Heavenly Urban Chef, Inc. v. Commissioner of Internal Revenue

EN BANC [C.T.A. EB CASE NO. 1586. July 27, 2018.] (C.T.A. Case No. 8556) HEAVENLY URBAN CHEF, INC. , petitioner , vs. COMMISSIONER OF INTERNAL REVENUE , respondent . DECISION UY , J p : Before the Court En Banc is a Petition for Review 1 filed by Heavenly Urban Chef, Inc. against the Commissioner of Internal Revenue on February 1, 2017, praying for reversal of the Decision dated August 9, 2016 2 and Resolution dated January 5, 2017, 3 both rendered by the Third Division of this Court (Court in Division) in CTA Case No. 8556, entitled "Heavenly Urban Chef, Inc.,Petitioner, versus Commissioner of Internal Revenue, Respondent," the dispositive portions of which respectively read as follows: HTcADC Decision dated August 9, 2016: " WHEREFORE ,premises considered, the instant Petition for Review is hereby DENIED .Accordingly, petitioner is ORDERED TO PAY respondent the modified amount of P28,724,811.72, representing basic deficiency income tax, VAT, and IAET, inclusive of the fifty percent (50%) surcharge imposed under Section 248 of the NIRC of 1997, as amended, computed as follows: Tax Type Basic Surcharge Total Income Tax P5,638,563.46 P2,819,281.73 P8,457,845.19 Value-Added Tax 13,182,288.12 6,591,144.06 19,773,432.18 Improperly Accumulated Earnings Tax 329,022.90 164,511.45 493,534.35 Total P19,149,874.48 P9,574,937.24 P28,724,811.72 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, VAT, IAET computed from the dates indicated below until full payment thereof pursuant to Section 249(B) of the NIRC of 1997, as amended: Basic Deficiency Tax Deficiency Interest computed from Income Tax P5,638,563.46 April 15, 2010 Value-Added Tax P13,182,288.12 January 25, 2010 Improperly Accumulated Earnings Tax P329,022.90 January 15, 2011 (b) Delinquency interest at the rate of 20% per annum on the total amount of P28,724,811.72 and on the 20% deficiency interest which have accrued as afore-stated in (a), computed from October 24, 2012 until full payment thereof pursuant to Section 249(C) of the NIRC of 1997, as amended. CAIHTE SO ORDERED ." Resolution dated January 5, 2017: " WHEREFORE ,premises considered, the instant Motion for Reconsideration (Re: Decision dated 09 August 2016) is DENIED for lack of merit. SO ORDERED ." THE FACTS Petitioner Heavenly Urban Chef, Inc. is a domestic corporation duly organized and existing under the laws of the Philippines, with address at Lot 86 Bagsakan Road corner Avocado Street, FTI Complex, Taguig City. On the other hand, respondent is the Commissioner of the Bureau of Internal Revenue (BIR),vested by law with authority to decide, approve, and reverse assessments of internal revenue taxes. He holds office at the BIR National Office Building, Agham Road, Diliman, Quezon City. On January 18, 2010, Mission Order No. MSO200100076311 was issued by Regional Director Jaime B. Santiago, directing Revenue Officers Jefferson T. Ocampo, Ernesto P. Vibar, and Rafaelito C. Elias to monitor sales and/or place of business establishment of petitioner under observation or surveillance for violations of bookkeeping rules and regulations, particularly on non-issuance of receipts, and to apprehend violators of revenue laws and regulations, from January 18 to February 5, 2010. On June 25, 2010, Letter of Authority No. 200700028216 was issued by Regional Director Santiago, authorizing Revenue Officers Jefferson T. Ocampo, Ernesto P. Vibar, and Rafaelito C. Elias, and Group Supervisor Rosalina C. Orcullo, to examine petitioner's books of accounts and other accounting records for all internal revenue taxes for the period covering January 1, 2009 to December 31, 2009. On July 2, 2010, petitioner received a Notice for Presentation of Books of Accounts from respondent dated July 1, 2010, requesting the presentation of certain documents pursuant to the provision of Section 20 of Revenue Regulations (RR) No. V-1. On July 21, 2010 and on August 10, 2010, respondent issued a Second Notice for Presentation of Books of Accounts and a Final Request for Presentation of Records Re: Letter of Authority No. 00028216 dated June 25, 2010, respectively. aScITE For petitioner's failure to submit all requested documents, Revenue Officer Jefferson T. Ocampo served a Subpoena Duces Tecum dated September 3, 2010 addressed to Jean Paul Escudero, in his capacity as President of petitioner. On November 4, 2010, respondent filed a criminal complaint with the Prosecution Office of Makati City, against the officers of petitioner for alleged violation of Sections 5 (C), 256, and 266 of the National Internal Revenue Code (NIRC) of 1997, as amended. A Notice for an Informal Conference was issued by respondent on July 22, 2011. On September 19, 2011, respondent issued a Preliminary Assessment Notice (PAN) with attached Details of Discrepancies against petitioner. On October 3, 2011, petitioner submitted a Letter of Protest to the Regional Director of BIR Region No. 8 in Makati City. In support of its protest, petitioner submitted a letter to the BIR, including schedules and other documents, on October 13, 2011. On December 1, 2011, petitioner again wrote a letter to the BIR, submitting documents for the year 2009. Thereafter, petitioner received the Formal Assessment Notice (FAN) with Details of Discrepancies dated March 22, 2012 from respondent, assessing petitioner for alleged deficiency income tax, value-added tax (VAT),and improperly accumulated earnings tax (IAET) in the aggregate amount of P37,136,238.10, broken down as follows: INCOME TAX Taxable income/(loss) per ITR P3,750,458.00 Add: Adjustments/disallowance Unsupported expenses 50% rule P444,666.00 Undeclared Sales 14,695,017.86 Overclaimed expenses 39,733.00 15,179,416.86 Taxable Income per Audit 18,929,874.86 Basic income tax due Less: Tax paid per ITR 5,678,962.46 Payment 40,399.00 Creditable tax withheld 1,084,798.00 Total 1,125,197.00 Less: Unsupported creditable tax withheld 1,084,798.00 40,399.00 Basic deficiency income tax 5,638,563.46 Add: 50% surcharge 2,819,281.73 Interest (04/16/10 to 04/30/2012) 2,301,769.74 5,121,051.47 TOTAL AMOUNT DUE P10,759,614.93 VALUE-ADDED TAX VATable sales per return P22,225,437.83 Add: Sales not subjected to VAT 89,433,742.28 Adjusted VATable sales 111,659,180.11 Output tax 13,399,101.61 Less: Creditable input tax Claimed input taxes P2,606,964.98 Less: Unsupported input taxes 2,606,964.98 - VAT payable 13,399,101.61 Less: Tax paid per return 216,813.06 Basic deficiency value-added tax 13,182,288.55 Add: 50% surcharge 6,591,144.28 Interest (01/26/10 to 04/30/2012) 5,959,116.75 12,550,261.03 TOTAL AMOUNT DUE P25,732,549.58 IMPROPERLY ACCUMULATED EARNINGS TAX Basic deficiency tax P329,022.90 Add: 50% surcharge P164,511.45 Interest (01/16/10 to 04/30/2012) 150,539.24 315,050.69 TOTAL AMOUNT DUE P644,073.59 TOTAL DEFICIENCY TAXES P37,136,238.10 In the letter dated and filed on April 3, 2012, petitioner protested the FAN and requested a re-investigation of the assessment issued by respondent. DETACa In response to the protest, respondent issued his Final Decision on Disputed Assessment (FDDA) dated September 7, 2012, which was received by petitioner on September 12, 2012, upholding the FAN but increasing the deficiency amount to P38,993,513.65, due to an increase in the accruing interest: INCOME TAX Taxable income/(loss) per ITR P3,750,458.00 Add: Adjustments/disallowance Unsupported expenses 50% rule P444,666.00 Undeclared Sales 14,695,017.86 Overclaimed expenses 39,733.00 15,179,416.86 Taxable Income per Audit 18,929,874.86 Basic income tax due Less: Tax paid per ITR 5,678,962.46 Payment 40,399.00 Creditable tax withheld 1,084,798.00 Total 1,125,197.00 Less: Unsupported creditable tax withheld 1,084,798.00 40,399.00 Basic deficiency income tax 5,638,563.46 Add: 50% surcharge 2,819,281.73 Interest (04/16/10 to 10/24/2012) 2,848,633.16 5,667,914.89 TOTAL AMOUNT DUE P11,306,478.35 VALUE-ADDED TAX VATable sales per return P22,225,437.83 Add: Sales not subjected to VAT 89,433,742.28 Adjusted VATable sales 111,659,180.11 Output tax 13,399,101.61 Less: Creditable input tax Claimed input taxes P2,606,964.98 Less: Unsupported input taxes 2,606,964.98 - VAT payable 13,399,101.61 Less: Tax paid per return 216,813.06 Basic deficiency value-added tax 13,182,288.55 Add: 50% surcharge 6,591,144.28 Interest (01/26/10 to 10/24/2012) 7,237,618.16 13,828,762.44 TOTAL AMOUNT DUE P27,011,050.99 IMPROPERLY ACCUMULATED EARNINGS TAX Basic deficiency tax P329,022.90 Add: 50% surcharge P164,511.45 Interest (01/16/10 to 10/24/2012) 182,449.96 346,961.41 TOTAL AMOUNT DUE P675,984.31 TOTAL DEFICIENCY TAXES P38,993,513.65 Petitioner then filed a Petition for Review with the Court in Division on October 12, 2012. The case was docketed as CTA Case No. 8556. HEITAD On December 5, 2012, respondent filed his Answer in CTA Case No. 8556, interposing Special and Affirmative defenses, which include, among others, the following: allegedly, during the administrative investigation of its tax case, petitioner failed to substantiate or controvert by substantial evidence the BIR factual findings as petitioner failed to submit documents in support of its claimed expenses. Moreover, respondent alleged that petitioner had undeclared sales and over-claimed expenses; that petitioner failed to substantiate with sufficient evidence its claimed creditable withholding tax; that petitioner failed to subject to VAT its sales amounting P89,433,742.28; that it failed to submit the required VAT invoices or official receipts to support its claimed input taxes; and that petitioner failed to withhold and remit the corresponding IAET. Respondent further points out that he fully complied with the due process requirement mandated under Section 228 of the 1997 Tax Code, as implemented by RR No. 12-99 as petitioner was duly appraised of the factual and legal basis of the income, tax, VAT and IAET assessment for taxable year 2009. Allegedly, the assessment issued against petitioner was made pursuant to Section 6 (B) of the Tax Code; that the failure of petitioner to present/submit books of accounts and other accounting records for taxable year 2009 to the BIR during the administrative investigation of its tax case resulted to the issuance of the BIR Subpoena Duces Tecum and the consequent filing of the BIR of a criminal complaint against the responsible officers of petitioner. Finally, respondent submits that assessments are prima facie presumed correct and made in good faith and the taxpayer has the duty of proving otherwise. The case was set for pre-trial conference on January 25, 2013. Respondent filed his Pre-Trial Brief on January 16, 2013; while petitioner filed its Pre-Trial Brief on January 22, 2013. Upon motion of respondent, the pre-trial conference was reset. aDSIHc On January 16, 2013, petitioner filed its Request for Admission by Adverse Party , requesting respondent to admit certain facts and documents pertinent to the case, pursuant to Rule 26 of the Rules of Court, as amended. Respondent filed its Comment on February 8, 2013. In the Resolution dated March 14, 2013, the Court noted petitioner's Request for Admission by Adverse Party and respondent's Comment . The pre-trial conference was held on August 1, 2013. On October 21, 2013, the parties filed their Joint Stipulation of Facts and Issues ,which was adopted by the Court in Division in the Pre-Trial Order dated December 10, 2013. During trial, petitioner presented Arden Diano Retales, its Finance Officer in the years 2010 to 2011, as its witness. Subsequently, petitioner formally offered its documentary evidence on August 21, 2014. The Court in Division issued the Resolution dated September 10, 2014, admitting, as petitioner's evidence, Exhibits "P-1","P-2","P-3","P-4","P-5","P-6","P-7","P-15","P-24","P-26","P-29","P-30","P-31","P-32","P-33","P-34","P-35","P-36","P-37","P-40","P-41","P-42","P-43","P-44",and "P-45".However, the Court in Division denied the admission of Exhibits "P-8","P-9","P-12","P-16","P-22",and "P-25",for petitioner's failure to identify said exhibits; Exhibits "P-38" and "P-39",for petitioners failure to present the originals for comparison; Exhibit "P-11",for not being found in the records of the case; Exhibits "P-13" and "P-14",for petitioner's failure to identify said exhibits and for not being found in the records; and Exhibit "P-10",for petitioner's failure to present the originals for comparison and failure to identify said exhibit. On the other hand, respondent presented Revenue Officer Arturo D. Boniol, Jr. and Revenue Officer Rosalina C. Orcullo. Moreover, he filed his Formal Offer of Evidence on May 7, 2015. In the Resolution dated May 27, 2015, the Court in Division admitted Exhibits "R-1","R-2","R-2-A","R-3","R-3-A","R-4","R-4-A","R-4-B","R-5","R-5-A","R-6","R-6-A","R-6-B","R-7","R-7-A","R-7-B","R-8","R-8-A","R-8-B","R-9","R-9-A","R-9-B","R-10","R-10-A","R-11","R-11-A","R-12","R-12-A","R-13","R-13-A","R-14","R-14-A","R-15","R-15-A","R-15-B","R-16","R-16-A","R-17","R-17-A","R-18","R-18-A","R-18-B","R-18-C","R-18-D","R-19","R-19-A","R-20","R-20-A","R-21","R-22","R-21-A","R-22-A","R-23","R-23-A","R-24","R-24-A","R-25","R-25-A","R-26","R-26-A","R-27","R-27-A","R-27-B","R-27-C","R-27-D","R-28","R-28-A","R-28-B","R-28-C","R-29","R-30","R-30-A","R-31",and "R-31-A",as respondent's evidence. ATICcS As directed by the Court in Division, petitioner filed its Memorandum on August 3, 2015. Meanwhile, on July 16, 2015, respondent filed his Manifestation and Motion ,stating that he is adopting the arguments found in the special and affirmative defenses of his Answer dated November 20, 2012, as part of his Memorandum .Thus, CTA Case No. 8556 was submitted for decision on August 13, 2015 by the Court in Division. In the Assailed Decision dated August 9, 2016, 4 petitioner's Petition for Review was denied, thereby ordering petitioner to pay respondent the modified amount of P28,724,811.72, representing basic deficiency income tax, VAT, and IAET, inclusive of the fifty percent (50%) surcharge, plus deficiency and delinquency interests. Petitioner then filed its Motion for Reconsideration (Re: Decision dated 09 August 2016) on August 31, 2016. 5 In the assailed Resolution dated January 5, 2017, 6 the Court in Division denied petitioner's Motion for Reconsideration for lack of merit. On February 1, 2017, petitioner filed the instant Petition for Review with the Court En Banc . 7 In the Resolution dated February 23, 2017, 8 respondent was directed by the Court En Banc to file his comment on the instant Petition for Review within ten (10) days from receipt thereof. On April 3, 2017, respondent filed his Manifestation & Motion , stating that he is adopting the factual findings and conclusions made by all the members of the Court in Division in the Decision dated August 9, 2016 and Resolution dated January 5, 2017. 9 In the Minute Resolution dated April 5, 2017, 10 the Court En Banc noted respondent's Manifestation & Motion . On April 19, 2017, the Court En Banc issued a Resolution giving due course to the instant Petition for Review and directing both parties to submit their respective memoranda within thirty (30) days from receipt of the said Resolution. 11 On June 13, 2017, petitioner filed its Memorandum . 12 Respondent, however, failed to file his memorandum. 13 Thereafter, in the Resolution dated July 17, 2017, the instant case was deemed submitted for decision. 14 ETHIDa Hence, this Decision. THE ISSUES Petitioner raises the following issues for the Court En Banc 's resolution, to wit: "4.1 WHETHER THE THIRD DIVISION OF THIS HONORABLE COURT GRAVELY ERRED IN FINDING PETITIONER LIABLE FOR DEFICIENCY INCOME TAX IN THE AMOUNT OF PHP5,638,563.46, SPECIFICALLY WHEN THE THIRD DIVISION OF THIS HONORABLE COURT FOUND PETITIONER LIABLE AND ACCOUNTABLE FOR: 4.1.1 UNSUPPORTED EXPENSES OF PHP444,666.00 UNDER THE 50% RULE. 4.1.2 UNDECLARED SALES OF PHP14,695,017.86. 4.1.3 OVER CLAIMED EXPENSES OF PHP39,733.00. 4.1.4 UNSUPPORTED CREDITABLE TAX WITHHELD OF PHP1,084,798.002. 4.2 WHETHER THE THIRD DIVISION OF THIS HONORABLE COURT GRAVELY ERRED IN FINDING PETITIONER LIABLE FOR DEFICIENCY VAT OF PHP13,399,101.18, SPECIFICALLY WHEN THE THIRD DIVISION OF THIS HONORABLE COURT FOUND PETITIONER LIABLE AND ACCOUNTABLE FOR: 4.2.1 SALES NOT SUBJECT TO VAT OF PHP89,433,742.28. 4.2.2 UNSUPPORTED INPUT TAXES OF PHP2,606,964.98. 4.3 WHETHER THE THIRD DIVISION OF THIS HONORABLE COURT GRAVELY ERRED IN FINDING PETITIONER LIABLE FOR DEFICIENCY TAX ON IMPROPERLY ACCUMULATED EARNINGS OF PHP329,022.90. 4.4 WHETHER THE THIRD DIVISION OF THIS HONORABLE COURT GRAVELY ERRED WHEN IT DIMSISSED (sic) THE INSTANT PETITION FOR REVIEW AND ORDERED PETITIONER TO PAY RESPONDENT A TOTAL OF PHP28,724,811.72." 15 Petitioner's arguments: Petitioner argues that the Court in Division erred in ruling that petitioner failed to substantiate its expenses and in sustaining respondent's disallowance of fifty percent (50%) of the claimed expenses. According to petitioner, it has fully substantiated and proved all expenses incurred. TIADCc Contrary to the ruling of the Court in Division, petitioner claims that it has neither undeclared sales nor unsupported creditable tax withheld. Petitioner insists that it has submitted a summary of its official receipts issued to its clients, which shows that all its transactions in the Convergys Makati outlet have been duly receipted and declared. Further, it claims that the extrapolation method used by respondent in determining the alleged undeclared sales is unsupported by any written testimony or report by any duly-authorized personnel; that it is allegedly speculative, hypothetical, and fictional; and that the said method violated the right of petitioner to due process of law as this is clearly unsupported by any substantial evidence, but only by whimsical and capricious presumptions. Petitioner asserts that it was not informed of the legal and factual basis of assessment considering that the BIR officer was not able to satisfactorily justify the extrapolation method used as basis of the computation of the disputed assessment. Moreover, petitioner submits that it has sales transactions which are not subject to VAT; that most of its transactions are with zero-rated VAT-registered entities; and that all its input taxes are fully supported and substantiated. Finally, petitioner contends that there is no legal basis to hold it liable for IAET. According to petitioner, the amount of P4,200,000.00 is approximately the amount of retained earnings earmarked for its transfer of facilities to the FTI Compound. Respondent's arguments: In respondent's Manifestation & Motion filed on April 3, 2017, respondent manifests that that he is adopting the factual findings and conclusions made by all the members of the Court in Division in the Decision dated August 9, 2016 and Resolution dated January 5, 2017. Thus, respondent prays that the instant Petition for Review be dismissed for palpable lack of merit. THE COURT EN BANC 'S RULING The instant Petition for Review is bereft of merit. Petitioner failed to substantiate its claimed expenses/deductions. In the assailed Decision, the Court in Division ruled that petitioner failed to substantiate its claimed deductions amounting to P889,332.00. It finds that petitioner only presented a Summary of Petitioner's Operating Expenses for 2009 16 without offering or submitting the supporting receipts for the said expenses. Accordingly, the Court in Division, following the case of Mariano Zamora vs. Collector of Internal Revenue and pursuant to Section 2.4 of Revenue Memorandum Circular (RMC) No. 23-2000, upheld the findings of respondent and disallowed half of the claimed expenses. On the other hand, petitioner claims that it has no unsupported expenses and that it has submitted the receipts which prove the substantiation of the expenses incurred. Hence, it argues that there is no legal basis for respondent to apply the rule of disallowing half of the claimed expenses in case of unsubstantiated expenses. cSEDTC We sustain the ruling of the Court in Division. Section 34 (A) (1) (b) of the NIRC of 1997, as amended, emphasizes the importance of substantiating the taxpayer's expenses or deductions from gross income. It provides as follows: "SEC. 34. Deductions from Gross Income . Except for taxpayers earning compensation income arising from personal services rendered under an employer-employee relationship where no deductions shall be allowed under this Section other than under Subsection (M) hereof, in computing taxable income subject to income tax under Sections 24(A);25(A);26; 27(A),(B) and (C);and 28(A)(1),there shall be allowed the following 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 ." (Emphasis and underscoring supplied) Based on the foregoing, deduction from gross income is allowed, provided, the taxpayer shall substantiate the amount of expenses being deducted with official receipts or adequate records. Pertinent thereto, applying the doctrine laid down in the case of Mariano Zamora vs. Collector of Internal Revenue and Court of Tax Appeals , 17 RMC No. 23-00 provides that the disallowance of 50% of the taxpayer's claimed deduction is valid, if there is a showing that expenses have been incurred but the exact amount thereof cannot be ascertained due to absence of documentary evidence, to wit: "SECTION 2. Prescribed Revenue Procedures . xxx xxx xxx 2.4 Existing Revenue Procedures and Jurisprudence Governing Assessment Based on the Best Evidence Obtainable . Provided hereunder are the existing revenue procedures and jurisprudence governing issuance of a deficiency tax assessment based on the best evidence obtainable: AIDSTE xxx xxx xxx (c) Assessment Based on Estimate; 50% Rule, in the Absence of Receipts to Prove Actual Amount of Expense Deduction. The Court held in the Mariano Zamora case that, if there is a showing that expenses have been incurred but the exact amount thereof cannot be ascertained due to absence of documentary evidence, it is the duty of the BIR to make an estimate of the deduction that may be allowable in computing the taxpayer's taxable income ,bearing heavily against the taxpayer whose inexactitude is of his own making. That disallowance of 50% of the taxpayer's claimed deduction is valid ." (Emphases supplied) In the instant case, a perusal of the records show that petitioner only offered the Summary of Petitioner's Operating Expenses for 2009 18 to prove that the expenses were fully substantiated. Indeed, petitioner failed to present the official receipts or other adequate records to support the claimed expenses. As correctly ruled by the Court in Division, the summary alone is not sufficient to verify the nature and actual payment of the expenses therein. Moreover, the said document is self-serving and thus, cannot be relied upon by the Court. Petitioner should have submitted other adequate documentary evidence to substantiate and corroborate the claimed deduction. In Commissioner of Internal Revenue vs. General Foods (Phils.), Inc. , 19 the Supreme Court said: "It is a governing principle in taxation that tax exemptions must be construed in strictissimi juris against the taxpayer and liberally in favor of the taxing authority; and he who claims an exemption must be able to justify his claim by the clearest grant of organic or statute law. An exemption from the common burden cannot be permitted to exist upon vague implications. Deductions for income tax purposes partake of the nature of tax exemptions; hence, if tax exemptions are strictly construed, then deductions must also be strictly construed ." (Emphasis supplied) In view of the foregoing, and considering that petitioner failed to present sufficient evidence to support the expenses claimed, this Court finds that respondent is justified in disallowing 50% of petitioner's claimed deduction pursuant to RMC No. 23-00. Petitioner failed to controvert the assessed undeclared revenue. In the assailed Decision, the Court in Division ruled that petitioner has undeclared sales amounting to P14,695,017.86, computed based on the extrapolation method under Section 6 (C) of the NIRC of 1997, and implemented by Revenue Memorandum Order No. 003-09 dated January 15, 2009. SDAaTC The Court in Division ruled that respondent may use the result from the surveillance as basis for the assessment of taxes if there is reason to believe that the taxpayer failed to declare the correct income, sales or receipts and such assessment shall be deemed prima facie correct. Petitioner, on the other hand, argues that the Court in Division is mistaken in sustaining the extrapolation method. Petitioner submits that the method used is speculative, hypothetical and fictional; and that it violates the right of petitioner to due process of law since it is unsupported by any substantial evidence, but only by whimsical and capricious presumptions. We disagree with petitioner. Sec. 6 of the NIRC of 1997 allows respondent to conduct surveillance activities, to wit: "Sec. 6. Power of the Commissioner to Make Assessments and Prescribe Additional Requirements for Tax Administration and Enforcement . xxx xxx xxx (C) Authority to Conduct Inventory-taking, Surveillance and to Prescribe Presumptive Gross Sales and Receipts . The Commissioner may, at any time during the taxable year ,order inventory-taking of goods of any taxpayer as a basis for determining his internal revenue tax liabilities, or may place the business operations of any person, natural or juridical, under observation or surveillance if there is reason to believe that such person is not declaring his correct income, sales or receipts for internal revenue tax purposes. The findings may be used as the basis for assessing the taxes for the other months or quarters of the same or different taxable years and such assessment shall be deemed prima facie correct . When it is found that a person has failed to issue receipts and invoices in violation of the requirements of Sections 113 and 237 of this Code, or when there is reason to believe that the books of accounts or other records do not correctly reflect the declarations made or to be made in a return required to be filed under the provisions of this Code, the Commissioner, after taking into account the sales, receipts, income or other taxable base of other persons engaged in similar businesses under similar situations or circumstances or after considering other relevant information may, prescribe a minimum amount of such gross receipts, sales and taxable base, and such amount so prescribed shall be prima facie correct for purposes of determining the internal revenue tax liabilities of such person." (Emphasis and underscoring supplied) It is clear from the foregoing provision that respondent is authorized to conduct surveillance if there is reason to believe that such person is not declaring his correct income, sales or receipts for internal revenue tax purposes .Further, the findings therein may be used as basis for assessing the taxes for the other months or quarters of the same or different taxable years and such assessment shall be deemed prima facie correct. AaCTcI Indeed, it is accepted that even an assessment based on estimates is prima facie valid and lawful where it does not appear to have been arrived at arbitrarily or capriciously. 20 In this case, in assessing petitioner with undeclared sales, respondent placed petitioner under surveillance pursuant to a complaint that petitioner is not issuing official receipts. In the surveillance conducted, respondent noted the following violations committed by petitioner: 21 1. Petitioner's Makati Branch (Convergy's) was unregistered; 2. No "Notice to the Public" and "Ask for Receipt" was posted; 3. The five (5) POS machines located at the 4th and 8th floor, were all unregistered; 4. No official receipts under the Convergy's address, (Makati Branch) were found in the area, instead a booklet of official receipts with its head office address was found. Based on the above results of the surveillance conducted, and due to petitioner's failure to submit the official receipts and other pertinent documents to controvert the foregoing findings, respondent assessed petitioner for unreported sales. As borne by the records, and as indicated in the assessment notices (PAN, 22 FAN, 23 and FDDA 24 ),the amount of unreported sales was determined using the extrapolation method. Under the said method, respondent extrapolated the data gathered from the surveillance conducted during the investigation of petitioner's tax deficiency in determining the average daily sales. Considering that petitioner started business operations in July 2009 but was only registered on March 24, 2010, respondent assessed petitioner for unreported sales for the period July 2009 to December 2009 based on the daily average sales determined using the extrapolation method. The foregoing findings remains unrebutted. Accordingly, We subscribe to the Court in Division's ruling that, since no sufficient evidence was presented to overcome the findings made by respondent, resort to the extrapolation method in assessing petitioner for undeclared sales is justified and in accordance with the above-quoted Section 6 (C) of the NIRC of 1997. It bears noting that under the aforecited Section 6 (C) of the NIRC of 1997, the findings made by respondent from the surveillance conducted may be used as basis for assessing the taxes and such assessment shall be deemed prima facie correct. acEHCD In this case, to controvert the assessed undeclared revenue, petitioner submitted as evidence a Summary of Petitioner's Official Receipts 25 and the 2009 Audited Financial Statement (AFS). 26 However, the Court En Banc finds the said Summary of Petitioner's Official Receipts insufficient to rebut the subject assessment. Petitioner should have submitted the pertinent official receipts that would enable this Court to verify the sales actually made by petitioner for taxable year 2009. Moreover, the said summary is self-serving and uncorroborated and thus, cannot be relied upon by this Court. As to the 2009 AFS, the same cannot also be considered by the Court since the Court in Division denied its admission in the Resolution dated September 10, 2014, 27 for failure of petitioner to present the original copy for comparison. Nonetheless, even if We take it into account, the Court finds that the AFS is insufficient to dispute the assessed unreported claim. Petitioner should have provided the Court with copies of its books of account ( i.e. ,general journal, general ledger, subsidiary ledger, and cash receipts books) and source documents ( i.e. ,official receipts, and invoices),upon which the figures shown in the said AFS were based. Needless to state, as cases filed before this Court are litigated de novo ,party-litigants should prove every minute aspect of their cases. 28 Taking the foregoing into consideration, We find no basis to deviate from the conclusion reached by the Court in Division that the extrapolation method used by respondent is justified. Absent any proof of any irregularity on the part of the examiner, the assessment will not be disturbed. Considering the result of the surveillance conducted vis--vis the failure of petitioner to controvert the findings made therein, the assessed undeclared sales amounting to P14,695,017.86 must be sustained. Petitioner failed to substantiate the overclaimed expenses. In the assailed Decision, the Court in Division sustained the disallowance for overclaimed expenses amounting to P39,733.00, which is the discrepancy between the declared itemized deduction per Income Tax Return (ITR) amounting to P17,230,841.00 29 and the total deductions per 2009 AFS amounting to P17,191,108.00 30 for failure of petitioner to sufficiently refute the findings of respondent. A perusal of the records of the case show that petitioner failed to explain the discrepancy between the amount of expenses reported in the 2009 AFS and the amount of deductible expense per ITR. Absent any reconciliation of the difference, the Court cannot ascertain whether the excess amount of the claimed expenses in the ITR is deductible for tax purposes. Moreover, no evidence was presented to contradict the findings of respondent. As such, We shall sustain the findings of the Court in Division based on the principle that tax assessments by tax examiners are presumed correct and made in good faith, and all presumptions are in favor of the correctness of a tax assessment unless proven otherwise. 31 EcTCAD Petitioner failed to substantiate its claimed creditable withholding tax. The Court in Division sustained the disallowance of creditable withholding taxes amounting to P1,084,798.00, for failure of petitioner to support the same with sufficient evidence in accordance with Section 2.58.3 (B) of RR No. 2-98. 32 The Court in Division held that the certificates of creditable withholding tax found in the BIR Records were mere photocopies and were not signed or issued under the name of petitioner; and that there was no summary alphalist of withholding tax agents, accounting records, invoices or receipts submitted, which would have been used to verify the validity of the sales. On the other hand, petitioner in the instant petition merely alleges that it has no unsupported creditable tax, without pointing to any evidence to refute the said findings made by the Court in Division. In this regard, We find that petitioner failed to present satisfactory proof of the fact of withholding. It bears emphasis that the Certificate of Creditable Taxes Withheld at Source 33 and the ITR for taxable year 2009 34 which were offered as evidence by petitioner were denied admission by the Court in Division in the Resolution dated September 10, 2014, 35 for failure of petitioner to identify the said documents. Further, as discussed by the Court in Division and noted in the records, even the certificates of creditable withholding tax found in the BIR records cannot be given credence by the Court as these were mere photocopies and were not signed or issued under the name of petitioner. 36 In addition, petitioner did not furnish this Court with documentary evidence such as accounting records, audited financial statements, and annual ITR for taxable year 2009 which would serve as basis to ascertain the alleged recognition of income. Consequently, the Court cannot fully determine if the corresponding withholding tax is allowable as tax credit for taxable year 2009 as required under Section 2.58.3 (B) of RR No. 2-98. In view of the foregoing, We sustain the disallowance of the creditable withholding tax considering the failure of petitioner to present adequate evidence to support the claimed creditable taxes. SDHTEC In summary, this Court affirms and finds no compelling reason to disturb the conclusions arrived at by the Court in Division in sustaining respondent's assessment for deficiency income tax of P5,638,563.46. As for the deficiency VAT in the amount of P13,399,101.18, We find that petitioner is liable therefor. Petitioner failed to prove that its sales amounting to P89,433,742.00 is not subject to VAT. Petitioner argues that the Court in Division erred in ruling that its sales amounting to P89,433,742.00 is subject to VAT. According to petitioner, it submitted a summary of the PEZA-registered certificates of its clients and a summary of the official receipts issued to its clients, showing that most of the transactions of petitioner are with-zero-rated VAT-registered corporate entities. Petitioner also reiterated its position that the assessed undeclared sales amounting to P14,695,017.86 should not be subjected to VAT, considering that the said amount was determined using the extrapolation method and therefore is grounded on mere speculations. However, as determined by the Court in Division, whose findings of facts are generally accorded the highest respect, petitioner failed to discharge its burden of proving that the sales amounting to P74,738,721.17 qualify for VAT zero-rating. This Court cannot give credence to the PEZA certifications 37 offered in evidence, as the same were denied admission by the Court in Division. 38 Nonetheless, even if We take into account the said certifications, the same are insufficient to prove that petitioner's transactions with the entities therein, qualify for VAT zero-rating. The certification, in itself, does not indicate the amount and nature of the transactions entered into by petitioner. At most, the PEZA certifications will only prove that the entities indicated therein are PEZA-registered entities. Anent the Summary of Petitioner's Official Receipts , 39 We rule that the summary alone, without presenting the official receipts and sales invoices, is inadequate to prove that the subject sales qualify for VAT zero-rating. Without the official receipts and sales invoices, the Court En Banc cannot verify the nature and scope of the transactions. Moreover, the summary is self-serving and has not been corroborated by other documentary evidence. As such, the same cannot be relied upon by this Court. Accordingly, petitioner failed to prove that the sales amounting to P74,738,721.17 qualify for VAT zero-rating. As to the assessed undeclared sales amounting to P14,695,017.86 which was determined based on the extrapolation method, We rule that the findings of respondent are deemed prima facie correct absent any proof of irregularity on the part of respondent. As discussed earlier, resorting to the surveillance and extrapolation method by respondent is justified in accordance with Section 6 (C) of the NIRC of 1997. In this case, petitioner failed to offer adequate proof to controvert the assessed undeclared sales. Hence, We find no reason to deviate from the Court in Division's conclusion that petitioner's undeclared sales is subject to VAT. The Court in Division correctly disallowed the input tax in the amount of P2,409,031.60. The Court in Division sustained the disallowance of input tax credit amounting to P2,409,031.60 for failure of petitioner to submit the sales invoices in support of its claimed input VAT. HSAcaE On the other hand, petitioner argues that it has no unsupported input taxes and that it submitted to respondent a Summary of Input Tax Claims 40 which were supported by sales invoices. Under Section 110 (A) (1) an input tax must be evidenced by a VAT invoice or official receipt to be creditable against output tax, to wit : "SEC. 110. Tax Credits . (A) Creditable Input Tax . (1) Any input tax evidenced by a VAT invoice or official receipt issued in accordance with Section 113 hereof on the following transactions shall be creditable against the output tax: xxx xxx xxx." (Emphasis supplied) In this case, an examination of the quarterly VAT Returns for taxable year 2009 41 shows that petitioner supposedly incurred input VAT in the amount of P2,409,031.60. However, petitioner failed to substantiate the same with the requisite VAT invoices or official receipts as required under Section 110 (A) (1) of the NIRC of 1997, as amended. Petitioner's insistence that it was able to submit the supporting documents to respondent deserves scant consideration. As discussed by the Court in Division, there is nothing on record which shows that petitioner has submitted the supporting documents for its claimed input tax. It bears stressing that the sole document submitted by petitioner to support its claimed input tax is the Summary of Input Tax Claims ,which was inadequate to substantiate the claimed input tax. Moreover, the said document was denied admission by the Court in Division for failure of petitioner to present the original for comparison, 42 and hence, cannot likewise be considered by the Court En Banc . Accordingly, We sustain the disallowance of the creditable input tax of P2,409,031.60. All told, the Court En Banc will not disturb the Court in Division's finding of petitioner's liability for deficiency VAT of P13,399,101.18, absent any compelling evidence to the contrary. AScHCD Petitioner is liable for deficiency improperly accumulated earnings tax. Petitioner maintains that the Court in Division erred in ruling that it has improperly accumulated earnings resulting in deficiency taxes. It claims that the amount of P4,200,000.00 is approximately the amount of retained earnings which has been earmarked for its transfer of facilities to the FTI Compound and is evidenced by the Board Resolution dated December 5, 2008. 43 On the other hand, the Court in Division, in sustaining the assessment for deficiency IAET of P329,022.90, ruled that petitioner's argument is wanting as to the details of the plan of expansion or transfer and that no other evidentiary documents were presented by petitioner to prove the plan of expansion. The Court in Division concluded that petitioner's contention has no leg to stand on considering that the Board Resolution dated December 5, 2008 offered by petitioner was denied admission for petitioner's failure to identify said exhibit and for not being found in the records. We agree with the Court in Division. Section 29 of the NIRC of 1997, and as implemented by Section 3 of RR No. 2-2001, provide as follows: "SEC. 29. Imposition of Improperly Accumulated Earnings Tax . (A) In General . In addition to other taxes imposed by this Title, there is hereby imposed for each taxable year on the improperly accumulated taxable income of each corporation described in Subsection B hereof, an improperly accumulated earnings tax equal to ten percent (10%) of the improperly accumulated taxable income. (B) Tax on Corporations Subject to Improperly Accumulated Earnings Tax . (1) In General . The improperly accumulated earnings tax imposed in the preceding Section shall apply to every corporation formed or availed for the purpose of avoiding the income tax with respect to its shareholders or the shareholders of any other corporation, by permitting earnings and profits to accumulate instead of being divided or distributed . xxx xxx xxx (C) Evidence of Purpose to Avoid Income Tax . xxx xxx xxx (2) Evidence Determinative of Purpose . The fact that the earnings or profits of a corporation are permitted to accumulate beyond the reasonable needs of the business shall be determinative of the purpose to avoid the tax upon its shareholders or members unless the corporation, by the clear preponderance of evidence, shall prove to the contrary . HESIcT xxx xxx xxx (E) Reasonable Needs of the Business . For purposes of this Section, the term 'reasonable needs of the business' includes the reasonably anticipated needs of the business ." (Emphasis supplied) Clearly, from the foregoing, the IAET equivalent to 10% of the improperly accumulated earnings shall be imposed on corporations that permit its earnings and profits to accumulate beyond the reasonable needs of the business, instead of being distributed as dividends unless the corporation, by clear preponderance of evidence, shall prove to the contrary. Pertinent thereto, Section 3 of RR No. 2-2001 enumerates what constitute accumulation of earnings for the reasonable needs of the business, to wit : "SECTION 3. Determination of Reasonable Needs of the Business . xxx xxx xxx For purposes of these Regulations, the following constitute accumulation of earnings for the reasonable needs of the business: a) Allowance for the increase in the accumulation of earnings up to 100% of the paid-up capital of the corporation as of Balance Sheet date, inclusive of accumulations taken from other years; b) Earnings reserved for definite corporate expansion projects or programs requiring considerable capital expenditure as approved by the Board of Directors or equivalent body ; c) Earnings reserved for building, plants or equipment acquisition as approved by the Board of Directors or equivalent body; d) Earnings reserved for compliance with any loan covenant or pre-existing obligation established under a legitimate business agreement; e) Earnings required by law or applicable regulations to be retained by the corporation or in respect of which there is legal prohibition against its distribution; f) In the case of subsidiaries of foreign corporations in the Philippines, all undistributed earnings intended or reserved for investments within the Philippines as can be proven by corporate records and/or relevant documentary evidence." (Emphasis supplied) In this case, petitioner alleges that the reasonable needs of the business fall under Section 3 (b) of RR No. 2-2001. To prove the same, petitioner submitted a copy of the Board Resolution dated December 5, 2008 44 which states that "4.2 Million will be allocated/reserved for Expansion expenses on planned transfer to FTI." This Court, however, cannot give credence to the said Board Resolution, considering that the same was denied admission by the Court in Division for petitioner's failure to identify the document. 45 AcICHD Nonetheless, even if We give credence to the same Board Resolution, it is inadequate to prove the accumulation of earnings for the reasonable needs of petitioner's business. As ruled by the Court in Division, a perusal of the said Board Resolution shows that it is wanting of details as to the alleged planned expansion. Under Section 7 of RR No. 2-2001, it explicitly provides that a speculative and indefinite purpose will not suffice, to wit: "SECTION 7. Determination of Purpose to Avoid Income Tax . xxx xxx xxx In order to determine whether profits are accumulated for the reasonable needs of the business as to avoid the imposition of the improperly accumulated earnings tax, the controlling intention of the taxpayer is that which is manifested at the time of accumulation, not subsequently declared intentions which are merely the product of afterthought. A speculative and indefinite purpose will not suffice. The mere recognition of a future problem or the discussion of possible and alternative solutions is not sufficient. Definiteness of plan/s coupled with action/s taken towards its consummation are essential ." (Emphasis supplied) Based on the foregoing, the determination on whether profits are accumulated for the reasonable needs of the business to avoid the tax hinges on the intention of the taxpayer and is manifested at the time of accumulation. Further, it is essential that the plan of expansion is definite and is coupled with actions towards its consummation. The instant case, however, is bereft of evidence to show that the accumulation of earnings is for the reasonable needs of the company. Petitioner failed to establish by clear and preponderance of evidence the definite plan of expansion as well as the actions taken by the company to consummate the same. Hence, this Court finds no cogent reason to reverse the findings of the Court in Division that petitioner is liable for deficiency IAET of P329,022.90. Modified Deficiency and Delinquency interests under the TRAIN Law Notably, after the instant case was submitted for decision by the Court En Banc on July 17, 2017, Republic Act (RA) No. 10963 or otherwise known as the "Tax Reform for Acceleration and Inclusion" (TRAIN Law), took effect on January 1, 2018, amending pertinent provisions of the NIRC of 1997, among which is Section 249. 46 The amended provision of Section 249 reads as follows: "SEC. 249. Interest . caITAC (A) In General . There shall be assessed and collected on any unpaid amount of tax, interest at the rate of double the legal interest rate for loans or forbearance of any money in the absence of an express stipulation as set by the Bangko Sentral ng Pilipinas from the date prescribed for payment until the amount is fully paid :Provided, That in no case shall the deficiency and delinquency interest prescribed under Subsections (B) and (C) hereof be imposed simultaneously . (B) Deficiency Interest . Any deficiency in the tax due, as the term is defined in this Code, shall be subject to the interest prescribed in Subsection (A) hereof, which interest shall be assessed and collected from the date prescribed for its payment until the full payment thereof, or upon issuance of a notice and demand by the Commissioner of Internal Revenue, whichever comes earlier. (C) Delinquency Interest . x x x." (Emphasis supplied) Based on the foregoing, the following amendments are noted: 1. The interest rate is reduced to "double the legal interest rate for loans or forbearance of any money in the absence of an express stipulation as set by the Bangko Sentral ng Pilipinas." Currently, the legal interest rate is 6%, 47 hence the interest rate to be applied on any unpaid amount of tax shall be 12%, which is lower than the twenty (20%) interest imposed under Section 249 of the NIRC of 1997. 2. In no case shall the deficiency interest and delinquency interest be imposed simultaneously. As such, the overlapping of interest penalties under the NIRC of 1997 has been effectively eliminated. 3. The period for the application of deficiency interest is modified to run from the date prescribed for its payment until the full payment thereof, or upon issuance of a notice and demand by the CIR, whichever comes earlier. Hence, under the TRAIN law, the running of the period for the computation of the deficiency interest may be interrupted by the issuance of a notice and demand by the CIR. It bears noting that under the NIRC of 1997, the deficiency interest shall be assessed and collected from the date prescribed for its payment until the full payment thereof and is not interrupted by the issuance of a notice or demand from the CIR. The principle is well entrenched that statutes, including administrative rules and regulations, operate prospectively only, unless the legislative intent to the contrary is manifest by express terms or by necessary implication. 48 There being no clear legislative intent to retroactively apply the provisions of the TRAIN law, the same should only be applied prospectively, i.e. ,beginning January 1, 2018. TAIaHE Furthermore, it bears emphasis that tax burdens are not to be imposed, nor presumed to be imposed, beyond what the statute expressly and clearly imports, tax statutes being construed strictissimi juris against the government. Any doubt on whether a person, article or activity is taxable is generally resolved against taxation. 49 Considering the foregoing principles, the effects of the amendments under the TRAIN Law, particularly the imposition of interests, shall be applied to this case. Thus, as of January 1, 2018, the interests to be imposed must already be 12%,and there must no longer be a simultaneous imposition of deficiency and delinquency interests. On the other hand, for the pertinent period prior to January 1, 2018 or until December 31, 2017 , the provision under the old law, (NIRC of 1997, as amended) shall be applicable. WHEREFORE ,in light of the foregoing considerations, the Petition for Review is PARTIALLY GRANTED . The Decision dated August 9, 2016 and the Resolution dated January 5, 2017, both rendered by the Court in Division in CTA Case No. 8556, are AFFIRMED with MODIFICATION . Accordingly, petitioner is ORDERED TO PAY respondent the amount of P28,724,811.72, representing basic deficiency income tax, VAT, and IAET, inclusive of the fifty percent (50%) surcharge imposed under Section 248 of the NIRC of 1997, as amended, computed as follows: Tax Type Basic Surcharge Total Income Tax P5,638,563.46 P2,819,281.73 P8,457,845.19 Value-Added Tax 13,182,288.12 6,591,144.06 19,773,432.18 Improperly Accumulated Earnings Tax 329,022.90 164,511.45 493,534.35 Total P19,149,874.48 P9,574,937.24 P28,724,811.72 In addition, petitioner is ORDERED TO PAY following deficiency and delinquency interest, computed in accordance with the provisions of Section 249 of the NIRC of 1997, in its original text and as amended by RA No. 10963 (TRAIN law), viz. : 1) Deficiency interest at the rate of twenty percent (20%) per annum on the basic deficiency income tax, VAT, and IAET, computed from the dates indicated below until December 31, 2017 : ICHDca Basic Tax Commencement dates Income Tax P5,638,563.46 April 15, 2010 VAT P13,182,288.12 January 25, 2010 IAET P329,022.90 January 15, 2011 2) Delinquency interest at the rate of 20% per annum on the total amount of P28,724,811.72 and on the 20% deficiency interest which have accrued as afore-stated in (a),computed from October 24, 2012 until December 31, 2017 ; 3) Delinquency interest at the rate of 12% on the total unpaid amount [basic taxes, surcharges, and interests computed on (a) and (b) above] from January 1, 2018 until the same is fully paid . SO ORDERED. (SGD.) ERLINDA P. UY Associate Justice Juanito C. Castaeda, Jr.,Lovell R. Bautista, Caesar A. Casanova, Esperanza R. Fabon-Victorino, Cielito N. Mindaro-Grulla, Ma. Belen M. Ringpis-Liban and Catherine T. Manahan, JJ. ,concur. Roman G. del Rosario, P.J. ,with Concurring and Dissenting Opinion. Separate Opinions DEL ROSARIO , P.J.,concurring and dissenting opinion : I concur with the ponencia in partially granting the Petition for Review, and in affirming the Decision dated August 9, 2016 and the Resolution dated January 5, 2017, both rendered by the Court in Division in CTA Case No. 8556, but only insofar as it orders petitioner to pay the basic deficiency income tax, Value-Added Tax (VAT), and Improperly Accumulated Earnings Tax (IAET), inclusive of surcharge in the total amount of P28,724,811.72. The point of my dissent, however, pertains to the ponencia 's computation of deficiency and delinquency interests. The ponencia holds that as of January 1, 2018, the date of effectivity of Republic Act No. 10963 (TRAIN Law), the imposable interest should be 12%, and that prior to January 1, 2018 or until December 31, 2017, the provision under the old law, the National Internal Revenue (NIRC) of 1997, as amended, should apply . While I agree with the ponencia that the application of the amendatory provisions of the TRAIN Law on the imposition of deficiency and delinquency interests is proper, it must be applied without any cut-off dates in determining the correct amount of petitioner's tax liability. Section 249, as amended by the TRAIN Law, reads: cDHAES "Sec. 75. Section 249 of the NIRC, as amended, is hereby further amended to read as follows: 'Sec. 249. Interest . '(A) In General . There shall be assessed and collected on any unpaid amount of tax, interest at the rate of double the legal interest rate for loans or forbearance of any money in the absence of an express stipulation as set by the Bangko Sentral ng Pilipinas from the date prescribed for payment until the amount is fully paid: Provided ,That in no case shall the deficiency and the delinquency interest prescribed under Subsections (B) and (C) hereof, be imposed simultaneously. '(B) Deficiency Interest . Any deficiency in the tax due, as the term is defined in this Code, shall be subject to the interest prescribed in Subsection (A) hereof, which interest shall be assessed and collected from the date prescribed for its payment until the full payment thereof, or upon issuance of a notice and demand by the Commissioner of Internal Revenue, whichever comes earlier. '(C) Delinquency Interest . x x x 'xxx xxx xxx.'"" It must be emphasized that deficiency interest and delinquency interest on tax are based on law. When the law is amended during the pendency of a case, and there being a specific provision as to when the amendment becomes effective, there is no reason for the Court not to apply the law as amended . Parenthetically, the TRAIN Law made a substantial modification on the rate of deficiency interest and delinquency interest, and the mode by which such interests may be computed . A comparison of the provision of Section 249 on interest under the NIRC and its amendment under the TRAIN Law would readily highlight the radical incongruity, viz. : Section 249, NIRC of 1997, as amended Section 249, NIRC, as amended by the TRAIN Law Deficiency Interest Deficiency Interest 20% per annum ,from the date prescribed for its payment until the full payment thereof 12% per annum ,from the date prescribed for its payment until: (i) the full payment thereof; or (ii) upon issuance of a notice and demand by the Commissioner of Internal Revenue, whichever comes earlier Provided that in no case shall the deficiency and delinquency interest be imposed simultaneously Delinquency Interest Delinquency Interest 20% per annum ,until fully paid 12% per annum ,until fully paid The comparative provision of Section 249, before and after its amendment by the TRAIN Law vis--vis the imposition of interest in the ponencia ,is graphically shown hereunder: TCAScE From the foregoing, it is readily apparent that Section 249 of the NIRC of 1997, as amended by the TRAIN Law, incorporates three (3) provisos that cannot be applied without setting aside the original version of Section 249 of the NIRC of 1997: First , the TRAIN Law prescribes 12% interest, which is double the legal interest rate for loans or forbearance of money, while the old provision prescribes the rate of 20% per annum; Second , under the TRAIN Law, the deficiency interest is computed from the date prescribed for its payment: (i) until the full payment thereof; or (ii) until the issuance of a notice and demand by the CIR, whichever comes earlier .The old version confined its computation strictly from the date prescribed for its payment until the full payment thereof; and Third , the TRAIN Law proscribes the simultaneous imposition of deficiency interest and delinquency interest, which the old version allows. In other words, since the TRAIN Law clearly became effective on January 1, 2018, there can be no logical and practical approach than to apply it in accordance with its clear language, Thus, the computation of deficiency interest should now be in accordance with the TRAIN Law, that is at 12% and only until demand; while delinquency interest at the rate also of 12% should be from the due date appearing in the notice of demand until fulfillment . In computing deficiency and delinquency interests, the provisions of the TRAIN Law are not being applied retroactively. At the time that petitioner is adjudged to be liable to pay the deficiency taxes with corresponding deficiency interest and delinquency interest, the prevailing provisions are that of the TRAIN Law which specifically state that there shall be no simultaneous imposition of deficiency and delinquency interests .Thus, the Court has no recourse but to apply the same. To be sure, there is nothing in the TRAIN Law which provides that the rate and manner of computing deficiency and delinquency interests shall be applied only to assessments issued after TRAIN Law's effectivity. It is clearly and plainly provided that upon TRAIN Law's effectivity, "in no case shall the deficiency and delinquency interests be imposed simultaneously ." In view of the effectivity of the TRAIN Law on January 1, 2018, the amendatory provisions of the TRAIN Law on the imposition of deficiency and delinquency interests must be applied in determining the amount of petitioner's tax liability . ASEcHI All told, I VOTE to: (i) PARTIALLY GRANT the Petition for Review filed by Heavenly Urban Chef, Inc.; (ii) AFFIRM the Decision of the Court in Division insofar as it ordered Heavenly Urban Chef, Inc. to pay the Commissioner of Internal Revenue the amount of P28,724,811.72 representing basic deficiency income tax, VAT, and IAET, inclusive of fifty percent (50%) surcharge imposed under Section 248 of the NIRC of 1997, as amended, computed as follows: Deficiency Tax Basic Surcharge Total Income Tax P5,638,563.46 P2,819,281.73 P8,457,845.19 Value-Added Tax 13,182,288.12 6,591,144.06 19,773,432.18 Improperly Accumulated Earnings Tax 329,022.90 164,511.45 493,534.35 Total P19,149,874.48 P9,574,937.24 P28,724,811.72 WITH MODIFICATION relating to the imposition of deficiency and delinquency interest to be computed in accordance with the provision of Section 249 of the NIRC of 1997, as amended by RA No. 10963 (TRAIN law). (iii) ORDER petitioner Heavenly Urban Chef, Inc. to PAY the Bureau of Internal Revenue the amount of P28,724,811.72 representing basic deficiency income tax, VAT, and IAET and the 50% surcharge imposed under Section 248 of the NIRC of 1997, as amended, and to PAY the Bureau of Internal Revenue the following: (a) Deficiency interest at the rate of twelve percent (12%) per annum on the basic deficiency income tax, VAT, and IAET, computed from the date prescribed for payment as indicated below until March 26, 2012 , 1 the date of Heaven Urban Chef, Inc. receipt of the Final Assessment Notice and Formal Letter of Demand, dated March 22, 2012, pursuant to Section 249 (B) of the NIRC of 1997, as amended by RA No. 10963: TAX TYPE BASIC TAX DEFICIENCY INTEREST COMPUTED FROM Income Tax P5,638,563.46 April 15, 2010 Value-Added Tax 13,182,288.12 January 25, 2010 Improperly Accumulated Earnings Tax 329,022.90 January 15, 2011 (b) Delinquency interest at the rate of 12% per annum on the total amount of P28,724,811.72 and on the 12% deficiency interest which have accrued as aforestated in item (a) above, computed from April 23, 2012 2 until the amount is fully paid, pursuant to Section 249 (C) of the NIRC of 1997, as amended. cTDaEH Footnotes 1. EB Docket, pp. 1 to 32. 2. Erroneously dated in the Petition for Review as "09 December 2016." This Decision was penned by Associate Justice Ma. Belen Ringpis-Liban, and concurred by Associate Justice Lovell R. Bautista and Associate Justice Esperanza R. Fabon-Victorino, EB Docket, pp. 36 to 69. 3. EB Docket, pp. 91 to 99. 4. EB Docket, pp. 36 to 69; Division Docket Vol. 4 (CTA Case No. 8556),pp. 2315 to 2348. 5. EB Docket, pp. 70 to 88; Division Docket Vol. 4 (CTA Case No. 8556),pp. 2350 to 2369. 6. EB Docket, pp. 91 to 99; Division Docket Vol. 4 (CTA Case No. 8556),pp. 2375 to 2383. 7. EB Docket, pp. 1 to 32. 8. EB Docket, pp. 101 to 102. 9. EB Docket, pp. 103 to 105. 10. EB Docket, p. 106. 11. EB Docket, pp. 112 to 113. 12. EB Docket, pp. 114 to 135. 13. Per Records Verification dated June 19, 2017 issued by the Judicial Records Division of this Court, EB Docket, p. 137. 14. EB Docket, pp. 139 to 140. 15. Petitioner's Memorandum ,EB Docket, pp. 116 to 117; Refer also to the Petition for Review ,EB Docket, pp. 4 to 5. 16. Exhibit "P-36" (Exhibit "K"),Division Docket Vol. 3 (CTA Case No. 8556),pp. 1785 to 1789. 17. G.R. No. L-15290, May 31, 1963. 18. Exhibit "P-36" (Exhibit "K"),Division Docket Vol. 3 (CTA Case No. 8556),pp. 1785 to 1789. 19. G.R. No. 143672, April 24, 2003. 20. Marcos II vs. Court of Appeals, et al. , G.R. No. 120880, June 5, 1997. 21. Exhibit "R-5",BIR Records, pp. 170 to 171. 22. Exhibits "R-18","R-18-A," and "R-18-B",BIR Records, pp. 316 to 320. 23. Exhibits "R-28","R-28-A",and "R-28-B",BIR Records, pp. 838 to 842. 24. Exhibits "R-27","R-27-A",and "R-27-B",BIR Records, pp. 852 to 856. 25. Exhibit "P-37" (Exhibit "L"),Division Docket Vol. 3 (CTA Case No. 8556),pp. 1790 to 1794. 26. Exhibit "P-38" (Exhibit "M"),Division Docket Vol. 3 (CTA Case No. 8556),pp. 1795 to 1816. 27. Division Docket Vol. 4 (CTA Case No. 8556),pp. 1923 to 1924. 28. Dizon vs. Court of Tax Appeals, et al. , G.R. No. 140944, April 30, 2008; Atlas Consolidated Mining and Development Corporation vs. Commissioner of Internal Revenue , G.R. No. 145526, March 16, 2007; and Commissioner of Internal Revenue vs. Manila Mining Corporation , G.R. No. 153204, August 31, 2005. 29. BIR Records, p. 607. 30. BIR Records, pp. 786, 626, and 625. 31. Commissioner of Internal Revenue vs. Gonzales ,G.R. No. 177279, October 13, 2010. 32. Section 2.58.3 (B) of RR No. 2-98 provides as follows: "SECTION 2.58.3. Claim for Tax Credit or Refund. xxx xxx xxx (B) Claims for tax credit or refund of any creditable income tax which was deducted and withheld on income payments shall be given due course only when it is shown that the income payment has been declared as part of the gross income and the fact of withholding is established by a copy of the withholding tax statement duly issued by the payor to the payee showing the amount paid and the amount of tax withheld therefrom." 33. Exhibit "P-9" (Exhibit "F-3"),Division Docket Vol. 3 (CTA Case No. 8556),p. 1730. 34. Exhibits "P-8" and P-16, (Exhibit "F-2") Division Docket Vol. 3 (CTA Case No. 8556),p. 1739. 35. Division Docket Vol. 4 (CTA Case No. 8556),pp. 1923 to 1924. 36. BIR Records, pp. 689 to 759. 37. Exhibits "P-10" (Exhibit "F-4"),"P-11","P-12" (Exhibit "F-4-B"),and "P-13" (Exhibit "F-4-C"),Division Docket Vol. 3 (CTA Case No. 8556),pp. 1732 to 1735. 38. Division Docket Vol. 4 (CTA Case No. 8556),pp. 1923 to 1924. 39. Exhibit "P-37" (Exhibit "L"),Division Docket Vol. 3 (CTA Case No. 8556),pp. 1790 to 1794. 40. Exhibit "P-39" (Exhibit "N"),Division Docket Vol. 3 (CTA Case No. 8556),pp. 1817 to 1887. 41. BIR Records, pp. 654 to 657. 42. Division Docket Vol. 4 (CTA Case No. 8556),pp. 1923 to 1924. 43. Exhibit "P-14",(Exhibit "F-5"),Division Docket Vol. 3 (CTA Case No. 8556),p. 1736. 44. Exhibit "P-14" (Exhibit "F-5"),Division Docket Vol. 3 (CTA Case No. 8556),p. 1736. 45. Division Docket Vol. 4 (CTA Case No. 8556),pp. 1923 to 1924. 46. Section 249 of the NIRC of 1997 reads: "SEC. 249. Interest . (A) In General . There shall be assessed and collected on any unpaid amount of tax, interest at the rate of twenty percent (20%) per annum , or such higher rate as may be prescribed by the rules and regulations, from the date prescribed for its payment until the amount is fully paid. (B) Deficiency Interest . Any deficiency in the tax due, as the term is defined in this Code ,shall be subject to the interest prescribed in Subsection (A) hereof, which interest shall be assessed and collected from the date prescribed for its payment until the full payment thereof. (C) Delinquency Interest . In case of failure to pay: xxx xxx xxx (3) A deficiency tax, or any surcharge or interest thereon on the due date appearing in the notice and demand of the Commissioner, there shall be assessed and collected on the unpaid amount, interest at the rate prescribed in Subsection (A) hereof until the amount is fully paid, which interest shall form part of the tax." (Emphases supplied) 47. BSP MB Circular No. 799, Series 2013 which took effect on July 1, 2013. 48. BPI Leasing Corporation vs. Court of Appeals, et al. ,G.R. No. 127624, November 18, 2003. 49. Dizon vs. Court of Tax Appeals, et al. , G.R. No. 140944, April 30, 3008. DEL ROSARIO, P.J.,concurring and dissenting opinion: 1. In paragraphs 5 and 6 of the parties' Joint Stipulation of Facts and Issues filed on October 21, 2013 (CTA Docket, pp. 1565-1566),the parties entered into stipulation that the [Formal] Assessment Notice (FAN) dated March 22, 2012, and the Details of Discrepancy dated March 22, 2012 attached to the FAN were duly received by petitioner. Exhibit "R-31" or the Judicial Affidavit of Special Investigator Rosalina C. Orcullo dated February 25, 2013 (BIR Records, p. 897),however, reveals that it was sent to petitioner on March 26, 2012. Considering that it was not objected to by petitioner's counsel during Ms. Orcullo's cross-examination in the hearings of November 27, 2014 (TSN, pp. 23-55) and April 7, 2015 (TSN, pp. 2-43),and re-cross examination on April 7, 2015 (TSN, pp. 53-61),it is thus undisputed that both parties admitted that the date it was sent by respondent, and the date it was received by petitioner is on March 26, 2012. 2. The due date appearing in the Assessment Notices for income tax, VAT, and IAET, all dated March 22, 2012.