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Petition To Review-fashionsaverWarehouse
Petition To Review-fashionsaverWarehouse
laws with office address at Savers Square Building, EDSA Extension, Pasay City.
tasked to collect taxes. It holds office along Agham road in Quezon City where it
the Bureau of the Internal Revenue Region No. 8 which region has
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other court processes at his office address at BIR Revenue Region No. 8, Atrium
Elenita Quimosing are Revenue Officers of Revenue District No. 51, Pasay City
with office address at KCT Bldg. EDSA Extension, Pasay City where they may be
Notice dated 4 January 2005 from the Bureau of Internal Revenue Region No. 8,
Pasay City. The said Formal Assessment Notice which was signed by the Acting
file protest within thirty (30) days from the receipt hereof or pay the tax within the
time prescribed in the notice of assessment, the assessment shall be final and
therefore subject to 25 % surcharge and the interest on the unpaid amount until
fully paid pursuant to RR 12-99 in relation to Sections 228, 248 (A) (3) and 249
January 2005 which filing is within the thirty days directive of the Acting
days after the filing of the Letter of Protest, the same is not resolved by respondent
petitioner did not receive any decision from Mr. Anselmo G. Adriano on the matter
8. Petitioner has thirty days from 13 July 2005 or until August 12,
2005, within which to file a Petition for Review of the decision/inaction of the
Acting Regional Director who issued the Assessment Notice, with the Court of
Tax of Appeals.
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
Co. CPAs together with Rowena M. Quinones of petitioner FSWC attended the
Escalada and Mr. Eusebio Bravo of the BIR RDO 51, Pasay City. A copy of the
Quinones presented all the petitioner’s source documents for submission and
examine the same allegedly because petitioner refused to sign a Waiver of the
Defense of Prescription Under the Statute of the National Internal Revenue Code;
District Officer indicating therein that the original documents for review were
Notice dated 10 December 2004 issued and signed by Acting Regional Director
Assessment and requesting for reconsideration; Please see Annex “D” and “D-
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instruction quoted as follows: “In the case of failure to file protest within thirty
days from the receipt hereof or pay the tax within the time prescribed in the notice
of assessment, the assessment shall become final and therefore subject to 25%
surcharge and interest on the unpaid amount until fully paid pursuant to RR-12-99
in relation to Sections 228, 248 (A) (3) and 249 (C) (3) of the 1997 NIRC.”
18. Since 14 January 2005 when the last document was submitted to 13
July 2005, one hundred eighty (180) days have passed, petitioner did not receive
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any decision from Mr. Anselmo G. Adriano to whom the Letter of Protest was
addressed;
ISSUES
I. Whether or not Petitioner did not submit documents necessary for conduct
of investigation prompting the Acting Regional Director Anselmo G.
Adriano to issue a deficiency assessment;
II. Whether or not the amount of P3,787,258.64 reflected in the Formal
Assessment Notice (Annex “E-3”) constitute 50% disallowed expenses
based on best evidence obtainable;
III. Whether or not the Tax Credits claimed are properly substantiated ;
IV. Whether or not the amount of P 1, 746, 563. 79 input tax on domestic
purchases is unsupported by documents .
ARGUMENTS/DISCUSSION
documents but the Revenue Officers/Examiners refused to receive the same. The
Acting Regional Director himself refuses to resolve the protest if a Waiver of the
all the necessary source documents at the Informal Conference of October 27,
Escalada and Mr. Eusebio Bravo. The receipt of the same was refused by the said
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Prescription Under the Statute of the National Internal Revenue Code should be
signed first. Affidavits about this incident is attached herewith as Annexes “G”
and “H”.
Mr. Nestor Velasco and Mrs. Rowena Quinones negotiated and pleaded that
were not at all amenable but instead adamantly insisted on the Waiver of the
Defense of Prescription.
The Acting Regional Director himself would insist on the Waiver when in
directive quoted to wit: “In case you disagree to our proposed assessment you or
Preliminary Assessment Notice (PAN) within fifteen days from the date of receipt
thereof, stating the facts, the applicable laws, rules and regulations or
and 222 of the 1997 NIRC at least six (6) months from date of execution, to give
this office and your company time to resolve/discuss issues involved per Revenue
Regulation (RR) Nos. 12-85 and 12-99 duly signed by authorized official and
delegation order to sign the said waiver per Revenue Memorandum Order No. 20-
considered void and without force and effect, accordingly, Formal Assessment
through accountant Mr. Nestor Velasco and Mrs. Rowena Quinones, at the
and Eusebio Bravo that they receive the documents they brought and examine the
same. In support of this fact are affidavits appended herewith as Annex “G “and
“H.”
The refusal of the Petitioner to sign the said Waiver is perfectly valid, legal,
and reasonable. Petitioner company through its duly authorized officers refused to
sign the said Waiver for the following reasons: (1) the waiver of the Defense of
Prescription will only lengthen the time period within which the company will be
(2) the waiver of the Defense of Prescription will entail that Petitioner company
should preserve for an indefinite period of time their books and accounts for the
year 2001 which is the year in question, and this task is cumbersome and
impossible to do.
It is not the fault of petitioner if the Revenue Officers needed more time to
exact. The year in question is year 2001. The Bureau of Internal Revenue is
granted by law (Section 203 of the 1997 NIRC) three years within which to
protection and benefit of the statute of limitations, cannot be compelled nor forced
upon the beneficiary of the statute. The waiver of the benefit/protection of the
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laws is a personal right that only the beneficiary citizen can opt to do, and it
compel a citizen to renounce his rights and protection granted by law is clearly a
violation of rights. Petitioner is merely exercising his right to raise, in the future,
the defense of prescription against the State. Moreover, nowhere in the 1997
authorized representative.
Petitioner submits that the expenses declared in the income tax return are
deductible. The sum of P 3, 787, 258.64 which constitute the 50% disallowed
expenses are in fact, expenses, and they are supported by documents, hence these
The documents presented in this instant Petition for Review and marked as
“I”.
The results of petitioner’s operations for the year ended December 2001 are
The Formal Assessment Notice (annex E-5) further stated and we quote:
“50% disallowed expenses based on best evidence obtainable --- Due to your
Outside Services
(NET)
DATE SI/OR PERIOD GROSS 10% VAT AMOUNT 1% EWT ANNEX/
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signed by Yolly Manuel of J&J Human Resources, for a more detailed lay-out of
the expenses incurred and paid. The corresponding official receipts can be
The documents annexed and marked “K-1” to “K-22” show the expenses
billed by and paid to J & J Human Resources, which expenses amount to a total of
P3, 834, 802.08 exclusive of VAT. The said amount is exclusive of VAT in
The billing statements for the outside charges incurred from November 26
to December 25 are missing though. Thus, their sums shall be disallowed for
documents.
of P3, 834, 802. 08 is without factual basis. The disallowed expense must be
Annexes “L-1“ to “L-11 “ show the amount of expenditures for light and
Pasay City with TIN 004-778-375-VAT in which building, appellant Fashion Saver
is doing business.
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light and water amounting to P527, 837.84 must be struck down. The
disallowed. Annex “M” is the Sales Invoice issued by Phillogix Systems Inc.
with TIN # 205-713-621-0000 VAT reflecting the amount of P58, 000 representing
full.
Communication
of P37, 752.24 incorporated in the item “deductions” in the Income Tax Return
In the Formal Assessment Notice (Annex “E-3) the expense in the amount
Such expenses for taxes, licenses and fees are explained as follows:
expense because the expenses for taxes, licenses, and fees are supported by official
receipts. Therefore, the expense in the sum of P 209, 946.38 is deductible in full.
Rental
The BIR disallowed the amount of P1, 140,000 as 50% disallowed rental
The rent expense declared in the amount of P2, 280, 000 being supported
Supplies
Being supported by receipts, the total expense amounting to P98, 120.91 must be
deductible in full. The expenses in the sum P16, 683 (10,665 + 6,018) may be
The Prior Year Excess Tax Credit of P 66,528. 87 are supported by Income
disclosed that your claimed prior year excess tax credit amounting to P 66, 528.87
was not supported by Income Tax Return for the said prior year (taxable year
2000) hence, said amount was disallowed as tax credit pursuant to Section 2.58.3
(B) of RR 2-98.”
The Income Tax Return for the year 2000 in which the said tax credit
appears is attached herewith as Annex “P” and made an integral part hereto.
amount of P 16, 882.67 as per Income Tax Return (pls. see Annex “Q”) is
386.51 “R-12”
37.24 “R-14”
59.31 “R-16”
9.15 “R-18”
89.15 “R-20”
91.98 “R-22”
37.38 “R-24”
85.67 “R-26”
TOTAL 16, 688.40 P 16, 882.67 less 16,
688. 40 = P194.27
deficiency
incorrect.
The formal assessment notice in its Annex “A” explained the deduction to
wit: “Minimum Corporate Income Tax per return in the amount of P83, 463.21
was deducted from the total allowable tax credit taking into account that allowing
said amount will result to double benefit since this will be carried forward on an
annual basis and credited against the normal income tax for the three (3)
relation to RR 9-98”
The amount of P83, 463.21 MCIT should not be deducted from the tax
credits. The said amount is the current MCIT for the year ended 2001, and being
so, it is the amount of tax payable. Please refer to the Income Tax Return for 2001
(Annex “Q”) and the amount of P83, 463.21 appears as the MCIT which is the tax
payable. It also appears in the said return that the P83, 463.21 MCIT was
deducted of Prior Year’s Excess Credits in the amount of P66, 528.87 and
Creditable Tax Withheld in the sum of P16, 882.67. The deduction resulted to the
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amount of only P51.67 which is now the tax payable. Annex “Q-1” is the receipt
VAT-registered.
“Verification of your submitted schedule of input tax disclosed that the suppliers
whom you purchased your goods/services were not registered as VAT taxpayer
Section 110 in relation to Section 113 both of the 1997 NIRC.” Annexes “S” to
“S-11” are the summary list of purchases from various suppliers who are
numerous in number. It is incredible that the Revenue Officers found all these
suppliers to be unregistered for VAT purposes. If that is true, then the Bureau of
The only issue posed by the Acting Regional Director in his formal
the schedule of monthly purchases for the year 2001 with original invoices were
already submitted to the BIR Legal Division Revenue Region no. 8 and was
receipts bear the VAT registration number of the supplier who issued the
invoice/receipt. Of course, the amount of the input tax can be deduced from the
is to ask for VAT registered invoices and official receipts for any purchases made
in order to be able to claim and charge the input tax against the output tax and
acted in good faith that the suppliers invoices issued to them are duly VAT
registered with the BIR as shown by information in their sales invoices as required
in Section 110 in relation to Section 113(A) and 237 of the NIRC, as amended by
RA 8424 and Section 4.108-1 of RR-7-95 hence, the petitioner company is not
liable for said VAT deficiency. Section 110 (A) (1) was already complied with
original VAT invoices during the initial meeting. The original sales invoices and
official receipts were already submitted to the BIR Legal Division. The suppliers
should be responsible for the alleged VAT deficiency if proven that they have
indeed violated the VAT provisions of the NIRC. Burden of proof on the
June 27, 2002; and KBP Real Estate Corporation v. Commissioner, May 15, 2002,
---- the Court of Tax Appeals ruled that supporting documents such as VAT
VAT arising from petitioner’s purchases of goods and services as well as its
December 31, 1997 were supported by various check vouchers with supporting
VAT invoices and/or official receipts (exhibits A-1-A-776) while its importations
were supported by import entry declarations, bills of lading, air waybills, packing
Inc. v. Commissioner of Internal Revenue, May 28, 2002, CTA Case no. 5938)
“Anent the second issue, petitioner presented Sales invoice no. 008 to prove
that the input VAT paid in the subject transaction was US$743,400 (exhibit H).
Under Revenue Memorandum Order no. 1-99, for purposes of input VAT
duly issued by the supplier of goods or properties while purchase of service shall
Commissioner of Internal Revenue May 15, 2002, CTA Case no. 6035)
From the foregoing premises, the amount of P1, 746, 563.79 input tax of
tax of P1,511,909.59 should be offset by the said input tax of P1, 746, 563.79,
alpha list.
The alpha list annexed and marked as Annex “T” and “T-1” and made an
integral part herewith shows that the amount of P4, 120.85 in question was
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actually withheld. The alpha list was submitted to the BIR RDO on January 31,
It is clear from the BIR Form no. 1601-C (please see Annex “U”) that the
From all the foregoing premises, and with all the necessary source
documents annexed and made an integral part of this instant petition and submitted
before this Honorable Court for examination and consideration, the following
Income Tax
Less:
Excess input tax carried forward
to succeeding period ( 243, 381.22) 1, 503, 182.50
Honorable Court of Tax Appeal, that after due notice and hearing set aside the
Anselmo G. Adriano.
Petitioners pray for such other reliefs just and equitable under the premises.
By:
Copy furnished:
E X P LA N AT I O N
The copies for BIR, Mr. Adriano and for the Revenue Officers were served
through registered mail due to distance and lack of messengerial personnel.