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  • Cir V Hantex Trading Co, Inc. G.R. NO. 136975: March 31, 2005 Callejo, SR., J.: Facts

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    Kate Garo
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    This case involved a tax assessment made by the Bureau of Internal Revenue (BIR) against Hantex Trading Co. for alleged deficiency income and sales taxes for 1987. The BIR based its assessment on photocopies of the company's import records, as the original records had been destroyed by termites. The Supreme Court ruled that (1) photocopies do not qualify as the "best evidence" allowed under tax laws to make an assessment, and (2) the assessment was void because it was based on worthless photocopies rather than facts. As the assessment lacked sufficient evidentiary basis, it failed to withstand judicial scrutiny.

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    best evidence obtainable rule

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    CIR v Hantex Trading Co_digest

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    This case involved a tax assessment made by the Bureau of Internal Revenue (BIR) against Hantex Trading Co. for alleged deficiency income and sales taxes for 1987. The BIR based its assessment on photocopies of the company's import records, as the original records had been destroyed by termites. The Supreme Court ruled that (1) photocopies do not qualify as the "best evidence" allowed under tax laws to make an assessment, and (2) the assessment was void because it was based on worthless photocopies rather than facts. As the assessment lacked sufficient evidentiary basis, it failed to withstand judicial scrutiny.

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    68 views2 pages

    Cir V Hantex Trading Co, Inc. G.R. NO. 136975: March 31, 2005 Callejo, SR., J.: Facts

    Uploaded by

    Kate Garo
    This case involved a tax assessment made by the Bureau of Internal Revenue (BIR) against Hantex Trading Co. for alleged deficiency income and sales taxes for 1987. The BIR based its assessment on photocopies of the company's import records, as the original records had been destroyed by termites. The Supreme Court ruled that (1) photocopies do not qualify as the "best evidence" allowed under tax laws to make an assessment, and (2) the assessment was void because it was based on worthless photocopies rather than facts. As the assessment lacked sufficient evidentiary basis, it failed to withstand judicial scrutiny.

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    © All Rights Reserved
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    CIR v HANTEX TRADING CO, INC.

    G.R. NO. 136975 : March 31, 2005


    CALLEJO, SR., J.:

    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.

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