SLP as basis for tax assessment

Tax assessments are presumed correct and made in good faith. The assessments should not, however, be based on presumptions no matter how reasonable or logical the presumption might be. In order to withstand the test of judicial scrutiny, the assessment must be based on actual facts.

In the instant case, a company engaged in transmission of information was assessed for undeclared sales. The BIR’s assessment arose from the matching of computer records using the summary list of purchases submitted by the taxpayer’s customers.

The Court of Tax Appeals (CTA) held that the BIR’s assessment against the taxpayer cannot be sustained since the assessment lacks factual basis. The BIR based its assessment merely on an unverified quarterly list. The CTA maintained that the summary list of purchases should have been verified with other externally sourced data in order to check the integrity of the information gathered.

According to the CTA, even the BIR, in its Revenue Memorandum Order No. (RMO) 04-03, recognizes the need to verify the amounts reflected in the quarterly summary list of purchases with other externally sourced data in ascertaining the taxpayer’s underdeclaration of revenues or overstatement of costs and expenses.

Hence, for failure to corroborate its assessment with other externally sourced data, the CTA ordered the cancellation of the deficiency income tax and VAT against the taxpayer.

(Commissioner of Internal Revenue v. Fax N Parcel, Incorporated, CTA EB 883 re: CTA Case No. 7415, February 14, 2013)

Tax Brief – March 2013

Punongbayan and Araullo