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Cir V Hantex Trading Co, Inc. G.R. NO. 136975: March 31, 2005 Callejo, SR., J.: Facts
Cir V Hantex Trading Co, Inc. G.R. NO. 136975: March 31, 2005 Callejo, SR., J.: Facts
FACTS:
Respondent is an importer of synthetic resin and other chemicals for the manufacture of its products.
The Economic Intelligence and Investigation Bureau (EIIB) investigated the importations of the
respondent. It relied on the alleged photocopies of Consumption Entries of the respondent. Such
photocopies are not authenticated because according to the custodian thereof, the original copies had
been eaten by termites. Instead, it only secured certifications from Port of Manila and BOC for the
entries filed by the respondent and processed and released by the such offices. Additionally, it also
secured certified copies of Profit or Loss Statements for 1987 filed by the respondent with the SEC.
After investigation, the EIIB transferred the case to BIR and recommended the collection of the total tax
assessment from the respondent. The BIR conducted an investigation on the 1987 importations of the
respondent based on the records elevated by the EIIB to the BIR (inclusive of the photocopies of the
Consumption Entries). The BIR ordered the respondent to pay deficiency income and sales taxes for the
year 1987.
ISSUE:
1. Whether photocopies are considered to be part of the best evidence obtainable rule under the
NIRC.
2. Whether the assessment is void.
HELD:
1. NO. The "best evidence" envisaged in Section 16 of the 1977 NIRC, as amended, includes the
corporate and accounting records of the taxpayer who is the subject of the assessment process, the
accounting records of other taxpayers engaged in the same line of business, including their gross
profit and net profit sales. Such evidence also includes data, record, paper, document or any
evidence gathered by internal revenue officers from other taxpayers who had personal transactions
or from whom the subject taxpayer received any income; and record, data, document and
information secured from government offices or agencies, such as the SEC, the BSP, the BOC, and
the Tariff and Customs Commission.
The best evidence obtainable may consist of hearsay evidence, such as the testimony of third
parties or accounts or other records of other taxpayers similarly circumstanced as the taxpayer
subject of the investigation, hence, inadmissible in a regular proceeding in the regular courts.
However, the best evidence obtainable under Section 16 of the 1977 NIRC, as amended, does not
include mere photocopies of records/documents. The petitioner, in making a preliminary and final
tax deficiency assessment against a taxpayer, cannot anchor the said assessment on mere machine
copies of records/documents. Such copies are mere scraps of paper and are of no probative value as
basis for any deficiency income or business taxes against a taxpayer. Machine copies present the risk
of error or tampering.
2. YES. As a general rule, tax assessments by tax examiners are presumed correct and made in good
faith. It is to be presumed, however, that such assessment was based on sufficient evidence. Here,
the petitioner based her finding that the 1987 importation of the respondent was underdeclared on
the worthless machine copies of the Consumption Entries. In order to stand judicial scrutiny, the
assessment must be based on facts. The presumption of the correctness of an assessment, being a
mere presumption, cannot be made to rest on another presumption.