Keansburg Marketing Corp. v. Commissioner of Internal Revenue

THIRD DIVISION [C.T.A. CASE NO. 9076. January 5, 2018.] KEANSBURG MARKETING CORPORATION , petitioner , vs. COMMISSIONER OF INTERNAL REVENUE , respondent . DECISION FABON-VICTORINO , J p : In this Petition for Review filed on June 22, 2015, petitioner Keansburg Marketing Corporation seeks to nullify and cancel the Formal Assessment Notice dated October 22, 2014, issued by respondent Commissioner of Internal Revenue (CIR) for deficiency Value-Added Tax (VAT) covering the period January 1 to June 30, 2012, in the total amount of P113,580,794.29, inclusive of interest, for lack of factual and legal bases. THE FACTS Petitioner is a domestic corporation whose office is located at 114 Legaspi Street, Legaspi Village, Makati City. 1 It is registered with the Securities and Exchange Commission (SEC) with Company Registration No. AS091-194028 issued on August 2, 1991, and with the Bureau of Internal Revenue (BIR) with Tax Identification Number (TIN) 005-011-362-000. 2 Petitioner is primarily engaged in the business of buying, selling, distributing, and marketing at wholesale and retail of fermented liquor, bottled water, and other beverages. 3 Respondent, on the other hand, as head of the Bureau of Internal Revenue (BIR), has the authority to decide disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties imposed in relation thereto or other matters arising under the National Internal Revenue Code (NIRC) or other laws or portions thereof administered by the BIR. He holds office at the BIR National Office Building, Agham Road, Diliman, Quezon City. For the period covering January to June 30, 2012, petitioner manually filed its Monthly and Quarterly VAT Returns as follows: PERIOD COVERED (2012) DATE FILED January February 20, 2012 4 February March 19, 2012 5 First Quarter April 25, 2012 6 April May 21, 2012 7 May June 20, 2012 8 Second Quarter July 23, 2015 9 On March 18, 2013, petitioner received Letter of Authority (LOA) No. V08-2013-00000121 10 dated March 14, 2013, authorizing Revenue Officer (RO) Jenny Ferrera and Group Supervisor (GS) Renan Plata of BIR Revenue District No. V08-Assessment Division, to conduct an examination of petitioner's books of accounts and other accounting records for VAT for the period January 1, 2012 to June 30, 2012, pursuant to BIR Revenue Memorandum Order (RMO) No. 20-2012, VAT Audit Program. 11 Thereafter, respondent issued a Preliminary Assessment Notice 12 (PAN) dated September 12, 2014, which petitioner received on September 15, 2014 with the attached Details of Discrepancies 13 and Analysis of Sales per Third Party Information (TPI) from AITEID 14 for January to June 2012. On October 27, 2014, petitioner received a Formal Assessment Notice 15 (FAN) dated October 22, 2014, Details of Discrepancies, 16 Assessment Notice No. VT-ELA16721-12-14-1007 17 and Analysis of Sales per TPI from AITEID; 18 assessing it for deficiency VAT in the alleged amount of P113,580,794.29, inclusive of interest, for taxable period January 1 to June 30, 2012. 19 On November 24, 2014, petitioner filed a Protest 20 to the FAN with the Office of the Regional Director Jonas DP. Amora of Revenue Region No. 8-Makati, through a Request for Reconsideration of the assessment in the FAN, 21 praying for its cancellation and withdrawal. 22 On June 22, 2015, petitioner filed the instant Petition for Review 23 claiming inaction on the part of respondent. In his Answer, 24 respondent posits that petitioner is being assessed for deficiency VAT for taxable period January 1, 2012 to June 30, 2012 as it failed to substantiate or controvert his findings in the administrative investigation conducted against it. In any event, due process requirements mandated under Section 228 of the NIRC of 1997, as amended, and implemented by Revenue Regulations No. 12-99 were complied with when the FAN and Letter of Demand dated October 22, 2014 with attached Details of Discrepancies were issued to petitioner. Precisely, petitioner was able to file a letter protest against the FAN. Further, the subject assessment was issued in accordance with law and regulations and is prima facie presumed correct and made in good faith. It is therefore incumbent upon petitioner to prove the contrary. Absent any proof of irregularities in the performance of official duties, the said VAT assessment should not be disturbed. 25 After the Pre-Trial Conference, the parties filed their Joint Stipulation of Facts 26 on November 4, 2015. With the issuance of the Pre-Trial Order on December 1, 2015, 27 the Pre-Trial Conference was deemed terminated. During the trial, petitioner presented Reynaldo M. Tan and Norberto M. Resma as its witnesses. Witness Reynaldo M. Tan testified 28 that as petitioner's Manager, he oversees sales operation in the various branches of petitioner in Cabuyao and Sta. Cruz, Laguna, Lucena City, Calapan City and Puerto Princesa City. He likewise oversees the auditing of petitioner's sales officers and/or agents in the different areas of operation and ensures that the financial reporting to higher management and bookkeeping are timely accomplished, as well as petitioner's compliance with reportorial requirements of various government agencies. He further testified that he is in custody of documents pertinent to the assailed assessment, i.e. , LOA No. V09-2013-0000021 with SN: ELA201100016721 dated March 14, 2013 pertaining to the VAT audit of petitioner for the period covering January to June 2012. After the LOA, petitioner received from respondent a Request for Presentation of Records to which it complied and submitted copies of its Articles of Incorporation, the 1st and 2nd Quarters Income Tax Return (ITR) for calendar year (CY) 2012, Summary Alphalist of Withholding Taxes (SAWT), BIR Form No. 2307 or the Certificate of Creditable Tax Withheld at Source for CY 2012, together with the Transmittal Letters dated April 22, 2013 29 and May 2, 2013. 30 Petitioner also submitted its Summary List of Purchases (SLP) for January to June 2012, 31 Summary List of Sales (SLS) for January to June 2012, 32 Trial Balance, General Ledger, Certifications of Purchases from its major suppliers of goods, Inventory List as of December 31, 2012, Inventory List as of June 30, 2012 and Schedule of Property, Plant and Equipment, Sales Invoices issued by petitioner to its customers and issued by petitioner's suppliers of goods, together with Transmittal Letters dated May 20, 2013, 33 June 7, 2013, 34 July 4, 2013, 35 August 8, 2013 36 and August 15, 2013. 37 On July 17, 2014, petitioner paid its deficiency VAT in the amount of P978,391.46 38 for the taxable period under audit investigation. On September 12, 2014, respondent issued a PAN against petitioner. This was followed by a FAN issued on October 27, 2014, with attached Details of Discrepancy, Assessment Notices and Analysis of Sales per TPI from AIETEID. On November 24, 2014, petitioner filed a Protest via a Request for Reconsideration particularly explaining the discrepancy between the BIR findings and its own record. As to petitioner's alleged undeclared sales of P9,596,358.14, the witness stated that the observed discrepancy might have been due to the following, namely: 1) discrepancies in reporting of business or trade name between petitioner and its customers; 2) some of petitioner's customers did not provide their TIN or supplied the wrong TIN; 3) there were third parties who were not actual customers of petitioner but might have indicated petitioner's TIN in their SLPs; and 4) there might be a timing difference in the reporting of purchases in SLP on the part of petitioner's customers and reporting of sales on petitioner's SLS. Anent the disallowance of the input taxes amounting to P76,463,021.95 for the period of January to June 2012 for lack of supporting documents, the witness explained that petitioner submitted during the investigation invoices as well as certifications from Asia Brewery, Incorporated 39 and Interbev Philippines, Inc., 40 to support its claim for input tax which proved inutile since petitioner's whole input tax remained disallowed. The witness believed that it is not required to attach all the supporting documents to credit input taxes in the VAT returns. Finally, as to petitioner's alleged liability for deficiency VAT and increments for the same taxable period, suffice it to say that the assessment was not broken down for the quarters covered. Witness Tan admitted that his testimony is merely based on the record. However, he knows that petitioner's VAT Returns were signed by petitioner's President, Rolando Chua, and that he had no participation in the preparation of the same. The transmittal letters he identified were not signed by any of petitioner's representatives. Based on the record, they were all faithful reproductions of the originals and were received by the BIR as evidenced by the latter's stamp mark. The Court-commissioned Independent Certified Public Accountant (ICPA) Norberto M. Resma declared 41 that he audited and evaluated petitioner's documents pertaining to the questioned deficiency VAT assessment issued by respondent in the amount of P113,580,794.29, inclusive of interest for taxable period January 1 to June 30, 2012. His investigation 42 revealed that out of petitioner's alleged undeclared sales of P9,596,358.14, the amount of P5,158,171.55 was unsubstantiated, thus, it should be added to petitioner's taxable gross sales. Anent the unsupported Input Tax of P76,463,021.95, the amount of P1,420,117.00 lacks supporting documents. Hence, out of the total assessment of around P113,000,000.00, the total amount of VAT due from petitioner is P89,447.72. The ICPA further testified that petitioner's alleged undeclared sales of P12,862,162.00 arose from third-party information which, upon his validation using the SLS submitted to the BIR, was reduced to P5,158,171.55. With respect to the unsupported input tax, he explained that petitioner's supporting documents consisting of official receipts and invoices complied with the invoicing requirements under NIRC of 1997, as amended. After Formal Offer of Evidence, 43 petitioner rested its case per Resolution dated April 18, 2016. 44 For his defense, respondent presented his lone witness, RO Attorney Renan A. Plata who testified, 45 that he has been employed with the BIR since 2004 and from September 3, 2012, he was with the Assessment Division VAT Audit Group, BIR Revenue Region No. 8-Makati. Together with RO Jenny A. Ferrera, he conducted the audit/examination of certain documents/records of petitioner, to determine its VAT liability, if any, for the period covering January 1 to June 30, 2012, pursuant to BIR Electronic LOA No. eLA201100016721 dated March 14, 2012 46 issued by then Regional Director Nestor S. Valeroso. On March 18, 2013, 47 said eLOA was received by petitioner together with the BIR Checklist of Requirements for VAT Audit. 48 Due to petitioner's failure to submit documentary requirements, the BIR issued the First Request for Presentation of Records dated April 1, 2013, 49 which petitioner received on April 3, 2013. 50 However, petitioner still failed to comply, hence, the Second and Final Notice dated April 16, 2013 51 was issued, which petitioner received on April 17, 2013. 52 Still, there was no compliance on the part of petitioner. In view thereof, respondent, through the Regional Director, issued a Subpoena Duces Tecum (SDT) No. RR8-2013-0003 dated July 23, 2013, 53 to compel petitioner and its responsible officers to submit the required books of accounts and other pertinent records for VAT examination for the period covering January 1 to June 30, 2012. Notwithstanding its receipt on July 26, 2013, 54 petitioner failed to submit the listed documents, prompting the BIR to issue a Letter dated April 22, 2014, 55 containing a similar request for submission of certain documents. Since petitioner submitted irrelevant and incomplete documents, the investigating ROs proceeded with the VAT audit/examination to determine petitioner's VAT liability for the period covering January 1 to June 30, 2012, in accordance with the VAT Audit Procedures prescribed under Revenue Audit Memorandum Order (RAMO) No. 01-1999. Thereafter, they prepared an Undated Memorandum Report 56 on the result of the investigation and the legal basis of the assessed deficiency VAT against petitioner for the period covering January 1 to June 30, 2012 and recommended to the BIR Regional Director, RR 8-Makati, the issuance of a PAN. The PAN dated September 12, 2014 with attached Details of Discrepancies and Analysis of Sales per TPI from AITEID for January to June 2012 57 was issued to petitioner for deficiency VAT for the period January 1 to June 30, 2012 in the amount of P110,630,643.79 (inclusive of 20% interest). The PAN was followed by the FAN with Letter of Demand dated October 22, 2014 with attached Details of Discrepancies and Analysis of Sales per TPI from AITEID for January-June 2012 58 assessing petitioner for deficiency VAT for the same period but in the increased amount of P113,580,794.29 (inclusive of 20% interest). RO Plata opined that the Details of Discrepancies and Analysis of Sales per TPI from AITEID attached to the FAN and Letter of Demand informed petitioner of the factual and legal bases of the assessment for deficiency VAT issued against it. However, the witness admitted that the BIR was not able to secure the necessary certifications from the third parties. He further declared that the TPI came from the BIR's Integrated Data System, which was compared with petitioner's declared sales. However, since they were not allowed to access petitioner's record, the assessment notice was issued without validation. Neither was there any effort on their part to ask information from petitioner's suppliers given that petitioner is doing business all over Luzon, hence, it would be impractical to send letters to all of them. Thus, they decided to validate the information from petitioner itself whom they expected to have the records which they could use for purposes of tracing which undeclared sales and the particular suppliers. After respondent posted his Formal Offer of Evidence on August 30, 2016, 59 he rested per Resolution dated October 4, 2016. 60 On January 6, 2017, 61 the instant case was submitted for decision considering petitioner's Memorandum filed on December 16, 2016, 62 sans respondent's Memorandum, 63 despite directive. THE ISSUES The main issue 64 submitted by the parties for the determination of the Court is as follows: Whether the petitioner is liable for the alleged deficiency value-added tax and increments for taxable period January to June 2012 in the amount of P113,580,794.29. THE COURT'S RULING The timeliness of the filing of the Petition for Review must first be ascertained. Section 228 of the National Internal Revenue Code (NIRC) of 1997, provides: Sec. 228. Protesting 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 preassessment 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. Corollarily, Sections 3.1.4 and 3.1.5 of Revenue Regulations (RR) No. 12-99, state: SECTION 3. Due Process Requirement in the Issuance of a Deficiency Tax Assessment. xxx xxx xxx 3.1.4 Formal Letter of Demand and Assessment Notice . The formal letter of demand and assessment notice shall be issued by the Commissioner or his duly authorized representative. The letter of demand calling for payment of the taxpayer's deficiency tax or taxes shall state the facts, the law, rules and regulations, or jurisprudence on which the assessment is based, otherwise, the formal letter of demand and assessment notice shall be void x x x." 3.1.5 Disputed Assessment. The taxpayer or his duly authorized representative may protest administratively against the aforesaid formal letter of demand and assessment notice within thirty (30) days from date of receipt thereof. If there are several issues involved in the formal letter of demand and assessment notice but the taxpayer only disputes or protests against the validity of some of the issues raised, the taxpayer shall be required to pay the deficiency tax or taxes attributable to the undisputed issues, in which case, a collection letter shall be issued to the taxpayer calling for payment of the said deficiency tax, inclusive of the applicable surcharge and/or interest. No action shall be taken on the taxpayer's disputed issues until the taxpayer has paid the deficiency tax or taxes attributable to the said undisputed issues. The prescriptive period for assessment or collection of the tax or taxes attributable to the disputed issues shall be suspended. xxx xxx xxx If the taxpayer fails to file a valid protest against the formal letter of demand and assessment notice within thirty (30) days from date of receipt thereof, the assessment shall become final, executory and demandable. If the protest is denied, in whole or in part, by the Commissioner, the taxpayer may appeal to the Court of Tax Appeals within thirty (30) days from date of receipt of the said decision, otherwise, the assessment shall become final, executory and demandable. In general, if the protest is denied, in whole or in part, by the Commissioner or his duly authorized representative, the taxpayer may appeal to the Court of Tax Appeals within thirty (30) days from date of receipt of the said decision, otherwise, the assessment shall become final, executory and demandable: Provided, however, that if the taxpayer elevates his protest to the Commissioner within thirty (30) days from date of receipt of the final decision of the Commissioner's duly authorized representative, the latter's decision shall not be considered final, executory and demandable, in which case, the protest shall be decided by the Commissioner. If the Commissioner or his duly authorized representative fails to act on the taxpayer's protest within one hundred eighty (180) days from date of submission, by the taxpayer, of the required documents in support of his protest, the taxpayer may appeal to the Court of Tax Appeals within thirty (30) days from the lapse of the said 180-day period, otherwise, the assessment shall become final, executory and demandable. Thus, if the administrative protest is not acted upon by respondent, petitioner has thirty (30) days from the lapse of the one hundred eighty (180)-day period within which to file an appeal before this Court. In this case, petitioner filed its administrative protest 65 to the FAN on November 24, 2014. Counting one hundred eighty (180) days from November 24, 2014, the day when petitioner filed its appeal, respondent had until May 23, 2015, within which to decide on petitioner's appeal. Since respondent failed to act upon petitioner's appeal, petitioner had thirty (30) days, or until June 22, 2015, within which to file an appeal to the Court. Thus, the Petition for Review was seasonably filed on June 22, 2015. On the merits of the case, respondent assessed petitioner for deficiency VAT in the aggregate amount of P113,580,794.29 for the period covering January 1 to June 30, 2012, as follows: VATable sales per VAT returns P677,419,602.34 Add: Undeclared Sales (Schedule 1) 9,596,358.14 Adjusted Vatable Sales P687,015,960.48 Output tax due P82,441,915.26 Less: Input tax claimed per return P76,463,021.95 Less: Unsupported input tax 76,463,021.95 - VAT payable P82,441,915.26 Less: Tax payments 4,827,330.35 Basic Tax Due P77,614,584.91 Less: Voluntary Payment based on Undisputed Issues 699,946.85 Basic tax still due P76,914,638.06 Add: Interest (07.26.12 to 12.12.14) 36,666,156.23 Total amount due P113,580,794.29 The above deficiency VAT is hinged on the findings that petitioner has undeclared sales in the amount of P9,596,358.14 and unsupported input tax of P76,463,021.95. I. Whether respondent's allegation that petitioner has undeclared sales has factual and legal bases. According to respondent, a comparison of petitioner's sales per TPI and sales per SLS shows that petitioner has undeclared sales from its customers in the amount of P9,596,358.14, precisely an assessment for deficiency VAT was issued against it pursuant to Section 106 of the NIRC of 1997, as amended, to wit: 66 Sales per particular Customers (TPI) P12,862,162.63 Sales per Declared SLS 3,265,804.49 Undeclared Sales P9,596,358.14 Petitioner however argues that the method employed by respondent in securing data from the BIR-TPI which were compared with the figures appearing on its SLS violates RMO No. 04-03, which requires the BIR to verify the allegations stemming from TPI through externally sourced data. Based on the record, the purported petitioner's sales to its customers amounting to P9,596,358.14 were determined as follows: 67 TPI from AITED SLS Registered Name Total Gross Purchases of Purchaser (P) Reported Gross Sales (P) UNDECLARED SALES (P) 3 G Store Specialists, Inc. 20,758.93 20,758.93 3J Gas and Services Corporation 29,529.61 29,529.61 Alcancia Anneleen Aberin 25,348.21 25,348.21 Alcancia Ma. Theresa Aberin 5,625.00 5,625.00 Almonds International Sales, Inc. 181,671.72 181,243.15 428.57 Araya Mario Gabriel Talavera 8,048.93 8,048.93 Balintag Ralph Albert G. 449,945.53 449,945.53 Banaynal Ma. Monina Estoce 5,376.79 5,376.79 Bargain City, Incorporated 418,320.00 418,320.00 Barrera Edna Talabis 2,591.96 2,591.96 Beredo Juanito Rodriguez 78,850.91 78,850.91 Bernacer Felix Cabug Os 16,141.06 16,141.06 Bestgrillers, Inc. 187,437.25 187,437.25 Caballero Manuel Jr. P. 25,383.93 25,383.93 Caballero Marketing, Inc. 36,425.88 36,425.88 Calamba Medical Center 479,671.42 278,002.77 201,668.65 Calatagan Golf Club, Inc. 59,446.33 59,446.33 Candelaria Drug Corporation 104,739.52 104,739.52 Canela Julieto Odono 39,819.64 39,819.64 Castillo Cristopher Dalangin 4,869.65 4,869.65 Cataring Jennifer A. 225,089.29 225,089.29 Chase Edward Eliseff 3,921.42 3,921.42 Chongco Chona Lorenzo 172,392.86 172,392.86 Concepcion Gerardo Latorre 38,019.64 15,321.43 22,698.21 Concepcion Jocelyn Leano 19,067.86 19,067.86 De Los Reyes Amelia Enriquez 37,103.02 37,103.02 Delos Santos Ricardo A. 25,160.72 25,160.72 Dimacuha Victor Reginald Abaya 2,678.57 2,678.57 Econo Clean, Inc. 3,750.00 3,750.00 Edward Keller Philippines, Inc. 8,928.67 8,928.67 Emilus Mart, Inc. 1,666,076.50 1,242,699.33 423,377.17 Enercom Marketing Corporation 19,137.68 19,137.68 Ester Supermarket, Inc. 49,566.97 35,455.36 14,111.61 Evangelista Marivel Padilla 18,585.71 18,585.71 Fajardo Dorothea Ramos 9,587.50 9,587.50 First Coastal Fuel Corporation 31,465.18 31,465.18 Foodlink Resource and Mgt., Inc. 28,237.28 28,237.28 Foundation Specialists, Inc. 12,343.75 12,343.75 Gallardo Ma. Cecilia Chavez 322,682.15 322,682.15 Ge Grocery Thrift Market, Inc. 145,769.65 145,769.65 Georkimart, Inc. 50,706.25 50,706.25 Giant Petroleum Concepts Phils., Inc. 28,839.27 28,839.27 Go Elizabeth L. 159,021.42 159,021.42 Honda Parts Manufacturing Corporation 386,785.69 270,071.43 116,714.26 Ibarra Fernando Bayocboc 13,373.67 13,373.67 Industramach, Inc. 1,351.35 1,351.35 Jambalos Judith Villaflores 62,271.61 62,271.61 Jamelarin Maria Crisanta Emocling 1,937.50 1,937.50 K2 Drug Group, Inc. 16,727.74 16,727.74 Kalugdan Leizel Ugalde 552,428.57 552,428.57 Karnani Virender Vijay Nandlal 28,874.55 28,874.55 Kic Traders and Co., Inc. 42,570.54 42,570.54 King Arsenio Co. 378,256.95 375,131.25 3,125.70 Laguna Auto-Parts Manufacturing Corp. 10,815.76 10,815.76 Laguna Basic Food Group, Inc. 5,625.00 5,625.00 Lardizabal Efraim Valdez 930.35 930.35 Legend Hotels International Corporation 207,285.58 75,526.75 131,758.83 Leopando Leovigildo L. 38,468.26 38,468.26 Leycano-Boongaling Family Corporation 695.20 695.20 Lim Arvin Cabarrubias 50,125.00 50,125.00 Lim Natalie Cherubin Kuan 17,678.57 17,678.57 0.00 Lim Ryan Cabarubbias 11,741.07 11,741.07 LTS Supermarket, Inc. 358,190.19 283,779.79 74,410.40 Magbuhos Carmelita D. 2,035.71 2,035.71 Magbuhos Francisco D. 3,928.57 3,928.57 Mallari Deborah Agnes Bautista 31,866.07 31,866.07 Mallari Rolando Constantino 83,504.55 57,571.43 25,933.12 Masarap Talagang Pagkain Corporation 261,637.50 261,637.50 Mc Roms Chr Corporation 9,375.00 9,375.00 Mendoza Jeanette Tan 5,285.72 5,285.72 Mendoza Zenaida K. 25,464.30 25,464.30 Monde Nissin Corporation 11,714.32 11,714.32 Ngo Maribeth Uy 18,088.39 18,088.39 Nippon Paint Philippines, Inc. 781.25 781.25 Ong Mennen Pimentel 7,281.08 7,281.08 Ong Vicente Cleofas 20,012.50 17,589.29 2,423.21 Ortega Vencio Maramot 5,628.78 5,628.78 Pabalan Grace San Pascual 247,578.59 247,578.59 Packageworld, Inc. 17,866.08 17,866.08 Pancho Francis Alfon O. 141,522.30 118,483.93 23,038.37 Pancho Roberto Carandang 79,210.26 79,210.26 Pepmaco Manufacturing Corporation 43,303.58 43,303.58 Peradilla Pea Agustin 1,131,365.40 1,131,365.40 Perez Teresita Evangelista 6,208.03 6,208.03 Perez Wilnor Caballero 4,436.61 4,436.61 Profeta Imelda Pugay 13,901.79 13,901.79 Purificacion Namerta B. 26,150.89 26,150.89 Quick Stop Convenience Store, Inc. 211,448.20 154,336.97 57,111.23 Quiminiano Normita De Castro 79,205.37 79,205.37 Ramos Timoteo Payaban 43,871.43 43,871.43 Recio Allan B. 4,241.07 4,241.07 Rose Pharmacy, Inc. 80,598.00 52,799.11 27,798.89 Salinas Ma. Nerissa Yap 723,094.06 723,094.06 Samonte Hector A. 1,500.00 1,500.00 San Pascual Sheryl Delarosa 35,535.72 35,535.72 San Roque Drug Corporation 15,756.56 15,756.56 Sandugo Mindoro Drug Corporation 6,461.38 6,461.38 Santos Joy Macasarte 22,098.24 22,098.24 Sensient Technologies Phils., Inc. 3,348.21 3,348.21 Silang Ramil Espinelli 96,478.57 96,478.57 So Catty Delemos 264,100.44 264,100.44 Sta. Elena Properties, Inc. 49,928.51 49,928.51 Star UPLB Commercial Lane Corp. 243,006.27 243,006.27 Swedish Puerto Galera Hill Resort, Inc. 3,750.00 3,750.00 Tan Lorna Chan Pinco 54,625.00 54,625.00 Tan Perfecto Ambi 20,473.21 20,473.21 Teng Consuelo Ng 6,810.71 6,810.71 Tiongson Amelita Justina Poticano 659,397.65 659,397.65 Toshiba Information Equipment Phils., Inc. 22,021.00 22,021.00 Toyo Ink Compunds Corporation 28,571.70 28,571.70 Tsukiden Electronics Philippines, Inc. 16,254.48 16,254.48 Tulicanaba Corporation 6,274.10 6,274.10 Uy Joy Hinolan 40,268.75 39,752.68 516.07 Uy Rico E. 413,107.15 413,107.15 Velasco Danilo Delos Reyes 1,145.54 1,145.54 Victor Hugo Energy Corporation 66,377.33 53,361.25 13,016.08 Total 12,862,162.70 3,265,804.49 9,596,358.14 Thus, from the foregoing table, the alleged total purchases made by third party purchasers from petitioner for the 1st and 2nd quarters of 2012 amounted to P12,862,162.70. However, as admitted by respondent's witness, RO Plata, the SLPs received by the BIR was not verified with externally sourced data to check its correctness. Likewise, respondent did not secure the required certifications or confirmation from the alleged third-party sources to support the integrity of the amounts per BIR-TPI data. 68 In the case of Commissioner of Internal Revenue vs. Hantex Trading Co. , Inc. , 69 the Supreme Court had the occasion to rule that while as a rule, tax assessments by tax examiners are presumed correct and made in good faith, prima facie correctness of a tax assessment does not apply upon proof that an assessment is utterly without foundation, meaning it is arbitrary and capricious, to wit: We agree with the contention of the petitioner that, as a general rule, tax assessments by tax examiners are presumed correct and made in good faith. All presumptions are in favor of the correctness of a tax assessment. It is to be presumed, however, that such assessment was based on sufficient evidence. Upon the introduction of the assessment in evidence, a prima facie case of liability on the part of taxpayer is made. If a taxpayer files a petition for review in the CTA and assails the assessment, the prima facie presumption is that the assessment made by the BIR is correct, and that in preparing the same, the BIR personnel regularly performed their duties. This rule for tax initiated suits is premised on several factors other than the normal evidentiary rule imposing proof obligation on the petitioner-taxpayer: the presumption of administrative regularity; the likelihood that the taxpayer will have access to the relevant information; and the desirability of bolstering the record-keeping requirements of the NIRC. However, the prima facie correctness of a tax assessment does not apply upon proof that an assessment is utterly without foundation, meaning it is arbitrary and capricious. Where the BIR has come out with a 'naked assessment,' i.e. , without any foundation character, the determination of the tax due is without rational basis. In such a situation, the U.S. Court of Appeals ruled that the determination of the Commissioner contained in a deficiency notice disappears. Hence, the determination by the CTA must rest on all the evidence introduced and its ultimate determination must find support in credible evidence . Further, in the case of Fax n Parcel, Incorporated vs. Commissioner of Internal Revenue , 70 the CTA En Banc ruled that although tax assessments have the presumption of correctness and regularity in its favor, it is also equally true that assessments should not be based on mere presumptions no matter how reasonable or logical the presumption might be. Accordingly, the assessment on the alleged undeclared sales cannot be sustained since it was based on admittedly unverified amounts extracted from respondent's own data base. Moreover, supporting certifications or confirmations from the petitioner's customers should have been secured to verify the correctness of the amounts. At the very least, respondent should have presented the SLPs from which the data were lifted. Notably, RMO No. 04-03 requires the verification of the amounts reflected in the quarterly report with other externally sourced data in ascertaining the taxpayer's underdeclaration of revenues or overstatement of costs and expenses, if any. The pertinent portions of RMO No. 04-03 are quoted as follows: The Bureau of Internal Revenue is reengineering its work processes in order to increase revenue collections and to pursue quality audit by making use of available internal and external information resources. In order to strengthen and enhance its assessment functions, the utilization of information technology has been identified as an effective tool to improve tax administration through the development of the Reconciliation of Listings for Enforcement (RELIEF) System. The RELIEF System was created to support third party information program and voluntary assessment program of the Bureau through the cross-referencing of third party information from the taxpayer's Summary List of Sales and Purchases prescribed to be submitted on a quarterly basis pursuant to Revenue Regulations No. 7-95, as amended by RR 13-97, RR 7-99 and RR 8-2002. The RELIEF System shall cover all VAT taxpayers above threshold limits set by RR 8-2002 to submit Summary Lists of Sales and Purchases in magnetic form based on a prescribed electronic format. The consolidation and matching of information with other externally sourced data will detect underdeclaration of revenues/overdeclaration of cost and expenses, thus, resulting to greater tax potential. Considering the foregoing, the assessment on undeclared sales shall be cancelled. II. Whether respondent's disallowance of petitioner's input tax has factual and legal bases. Respondent's verification disclosed that the input tax claimed per VAT Returns amounting to P76,463,021.95 was not properly supported, hence not allowed as deduction to output tax pursuant to Section 110 (A) (2) of the NIRC of 1997, as amended. Per document submitted by petitioner for audit by the ICPA, the total input VAT declared in the 1st and 2nd Quarterly VAT Returns of taxable year 2012 amounting to P76,463,021.95 was composed of the following major and minor purchases: Major Purchases Asia Brewery, Incorporated P34,287,028.28 Interbev Philippines, Inc. 36,924,622.48 Sub-total P71,211,650.76 Minor Purchases Various suppliers 5,251,371.19 Total input tax claimed per return P76,463,021.95 The ICPA verified the purchases through examination of petitioner's original Paying Vouchers (PV), including its supporting documents such as official receipts, sales invoices, billing and other related documents, and his findings are as follows: 71 Particulars Tax Base Input Tax Total (P) (P) (P) Per Books 637,191,852.00 76,463,022.00 713,654,874.00 On Major Supplier of Goods 593,430,423.00 71,211,651.00 664,642,074.00 Other Supplier of Goods 43,761,429.00 5,251,371.00 49,012,800.00 Verified Supporting Documents 42,341,312.00 5,080,957.00 47,422,269.00 Unverified due to Unavailability of Supporting Documents 1,420,117.00 170,414.00 1,590,531.00 Clear from the foregoing that the input VAT amounting to P170,414.00 must be disallowed for petitioner's failure to back it up with invoices or official receipts required under Section 110, in relation to Sections 113 and 237 of the NIRC of 1997, as amended, and as implemented by Sections 4.110-1 and 4.113-1 of Revenue Regulations (RR) No. 16-2005. In addition to the cited disallowance, the examination of the documents submitted by petitioner leads to the inevitable conclusion as discussed below. A. Input VAT from Domestic Purchases of Goods from Asia Brewery, Incorporated n (ABI) and Interbev Philippines, Incorporated (IPI) Record reveals that petitioner's input VAT on domestic purchases from ABI and IPI from January to June 2012 amounted to P34,287,028.33 and P36,924,622.48, respectively, net of monthly debit and credit memos, to wit: Month (CY 2012) Asia Brewery, Inc. (ABI) Beer Bottled Water Total Beer & Bottled Water Net Input VAT (P) Invoice Amount 72 (P) Invoice Amount 73 (P) Invoice Amount (P) Less: CM/ Add: DM 74 (P) January 5,211,555.32 1,261,330.07 6,472,885.39 (323,334.85) 6,149,550.54 February 3,111,597.96 1,320,697.08 4,432,295.04 (36,548.03) 4,395,747.01 March 4,317,960.19 1,610,535.54 5,928,495.73 (25,546.05) 5,902,949.68 April 4,797,780.11 1,575,624.65 6,373,404.76 (239,506.88) 6,133,897.88 May 5,010,711.50 1,901,438.57 6,912,150.07 (286,563.11) 6,625,586.96 June 3,618,732.75 1,344,642.65 4,963,375.40 115,920.86 5,079,296.26 Total 26,068,337.83 9,014,268.56 35,082,606.39 (795,578.06) 34,287,028.33 Month (CY 2012) Interbev Philippines, Inc. (IPI) Soda & Energy Drink Net Input VAT (P) Invoice Amount 75 (P) Less: CM/ Add: DM 76 (P) January 5,542,860.21 (221,714.41) 5,321,145.80 February 5,538,627.54 5,538,627.54 March 6,761,389.58 41,910.79 6,803,300.37 April 6,522,424.47 (115,116.97) 6,407,307.50 May 6,526,604.45 (271,953.95) 6,254,650.50 June 6,341,498.06 258,092.71 6,599,590.77 Total 37,233,404.31 (308,781.83) 36,924,622.48 Upon verification, it appears that the total input VAT of P1,848,547.86 must be disallowed for failure to comply with the invoicing and substantiation requirements provided under Sections 110 (A) and 113 (A) and (B) of the NIRC of 1997, as amended, and as implemented by Sections 4.1102, 4.110-8, and 4.113-1 (A) and (B) of RR No. 16-2005, as follows: Date Registered Name Invoice Nos. Tax Base (P) Input Tax (P) Purchases from Asia Brewery, Inc. (Asia Brewery, Inc. Bottled Water) I. Petitioner's address and TIN were not indicated in the supporting VAT sales invoices 1/2/2012 Asia Brewery, Inc. 138839 23,303.57 2,796.43 1/2/2012 Asia Brewery, Inc. 138838 136,475.00 16,377.00 1/2/2012 Asia Brewery, Inc. 138837 79,942.86 9,593.14 1/2/2012 Asia Brewery, Inc. 138840 88,464.29 10,615.71 1/2/2012 Asia Brewery, Inc. 138821 16,000.00 1,920.00 1/2/2012 Asia Brewery, Inc. 138820 184,241.07 22,108.93 1/2/2012 Asia Brewery, Inc. 138826 121,142.86 14,537.14 1/2/2012 Asia Brewery, Inc. 138825 96,241.07 11,548.93 1/2/2012 Asia Brewery, Inc. 138824 89,775.00 10,773.00 1/2/2012 Asia Brewery, Inc. 138831 87,160.71 10,459.29 1/2/2012 Asia Brewery, Inc. 138830 228,312.50 27,397.50 1/2/2012 Asia Brewery, Inc. 138829 9,687.50 1,162.50 1/4/2012 Asia Brewery, Inc. 138915 29,642.86 3,557.14 1/5/2012 Asia Brewery, Inc. 138986 53,080.36 6,369.64 1/5/2012 Asia Brewery, Inc. 138985 103,562.50 12,427.50 1/5/2012 Asia Brewery, Inc. 138972 176,571.43 21,188.57 1/5/2012 Asia Brewery, Inc. 138971 98,839.29 11,860.71 1/5/2012 Asia Brewery, Inc. 138975 107,285.71 12,874.29 1/5/2012 Asia Brewery, Inc. 138974 201,446.43 24,173.57 1/6/2012 Asia Brewery, Inc. 139045 29,642.86 3,557.14 1/6/2012 Asia Brewery, Inc. 139096 123,975.00 14,877.00 1/6/2012 Asia Brewery, Inc. 139095 212,012.50 25,441.50 1/6/2012 Asia Brewery, Inc. 139094 129,948.21 15,593.79 1/9/2012 Asia Brewery, Inc. 139157 29,642.86 3,557.14 1/9/2012 Asia Brewery, Inc. 139175 23,303.57 2,796.43 1/9/2012 Asia Brewery, Inc. 139174 62,566.07 7,507.93 1/9/2012 Asia Brewery, Inc. 139164 21,410.71 2,569.29 1/9/2012 Asia Brewery, Inc. 139163 78,348.21 9,401.79 1/9/2012 Asia Brewery, Inc. 139176 17,687.50 2,122.50 1/10/2012 Asia Brewery, Inc. 139215 91,250.00 10,950.00 1/10/2012 Asia Brewery, Inc. 139214 186,946.43 22,433.57 1/10/2012 Asia Brewery, Inc. 139219 128,125.00 15,375.00 1/10/2012 Asia Brewery, Inc. 139218 33,482.14 4,017.86 1/11/2012 Asia Brewery, Inc. 139268 29,642.86 3,557.14 1/11/2012 Asia Brewery, Inc. 139273 11,160.71 1,339.29 1/11/2012 Asia Brewery, Inc. 139272 34,175.00 4,101.00 1/11/2012 Asia Brewery, Inc. 139271 75,387.50 9,046.50 1/12/2012 Asia Brewery, Inc. 139341 61,071.43 7,328.57 1/12/2012 Asia Brewery, Inc. 139340 137,150.00 16,458.00 1/12/2012 Asia Brewery, Inc. 139339 123,380.36 14,805.64 1/13/2012 Asia Brewery, Inc. 139374 29,642.86 3,557.14 1/13/2012 Asia Brewery, Inc. 139379 32,678.57 3,921.43 1/13/2012 Asia Brewery, Inc. 139393 150,000.00 18,000.00 1/13/2012 Asia Brewery, Inc. 139392 117,225.00 14,067.00 1/13/2012 Asia Brewery, Inc. 139394 39,464.29 4,735.71 1/13/2012 Asia Brewery, Inc. 139349 124,075.00 14,889.00 1/13/2012 Asia Brewery, Inc. 139348 10,250.00 1,230.00 1/14/2012 Asia Brewery, Inc. 139417 8,000.00 960.00 1/14/2012 Asia Brewery, Inc. 139416 31,125.00 3,735.00 1/14/2012 Asia Brewery, Inc. 139415 47,892.86 5,747.14 1/16/2012 Asia Brewery, Inc. 139496 326,087.50 39,130.50 1/16/2012 Asia Brewery, Inc. 139493 11,437.50 1,372.50 1/16/2012 Asia Brewery, Inc. 139492 81,505.36 9,780.64 1/16/2012 Asia Brewery, Inc. 139494 10,250.00 1,230.00 1/16/2012 Asia Brewery, Inc. 139548 29,035.71 3,484.29 1/16/2012 Asia Brewery, Inc. 139547 113,960.71 13,675.29 1/16/2012 Asia Brewery, Inc. 139512 29,642.86 3,557.14 1/17/2012 Asia Brewery, Inc. 139597 20,848.21 2,501.79 1/17/2012 Asia Brewery, Inc. 139596 57,750.00 6,930.00 1/17/2012 Asia Brewery, Inc. 139595 50,700.00 6,004.00 1/17/2012 Asia Brewery, Inc. 139604 46,607.14 5,592.86 1/17/2012 Asia Brewery, Inc. 139603 82,857.14 9,942.86 1/17/2012 Asia Brewery, Inc. 139602 163,275.00 19,593.00 1/17/2012 Asia Brewery, Inc. 139560 82,678.57 9,921.43 1/17/2012 Asia Brewery, Inc. 139561 75,428.57 9,051.43 1/17/2012 Asia Brewery, Inc. 139562 73,510.71 8,821.29 1/17/2012 Asia Brewery, Inc. 139619 16,050.00 1,926.00 1/17/2012 Asia Brewery, Inc. 139618 41,000.00 4,920.00 1/17/2012 Asia Brewery, Inc. 139617 14,175.00 1,701.00 1/17/2012 Asia Brewery, Inc. 139616 41,000.00 4,920.00 1/17/2012 Asia Brewery, Inc. 139615 69,675.00 8,361.00 1/18/2012 Asia Brewery, Inc. 139690 27,160.71 3,259.29 1/18/2012 Asia Brewery, Inc. 139689 125,362.50 15,043.50 1/18/2012 Asia Brewery, Inc. 139652 29,642.86 3,557.14 1/18/2012 Asia Brewery, Inc. 139706 24,000.00 2,880.00 1/18/2012 Asia Brewery, Inc. 139705 30,312.50 3,637.50 1/18/2012 Asia Brewery, Inc. 139678 44,642.86 5,357.14 1/18/2012 Asia Brewery, Inc. 139685 14,550.00 1,746.00 1/18/2012 Asia Brewery, Inc. 139679 16,987.50 2,038.50 1/18/2012 Asia Brewery, Inc. 139684 32,000.00 3,840.00 1/18/2012 Asia Brewery, Inc. 139683 8,000.00 960.00 1/18/2012 Asia Brewery, Inc. 139682 50,237.50 6,028.50 1/18/2012 Asia Brewery, Inc. 139681 21,712.50 2,605.50 1/18/2012 Asia Brewery, Inc. 139680 29,062.50 3,487.50 1/19/2012 Asia Brewery, Inc. 139750 40,000.00 4,800.00 1/19/2012 Asia Brewery, Inc. 139749 163,125.00 19,575.00 1/19/2012 Asia Brewery, Inc. 139748 191,491.07 22,978.93 1/20/2012 Asia Brewery, Inc. 139791 29,642.86 3,557.14 1/20/2012 Asia Brewery, Inc. 139793 188,062.50 22,567.50 1/20/2012 Asia Brewery, Inc. 139792 126,466.07 15,175.93 1/21/2012 Asia Brewery, Inc. 139861 23,303.57 2,796.43 1/21/2012 Asia Brewery, Inc. 139886 9,687.50 1,162.50 1/21/2012 Asia Brewery, Inc. 139885 46,607.14 5,592.86 1/21/2012 Asia Brewery, Inc. 139884 73,453.57 8,814.43 1/21/2012 Asia Brewery, Inc. 139865 69,910.71 8,389.29 1/21/2012 Asia Brewery, Inc. 139857 23,303.57 2,796.43 1/23/2012 Asia Brewery, Inc. 139866 7,767.86 932.14 1/23/2012 Asia Brewery, Inc. 139908 37,053.57 4,446.43 1/23/2012 Asia Brewery, Inc. 139909 16,339.29 1,960.71 1/24/2012 Asia Brewery, Inc. 139950 21,410.71 2,569.29 1/24/2012 Asia Brewery, Inc. 139952 54,600.00 6,552.00 1/24/2012 Asia Brewery, Inc. 139951 40,071.43 4,808.57 1/24/2012 Asia Brewery, Inc. 139971 20,500.00 2,460.00 1/24/2012 Asia Brewery, Inc. 139970 39,750.00 4,770.00 1/24/2012 Asia Brewery, Inc. 139969 77,135.71 9,256.29 1/25/2012 Asia Brewery, Inc. 139996 20,848.21 2,501.79 1/25/2012 Asia Brewery, Inc. 139995 63,312.50 7,597.50 1/25/2012 Asia Brewery, Inc. 139994 68,758.93 8,251.07 1/25/2012 Asia Brewery, Inc. 139999 234,875.00 28,185.00 1/25/2012 Asia Brewery, Inc. 139998 58,537.50 7,024.50 Subtotal (January 2012) 7,798,998.19 935,879.81 II. Supported by photocopied/scanned copies of VAT invoices marked as "Certified True Copy" but the authority of the person certifying the same cannot be ascertained 5/26/2012 Asia Brewery, Inc. 149992 73,000.00 8,760.00 5/26/2012 Asia Brewery, Inc. 149991 221,625.00 26,595.00 5/29/2012 Asia Brewery, Inc. 150085 178,094.64 21,371.36 5/29/2012 Asia Brewery, Inc. 150091 316,525.00 37,983.00 5/29/2012 Asia Brewery, Inc. 150083 109,491.07 13,138.93 5/29/2012 Asia Brewery, Inc. 150082 73,562.50 8,827.50 5/29/2012 Asia Brewery, Inc. 150084 11,160.71 1,339.29 5/29/2012 Asia Brewery, Inc. 150138 27,937.50 3,352.50 5/29/2012 Asia Brewery, Inc. 150137 81,750.00 9,810.00 5/29/2012 Asia Brewery, Inc. 150136 69,675.00 8,361.00 5/30/2012 Asia Brewery, Inc. 150154 41,910.71 5,029.29 5/30/2012 Asia Brewery, Inc. 150153 38,800.00 4,656.00 5/30/2012 Asia Brewery, Inc. 150152 106,698.21 12,803.79 5/30/2012 Asia Brewery, Inc. 150189 151,357.14 18,162.86 5/30/2012 Asia Brewery, Inc. 150188 148,339.29 17,800.71 5/30/2012 Asia Brewery, Inc. 150217 65,035.71 7,804.29 5/30/2012 Asia Brewery, Inc. 150216 105,937.50 12,712.50 5/30/2012 Asia Brewery, Inc. 150215 132,175.00 15,861.00 5/30/2012 Asia Brewery, Inc. 150175 76,925.00 9,231.00 5/30/2012 Asia Brewery, Inc. 150214 15,262.50 1,831.50 5/30/2012 Asia Brewery, Inc. 150213 41,000.00 4,920.00 5/30/2012 Asia Brewery, Inc. 150212 72,487.50 8,698.50 5/30/2012 Asia Brewery, Inc. 150211 72,487.50 8,698.50 5/30/2012 Asia Brewery, Inc. 150234 57,142.86 6,857.14 5/30/2012 Asia Brewery, Inc. 150233 66,600.00 7,992.00 5/30/2012 Asia Brewery, Inc. 150232 9,600.00 1,152.00 5/30/2012 Asia Brewery, Inc. 150231 45,089.29 5,410.71 5/31/2012 Asia Brewery, Inc. 150308 58,650.00 7,038.00 5/31/2012 Asia Brewery, Inc. 150307 111,423.21 13,370.79 5/31/2012 Asia Brewery, Inc. 150262 75,112.50 9,013.50 5/31/2012 Asia Brewery, Inc. 150261 54,187.50 6,502.50 5/31/2012 Asia Brewery, Inc. 150263 7,750.00 930.00 Subtotal (May 2012) 2,716,792.84 326,015.16 6/1/2012 Asia Brewery, Inc. 150369 40,000.00 4,800.00 6/1/2012 Asia Brewery, Inc. 150368 301,900.00 36,228.00 6/1/2012 Asia Brewery, Inc. 150326 48,232.14 5,787.86 6/1/2012 Asia Brewery, Inc. 150327 108,262.50 12,991.50 6/2/2012 Asia Brewery, Inc. 150393 16,000.00 1,920.00 6/2/2012 Asia Brewery, Inc. 150392 106,912.50 12,829.50 6/2/2012 Asia Brewery, Inc. 150426 89,580.36 10,749.64 6/2/2012 Asia Brewery, Inc. 150425 102,750.00 12,330.00 6/2/2012 Asia Brewery, Inc. 150424 98,564.29 11,827.71 6/4/2012 Asia Brewery, Inc. 150478 317,650.00 38,188.00 6/5/2012 Asia Brewery, Inc. 150530 58,875.00 7,065.00 6/5/2012 Asia Brewery, Inc. 150529 102,760.71 12,331.29 6/5/2012 Asia Brewery, Inc. 150528 22,321.43 2,678.57 6/5/2012 Asia Brewery, Inc. 150527 87,250.00 10,470.00 6/5/2012 Asia Brewery, Inc. 150526 57,285.71 6,874.29 Subtotal (June 2012) 1,558,344.64 187,001.36 (Asia Brewery, Inc. Beer) III. Supported by photocopied/scanned copies of VAT invoices marked as "Certified True Copy" but the authority of the person certifying the same cannot be ascertained 4/4/2012 Asia Brewery, Inc. 322722 30,000.00 3,600.00 4/24/2012 Asia Brewery, Inc. 323546 120,000.00 14,400.00 4/23/2012 Asia Brewery, Inc. 323528 212,571.43 25,508.57 4/23/2012 Asia Brewery, Inc. 324049 212,571.43 25,508.57 Subtotal (April 2012) 575,142.86 69,017.14 TOTAL DISALLOWANCES ABI 12,649,278.53 1,517,913.47 Purchases from Interbev Philippines, Inc. IV. Supported by photocopied/scanned copies of VAT invoices marked as "Certified True Copy" but the authority of the person certifying the same cannot be ascertained 1/24/2012 Interbev Philippines, Inc. 72643 174,000.00 20,880.00 1/25/2012 Interbev Philippines, Inc. 71278 152,000.00 18,240.00 1/26/2012 Interbev Philippines, Inc. 73748 101,500.00 12,180.00 1/27/2012 Interbev Philippines, Inc. 76193 145,000.00 17,400.00 1/28/2012 Interbev Philippines, Inc. 76204 174,000.01 20,880.00 1/29/2012 Interbev Philippines, Inc. 76205 174,000.01 20,880.00 1/30/2012 Interbev Philippines, Inc. 76210 145,000.00 17,400.00 1/31/2012 Interbev Philippines, Inc. 76227 145,000.00 17,400.00 Subtotal (January 2012) 1,210,500.02 145,260.00 2/1/2012 Interbev Philippines, Inc. 75666 145,000.00 17,400.00 2/2/2012 Interbev Philippines, Inc. 75424 145,000.00 17,400.00 2/3/2012 Interbev Philippines, Inc. 75318 145,000.00 17,400.00 2/4/2012 Interbev Philippines, Inc. 74947 145,000.00 17,400.00 2/5/2012 Interbev Philippines, Inc. 74913 174,000.00 20,880.00 2/6/2012 Interbev Philippines, Inc. 74914 145,000.00 17,400.00 2/7/2012 Interbev Philippines, Inc. 74652 94,000.00 11,280.00 2/8/2012 Interbev Philippines, Inc. 76900 174,000.01 20,880.00 2/9/2012 Interbev Philippines, Inc. 80991 160,358.39 19,243.01 2/10/2012 Interbev Philippines, Inc. 79391 217,428.57 26,091.43 Subtotal (February 2012) 1,544,786.97 185,374.44 TOTAL DISALLOWANCES IPI 2,755,286.99 330,634.44 TOTAL DISALLOWANCES ABI & IPI 15,404,565.52 1,848,547.91 Note that the above amounts were based on the original invoice amounts, without adjustments for the debit/credit memos (DM/CM) issued by ABI 77 and IPI; 78 thus, there is need to further adjust the above input VAT amounts applying the pertinent DM/CM issued by ABI and IPI. However, since the DM/CM were issued on a monthly basis without specifying the invoices unto which those specifically pertain to, it is reasonable to pro-rate the net DM/CM per month among the allowed and disallowed input VAT claims. Consequently, the input VAT amounts of P1,459,422.18 and P324,824.04 must be disallowed from the input VAT claimed on domestic purchases of goods from ABI and IPI, respectively, or in the aggregate amount of P1,784,246.22 from January to June 2012, to wit: Amount Disallowed Total Input VAT Claim Ratio DM/CM Pro-rated DM/CM Attributable to Disallowed Input VAT Total Disallowances (P) (A) (P) (B) (P) [C=(A/B)] (P) (D) (P) [E=(CxD)] (P) F=(A-E) ABI (Bottled Water) January 935,879.81 6,472,885.39 14.46% (323,334.85) (46,749.25) 889,130.56 ABI (Bottled Water) May 326,015.16 6,912,150.07 4.72% (286,563.11) (13,515.90) 312,499.26 ABI (Bottled Water) June 187,001.36 4,963,375.40 3.77% 115,920.86 4,367.46 191,368.82 ABI (Beer) April 69,017.14 6,373,404.76 1.08% (239,506.88) (2,593.60) 66,423.54 Sub-total ABI 1,517,913.47 (58,491.29) 1,459,422.18 Interbev January 145,260.00 5,542,860.21 2.62% (221,714.41) (5,810.40) 139,449.60 Interbev February 185,374.44 5,538,627.54 3.35% - - 185,374.44 Sub-total IPI 330,634.44 (5,810.40) 324,824.04 TOTAL 1,848,547.91 (64,301.69) 1,784,246.22 B. Input VAT from Other Domestic Purchases of Goods and Services Further examination of the documents submitted to substantiate the input VAT claimed on domestic purchases of goods and services other than ABI and IPI shows that the amount of P5,079,313.19 must likewise be disallowed due to the following grounds: Particulars Tax Base (P) Input Tax (P) Purchase of Goods (Annex A) No Supporting Invoices or Official Receipts 90,122.42 10,814.63 Supporting Invoices/ORs do not indicate the TIN of the petitioner 81,233.92 9,748.03 Supporting Invoices/ORs do not indicate the TIN and Address of the petitioner 433,307.56 51,996.92 Supported by Invoices/ORs issued not in the name of the petitioner 924.11 110.89 Purchases of goods supported by invoices dated outside the period of claim 7,693,613.46 923,233.39 Purchases of goods are supported by Bank Deposits for the account of the Payee 378,227.40 45,387.28 Purchases of goods are supported by Tape Receipts 6,808.87 817.08 Purchases of goods supported by VAT ORs imprinted with the phrase "Not valid as source of input tax" 70,178.58 8,421.42 Supporting Invoice is Unreadable 890.40 106.85 Total 8,755,306.72 1,050,636.49 Purchase of Capital Goods (Annex B) No Supporting Invoice or Official Receipt 60.71 7.29 Supporting Invoice does not indicate the TIN of the petitioner 36,116.07 4,333.93 Supporting Invoices/ORs do not separately indicate the TIN and Address of the petitioner 7,414.29 889.71 Purchases of capital goods supported by invoices dated outside the period of claim 243,493.08 29,219.19 Supporting Official Receipt is unreadable 603.57 72.43 Total 287,687.72 34,522.55 Purchase of Services (Annex C) No Supporting Invoices or Official Receipts 198,914.00 23,869.64 Supporting Invoices/ORs do not indicate the TIN of the petitioner 1,934,976.99 232,197.25 Supporting Invoices/ORs do not indicate the TIN and Address of the petitioner 24,790,894.45 2,974,907.54 Purchases from Non-VAT Suppliers; supported by NON-VAT ORs 1,457,894.77 174,947.35 Supported by Invoices/ORs issued not in the name of the petitioner 48,752.20 5,850.30 Purchases of services supported by Invoices Dated Outside the Period of Claim 4,238,620.78 508,634.30 Purchases of services are supported by Bank Deposits for the account of the Payee 196,312.66 23,557.52 Purchases of services are supported by Billing Advice 323,628.57 38,835.43 Purchases of services are supported by Parking Tickets 390.90 46.90 Purchases of services are supported by Provisional Receipts 4,977.27 597.27 Purchases of services are supported by Tape Receipts 2,076.75 249.25 Purchase of service is supported by Terminal Fee Ticket 115.18 13.82 Purchases of services supported by VAT ORs Imprinted with the Phrase "Not Valid as Source of Input Tax" 84,391.57 10,127.00 Supporting Invoices/ORs are Unreadable 2,671.42 320.58 Total 33,284,617.51 3,994,154.15 Grand Total 42,327,611.95 5,079,313.19 In sum, respondent's assessment on petitioner's unsupported input tax must be upheld but only to the extent of P7,033,973.41, as determined below: Unverified due to unavailability of supporting documents as per ICPA Report P170,414.00 Additional Disallowances by the Court: Domestic purchases of goods from ABI and IPI P1,784,246.22 Other domestic purchases of goods and services 5,079,313.19 6,863,559.41 Total unsupported input tax P7,033,973.41 Consequently, petitioner is liable to pay deficiency VAT in the amount of P6,334,026.54, computed as follows: VATable sales per VAT returns P677,419,602.34 Output tax due P81,290,352.28 Less: Input tax claimed per return P76,463,021.95 Less: Unsupported input tax 7,033,973.41 69,429,048.54 VAT payable P11,861,303.74 Less: Tax payments 4,827,330.35 Basic Tax Due P7,033,973.39 Less: Voluntary Payment based on Undisputed Issues 699,946.85 Deficiency VAT P6,334,026.54 WHEREFORE , the instant Petition for Review filed by petitioner Keansburg Marketing Corporation on June 22, 2015, is PARTIALLY GRANTED . Consequently, the assessment issued by respondent Commissioner of Internal Revenue against petitioner for taxable period January 1 to June 30, 2012 for deficiency Value-Added Tax is UPHELD IN PART . Accordingly, petitioner is hereby DIRECTED TO PAY respondent the amount of P7,917,533.18, representing deficiency VAT inclusive of twenty-five percent (25%) surcharge imposed under Section 248 (A) (3) of the NIRC of 1997, as amended, as computed below: Basic deficiency VAT P6,334,026.54 Add: 25% Surcharge 1,583,506.64 Total VAT due P7,917,533.18 In addition, petitioner is ORDERED TO PAY (a) Deficiency interest at the rate of twenty percent (20%) per annum on the basic deficiency VAT of P6,334,026.54 computed from July 25, 2012, until full payment thereof pursuant to Section 249 (B) of the NIRC of 1997, as amended; and (b) Delinquency interest at the rate of 20% per annum on the total amount of P7,917,533.18 and on the 20% deficiency interest which have accrued as afore-stated (a), computed from November 24, 2014, until full payment thereof pursuant to Section 249 (C) of the NIRC of 1997, as amended. SO ORDERED. (SGD.) ESPERANZA R. FABON-VICTORINO Associate Justice Lovell R. Bautista and Ma. Belen M. Ringpis-Liban, JJ. , concur. ANNEX A Purchase of Goods ANNEX B Purchase of Capital Goods ANNEX C Purchase of Services Footnotes 1. Par. 1, Summary of Admitted Facts, Joint Stipulation of Facts and Issues (JSFI), vol. 2 docket, p. 575. 2. Par. 3, Summary of Admitted Facts, JSFI, vol. 2 docket, p. 575. 3. Par. 4, Summary of Admitted Facts, JSFI, vol. 2 docket, p. 575. 4. Exhibits "P-6" and "P-6-a". 5. Exhibits "P-7" and "P-7-a". 6. Exhibits "P-8" and "P-8-a". 7. Exhibits "P-9" and "P-9-a". 8. Exhibits "P-10" and "P-10-a". 9. Exhibits "P-11" and "P-11-a". 10. Exhibit "R-2". 11. Par. 7, Summary of Admitted Facts, JSFI, vol. 2 docket, p. 575. 12. Exhibit "R-9". 13. Exhibit "R-9-b". 14. Exhibit "R-9-c". 15. Exhibits "P-1" and "R-10". 16. Exhibits "P-2" and "R-10-b". 17. Exhibit "P-3". 18. Exhibits "P-4" and "R-10-c". 19. Par. 5, Summary of Admitted Facts, JSFI, vol. 2 docket, p. 575. 20. Exhibit "P-5". 21. Par. 6, Summary of Admitted Facts, JSFI, vol. 2 docket, p. 575. 22. Par. 14, Summary of Admitted Facts, JSFI, vol. 2 docket, p. 576. 23. Vol. 1 docket, pp. 10-22. 24. Vol. 2 docket, pp. 509-513. 25. Interprovincial Autobus Co., Inc. v. Collector of Internal Revenue , 98 Phil. 290; Sy Po v. CTA , G.R. 81446, August 18, 1988; Dayrit v. Cruz , L-39910, September 26, 1988; Cagayan Robina Sugar Milling Co. v. CA , G.R. 122451, October 12, 2000. 26. Vol. 2 docket, pp. 574-582. 27. Vol. 2 docket, pp. 837-845. 28. Exhibits "P-29" and "P-29-a". 29. Exhibit "P-16". 30. Exhibit "P-17". 31. Exhibits "P-15" to "P-15-e". 32. Exhibits "P-14" to "P-14-e". 33. Exhibit "P-18". 34. Exhibit "P-19". 35. Exhibit "P-20". 36. Exhibit "P-21". 37. Exhibit "P-24". 38. Exhibits "P-27" and "P-27-a". 39. Exhibit "P-22". 40. Exhibit "P-23". 41. Exhibits "P-31" and "P-31-a". 42. ICPA Report dated November 23, 2015, Exhibits "P-29" and "P-29-a". 43. Vol. 3 docket, pp. 1117-1128. 44. Vol. 3 docket, pp. 1373-1374. 45. Exhibits "R-11" and "R-11-a". 46. Exhibit "R-2". 47. Exhibit "R-3-b". 48. Exhibit "R-3". 49. Exhibit "R-4". 50. Exhibit "R-4-b". 51. Exhibit "R-5". 52. Exhibit "R-5-b". 53. Exhibit "R-7". 54. Exhibit "R-7-b". 55. Exhibit "R-6". 56. Exhibit "R-8". 57. Exhibits "R-9" to "R-9-c". 58. Exhibits "R-10" to "R-10-c". 59. Vol. 3 docket, pp. 1415-1422. 60. Vol. 3 docket, pp. 1431-1432. 61. Vol. 3 docket, pp. 1479-1480. 62. Vol. 3 docket, pp. 1446-1448. 63. Per Records Verification Report dated December 19, 2016, vol. 3 docket, p. 1477. 64. Issues, JSFI, vol. 2 docket, p. 577. 65. Exhibit "P-5". 66. Exhibits "P-2" and "R-10-b". 67. Exhibit "P-4". 68. TSN dated July 26, 2016, pp. 12-15. 69. G.R. No. 136975, March 31, 2005. 70. CTA EB No. 883, February 14, 2013. 71. Exhibit "P-30". 72. Annex 9, ICPA Report, Exhibit "P-30". 73. Annex 9, ICPA Report, Exhibit "P-30". 74. Annex 11, ICPA Report, Exhibit "P-30". 75. Annex 10, ICPA Report, Exhibit "P-30". 76. Annex 12, ICPA Report, Exhibit "P-30". 77. Annex 11, ICPA Report. 78. Annex 12, ICPA Report.