55,863.67 ========= With regard to the input taxes claimed by petitioner as being supported by proper documentation totalling P29,768.15, perusal of the evidence submitted shows that only the amount of P14,999.21 represents petitioner's valid creditable input VAT as duly supported by VAT invoices/official receipts pursuant to Section 110 (A) (1) in relation to Section 113 (A) (1) and (2) of the NIRC of 1997, as amended. Below is the breakdown of the amount of P14,999.21: Supporting Input Documents (Exhibit VAT Number) Disallowed Disallowed per this Per BIR's Claimed per Creditable Court's Official CV# Audit VAT Return per Inv/OR verification Invoice Receipt Nanette Kagaoan 3894 P8,522.40 P8,522.40 P8,380.41 P141.99 P-23-A P-23-B Nanette Kagaoan 3792 3,328.08 3,328.08 3,328.07 0.01 P-23-C P-23-C Nanette Kagaoan 3939 1,467.86 1,467.86 1,446.80 21.06 P-23-I P-23-J Apolinar Maylon, Jr. 3872 343.93 343.93 343.93 P-23-F P-23-G Apolinar Maylon, Jr. 3870 1,500.00 1,500.00 1,500.00 P-23-M P15,162.27 P15,162.27 P14,999.21 P163.06 ========== ========== ========== ========= As indicated in the above table, petitioner's claimed input VAT per returns amounted to P15,162.27 instead of the creditable input VAT of P14,999.21. Thus, the discrepancy in the amount of P163.06 representing over-claimed input VAT shall be disallowed. Included in the P29,768.15 input VAT claimed by petitioner to be properly supported is the amount of P4,560.90, pertaining to petitioner's alleged payment to First Imperial Cargo per CV#3799. A scrutiny of CV#3799 53 and the related Bureau of Customs Import Entry and Declaration Form, 54 Bill of Lading, 55 Temporary Assessment Notice 56 and Assessment Notice 57 shows petitioner's payment for customs duties (CUD) in the amount of P42,068.00 and import processing fees (IPF) in the amount of P500.00 totalling P42,568.00 and VAT in the amount of P37,687.00 in the aggregate sum of P80,255.00 on its importation of bedding products and fabric in January 2008. While the amount of VAT paid by petitioner on the importation was P37,687.00, respondent disallowed the amount of P4,560.90 representing 12% of P42,568.00, the sum of the CUD and IPF. Since the VAT due on the importation in the amount of P37,687.00 was paid, it was erroneous on the part of respondent to disallow the amount of P4,560.90. cSEDTC As to the remaining disallowed input VAT of P10,044.98, included in the P29,768.15 input VAT claimed by petitioner to be properly supported, the same shall be disallowed for petitioner's failure to substantiate by proper VAT invoices or official receipts in accordance with Section 110 (A) in relation to Section 113 (A) (1) and (2) of the NIRC of 1997, as amended, detailed as follows: Disallowed Input VAT per this Court's CV# verification Reason for Disallowance Ramon Daniel Viloria 3997 P2,451.28 Although supported by VAT OR, it cannot be determined from the OR whether the input VATclaim pertains to goods or services Marina Nabejet/Office 3955 326.25 Input VAT claim on purchase of Warehouse goods supported by tape receipt instead of VAT invoice Luminaire Printing 3819 803.57 Input VAT claim on purchase of services supported by VAT invoice instead of VAT OR Eliza Reyes 3832 6,463.89 Input VAT claim merely supported by a receiving form Total P10,044.99 ========= In sum, petitioner's unsupported input VAT that should be disallowed amounted to P14,617.87, computed as follows: Unsupported Input VAT per BIR's audit P90,041.65 Less: Properly Supported Input VAT P14,999.21 Unclaimed Input VAT 55,863.67 Erroneously disallowed input VAT on importation 4,560.90 75,423.78 Unsupported Input VAT per this Court's verification P14,617.87 ========= B. Disallowed Input Taxes Claimed per Return P102,742.91 Respondent's verification disclosed that petitioner's claimed input tax per VAT returns for the four quarters of taxable year 2008 amounting to P696,923.23 was in excess of the allowable input tax of twelve percent (12%) of purchases for the same period. As a result, pursuant to Sections 110 and 113 of the NIRC of 1997, as amended, respondent disallowed the excess amounting to P102,742.91, computed as follows: 58 Purchases per Input Tax per VAT Return Return Should be Discrepancy 1st Quarter P1,753,789.82 P320,407.50 P210,454.78 P109,952.72 2nd Quarter 1,629,311.04 194,392.77 195,517.32 (1,124.55) 3rd Quarter 1,109,457.30 127,105.07 133,134.88 (6,029.81) 4th Quarter 458,944.51 55,017.89 55,073.34 (55.45) Total P4,951,502.67 P696,923.23 P594,180.32 P102,742.91 =========== ========== ========== ========== Petitioner contends that it made a typographical error or miscalculation in filling out the VAT return for the first quarter of taxable year 2008 and that instead of the declared purchases of P1,753,789.82, the correct amount should be P2,665,811.06, composed of domestic purchases in the amount of P722,017.40 and imported goods in the amount of P314,067.07 for January, domestic purchases in the amount of P631,047.84 for February and domestic purchases in the amount of P998,678.75 for March. With this adjusted first quarter purchases, petitioner posits that it even overpaid input taxes in the amount of P6,699.64. This Court agrees with petitioner. Following the correct computation of the total amount of purchases for the first quarter of taxable year 2008, petitioner actually had under-claimed its input tax per returns for the entire year 2008 in the amount of P6,699.64, as shown below: Discrepancy-Input Purchases per Input Tax per Should be Tax per Return is Return Return Input Tax higher/(lower) January Domestic purchases P722,017.40 P86,375.19 59 Imported purchases 314,067.08 60 37,688.05 February (Domestic purch.) 631,047.84 75,074.28 61 March (Domestic purch.) 998,678.75 121,269.98 62 1st Quarter P2,665,811.07 P320,407.50 P319,897.33 P510.17 2nd Quarter 1,629,311.04 194,392.77 195,517.32 (1,124.55) 3rd Quarter 1,109,457.30 127,105.07 133,134.88 (6,029.81) 4th Quarter 458,944.51 55,017.89 55,073.34 (55.45) Total P5,863,523.92 P696,923.23 P703,622.87 P(6,699.64) ============= ============ =========== ========== Consequently, the deficiency VAT assessment on the P102,742.91 input tax disallowance should be cancelled. In sum, petitioner is liable to pay basic deficiency VAT for taxable year 2008 in the amount of P123,407.07, computed as follows: VATable Sales per Return P12,720,419.86 Output Tax P1,526,450.38 Less: Creditable Input Tax Claimed Input Taxes P696,923.23 Less: Unsupported Input Taxes 14,617.87 682,305.36 VAT Payable (Excess Input Tax) P844,145.02 Less: Tax Paid per Return 720,737.95 Basic Deficiency Value-Added Tax P123,407.07 =========== III. EXPANDED WITHHOLDING TAX P7,625.33 Pursuant to Section 2.57.2 of Revenue Regulations No. 02-98, as amended, respondent assessed petitioner for deficiency EWT for taxable year 2008 in the aggregate amount of P7,625.33, including interest, breakdown of which is as follows: 63 Basic Tax Due (Schedule 2) P3,970.39 Add: Interest (01/16/09 to 08/23/13) P3,654.94 Total Amount Due P7,625.33 ======== Based on Schedule 2 of the Details of Discrepancies attached to the FDDA, respondent computed the basic deficiency EWT due as follows: 64 Goods Amount Tax Rate EWT Additions to Property and Equipment P37,978.00 Inventory Purchases 6,184,788.99 Office and Store Supplies 75,812.61 Gas and Oil Lubricants 79,449.59 Subtotal P6,378,029.19 1% P63,780.29 Services Communication, Light and Power P543,019.00 Dues and Subscriptions 94,615.00 Repairs and Maintenance 70,639.00 Representation and Entertainment 18,384.00 Insurance Expense 62,081.66 Advertising and Promotional Expense 29,435.00 Transportation and Travel 18,647.39 Subtotal P836,821.05 2% 16,736.42 Rentals P1,436,341.00 5% 71,817.05 Professional Fees Audit Fees P20,000.00 Professional and Legal Fees 177,601.00 Commission Expenses 78,878.10 Subtotal P276,479.10 10% 27,647.91 TOTAL P179,981.67 Less: Amount Remitted 176,011.28 Basic Tax Due P3,970.39 ========== Petitioner states that it paid the said assessment on March 27, 2012, 65 even before the FDDA was issued, in the total amount of P6,513.64 consisting of the basic tax of P3,970.39 and the deficiency interest of P2,543.25. Also, respondent did not dispute this assertion of petitioner. Verily, it is not one of the issues jointly stipulated by the parties for the resolution of the Court. Considering the foregoing, the said assessment should be set aside for having been duly paid by petitioner. SDAaTC IV. DOCUMENTARY STAMP TAX P76,885.66 Citing the case of Commissioner of Internal Revenue vs. Filinvest Development Corporation , 66 respondent assessed petitioner for deficiency DST for taxable year 2008 in the total amount of P76,885.66, including increments, computed as follows: 67 Basic Tax Due P31,692.00 Add: 50% Surcharge P15,846.00 Interest (01/06/09 to 08/23/13) 29,347.66 45,193.66 Total Amount Due P76,885.66 ========= In Schedule 3 of the Details of Discrepancies attached to the FDDA, respondent computed the basic deficiency DST due as follows: Advances from Stockholders P6,392,370.00 Multiply by: DST Rate P1/P200 Tax Due P31,962.00 =========== Petitioner points out that it paid the above-stated assessment on March 27, 2012, 68 even before the FDDA was issued, in the total amount of P68,011.90 consisting of the basic tax of P31,692.00, surcharge of P15,846.00 and deficiency interest of P20,473.90. Respondent did not refute this assertion of petitioner. Further, it is not one of the issues jointly stipulated by the parties to be resolved by the Court. Therefore, this assessment should be set aside for having been duly paid by petitioner. WHEREFORE , premises considered, the instant Petition for Review is hereby PARTIALLY GRANTED . The deficiency EWT and DST assessments are CANCELLED in view of petitioner's payment of the same. The deficiency income tax and VAT assessments for taxable year 2008 are UPHELD in the modified amount of TWO HUNDRED EIGHTY-FIVE THOUSAND SEVEN HUNDRED TWENTY PESOS AND 44/100 (P285,720.44) . Accordingly, petitioner is ORDERED TO PAY the amount of P285,720.44 , inclusive of the twenty-five percent (25%) surcharge imposed under Section 248 (A) (3) of the NIRC of 1997, as amended, computed as follows: TYPE OF TAX BASIC TAX SURCHARGE TOTAL Income Tax P105,169.28 P26,292.32 P131,461.60 Value-added Tax 123,407.07 30,851.77 154,258.84 Total P228,576.35 P57,144.09 P285,720.44 ========== ========== ========== In addition, petitioner is ORDERED TO PAY : (a) Deficiency interest at the rate of twenty percent (20%) per annum on the basic deficiency income tax and value-added tax computed from the dates indicated below until full payment thereof pursuant to Section 249 (B) of the NIRC of 1997, as amended: DEFICIENCY INTEREST TYPE OF TAX BASIC TAX COMPUTED FROM Income Tax P105,169.28 April 15, 2009 Value-added Tax P123,407.07 January 25, 2009 (b) Delinquency interest at the rate of 20% per annum on the total amount of P285,720.44 and on the 20% deficiency interest which have been accrued as afore-mentioned in (a), computed from August 23, 2013 until full payment thereof pursuant to Section 249 (C) of the NIRC of 1997, as amended. SO ORDERED. (SGD.) MA. BELEN M. RINGPIS-LIBAN Associate Justice Lovell R. Bautista and Esperanza R. Fabon-Victorino, JJ., concur. Footnotes 1. Par. 2, Stipulation of Facts, Joint Stipulation of Facts (JSF), docket, p. 763. 2. Exhibit "P-2", docket, pp. 529 to 539. 3. Exhibits "R-1", "R-1-a" and "R-1-b", BIR records, p. 50. 4. Exhibits "R-2", "R-2-a" and "R-2-b", BIR records, p. 49. 5. Exhibit "P-3", docket, p. 557; Exhibits "R-4", "R-4-a" and "R-4-b", BIR records, p. 54. 6. Par. 3, Stipulation of Facts, JSF, docket, p. 763. 7. Exhibits "P-4", "P-4-A", "P-4-B", "P-4-C" and "P-4-D", docket, pp. 558, 574, 575, 576 and 577, respectively. 8. Exhibit "P-5", docket, p. 578; Exhibits "R-5", "R-5-a" and "R-5-b", BIR records, p. 731. 9. Exhibit "P-6", docket, pp. 583 to 586. 10. Par. 4, Stipulation of Facts, JSF, docket, pp. 763-764; Exhibit "P-7", docket, p. 636; Exhibits "R-6" and "R-6-a", BIR records, p. 737. 11. Exhibit "P-8", docket, pp. 644 to 647. 12. Exhibit "P-9", docket, p. 648. 13. Par. 6, Stipulation of Facts, JSF, docket, p. 764; Exhibit "P-10", docket, pp. 649 to 652. 14. Par. 7, Stipulation of Facts, JSF, docket, p. 764; Exhibit "P-11", docket, p. 653. 15. Par. 8, Stipulation of Facts, JSF, docket, p. 764; Exhibit "P-12", docket, pp. 655 to 656. 16. Exhibit "P-13", docket, p. 663. 17. Exhibit "14", docket, p. 664. 18. Exhibits "P-18", "P-19", "P-19-a", docket, pp. 688 to 691. 19. Par. 11, Stipulation of Facts, JSF, docket, p. 764. 20. Exhibits "P-18", "P-20", "P-20-a", "P-20-b", docket, pp. 688 to 689, p. 693, p. 694 and p. 695, respectively. 21. Par. 12, Stipulation of Facts, JSF, docket, p. 764. 22. Exhibit "P-15", docket, p. 682. 23. Par. 9, Stipulation of Facts, JSF, docket, p. 764; Exhibit "P-17", docket, pp. 686 to 687. 24. Exhibit "P-1", docket, pp. 524 to 527. 25. Docket, pp. 6 to 24. 26. Docket, pp. 254 to 259. 27. Notice of Pre-Trial Conference issued on October 29, 2013, docket, p. 260. 28. Docket, pp. 283 to 290. 29. Docket, pp. 270 to 272. 30. Docket, pp. 763 to 766. 31. Docket, pp. 773 to 779. 32. Resolution dated July 23, 2014, docket, pp. 809 to 810. 33. Resolution dated January 6, 2015, docket, pp. 840 to 842. 34. Docket, pp. 843 to 860. 35. Docket, p. 861. 36. Docket, p. 863. 37. Stipulation of the Issues, JSF, docket, p. 765. 38. Exhibits "P-12" and "P-13", docket, pp. 655 to 656 and 663. 39. Exhibit "P-14", docket, p. 664. 40. Exhibit "P-1", docket, pp. 524 to 528. 41. Exhibit "P-1". 42. Exhibit "P-1". 43. Exhibit "P-1", Details of Discrepancies, docket, p. 526. 44. Petitioner's Memorandum, docket, pp. 848 to 851. 45. Exhibit "P-1", Annex B, docket, p. 528. 46. Exhibit "P-1", Details of Discrepancies, docket, p. 526. 47. Exhibit "P-1", Details of Discrepancies, docket, p. 526. 48. Exhibit "P-1", docket, p. 524. 49. Exhibit "P-1", Annex B, docket, pp. 526 and 528. 50. P90,071.66 instead of P90,041.65, (P4,861.85 + 85,179.81 = P90,071.66), computational error on the part of respondent. 51. Petitioner's Memorandum, docket, pp. 852 to 856. 52. Exhibits "P-22" and sub-markings, docket, pp. 724 to 728. 53. Attachment of Exhibit "P-6", docket, p. 587. 54. Attachment of Exhibit "P-6", docket, p. 588. 55. Attachment of Exhibit "P-6", docket, p. 590. 56. Attachment of Exhibit "P-6", docket, p. 589. 57. Attachment of Exhibit "P-6", docket, p. 591. 58. Exhibit "P-1", docket, p. 526. 59. Exhibit "P-6", docket, p. 613. 60. Exhibit "P-6", docket, p. 613 (P37,688.05 12%). 61. Exhibit "P-6", docket, p. 615. 62. Exhibit "P-6", docket, p. 617. 63. Exhibit "P-1", docket, pp. 525 and 526. 64. Exhibit "P-1", docket, p. 527. 65. Exhibit "P-19" and sub-markings, docket, pp. 690 to 692. 66. G.R. Nos. 163653 and 167689, July 19, 2011. 67. Exhibit "P-1", docket, pp. 525 and 527. 68. Exhibit "P-20" and sub-markings, docket, pp. 693 to 695.